Endeavor Group - Q3 2023

Transcript

Operator (participant)

Hello, and welcome to the Endeavor Third Quarter 2023 Results Call. My name is Lauren, and I'll be coordinating your call today. There'll be an opportunity for questions at the end of the presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. I will now hand you over to your host, James Marsh, Head of Investor Relations, to begin. Please go ahead.

James Marsh (Head of Investor Relations)

Good morning, and welcome to Endeavor's third quarter 2023 earnings call. A short while ago, we issued a press release, which you can view on our investor relations site, investor.endeavor.com. A recording of this call will also be available via that site for at least 30 days. Today, you will hear from Endeavor CEO, Ari Emanuel, and CFO, Jason Lublin, before President and COO, Mark Shapiro, joins us for Q&A. The purpose of this call is to provide you with the information regarding our third quarter 2023 performance. Commentary related to WWE's business and financial results in the context of Endeavor's results reflect WWE's performance for the period from September 12th through September 30th.

I do want to remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties, and assumptions, as well 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 proven correct, 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 were 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.

This measure 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 in the non-GAAP financial information posted on our IR website. With that, I'll turn it over to our CEO, Ari Emanuel.

Ari Emanuel (CEO)

Thanks, James, and good morning, everyone. This quarter's results reflect Endeavor's leading position in the sports and entertainment marketplace, even and especially as market dynamics evolve. To share just a few examples, we launched TKO and immediately delivered domestic media rights increases, a record-breaking global marketing partnership, and new international events with sizable site fees. Also in the quarter, we announced IMG's exclusive agreement with the NFL to manage its media rights in more than 30 markets, commenced Endeavor's share repurchase program, and initiated quarterly cash dividend payments. Before I discuss these and other highlights from the quarter in greater detail, I'd like to acknowledge the announcement we made last month about Endeavor's review of strategic alternatives.

Given the continued dislocation between our public market value and the intrinsic value of Endeavor's underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders. We will update the market if and when there's anything further to share. Turning now to the quarter. I'll start with our Owned Sports Properties segment, which includes TKO. Over just the first frame of our integration efforts, UFC and WWE have set live event records, announced international expansion plans, increased media rights fees, and confirmed a significant new global partnership. UFC had six live event sellouts in the quarter, and WWE set multiple records for premium live events, Money in the Bank, SummerSlam, and Payback.

In the Middle East, UFC announced the extension of its long-standing partnership with the Department of Culture and Tourism, Abu Dhabi, to continue hosting one numbered event there each year and up to three Fight Nights in the region. Additionally, UFC will debut a first-ever Fight Night in Saudi Arabia next March as part of Riyadh Season, a clear indication that Saudi Arabia has every intention of growing its relationship with the UFC, despite assumptions made about their recent investment in the Professional Fighters League. Similarly, WWE announced new international premium live events for 2024, one in Berlin and one in Perth, as part of a Tourism Western Australia partnership that includes the company's largest-ever site fee. On the U.S. domestic front, WWE announced yesterday that NXT will make its broadcast television debut beginning October 2024 on the CW Network.

That deal represents a 70% AAV increase and demonstrates strong demand for WWE content, which should serve as an encouraging sign to our investor base vis-a-vis our Monday Night Raw discussions, which are quite active at the moment with multiple linear and streaming partners. The NXT deal comes on the heels of a new five-year partnership with NBCUniversal to bring SmackDown back to USA Network beginning next year. That agreement represents a 40% AAV increase and includes four annual primetime specials that will air on NBC, marking the first time WWE will air on the network in primetime. We are also leveraging the full Endeavor flywheel to bring new global partnership opportunities to TKO. AB InBev just announced a significant multi-year deal with UFC to become its official global beer partner beginning in 2024.

The deal is UFC's biggest ever in the aggregate, including cash and marketing assets. In addition to TKO, the owned sports property segment includes results from Professional Bull Riders. PBR's second Team Series season began in July and averaged more than 1 million total viewers on broadcast partner CBS, and had similarly robust attendance at its live events. In our events, experiences, and rights segment, as mentioned, IMG's media group announced an exclusive agreement with the NFL to manage the league's media rights in more than 30 markets across Asia and Europe, beginning next year. This NFL deal represents the latest in a series of ways Endeavor is integral to the NFL ecosystem across commercial areas, including licensing, digital marketing, premium hospitality and experiences, player representation, and marketing on behalf of NFL teams and sponsors.

Also in the quarter, Frieze bolstered its U.S. presence with acquisitions of The Armory Show in New York and Expo Chicago, two of the longest-running art fairs in the U.S., and completed a successful second edition of Frieze Seoul in South Korea with 120 galleries and 70,000 visitors. At On Location, momentum going into Super Bowl 58 is strong. By the end of the quarter, we'd already sold more On Location packages than ever before at that point in the sales cycle. Also, On Location's premium hospitality for WWE Money in the Bank in London became its highest-grossing non-WrestleMania event ever, and UFC 293 in Sydney drove the highest year-to-date UFC VIP revenue. Both events are examples of ways the Endeavor Flywheel supports TKO's growth and are testaments to the demand we are seeing for sports events and premium experiences across our platform.

Pivoting to our representation segment, notwithstanding impact from the strikes, performance during the quarter was buoyed by the Endeavor Flywheel and the diversified business we've grown at WME. In music, WME had a successful festival season in the quarter and increased our industry-leading market share in the country music category. Our investment in sports is also continuing to pay off. WME Sports struck record-breaking deals this year. With their deals, Bengals quarterback Joe Burrow became the highest-paid player in NFL history, and 49ers defensive lineman Nick Bosa became the highest-paid defensive player ever. WME Sports has already negotiated more than $1 billion in football contracts this season, with more than $700 million in guarantees.

IMG's industry-leading licensing team continued to deliver first-of-their-kind deals in the quarter, including a partnership between Macy's and Gap that will see 250 Macy's stores across the country debut Gap pop-ups within their footprint. Activating a crucial part of the Endeavor Flywheel, 160over90, together with WME and Endeavor's Talent Ventures team, incubated and launched WME client Snoop Dogg's Dr. Bombay Ice Cream. The product debuted in more than 3,500 Walmart locations nationwide. Turning next to our sports data and technology segment. Following OpenBet's successful launch with OPAP in Greece, we have been pursuing opportunities in additional emerging markets. In the quarter, OpenBet signed a new partnership with Play7 to enter Brazil's sports betting market.

We see significant opportunity ahead in Brazil, and OpenBet is well positioned to capitalize on the market's highly anticipated opening to regulated sports betting and potentially other digital gaming products. With that, I'll turn things over to Jason.

Jason Lublin (CFO)

Thanks, Ari, and good morning, everyone. I'll start by walking you through our financial results for the third quarter. I'll then provide you some color around what we're seeing in each of our operating segments. All comparisons will be to the third quarter of 2022. For the quarter ended September 30th, 2023, we generated $1.344 billion in consolidated revenue, up $123 million or 10.1%. Net loss for the quarter was $116 million, compared to net loss of $12.5 million a year ago. The change in net loss was largely driven by increased transaction-related expenses associated with the TKO transaction. Adjusted EBITDA for the quarter was $311.6 million, up $8.5 million or 2.8%. Now I'll walk you through each of our segments.

Our own sports property segment generated revenue of $479.7 million in the quarter, up $77.5 million or 19.3%, while the segment's adjusted EBITDA for the quarter was $237.4 million, up $41.7 million or 21.3%. Revenue growth in the segment was primarily driven by increases at UFC due to higher media rights and content fees from increases in contractual revenues, as well as higher renewals, as well as two additional fight night events compared to the prior year quarter. Segment revenue growth was also driven by higher live event revenue and sponsorships at UFC, in addition to higher site fees from multi-year partnerships. The WWE acquisition also contributed $52 million of revenue for the post-closing period of September 12th through September 30th.

As a reminder, the prior year quarter included $33 million of revenue related to Diamond Baseball Holdings, which we sold in September 2022. PBR also hosted 19 series events in the quarter, which drove a 26% increase in attendance over comparative events in 2022. Now turning to events, experiences, and rights. The segment recorded revenue of $367.1 million, down $27.1 million, or 7%. Segment adjusted EBITDA was $29.8 million, down $15.7 million, or 34.4%. The prior year quarter included $72 million of revenue from IMG Academy, which we sold this past June.

The decrease in segment revenue was partially offset by increases in media production revenue at IMG's media business from new contracts, including Major League Soccer, as well as media production for certain biennial and quadrennial events, including the Ryder Cup and Rugby World Cup, which did not occur in 2022. Increased revenue related to On Location's premium hospitality at the Ryder Cup. Live event revenue, primarily driven by new events such as Barrett-Jackson, New Orleans, and our acquisition of the Armory Show art fair in July of this year. Segment adjusted EBITDA for the quarter was primarily adversely affected by the sale of IMG Academy. On Location's ongoing IOC investment, which began in the third quarter of last year, and is inclusive of personnel, marketing, and technology costs, and decreases at Endeavor Streaming.

Moving on to our representation segment, revenue was $385.6 million, down $2.7 million. Segment revenue was impacted by a $29 million decrease at the agency, primarily driven by the impact of the WGA and SAG-AFTRA strikes, partially offset by growth in the sports and music divisions. This decrease was further offset by content delivery within our non-scripted production business, as well as increases at 160over90 and IMG's licensing business. WME Sports closed record-breaking NFL and NBA player deals, and WME's music touring business had a strong quarter, driven by continued demand for live music. More than 200 WME clients performed across festivals including Coachella, Lollapalooza, Glastonbury, and the CMA Fest in Nashville.

In the third quarter, segment adjusted EBITDA was $96.3 million, down $36.6 million, or 27.5%, primarily related to the adverse impact from both strikes. Related to the estimated impact of the strikes, we previously estimated the impact of the strikes would adversely affect our representation revenue by up to $25 million per month on average, relative to our forecast at the time. In the quarter, our agency performed better than expected, primarily due to overall deals being suspended at a slower rate than anticipated, profit participations, and outperformance in areas previously mentioned, such as sports and music. As a result, the strike impact adversely affected our agency revenues in the range of $40 million-$50 million in the quarter.

Looking to the fourth quarter, we expect the originally estimated impact of the strikes to continue based on the lagging effect of the WGA strikes, the ongoing SAG-AFTRA strike, as well as the time needed to meaningfully ramp production. Now, turning to our sports, data, and technology segment. Revenue was $124.8 million, up $78.1 million, while Adjusted EBITDA was $24 million, up $19.8 million. Growth in this segment revenue was attributed to the addition of OpenBet, which we acquired in September 2022, as well as growth in betting, data, and streaming at IMG Arena across a widening portfolio. For Wimbledon, IMG Arena delivered data feeds to more than 250 sports books, covering 651 matches.

IMG Arena also entered a multi-year partnership with Conference USA to become the league's official data rights collector for football and men and women's basketball. Moving on to our capital structure. We ended the quarter with $5.05 billion in debt and $1.34 billion in cash, resulting in $3.74 billion in net debt. Our net leverage was 3.22x at quarter end. As a recognition of our deleveraging progress and close of the TKO transaction, S&P Global Ratings recently upgraded our parent issuer credit rating, inclusive of the UFC credit group, to BB- from B+. In conclusion, given Endeavor's previously announced review of strategic alternatives, we are tabling discussions related to capital allocation and annual guidance at this time. With that, I'll hand it over to James.

Ari Emanuel (CEO)

Thanks, Jason. Operator, can we open up for questions now?

Operator (participant)

Thank you. If you would like to ask a question, then please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. Please also ensure that your phone is unmuted locally. So as a reminder, that is star followed by one to ask a question. Our first question comes from Kutgun Maral from Evercore ISI. Kutgun, please go ahead.

Kutgun Maral (Director)

Good morning, and thanks for taking the questions. Two, if I could, one on the strike and one on the health of the consumer. So first, on the strike, I know nothing is certain, but it does seem like we're getting closer to a resolution, hopefully by Thanksgiving, as opposed to the dispute extending into, you know, December of 2024. Jason, I know you talked a bit about the expectations for Q4, but can you help us think about the shape of the eventual recovery to your representation business and maybe Hollywood overall, once things are hopefully resolved? And it seems like, you know, there, there's a lot of pent-up demand for things to pick up day one, but I was wondering what kind of impediments there might be to getting the machine fully up and running, and when we might get there.

Is this a mid-2024 event, for example? And second, Ari, I know you called out the strength you're seeing across, it seems like effectively all of your events, but is there anything more you can share about the health of the consumer that you're seeing? It seems like you've been largely insulated so far, but we are seeing more and more cracks in this system in different industries, so would appreciate any added perspectives. Thank you.

Ari Emanuel (CEO)

So on the first question, I'll take it. This is Ari. Thanks for your question. It takes... You'll probably see, going into the first quarter, the ramp-up of things that were shut down because of the strikes. So the things that were closed, whether it had 19 days, 30 days, whatever amount, they'll pick up. Hopefully, the strike ends in the next couple of days. They'll prep again and then go the beginning of the year. The rest of the new stuff, and I agree with you, there's tons of pent-up demand, a lot of stuff on the, on the runway that will get going probably, you know, I'm saying, April-ish, May. Because you remember, you have to have two to three months of prep and then you can start doing the productions, both on the movie and television side.

So that's kind of the timeline to all of that. I think Mark will hit the consumer.

Mark Shapiro (President and COO)

Yes. Hey, Kutgun, how are you? Too bad, Ari and I thought we were going to wake up this morning, and this strike would be over. I'm sure Dad's also thinking the same thing on his call. Let's hope by the time we get to Disney, that's the case, for everybody's sake. On the general health of the consumer, look, you kinda answered it. You know, I don't want to hex anything here. But the bottom line is, we seem to be somewhat insulated, and our peers so far are reporting that they're somewhat insulated, right? I mean, you know, Disney's gonna go later today, but up till now, you know, they're kind of forecasting $10 billion in profits this year for their theme parks. So everybody's talking about ticket prices being so high, and the summer crowds were supposedly lower.

Meanwhile, they're, you know, they're up 5x from a decade ago. Live Nation, of course, the other day, just had their strongest quarter ever. They're on pace for record revenue in 2023. They're reporting record attendance. And then you kinda move over to our, our surf, if you will, and we've got record attendance and ticket per caps at multiple events, ranging pretty broadly from WWE to UFC to PBR, all the way to Frieze, which is our art fair that you know we hold in, in London, and we hold in Korea, and just been a good story for us. So we're not really seeing any slowdown. And then probably preempting another question, when you look at the Olympics in the state of On Location, and keep in mind, what we sell there are mainly travel packages.

The consumer that wants to go to Paris to go to multiple games, they need help with hotel, they want experiences, and often airfare is a part of that. And we've sold through one-third of our goal already, and the stacking of our marketing doesn't even take place till Q1, Q2. As you can see from NBC and their Sunday Night Football package, they just started to hit the Olympics hard, and every time they hit it, that bodes well for us. So far, insulated, health of consumers seems strong, and we're, believe me, we're keeping an eye out for it.

Ari Emanuel (CEO)

Great. Thanks, Operator.

Kutgun Maral (Director)

That's perfect. Thank you both.

Operator (participant)

Thank you. Our next question comes from David Karnovsky from JPMorgan. David, please go ahead.

David Karnovsky (Senior Research Analyst)

Hey, thank you. Maybe following up on the prior question, you know, as we reach the endgame on the actors strike, maybe you provide your updated view on the demand environment for scripted, kinda once we get past that initial pent-up period. And then just sticking on the rep side, I think there's been a fair amount of investor debate about the sustainability of concert touring, whether it can grow off 2023 levels. I think you mentioned, you know, 200 of your artists on the road in Q3, so would appreciate kind of, your view on sustainability, how that might look into 2024. Thanks.

Ari Emanuel (CEO)

I don't see the pent-up demand ending anytime soon. You know, you're gonna be ramping... I mean, the hardest thing we're gonna have to do is scheduling of people, mainly on the actor side, because there's gonna be so much product happening. And so I don't think anything's gonna, even after the first wave, slow down in that regard. You know, this constant drumbeat of, you know, is content at a peak? I don't believe that's the case. You're gonna see this, I think, through 2025. They've already pushed a bunch of stuff into 2025. Warner Bros., they've talked about it. Disney, they've talked about it. So, I don't see it slowing down for a while. You want to do it? Do you-

Mark Shapiro (President and COO)

Oh, yeah. Yeah, just on the music side, I mean, it's ironic we're, we're sitting here in Nashville at our country music office, where we lead the industry in terms of music representation, with a stellar leadership team here, and we're reviewing really our record, record bookings to date and forecasting next summer to be equally as strong. So artists want to tour, crowds want to see them, and we're seeing record attendance and, you know, record ticket per caps. Frankly, a lot of endorsement and sponsorship deals that are following that. So very consistent with what Live Nation's reporting. That bodes well for us. Don't see it slowing down. The festivals that we are a part of, that we have an ownership position or we book ourselves, equally, equally brisk.

Ari Emanuel (CEO)

Great. Thanks. Operator, next question, please.

Operator (participant)

Thank you. Our next question comes from Steve Laszczyk from Goldman Sachs. Steve, please go ahead.

Steve Laszczyk (VP)

Hey, guys. Good morning. Maybe first on the sports strategy at Endeavor, even with the UFC now over at TKO, you still have some fairly sizable sports assets at Endeavor, PBR, the Miami and Madrid Tennis Opens, I think, being some of your biggest. You also have the bid out there for the PGA. So I was curious just if you could update us on the sports strategy at Endeavor, the extent to which you think there's opportunity to scale that platform, and how that strategy might differ from how TKO might approach inorganic growth in the industry going forward. Then, maybe just a quick one for Jason. Could you unpack what drove the year-over-year change in net income for us in the quarter? Thank you.

Ari Emanuel (CEO)

On the sports strategy, when you think about the Miami Open or Madrid, if you've ever been to the Madrid Open, it's got, I mean, one of the biggest, biggest attractions, they sell these packages for the food festival that happens outside it. In addition, we're adding a music festival. So there, those are not, yes, they're sports, but they're really events, cultural events surrounding it. Same thing with Miami. So when you think about those sports, as you define those sports, those are actually really events. A sport is the UFC, a sport is WWE. Yes, PBR is there, but that's also an event, a country kind of event that travels. So that's how we think about it.

And as it relates to the PGA, remember, we had fees going back to, I don't know if you read all the details of the structure of our offer, and when we realized that, one, the pricing was getting ridiculous and they weren't gonna recognize our fees, we didn't wanna actually participate.

Mark Shapiro (President and COO)

Yeah, just Stephen, I wanna elaborate on that because I know there's been a lot of discussion on this, a lot written about it, and just the fact that you mentioned it, I think I'm glad Ari responded to that. Just to make sure we level set with everybody, because we wanna be consistent in our dialogue here. You know, we're not even on the TKO side. We are very focused on the integration there, and we're working closely with the Endeavor Flywheel to make sure we maximize revenue synergies. We're not even thinking about M&A. The PGA, to Ari's point, you know, we have a long, elaborate, comprehensive history with the PGA Tour.

Obviously, fans and what they do, we represent a lot of golfers, but we represent them and have represented them on media rights at times, certainly internationally as well, on events. We own some sanctions, sponsorship. We have, 160over90 clients that are official partners of the tour, like DP World. We do their sports betting, we have analytics. So we have a multiple, multiple disciplines, if you will, on commercial services. And so the opportunity was there that, hey, would we be interested in making a minority investment, being part of a consortium? And by the way, that consortium was probably TBD down the line. And all we said was, "Absolutely, we'd be interested in making a 10% minority investment, as long as many of these commercial services deals, those contracts, could get extended for $25 million per year." It was an aggressive ask.

Maybe it was unrealistic. We figured it would get shot down. It ultimately did, and then we were out of it. So it wasn't like we weren't talking out of two sides of our mouth. We're not looking to buy the PGA Tour, but certainly if we can have a little slice while we're getting our commercial services extended at a nice premium, we would do that. That just wasn't to be. So I think it- that context is very important here. Jason, can you talk about the net income?

Jason Lublin (CFO)

Yes, Stephen, on the net income one, I would point to two, primarily two items. One being transaction costs associated with the TKO transaction, in the neighborhood of $70-ish million plus, and also restructuring costs associated with that transaction in the neighborhood of $17 million+. So, those were big impacts on net income for the quarter, obviously, both one time in nature, and non-recurrent.

Ari Emanuel (CEO)

Great. Thanks, Stephen. Operator, next question, please.

Steve Laszczyk (VP)

Great. Thank you for all that.

Operator (participant)

Thank you. Our next question comes from Stephen Glagola from TD Cowen. Stephen, please go ahead.

Stephen Glagola (VP of Equity Research)

Hi, thanks for the question. Ari, as you recently took Endeavor public two and a half years ago, how do you view Silver Lake's consideration of a take-private proposal relative to other potential strategic alternatives you're exploring? And also, do you think a go private would hinder any platform synergies that you see currently existing within the assets you own?

Ari Emanuel (CEO)

Since my lawyers are around and you know the answer that I'm gonna have, I'm not commenting on anything as it relates to the go private or the review or anything that you've just mentioned, but I appreciate the question.

Stephen Glagola (VP of Equity Research)

Okay. Do you mind if I ask?

Ari Emanuel (CEO)

Next question, Operator.

Stephen Glagola (VP of Equity Research)

... one more then?

Mark Shapiro (President and COO)

Go ahead. Go ahead, Stephen.

Stephen Glagola (VP of Equity Research)

I apologize for that. Yeah.

Ari Emanuel (CEO)

No problem.

Stephen Glagola (VP of Equity Research)

How do you for the core representation business, you've said that, you know, this business has historically grown revenue and EBITDA, you know, in a double-digit CAGR over the last decade. How do you think the, you know, the end of the packaging deals and fees, and the new terms in the writers' and actors' contracts following these strikes are gonna impact that growth, that core growth over the next five to 10 years? Thanks.

Ari Emanuel (CEO)

Well, here's what I would say to you is: We have a very big, diversified business, as you can see by our results. So whether it be sports, whether it be music, whether it be digital, whether it be books, whether it be lectures. So we feel very good about now the well-roundedness of the whole organization. So, even though there's no packages, we also have old packages, and as you can see on Netflix, everybody's selling their properties, their old properties. Like, they sold Ballers, they sold Suits. Suits is one of the biggest shows. Those are big fees that come back in packages on the old packages. So we really feel good about the portfolio that we've put together.

Great. Thank you. Operator, next question, please.

Stephen Glagola (VP of Equity Research)

Thanks.

Operator (participant)

Thank you. Our next final question comes from David Joyce from Seaport Research Partners. Please go ahead, David.

David Joyce (Senior Equity Analyst)

Thank you. On the sports data and technology business, could you talk about some of the growth drivers from here? How much do you rely on any further regulation, domestically or internationally? Kind of what's the purview of where you could still be adding to your data rights there?

Mark Shapiro (President and COO)

... Thanks, David. Bringing us home with SD&T, I love it. All right, so I would say on this front, what we would say is, you know, remember, we have two parts of our business. One part is OpenBet, which is B2B, it's infrastructure, it's tech, it's white label for the myriad of sports betting operators who are out there. And increasingly, more and more these days, to your point, because regulation is lifting. You can see Brazil on the horizon, Finland, huge opportunity. Yesterday, just had a great meeting with a operator in the Dominican Republic.

So this is a very noisy area, which plays to our benefit because they're not going to go out there, many of these players, and spend all the capital required on infrastructure, on tech, and on labor, when they can just white label it in a much more efficient manner, both cost and speed, with OpenBet. So we feel very bullish about that business. It's a good quarter for us in this area, and the prospects for 2024, with more and more regulation getting lifted, play to our advantage. The area we have to be careful on is the IMG Arena side, and that is, to your point, sports data rights. I think heretofore, we've been very disciplined to this point. We don't play in Tier 1, kind of Trojan Horse, money loser properties.

I'm not going to single anybody out specifically or any company specifically, but often it is a, you know, rights fee fest to try to get the sports data from some of these major leagues. Frankly, the margins are just too tight. There's too much risk. We can't make money on that. So we play in the Tier 2 properties, the Tier 3 properties, and often package it with our media division at IMG, where we can get all kinds of efficiencies and synergies to make these profitable and strong margins. That's where we're going to continue to stay. So we are very content being the number three player in that marketplace behind Genius Sports and Sportradar, which of course, has been at it longer than anybody else, and probably is the leader and certainly the biggest.

David Joyce (Senior Equity Analyst)

Great.

I appreciate it.

Ari Emanuel (CEO)

You got it. Thanks, David. I just want to thank everyone, in conclusion here. Operator, you can close the call. Thank you.

Operator (participant)

This concludes today's call. Thank you for joining, everyone. You may now disconnect your lines.