On Monday, UFC parent company Endeavor Group Holdings released its second quarter results. While the company missed Wall Street expectations with alone $ 1.1 billion in revenue for the quarter, that cannot be blamed on the UFC which has seen impressive growth and turned out to be a cash cow for the heavily indebted Endeavor. According to their statement, “UFC’s second quarter performances – including three sold-out sold-out sold-out events – led to the largest first half in UFC history.”
Endeavor CFO Jason Lubin explained this during Monday results call:
UFC had a huge second quarter, which saw it achieve its biggest first half in terms of revenue and Adjusted EBITDA. The quarter benefited from three additional live events, including one pay-per-view. All three pay-per-view events during the quarter were at capacity and broke local gate records.
While neither Endeavor’s publication nor its SEC documents revealed UFC-specific numbers, they did have a breakdown of Endeavor’s three main segments, including owned sports properties of which the UFC is. the main component.
Highlights of Owned Sports Properties included revenue of $ 258.9 million for the quarter ending June 30, 2021. This was an increase of $ 106.6 million from the second quarter of 2020 An impressive increase of 70.0%. For the first 6 months of 2021, revenue reached $ 542 million, an increase of $ 157.9, or 41.1%, from the first 6 months of 2020.
The industry’s adjusted EBITDA for the second quarter of 2021 was almost double that of the previous year, rising from $ 66.8 million to $ 132.3 million. For the 6 months ending June 30, EBITDA increased from $ 168 million in 2020 to $ 278 million this year. Their margins are now above 51%.
Endeavor attributes these improvements primarily to an increase in media rights fees and an increase in the number of events held. According to Endeavor, their last five rights renewals have generated a 100% increase and record media deals for them in France and China. As for the number of events, in the first 6 months of this year they have hosted 22 UFC events, while in that same period in 2020 they have only hosted 16 as several events have been canceled. due to Covid-19.
In addition to income and profit, their 10-Q / A reported that their direct operating costs and selling, general and administrative expenses were also up compared to last year. This increase was mainly attributed to the cost of personnel as well as “travel costs related to the increase in the number of UFC events organized, including UFC Fight Island 3.0”.
The UFC constitutes the majority of these results for owned sports properties. We can extrapolate just how much by comparing previous reports on UFC’s annual revenue to the revenue reported by Endeavor for the segment.
In 2019, the UFC generated approximately $ 860 million in revenue, or 92% of the $ 936 million generated by Owned Sports Properties. In 2020, the UFC generated approximately $ 890 million in revenue, or 93% of the $ 953 million generated by Owned Sports Properties that year.
If we look at EBITDA, we see UFC making up a similar share. In 2019, the UFC had an estimated EBITDA of $ 374 million, or 90% of the EBITDA of its sports properties. In 2020, it was estimated at $ 423 million, or 92% of segment EBITDA.
If UFC still accounts for over 90% of the revenue and EBITDA of owned sports properties, the promotion will target $ 500 million in revenue and EBITDA of $ 250 million or more in the first 6 months.
If those numbers match the second half of the year – which is very possible given how UFC 264 has been one of the most successful events in UFC history and will be included in the third quarter results – then the UFC could end up hitting the billion dollar mark. in income this year, something they’ve already accomplished just looking at the past 12 months. (At least $ 506 million in revenue in the last 6 months of 2020 and around $ 500 million in the first 6 months of 2021.)
On average per event, the UFC will have seen its revenue drop from $ 22 million in the first half of 2020 to $ 23 million this year. EBITDA per event will also increase from $ 10 million last year to $ 11 million in the first 6 months of 2021.
Assuming the UFC represents a similar portion of Owned Sports Properties’ expenses, selling, general and administrative expenses will have decreased by 10%, from $ 4.3 million per event last year to $ 3.9 million. in 2021. Direct operating costs – which would include compensation for fighters – will have risen from an average of $ 8 million per event last year to $ 7 million per event this year.
Revenues from sports properties owned by Endeavor are primarily derived from “media rights fees, pay-per-view, sponsorships, ticket sales, subscriptions and license fees”. While they don’t break down specific line items, they do separate them into three categories:
- Media rights, which cover most contractual rights, including national and international broadcast rights, ESPN + PPV contractual income, and contractual license and sponsorship income.
- “Media production, distribution and content” which represents a tiny percentage of segment revenue.
- Events and performances, which would cover all non-contractual income such as ticket sales, additional à la carte income beyond the contractual guarantee and royalties.
Income from sports properties owned
|Returned||2018||2019||2020||Q2 2020||Q2 2021||Q1 + 2 2020||Q1 + 2 2021|
|Returned||2018||2019||2020||Q2 2020||Q2 2021||Q1 + 2 2020||Q1 + 2 2021|
|Media rights||264,380||542,406||555,124||103 226||162,938||226,040||340,591|
|Media production, distribution and content||5 768||7.136||5 956||1,064||1,240||3,200||3427|
|Events and performances||502,584||386,223||391 544||47,949||94 687||155,166||198,328|
In the past 12 months, owned sports properties have generated $ 435 million in event and performance revenue. This is largely due to pay-per-view, Endeavor CEO Ari Emanuel stating that “[o]On the pay per view front, over the last 12 months we have had a record total of pay per view purchases and the average pay per view per event has reached an all time high.
Their reported income also shows a drastic increase in media rights from 2018 to 2019 and an almost equally drastic decrease in event and performance income. The $ 278 million increase in media rights was in part due to the new ESPN broadcast deal which paid off more than the previous FOX deal and the ESPN + pay-per-view domestic contract. The $ 116 million drop in event performance was “primarily related to the transition of UFC residential pay-per-view sales from cable and satellite providers on an event-by-event basis to inclusion in the contract. long-term media rights with ESPN. . “
Endeavor also reported that as of June 30, 2021, they had “borrowed a total of $ 2.3 billion in senior term loans under the UFC Credit Facilities” after repaying $ 180.2 million the day before. These loans were revalued in January of this year, with UFC credit facility borrowings bearing interest at a variable interest rate equal to LIBOR plus adjusted or ABR plus. Based on current LIBOR, the UFC is expected to seek around $ 81 million in interest over the next 12 months, plus an additional $ 23 million in amortization. These payments should only represent around 1 / 5th of their EBITDA.
UFC’s credit facilities also include a revolving credit facility, which had a total borrowing capacity of $ 205.0 million and letter of credit and swingline loan sub-limits of up to 40. $ 0 million and $ 15.0 million, respectively.
Endeavor has highlighted a risk for the UFC: the pending class actions for which they are awaiting the official written opinion of the judge granting the group certification. The plaintiffs “seek treble damages under the antitrust laws, as well as attorney’s fees and expenses, and an injunction.” They note that the UFC intends to defend itself vigorously.
While Endeavor notes the risk posed by the lawsuit, they seem little concerned about competing with another MMA promotion. When asked whether Endeavor president Mark Shapiro was affected by competition with other MMA entities, his response revealed how little concern they had with old competitors or interested in acquiring the ‘one of them.
We do not seek to associate with anyone. We are not looking for joint ventures. We no longer need dry powder. We are in a very strong cash position, and frankly our cash will not be spent on MMA acquisitions. The UFC is paramount. This is the trophy asset and it will remain so. We really love competition. I mean he drives – did Dana White need more octane in her bloodstream, if you work with this man, and a rising tide lifts all boats, be it the USFL and the XFL with the NFL, the Continental Basketball Association with the NBA, La Major League Soccer and what has it done that has no impact on European football or the PFL.
Remember, PFL, Pro Fighters League is on ESPN. In fact, they are using the UFC to promote the PFL. So come one, come all, whatever makes MMA Sport grow, the combat sports space is for our benefit. So we look forward to more things to come.
Endeavor’s third quarter ends on September 30 and their next earnings call can be expected in November.