The UFC is taking a massive chunk of their cash reserves and giving it to their owners and investors. That is according to a report from the New York Post, stating that the leading MMA promotion has “approved a massive $300 million dividend to UFC investors.”
According to the report, half this money will be going to Endeavor, which owns a 50% stake in the UFC after the 2016 purchase. UFC private equity backers KKR and Silverlake will reportedly “also cash in” from their 42% stake in Endeavor.
The numerous celebrity investors that bought in a couple of years ago, will also receive dividends. As an example, Mark Wahlberg is said to have around $500,000 coming to him, while model Gisele Bündchen will receive $145,000.
The report pegs Dana White and Ari Emanuel to each receive “more than $3 million each,” although it could be much higher.
The NY Post’s source also claims that these payouts are due to the failed IPO from Endeavor late last year.
“Because an idea did not work, the UFC is now going to be the next source of cash until Endeavor goes back out again to try to go public,” said a source close to Endeavor. “It’s now draining the UFC in order to prop up the rest of the company.”
Some interesting financial numbers were also included in their report. According to their sources, the UFC had $900 million in revenue, and just $150 million of that went to the fighters. This would mean that the UFC paid fighters less than 16% share of the revenue.
This “under 16%” share is roughly in line with the company’s own projections (17% in 2019), but Endeavor’s President Mark Shapiro still tried to defend this stark difference to the other major sports that pay close to 50%.
“It’s different league by league,” Shapiro said. “We pay our fighters significantly more than any other MMA organization. They deserve it. Fighter compensation has gone up commensurately with the success of UFC.”
Bloody Elbow’s business analyst John Nash broke down how and where this $300 million could come from:
It would be interesting to know how they’re financing the dividend. If it was solely from earnings in 2019, then their EBITDA margins are much higher than previously suspected.
Based on reports by both Moody’s and Reuters, the UFC’s EBITDA was expected to be roughly $340 million in 2019. The company also reported having $80 million in cash on hand last summer. With $140 million or so in interest payments, plus another $10 million or so in CAPEX spending, the UFC seems to come up a little short on our back-of-the-envelope accounting for their $300 million dividend.
It’s very possible that the dividend is also including the money made from McGregor’s UFC 246 blockbuster or that the UFC’s EBITDA margins were much higher in 2019 that either Moody’s or Reuters reported.
With only $150 million being reportedly spent on fighters, and with cost savings that have apparently lowered their non fighter expenses since 2015 (supposedly shaving $50 million off of what was around $300 million then) the UFC’s EBITDA margins could be as high as 50% (something they projected for 2019 back when the Fertittas sold). This would give them more than enough to not only pay the interest on their loans, plus their CAPEX, and still have enough to pay out a $300 million dividend
While the sources in the NY Post’s report also questioned just how “ordinary,” it is to “dividend 90 percent of your cash,” this development isn’t as surprising to those following the business end of mixed martial arts. While this was the first time the UFC issued dividend payments to their new owners since the 2016 purchase, it was more of a common occurrence under the company’s old regime.
Nash explained as much, while also giving a few more analysis and observations given the report’s financial numbers.
- As big as that $300 million dividend sounds, it’s not the first time that the UFC had made massive payments out to its owners. In 2007, Zuffa apparently useful a large portion of their $325 million loan to pay a special dividend to Dana White and the Fertittas, totaling $199 million. In 2009, the company paid a $305 million dividend to its owners.
- It was reported that Dana White, while no longer owning a stake in the company, would still receive his previous 9% share of profits. If that’s still the case, then his dividend payment may instead be closer to $27 million.
- I am assuming that for fighter cost, they are referring to bout compensation and not including the other costs, such as identity payments, USADA, and the Reebok outfit policy, which would add another $24 million or so to costs.
- The “under 16%” revenue share, while eye-catching, isn’t that surprising. Projections from the time of the sale were that fighter compensation would be 17-18% in 2019 (with other fighter costs bringing the total up to 19-20%). Those numbers were considered conservative too, so if the $150 million number is accurate that would mean that the UFC managed to keep fighter pay around where they had hoped it would be.
- The $900 million in revenue isn’t very surprising either. It’s very close to what we estimated it would be at the end of last year, but still lower than the $1 billion plus they were projecting back in 2016.
- If we add Bellator and their projected $80 million last year and the PFL, then the three major MMA promotions combined for $1 billion in revenue, with the UFC being responsible for 90% of it.