I know there were a few splashy front page stories when Endeavor released their 2021 annual report but all I saw was a bunch of stuff about how much the CEO made and the comment thread devolved pretty quickly into a raging shit show. But did anyone actually read the report?

I'm in the middle of planning a move and wrapping up a few projects so I've had that SEC Filing saved on my reading list for a while without being able to read it. But I finally had some time and I don't think people really understand how much the UFC very much DOES NOT equal Endeavor Group Holdings, Inc.

Also, for all the magic 8-ball speculation about UFC finances, Endeavor does not provide much, if any, granular data specific to UFC costs, compensation, revenue or projections. So when you see people talking about how they "calculated" or "extrapolated" UFC business numbers they are uninformed about business, bad at math, lying, or some combination of the three.

The filing (known as a 10-K) is required by all publicly traded companies and is available to everyone from any number of investor sites or just as easily right from Endeavor's investor page on their website. Its 172 pages long but a lot of it is boiler plate legal stuff.

I want to dig into a few pieces of what we can glean from this report and point out the disconnect with many assumptions I see here. Not by everyone, I get that, but the comments about the business side our MMA watching hobby tends to a few defined directions on this online karate magazine, so let's dispel some myths.

The UFC IS RESPONSIBLE FOR A SIGNIFICANT, IF NOT MAJORITY, OF ENDEAVOR'S REVENUE.

This is absurd. Endeavor splits their operations into three segments. The UFC is part of their "Owned Sports Properties". This consists of the UFC, PBR (Professional Bull Riding), their 20-year partnership with Euroleague Basketball and the fact that in 2021 they formed Diamond Baseball Holdings and outright purchased six teams in MBL’s Professional Development League. They own teams in some of the lower levels but they also own Triple-A teams, including the AAA team right under the New York Yankees.

The initial press release said they were buying nine teams, but their 10-K stated they only bought six. Not sure if the other 3 fell through or are still ongoing negotiations. They partnered with the venture capital firm Silver Lake for this deal and have stated that their growth plan is to eventually own up to 40 or more MLB affiliated teams.

Anyway, is the UFC the largest part of THIS segment? Probably. Sort of.

Back in 2020 Owned Sports was the only segment that increased (by $16.9M) and they did call out the UFC for contributing this with a $20M increase in UFC rights fees, but this was surpassed by a $25M fee they got from the Euroleague when they canceled their season.

In 2021, Owned Sports saw an increase of $155M but they do not break out the individual contributors of that, saying only it was due to "increase in media rights fees, sponsorship deals and increased number of UFC events" plus increase in PBR events and successful completion of the Euroleague season.

So the UFC wasn’t the biggest contributor in 2019, but maybe 2020? I don’t know. Maybe.

Still, Owned Sports revenue was about $1.1B in 2021. Out of Endeavor’s total of $5.1B which equates to 21.8%; not even a quarter, barely more than a fifth. And this is ALL Owned Sports. The UFC is only a fraction of that, even if it is probably a large fraction.

As for profitability, Owned Sports had a total profit of $537.6M for the year. Is that mainly from the UFC? Is it all from the UFC and the other entities are losing money? No idea. No one out side the company and their accountants know. They are not required to break that out since the public can not buy shares of the UFC directly.

But remember this is only their operational profit. All of the back-end corporate costs are excluded. That was over $256M that all three segments have to cover.

HOW MUCH DOES ENDEAVOR DO BESIDES THE UFC?

Holy shit! A LOT!

Their largest segment is "Events, Experiences & Rights". Their IMG Events portfolio is insane. Concerts, international art tours, the Miss Universe pageant, major conventions, they put on New York’s Fashion Week. They just bought tennis’s ATP/WTA Madrid Open event. Even weird shit like the Taste of London culinary event and Hyde Park Winter Wonderland. They have services to help regional leagues develop and grow. They do venue management for stadiums and arenas all over the world.

The IMG Academy business came from them buying Nick Bolleteri’s tennis academy in Florida and is considered one of the top training facilities in the world.

Their IMG Arena service does the video, studio work and media production services for events all over the world, including things like the NFL, Wimbledon, English Premier League and Ryder Cup.

In September they also bought 100% of OpenBet for $1.2B to do online sports betting around the world.

They distribute global media rights on behalf of the Olympic Committee, the NFL, the NHL and 150 other clients.

The own NCSA, a for-profit division that works with middle and high school athletes to help get into the recruiting field for NCAA Division-I Schools.

They just bought On Location which sets up "fan experience events" on-site at events like the Super Bowl, NBA All-Star Game, Coachella, Burning Man, the Final Four, Olympic Games, etc.

They have Endeavor streaming that handles the tech and licensing side of live streaming for sports and media in five continents.

Lastly they have Endeavor Content that actually creates scripted and non-scripted shows and movies for streaming platforms. If anyone else is also watching Severance on Apple+ (and you totally should, its amazing!) that was created by Endeavor.

This Events, Experiences & Rights did just over $2B in revenue in 2021. Almost double all of their Owned Sports Properties combined.

Their other segment is "Representation" where they work as managers and agents for talent in every field: music, movies, television, authors, social media influencers, Broadway stars, you name it. In 2021 they represented 10 Tony award winners, 18 New York Times No.1 best sellers, 330 scripted television series. They licensed celebrities and celebrity brands totaling $15B in retail sales in 2021.

They also have their own Endeavor Modeling agency and they own One Sixty Over Ninety, which is a huge marketing & branding firm in Philly.

Their Representation segment did $1.96B in 2021. 76% more than the UFC’s Owned Sports segment.

I had no idea about half of this. I knew the talent management stuff and a lot of the tennis events but had never heard about most of these subsidiaries

ENDEAVOR HAS MASSIVE CASH FLOWS THAT COULD BE USED TO PAY FIGHTERS

Not really. Not unless you want to take it away from someone else, which clearly many of you do. I get that. Loud and clear.

Endeavor over all had a net loss in 2021 of $467.5M or -$1.14 per share. A bit better than say Uber (-$1.35 per share) and way better than AirBnb (-$12.08 per share!)

Endeavor is very much in debt. As of Dec 31, 2021 they had $5.6 billion in debt with the ability to borrow only an additional $381M. They are floating this debt through interest rate swaps and with inflation pushing rates up they specifically call out that every 1% increase in overall rate will cost them an additional $41 million per year.

They also inherited several loans from the UFC that are on much worse terms than Endeavors existing debt with very restrictive clauses about how that can and cannot be restructured. So they plan to pay it off as-is. This includes an 8-year lien for $425M secured by "substantially all of the assets of Zuffa".

So Endeavor as a holding company is not cash flush in a way that could just subsidize UFC costs and pour in money irrespective of UFC specific revenue

Fighter pay is considered an operating expense and would have to be covered by the UFC’s own revenue. The fact that movie star actor agent fees are up or that Severance is one of Apple+ Streaming’s top shows doesn’t mean the UFC gets to spend more money. That kind of general revenue increase may be used for capital expenses like international expansion, new facilities, or other strategic objectives but when it comes to employees and fighter contracts, the UFC has to carry its own weight, month-over-month and year-over-year.

THE UFC HAS/HAD $4B FROM WHEN THEY WERE BOUGHT THAT ISNT SHARED WITH THE FIGHTERS

This idea, or some reference to that four billion number comes up a lot. To be clear: The UFC does not have $4B in the bank. At all. And it never did.

The UFC acquisition was completed on May 3, 2021. Endeavor paid $300M to the Zuffa owners in three installments. They did this by issuing 17,119,727 shares of Class A Endeavor stock with a promissory note that was converted to another 6,975,244 shares 9 months later. This was pre-IPO so these were internal shares that you cant sell publicly. So for the people that wanted cash they had to sell these shares back to Endeavor, which most did. Endeavor cashed out $202.6M of those shares so it only had to give up $97.4M in stock. (plus the $16M promissory note shares)

The rest of that $4B was raised by a number of private equity firms that all pitched in to buy out the Fertitta’s and their investors. Those firms (Silver Lake being one of the largest) actually own about 40% of the UFC but are governed by an operating agreement that gives Endeavor 100% controlling interest to run the company. But those investors are entitled to direct profit sharing and/or debt servicing on the money they lent to Endeavor.

There were also a bunch of special shares of Zuffa that the Fertitta’s had created in anticipation of being bought. These were called Class P Units and Endeavor used Zuffa’s existing credit lines to finance $537.7 million to buy these out as well. So all that money, the $202.6M plus the $537.7M all went out the door as well as millions of new Class A shares that had to be converted into real shares when Endeavor went public.

Endeavor/UFC is left with additional debt, diluted Class A shares, a bunch equity partners that are entitled to revenue shares and 100% control of the UFC that they think they can run and grow into something worth far more than they paid for it. That’s it.

There is not some Ari Emmanuel Piggy Bank Fund in the UFC’s bank account with $4B dollars in it which Dana refuses to share. That’s just not how this works

FINE. BUT ARI AND OTHER EXECUTIVES STILL MAKE A SHITLOAD OF MONEY

This is true. They do. Ari Emmanuel has a base salary of $4M, the same as he had pre-IPO. He also has an annual bonus of $6M if he hits performance metrics set forth by the board. If he gets 90% of his numbers he's entited to at least 75% of that bonus. Anything less and the Board can pay or not pay him any bonus amount they think is appropriate.

He then has equity grants tied to the share price. They went public at $24 per share. As soon as it hit $28.50 (which is an 18.75% increase in company value) he received $26.5M in shares. After that, he gets $100M in shares for every $25.00 he can add to the stock price. So his next bonus is when NYSE:EDR hits $53.50. Its currently $27.09 and has never been higher than $35.28 so we have a ways to go here.

Endeavor is currently a $12.26B company which is up from the $10.86B it was when it went public. Which is up significantly from what it was worth as a private company.

Regardless of size or performance growth, many people feel $10M/year plus stock grants is too much for one person. Okay, I can respect that opinion or at least understand where it comes from but given a company this size I dont see the direct line back to "Fighters should make more" based on these numbers. Endeavor has 7,700 employees in 29 countries.

Fighters are contractors, not even full employees. If there is going to be a revenue redistribution, I would have to think that there are a lot of people already in line for a larger slice of this international corporate conglomerate that probably come before the independent contractors of one company in its lowest earning segment.

I want to do some more diving on some of its debt servicing numbers but I doubt that merits any write up on this site but here's the thing I can tell you:

This is the official document filed with the SEC, signed by Ari himself and validated by Deloitte & Touche as a certified public auditor and there are ZERO details in here about UFC business numbers. No revenue sharing, ticket sales, PPV, licensing, sponsors, or anything else. NOTHING. So when you see people writing about "UFC REVENUE" please make one of your first thoughts and your very first comment be "Where are you getting these numbers?"

Because if its some twice-removed extrapolation of limited data referenced in a court filing from 2014 or something than that is nothing but utter bullshit and should be treated as such. Its guess work at a very forgiving best and outright cherry picked lying in order to make people angry at a very realistic worst.

If anyone does take the time to dive in on the report as well, please post in comments if you see anything else particularly relevant that I missed. I only had some time this morning to read through this and I openly admit I haven't sifted all the details and charts in the exhibits. For instance, I still want to reconcile a lot of those building asset numbers with what they claim to have bought from Zuffa. But when I have time, when I have time....