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What to Know About Endeavor's IPO

By Asit Sharma - Jul 11, 2019 at 1:37PM

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The talent agency giant has a lot of cool content, and a lot of problems that should make investors hesitant.

In this week's episode of Industry Focus: Consumer Goods, tech analyst Nick Sciple and contributor Asit Sharma dive into the maybe-soon-to-be-public talent agency Endeavor. While Endeavor's claims that its total addressable market is $1.9 trillion are probably a little bit too bold, the company has some serious strengths in its content and mergers and acquisitions strategy. But it has a serious mountain of problems, too. The hosts explain Endeavor's debt issues, why investors should be skeptical about the adjusted EBITDA numbers, and how legal tensions with the Writers Guild of America could spell huge trouble for this IPO. Can Endeavor push past all this and beat the market? Tune in to find out more.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on July 09, 2019.

Nick Sciple: Welcome to Industry Focus, the podcast that dives into a different sector in the stock market every day. Today is Tuesday, July 9th, and we're talking about the Endeavor IPO. I'm your host, Nick Sciple, and today I'm joined by Motley Fool contributor Asit Sharma via Skype. How's it going, Asit?

Asit Sharma: Great, Nick, how are you?

Sciple: I'm doing great. I haven't had you on in a while. I think last time I had you on, we were talking about Cracker Barrel, if I'm not mistaken. How's your summer been?

Sharma: It's been wonderful. Did some traveling. Longtime listeners may remember me talking about my son, who's in Germany. The host family that hosted him two years ago, before he started engineering school, sent two of their daughters, teenage daughters, to us for almost three weeks. We still had two teenage boys in the house. We had a great time, did a lot of local stuff here in Raleigh, North Carolina, tried to show them my beautiful state. We also took them up to Washington. Didn't have time to stop in at Fool HQ in Alexandria. Went to New York. It was wonderful. But now I'm catching up. I am endeavoring [laughs] to catch up on all things Foolish. How's your summer going?

Sciple: Great, man. I had a great 4th of July over this weekend, had some friends in town visiting us. My girlfriend [and I] were able to go to the Rolling Stones concert on Wednesday. That was a bucket list show to get to go to. Very excited. Excited to, to your pun here, endeavor into this IPO as S-1 today.

For folks who aren't familiar with Endeavor, this is primarily a talent agency. Traces its business back to 1898 with the founding of William Morris Agency. Today, it's the longest running largest talent agency in the world. However, in recent years, the company has reshaped itself through a series of acquisitions that has moved its from traditional representation agency business into all manner of businesses, including content -- they now own UFC -- and other assets. Asit, can you give us an overview of what Endeavor looks like today and how it grew to its current size, through acquisition and otherwise?

Sciple: Sure. As you said, the company traces its roots back to 1898 with the founding of the William Morris Agency. In the 2000s, Endeavor Agency was formed by Ari Emanuel, and this company merged with WMA, William Morris, in 2009. Their next big step was to acquire IMG, that is the huge sports and marketing company. They did this off of some private equity fuel that they came across in 2012, when Silver Lake Partners became a major investor in the company. That changed the trajectory from these traditional talent agencies into a company that would become a serial acquirer. They acquired the Miss Universe and Pro Bull Riders in 2015. Listeners are familiar with the mixed martial arts giant UFC, they acquired that in 2016. And they launched their own content arm in 2017 called Endeavor Content. This previous year, 2018, they broadened into podcasts, VIP experiences, so experiential revenue, and also into sports betting, which is something you and I have discussed before, Nick. They're now into that with IMG Arena. One more company to mention is Learfield IMG College, which is a college licensing company, which has rights to different college brands. That's a very lucrative business. We'll get back to this small company later in the show, because that plays into how Endeavour sometimes acquires and also sells interest in companies that it's made more powerful. But that is basically a brief overview of their history.

Their business model is one that's extremely diverse. It starts with talent, but they also have a lot of intellectual property. They're in the content business. Again, it's a manifold of industries, from the traditional right of representation into, as I mentioned, sports betting, into sports and sports broadcasting. This is a company with a really wide footprint. one of the questions that we will cover in this show, is the footprint too wide? Can you make money when you are a jack of all trades in the content and distribution marketing world?

Sciple: You're exactly right. You look at the market, they call out in their S-1 their total addressable market being the global entertainment sports and media market. They say that's a $1.9 trillion market as of 2017. Obviously, when you take a look at a total addressable market that size, the realistic market is probably a little bit smaller than that, but they're playing all over the place when it comes to content and representation. They say that access is the key to their business model. Traditionally, that had been defined as through talent, but recently, they broadened that access to include brands, intellectual property, owned assets, as you mentioned, UFC. As we've seen content grow over time, Endeavor touches all parts of that business. They're representing, when you look at the talent side of the business, some of the most significant and important talent in the world. In 2018, Endeavour represented more Academy Award winners and Grammy winners than any other talent agency. This one blew my mind, they accounted for over half of HBO's original programming in 2018. Really, a significant presence across the content landscape it. To me, it seems similar in some ways to Live Nation, when you look at the way they play in events, where they touch every major player there.

But when you look at their financials, there are some questions about how these acquisitions have played out and whether they're going to fall to the bottom line, what synergies there might be with the business. Can you give us a brief overview of the how the revenue has grown over time and what's been driving that in recent years?

Sharma: Yeah, absolutely. Revenue has grown basically from a focus into its two biggest segments -- talent representation, which you mentioned. They have over 6,000 clients, $1.3 billion in revenue. That's 46% of their total revenue. That segment generates $335 million in EBITDA -- that's a word we're going to use a lot in this show. Listeners, as you know, earnings before interest, taxes, depreciation and amortization. EBITDA is a good proxy for basically operating cash flow. When get a company this complex, which has a lot of maybe arcane adjustments in its accounting, some investors like to cut right to the quick and see instead of net income or loss, what is that adjusted, or really the EBITDA number. They use an adjusted EBITDA number, we'll talk about that in a bit. So, talent representation, that, again, is 46% of revenue. They've also concentrated in this entertainment and sports segment. That's their second major segment. It's actually 63% of their total. Last year, that segment did $2.2 billion in revenue and had $439 million in EBITDA.

Just looking at that entertainment and sports segment for a bit, they specialize in distribution and sales. They're one of the largest independent global distributors of sports programming. Here's a stat that you brought to my attention. This one wowed me, Nick. They sell media rights globally in over 160 countries on behalf of more than 150 clients. One of those is the IOC, the International Olympic Committee.

There you have it. They also have a smaller segment, the third segment is called Endeavor X. It's relatively new. That segment did $66 million in revenue last year, and $45 million in EBITDA.

But let's talk about those financials. The company has had a phenomenal growth rate when you take a look at revenue. I calculated. This is a rough calculation, listeners. If there's a real number cruncher out there, don't call me on this. It might be a percentage or two off. But I counted that the company has had a 29% compounded annual growth rate in revenue over the last four years. In 2014, the company did $1.3 billion in revenue. That grew to $3.6 billion last year. They've done that through a combination of organic growth in some of the content areas, but through a lot of acquisitions, some of which Nick mentioned.

Now, here's the rub. If you look at this S-1 statement, this registration statement, Endeavor says, "Look, we did $3.6 billion in revenue, and we generated out of that some $552 million in adjusted EBITDA." But you hear that word adjusted. They've taken a number which is already adjusted -- when you're looking at EBITDA, you are adjusting that income, you're taking away non-cash items like interest expense, depreciation, and amortization, taxes. Some companies then adjust that number and want to remove other items that are typically one-time in nature. The problem that I've got with this adjusted EBITDA number is that it takes out a lot of items that are actually recurring from year to year to year on Endeavor's books. Stock compensation is one. Okay, that one maybe I can grant because that is a non-cash expense. In other words, when you put an expense on your income statement, when Nick and I run a business, and he gets paid partially in stock, that doesn't hit cash. So we can grant them that. But they're also pulling out numbers like merger and acquisition costs, restructuring costs, certain legal costs and the like. The problem with this is, if you look over their financials for the last four to five years, Endeavor is a serial acquirer, as I said. They have ongoing restructuring costs every year, they have ongoing legal costs that are tied to acquisitions, they have ongoing merger and acquisition costs. These are actually recurring items that should not be pulled out.

When I added these back in, I got that they actually generated $267 million in adjusted EBITDA, with my selective add-backs. The problem with this is, if you buy my argument that EBITDA is a rough proxy for operating cash flow, the company really doesn't generate a lot of operating cash. You can go to the cash flow statement. Last year, they only generated $121 million in true operating cash off of that $3.6 billion in sales. Their cash paid for interest bill last year was $267 million.

How are they supplying these deficits? The answer is, it's through their private equity investors. Yes, the company has borrowed a lot, but most of that's been tied to acquisitions. Where they're really getting funded is through about $2.3 billion in investments from Silverlake, the private equity firm that I [mentioned]. That's paying the bills for acquisitions, it's covering deficits. And now, you, potential investor, are going to be asked to cover some potential deficits as well when this issue prices.

Thank you for bearing with me. That was a bit of a long explanation. But I'd like to throw it back to you, Nick. What are your thoughts on that overview of their financial structure? Maybe you disagree with me on that analysis?

Sciple: I think there's clearly some concerns with their debt. When you look at their EBITDA without adjustments, you're looking at about a 15X debt to EBITDA, I believe. That's a pretty high multiple there. You really would have liked to see, with all these acquisitions over the past several years, some scale kick in where you start seeing some returns on those assets. Those haven't started to play out. And when you look at the way their debt is structured, the repayment schedule on their debt begins to accelerate around 2022, 2023. This business really needs to start generating positive cash flow to be able to support those debt payments in the coming years. Otherwise, it's going to be an issue for the company.

So, when you look at the issues with the debt, not having enough EBITDA to support the payments, at least as things are constituted today, that comes back to maybe why the company is going public. They mentioned that they're going to use the proceeds from their public offering to support working capital and corporate purposes, and may use it to pay down debt or to fund new acquisitions. When you look at Endeavor looking to use this IPO money to pay down debt, what are your thoughts looking at that as an investor, particularly when the debt and EBITDA is a concern for the business today?

Sharma: It doesn't necessarily bother me if -- as we're going to talk about in the second half of the show -- there's a viable path to take this phenomenal revenue growth and get some orange juice out of those oranges. If you take what's in the S-1, it's hard to gauge because as of yet, we just have an initial S-1 statement. Typically, listeners, you file your S-1, and then a few weeks later, you'll file what's called an S-1 amended statement, an S-1/A. Then you'll fill in placeholder numbers. There are not any placeholder numbers filled in. We don't know the expected pricing range, which tells us how much the company will raise. We don't know exactly how much would be allocated to working capital, how much debt. Those numbers typically get filled in. Nick will fill you in later in the show on why there hasn't been an S-1 amended statement filed yet. But absent that information, it doesn't bother me if the company can make a persuasive case on, "We'll pay down some debt, and here's how we're going to improve our margins and capitalize on this great intellectual property we have, our vast footprint in the market." But that is for us to toss around in just a few minutes. We'll pin that down, and then I'll return to your question, which is a great one.

Sciple: Okay, Asit, on the back half of the show, I want to talk about some of the opportunities for Endeavor to grow and leverage their assets, as well as some of the risks facing the business today. In their S-1, Endeavor talks about one of their opportunities as increasing demand from audiences for content. We see more and more -- Netflix, Amazon, Disney+ -- there's just more and more demand for content from consumers every day. Endeavor's trying to position themselves to be able to deliver that both through their relationships with talent, their owned assets they're moving into, as well as the marketing and production services they offer to other entities.

When you look at all these assets that Endeavor has together, do you think these pieces fit together and add leverage? When you look at the S-1, the competitive advantages that Endeavor calls out, do you buy the case that they're making?

Sharma: I'm tempted to because, as one of the world's largest, if not the largest, I believe they are the largest -- the reason I'm hedging here is, they've lost some of their writing talent, which we're going to talk about in a second here. But as the largest representor of talent, and also one of the largest conglomerates of content, and these subcategories that Nick has been talking about -- TV packaging fees, sponsorships, ticket sales, license fees, data streaming fees, pay per view programming, etc. -- as one of these largest conglomerates, they have the fuel. There's no problem with this company increasing revenue. And they're very savvy at acquiring to add on not just more revenue, but more diverse revenue.

The question is, has the focus been so much on adding all these services that it's detracted from a really basic part of the financial equation, which is, once you add new revenue, you have to find operating leverage. You have to increase margin, cut costs so those profits start flowing to the bottom line. I believe that Endeavor has the pieces. But what investors are going to ask, institutional investors, when they view the roadshow, when this company goes on the road and pitches this IPO to pension funds, to big corporate investors, they're really going to dig into the question of whether the management team, Ari Emanuel and Mr. Whitesell, who we'll also talk briefly about, Patrick Whitesell, do these awesome talent and acquisition moguls have the type of clinical, operational acumen to now start making profit out of what's been a money-losing business for a number of years? That's why I can't seem to get sold on this equation.

I do want to flip it back to you, Nick, to talk about their acquisition expertise. I've got a small point to make about that. But the other side of this coin is, they're good at acquiring small companies, adding to their intellectual properties. Could that be the piece that makes them attractive as an investor? I'll ask you about their acquisitions.

Sciple: When you look at Ari Emanuel, he started Endeavor, the agency, the historical business that led to what it is today, in 1995. Really had a vision to shake up the management industry. And he's really done that. He's had a vision, and he's been talking about taking Endeavor public for a long period of time. His vision has clearly played out, and he's been very aggressive in doing so. There does appear to be some opportunity as Endeavor moves into content to leverage their relationships with clients to maybe do some vertical content creation for their clients, that can create new opportunities that didn't exist before, where you can see all these assets rhyming together to create more value than they would on their own. It's just to be determined to see how they will be integrated. I'd really like to continue to watch this company over several quarters. Even most of these acquisitions. The big moves into podcasts and sports betting are only a year or two world, so it's hard to see what the final product will be after the integration takes place.

What are your thoughts there? You said you had some additional thoughts there, on what's going on with M&A there.

Sharma: Yeah. Briefly, one thing they seem to have a talent with is increasing value. They've got a stable of private equity investors. They seem to have a talent for making an acquisition and then selling off parts and pieces after making the company more valuable. The example I want to use is Learfield IMG College, which as we said earlier deals with college sports licensing. Very valuable business. After forming this company through the merger of two other companies, Endeavor had a 49% stake in Learfield IMG College. It turned around and sold recently a 13% stake back to affiliates of Silver Lake Partners. That was a pretty lucrative deal for them. Out of that, they were able to book a nearly $700 million gain on their books, which made up for losses in 2019. So, there is a talent here for buying low, combining with other assets, selling not even the whole thing, but selling a slice of an entity at a higher price. There's some value there.

I also did want to mention that one of their goals is to pursue more strategic M&A. As Endeavor has grown, you could make an argument that since they got a rich investor in the form of Silver Lake in 2012, they've done a lot of acquisitions. Not all of them have been the most strategic in nature. It's more of what we've been talking about, building capabilities across this wide footprint. But the company says it's going to be pretty strategic forward. So, there's some opportunity there.

Sciple: The last thing I'll say there on management and M&A, if you're going to buy into this company, you need to believe in the vision of Ari Emanuel, who is the CEO of the company, as well as Patrick Whitesell, who's the chairman. They were co-CEOs or for a period of time leading up to this. Those two men, along with Silver Lake, will dominate voting control of the of this business. Pretty much any decision that's going to happen with the company moving forward, they're going to have the voting rights to decide that. So, you really have to believe in the vision of these folks moving forward, and be willing to give them a long leash because I think there's going to be some volatility.

As we move into these risks ... right off the bat, when they go public, there are some question marks there. I want to talk about, when you think about a business like Endeavor, that is in the talent management business, one of the biggest risks that you have is that your assets are your clients that you represent and the talent that they have to content producers. And there's always a risk that those clients may become unhappy with your services, and may move on to other agents. And if you lose that, then there goes your business. In recent weeks and months, there has been a growing controversy between not just Endeavor, but all the major talent representation agencies and the Writers Guild of America, which represents most of the TV and writers in the country. Off the top, I'll go into more detail on this, but Asit, can you give our listeners a brief overview of what this dispute is between the Writers Guild and Endeavor? What is the Writers Guild upset about with agents and the like?

Sharma: Sure. The Writers Guild of America represents the talent side of the equation. There is a traditional, very simple fee equation which has been around for decades in which writers receive a certain amount of each deal once they're represented and go to work for the buyer of the content. Nick, I believe you told me earlier that this goes back to a case from the 1970s, where the WGA was upset to but agreed to a newer fee structure which includes something called packaging fees. Packaging fees basically put out a model where a company like Endeavor is paid out of the production budget of each episode of, say, a TV series, and also retains some of the profits. This is a 3-3-10 model. 3% of the series license fee, Endeavor or a company like Endeavor would get upfront. 3% of the license fee will be deferred. And 10% of profits will go to an agency like Endeavor if those profits materialize, which will be important in a second. This is versus a traditional 10% commission that a writer could expect.

Now, if you look at the perspective of the WGA, which represents the writers, this is a conflict of interest. The more the writers are paid, the less profitable a show will be, and the less of the production budget is left to pay Endeavor, which affects the rest of that with the packaging fees. So, WGA has basically gone to court, and they are suing not just Endeavor, but the other major talent agencies at the completely wrong time, I should say, for Endeavor. Nick, as we've been working on this episode over the last week, it seems like every day there's a new sally in this, which is not great news when you're getting ready to go one of these road shows and pitch your case to institutional investors.

But I'll flip it back to you. That's the brief overview, the context. Listeners, I will let our resident attorney, Nick, peel the onion back a little bit more for us.

Sciple: You've seen, like I said, in recent weeks and months, this feud between the Writers Guild and the major talent agencies flare up. As you mentioned, the Writers Guild has recently filed lawsuits against the major talent agencies, of which Endeavor is one, saying that, as you mentioned, there's a conflict of interest between these talent agencies getting these packaging fees that get a percentage of the production budget, and that amounts to a violation of the duty of loyalty that a fiduciary owes to their clients. In this case, the agent owes a fiduciary loyalty to the writer in this situation. If you are taking a percentage of the profits of a show, it's in your incentive to not increase the labor costs of said show, therefore, to keep the profits higher. So, there's a clear conflict of interest there.

However, there are some question marks over whether this has really caused a net harm to writers. To prevail on a claim or where you're alleging a violation of a duty of loyalty, you have to prove that there was harm, and that there was no a consent by the plaintiff to the agent's behavior. In this case, over the past five years, Endeavor has called out that only five series on ABC, CBS, NBC, or Fox have even generated backend profits, where those production rights would kick in. So, only for a small percentage of productions is this conflict actually materializing. For the vast majority of cases, Endeavor not taking their 10% traditional commission from their clients actually results in, in most cases, their clients getting a 10% higher payout than they would otherwise. So, it's to be determined how this case is going to play out.

There's also, the Writers Guild is suing all the talent agencies, alleging that they are price fixing, it's a horizontal price fixing allegation. I don't think that one is going to go forward, it's just very difficult to prove. You need a smoking gun, an email or something that says, "We agreed to fix prices at this price."

But then there's also a third lawsuit going on, also an antitrust lawsuit, where you've got all the talent agencies counter-suing the Writers Guild of America. William Morris Endeavor was the first one to do, filing suit in Los Angeles federal court on June 24th. They have an antitrust case going back the other way, alleging that the Writers Guild -- a little bit more background here. The Writers Guild passed a new code of conduct back in April. Part of that code of conduct required that any agency that would do business with the writers would have to sign on to it, and the provisions of that code of conduct prohibited agencies from engaging in packaging fees, as well as -- something Endeavor also does -- producing their own content in-house. When you're producing your own content as well, you can see, you become management as well as representing your clients. 7,000 writers have left their agents since that has taken place. They say that like 1,500 of those have left from Endeavor. Anyway, related to that lawsuit, Endeavor and the rest of the major talent agencies have countersued the Writers Guild of America, alleging a concerted refusal to deal, a group boycott that even violates the antitrust waivers that traditionally labor groups get from antitrust provisions.

All that to say, all these talent agencies, suing the Writers Guild of America. The Writers Guild of America, suing the talent agencies back and forth. That resulting in Endeavor potentially losing a meaningful number of its writer clients. Coming back to the investing point of view here, when you look at the uncertainty when it comes to Endeavor being able to keep its talent in-house ...

One last thing I'll mention is, the WGA is directly going after Endeavor's IPO. On July 2nd, they filed a letter directed at potential Endeavor investors, laying out the conflicts between WGA and Endeavor.

When you see all this playing out, how concerned does this make you for the IPO, and also for the business moving forward as well?

Sharma: Let me take the business first. The business is not as much of a concern. It's to everyone's interest that the WGA -- regardless of the fact that it's in attack mode now -- strikes a deal with the major agencies. Either they'll get some concession and peel back one or two of what they perceive to be conflicts of interests and breaches of fiduciary responsibility in the form of maybe even negotiating smaller packaging fees. They'll have some pullback. The two groups have to work together. The Guild needs the talent agencies, and vice versa. So, long-term for the business, there aren't that many concerns.

However, this has been a strong run in the markets over the last year two for initial public offerings. If you think about it, Endeavor, which is not a tech company, although they are investing in smaller technology-enabled companies, they're not a hot healthcare company, they are a content company, which has a good look in that they are a little faster-growing than your average content company. They're competing for investment dollars. And this is the rub -- when you're pitching this on Wall Street, institutional investors are going to be hesitant to step up in a big way. That can affect the pricing of the issue. And as we all know, the pricing of the issue determines how much you raise. That determines how much you'll have left to shore up working capital and pay down debt. And an institutional investor who thinks through this can see, if he or she looks around and does not see a groundswell of support because of the uncertainty around these legal issues -- if there's not enough groundswell of investment, you can do the math and understand that the IPO itself won't change the complexion of the company. And then, if you're an investor, why would you invest in that case? There's a circular logic that develops when a roadshow is assailed by issues like these. We've seen this story before over the years.

So, I am concerned for the IPO. I think it's within the realm of possibility that the IPO could be delayed or even shelved for some time. As I said, we haven't seen an amended statement yet. This initial statement was filed on May 23rd. It's about time to see that first amended statement that starts punching in numbers where right now, we just have placeholder blanks in the registration statement. So, I think it's sort of a worry.

Moving to the larger question, let's say they get through the IPO. Is this something that you, listener, would want to put your money behind? I'm going to ask Nick to opine on that first. I'll also give my opinion.

Sciple: I would say, right now, I want to see a couple quarters of how things play out. As I mentioned earlier, they've made a large number of acquisitions in the past few years. Particularly, some of the more interesting content that they've moved into has been in the last couple of years. So, I'd like to see how those things continue to get integrated. As well, we have this litigation hanging over their heads. Even if this dispute doesn't go to trial, the negotiations back and forth could take some time. If there is a work stoppage at any point, that of course is going to be a significant issue to Endeavor. If their clients are not working, they can't collect fees.

However, when you look at these package rights, that does give maybe Endeavor a little bit of leverage over the Writers Guild in this situation, in that Endeavor is going to have consistent revenue coming in from these package rights, while the agency, if they had a work stoppage or something like that, is just not going to have the same type of cash coming in. So, it looks as though Endeavour could have some leverage. But I want to see how things play out.

Another thing to think about, too, is the employees of this company, as they've made all these acquisitions and been preparing to go public, have been counting on getting some liquidity from this IPO. If that affects that, I'd be concerned -- in an agency like this, you could have some departures or move elsewhere. I really want to see those question marks be resolved before I put a lot of cash behind this company.

I will say, before we really dove into a lot of these issues, I was very excited about all the assets that Endeavor holds and the way that they can leverage their relationships with their clients to touch content across the board. I still like those assets, but I really want to see this dispute with the Writers Guild get resolved, and I would like to see a couple quarters at least have continued integration and some positive signs that we're going to see upticks in EBITDA. So, I think it's a "watch, wait and see" for me. Very interesting, but I want to see some more clarity right now. What about you, Asit?

Sharma: Yeah, I'm in the same boat, Nick. I want to watch this for a few quarters. Like you, I like the assets. The assets are strong. But the problem with this S-1 is, "Our strengths are our strengths, and we're going to amplify them even more." There really is no consideration in this S-1 to say, "Hey, we could have done a better job with controlling our operating costs, especially the distribution costs that go hand in hand with content, our marketing and selling costs," which are high. I think, if there'd been a little bit of focus to that, and a plan presented, like, "We have not just a way to become stronger on adjusted EBITDA basis, but on an EBITDA basis, or GAAP basis," income according to generally accepted accounting principles. Some kind of plan to show, on the operational side, that they can control costs and start getting some of that operating leverage. I would have been a little more excited about this. To me, that would signal, "We've got these great assets and we can make them profitable." And at the end of the day, investor, you need strong and growing cash flows just as you need a nice-looking adjusted number that you've been able to pick and choose what goes into that formula.

So, I'm going to wait and see. A very interesting company. This isn't to say that some point, you wouldn't want to make an investment. But I would not rush in for a few quarters at least.

Sciple: Yeah, I feel the exact same way, Asit. We'll continue to follow this one. It touches so many things I like -- sports, content.

Sharma: I know!

Sciple: Super interesting company. We'll definitely continue to follow it.

Sharma: Even had the betting angle for us, sports betting.

Sciple: I know, right? Everything we're talking about.

I always love having you on, Asit. We'll continue to follow this one, and hopefully talk about some more companies soon.

Sharma: Awesome. Looking forward to it. Thanks!

Sciple: You're welcome! As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear. Thanks to Austin Morgan for his work behind the glass. For Asit Sharma, I'm Nick Sciple, thanks for listening and Fool on!

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