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What we now know about the UFC’s finances

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A common refrain from fans for years was because the UFC was a private company, we, the public, was in the dark when it came to their finances. At best, we may know what their total revenue is for a given year, thanks to investor services like Moody’s or Standard & Poor’s. Anything more than that, such as net income, expenses, and amount paid to fighters, was near impossible to gleam.

A few years ago, I tried to use all the available financial data, including a 2007 Confidential Information Memorandum from Deutsche Bank, to come up with a breakdown of the UFC’s revenues, debt, and earnings. Since posting that series, a lot more information has become available to us, thanks mostly to the UFC’s sale in 2016, and the current antitrust lawsuit. From both of these sources, we’ve attained information pertaining to revenues, pay-per-view sales, fighter compensation, and expenses, almost exclusively covering the period from Zuffa’s purchase of the UFC from the Semaphore Entertainment Group until Frank and Lorenzo Fertitta’s sale to WME-IMG (now Endeavor).

For all the financial data posted in this article, I’ve tried to limit myself to material that was produced by Zuffa or with their assistance. This includes reports prepared by Zuffa for Deutsche Bank, a Lender’s Presentation prepared by WME-IMG, various Expert Reports from the UFC antitrust lawsuit that made use of Zuffa finances, as well as exhibits from the same suit that were displayed during hearings that made use of internal Zuffa documents or revealed formerly sealed financial information.

Multiple sources have now revealed Zuffa’s yearly revenues. We have combined these in the graph below, with the amounts in the blue columns being total revenues for January 1st-December 31st of the respective year. These come from the Deutsche Bank Memorandum and/or the Lender’s Presentation. For the few years where I am missing total revenues between 2001-2016, I use event revenues, which typically are around 90% of the total revenues. These are represented by the green columns and are taken from the Expert Reports of both Hal J. Singer and Andrew Zimbalist. The red columns show projected estimates which are taken from a page in a document named Project Basquiat, that was produced by WME-IMG following their purchase of the UFC in 2016, and was shown during a hearing in the UFC antitrust lawsuit.

UFC Total Revenue By Year

Year Revenue in millions
Year Revenue in millions
2001 4.5
2002* 8.7
2003* 7.5
2004 14.3
2005 48.3
2006 180
2007 226
2008 275
2009 336
2010 441
2011 437
2012 446
2013 516
2014 450
2015 609
2016* 666
2017E 735
2018E 800
2019E 940
2020E 980

A slide of an exhibit from the Expert Report of Andrew Zimbalist shown during the recent hearings revealed the event revenues for the following additional years:

2014 $412,923.026

2015 $490,465,381

2016 $666,060,145

Multiple sources were used for the total fighter compensation and wage share.

For the years 2001-2011, a pair of internal Zuffa graphs that were shown during the hearings were used to attain wage shares. The first graph showed “Fighters Comp as % of PPV Event Revenues” and was used for the years 2001-2003 (during that time, all of the events were PPVs). The second graph was for “Fighter Comp as % of Event Revenues”, and was used for the years 2004-2011.

For 2001-2011, total fighter compensation was calculated by multiplying the “Figher Comp %” and Event Revenue.

For 2012 on, for both wage share and total fighter compensation, the Project Basquiat page was used.

Green uses “Fighter Comp % of PPV Event Revenue”, Blue uses “Fighter Comp % of Event Revenue”, Yellow uses Project Basquiat page, Red is from Expert Report of Andrew Zimbalist, and Purple are projections from Project Basquiat page

When it came to EBITDA and net income, fewer years were available to me. Much of this still remains redacted in the Antitrust Lawsuit’s Expert Reports.

The 2007 Deutsche Bank Memorandum supplied the EBITDA and net incomes for 2004-2006. The Expert Report of Hal Singer provided the EBITDA and net income for 2010. The 2016 Lender’s Presentation provided the Pro Forma EBITDA for the years 2012-2015 and the net income for 2015.

According to the Expert Report of Hal Singer “Zuffa’s profits also appear to have been understated by Zuffa’s accounting practices. Zuffa’s purported “costs” include corporate jet expenses, bonuses, and management fees.”

UFC EBITDA and Net Income in millions

Year EBITDA Net Income
Year EBITDA Net Income
2004 0 -0.7
2005 6.7 6.3
2006 77 76
2010 169 130
2012 116
2013 171
2014 195
2015 189 119

UFC EBITDA Margin by Select Year

Year Margin
Year Margin
2004 0%
2005 14%
2006 42%
2010 39%
2012 28%
2013 33%
2014 21%
2015 31%

The total number of pay-per-views sold by year for the year 2009-2015 is taken from the Expert Report of Robert Topel. For 2001-2006, the 2007 Deutsch Bank Memorandum was used.

Total PPV Buys Per Year

Year PPV Buys
Year PPV Buys
2001 145588
2002 284214
2003 254890
2004 388324
2005 1096954
2006 4984204
2009 6457737
2010 7707123
2011 6848000
2012 4826147
2013 5843173
2014 2844591
2015 6412699

Residential PPV revenues were approximately $87 million in 2006, $190 million in 2010, and $195 million in 2015. The amount the UFC earned per PPV buy would have been approximately $17.45 in 2006, $24.65 in 2010, and $30.41 in 2015.

The breakdown of UFC revenues in 2006 was compiled using the 2007 Deutsche Bank memorandum. The breakdown of UFC revenues in 2015, along with PPV share of revenues and the annual revenues from domestic media rights are all taken from 2016 Lender’s Presentation.

UFC Revenue Sources in 2006 (in millions)

Source Amount
Source Amount
Residential PPV 87
Commercial PPV 4.1
Sponsorship 16.6
PPV Event Tickets 27
Taped TV 27
Int’l Rights.Fees 1.8
Merchandise 5.8
Digital 0
Live Events TV & Tickets 10

UFC Revenue for 2015 in Millions

Source Amount
Source Amount
Fight Pass 14
US Media Rights 128
Int’l Meda Right 83
Residential PPV 195
Commercial PPV 42
Sponsorship 52
PPV Event Tickets 48
Non PPV Tickets 19
Other Live Event 9
Other Consumer Products 2
Online 1
UFC Gyms 2
Video Games 4
Event Merchandise 4
Licensing 6

The breakdown of UFC expenses in 2015 was compiled by adding fighters total compensation for the year to the data found in the 2016 Lender’s Presentation.

Breakdown of UFC expenses in 2015

Category Amount in 000,000s
Category Amount in 000,000s
Employee Compensation 55.4
Content Production Costs 96.1
Marketing Costs (including PR) 51.2
T&E 23.6
Facilities / Consulting / Legal / Lobbying 19
Other G&A 22.1
Fighter Compensation 113
Supplementary Bonus 17.8
Equity Method Investments 6.9
Ow ner Plane Expense & Additional T&E 5.3
Net Interest Expense 21.8
Income Tax Expense 12.1
Depreciation and Amortization 7.8
Other Expenses 38.4

Four years ago I posted an article entitled, What investors are being told about UFC debt. that covered Zuffa’s loan history. Here is an excerpt from that article, covering their loans from 2007 through 2015:

In June, 2007, with Deutsche Bank operating as the lead bank, Zuffa LLC took out a $350 million credit facility which included a $325 million term loan and a $25 million revolver ( a loan that can be drawn, repaid, and then drawn from again), priced at Libor (the London Interbank Offered Rate) plus 200 basis points (bps).[ii] Originally Zuffa had been asking for a $275 million term loan with the proceeds earmarked for a $199 million dividend payment, $75 million for the repayment of debt, and $1 million for expenses.[iii] Deutsche Bank estimates that the first year interest payments will be approximately $20 million. Following stronger than expected bank commitments for the term loan the amount was increased by $50 million.[iv] Amortization for the term loan was 1% annually until maturity in 2012, at which point the balance was due. The revolver was due in 2015. [v]

In October 2009, Deutsche Bank was the lead bank for a $100 million senior secured incremental term loan, priced at Libor plus 550 bps with a Libor floor of 2%.[vi] The loan was to be used to pay down the fully drawn revolving credit facility and fund a $70 million dividend.[vii]

In November 2010, Zuffa executed a $25 million add-on to its revolving credit facility, bringing the total available funds to $50 million.[viii] In February of 2012 they extended their revolving credit facility until 2015, with an addition of 25 bps to the existing terms.

In June 2012, Deutsche Bank was the lead bank for another add on, this time for $60 million which was used to pay down the revolving credit facility. Terms were set at Libor plus 550 bps with a Libor floor of 2%.[ix]

In February 2013, Zuffa replaced the existing debt with a 7-year $450 million term loan B and a new 5-year $60 million revolving credit facility.[x] The rate for the term loan was set at Libor plus 350 bps with a step down rate of Libor plus 325 bps if the debt-to-EBITDA leverage ratio was lower than 3.5x. A Libor floor of 1% was set for the Libor rate.[xi]

In March of 2014, Zuffa repriced and upsized their outstanding term loan to $475 million. The new rate was now Libor plus 350 bps with a Libor floor of 0.75%.[xii]

It is worth noting that in addition to whatever distributions the owners were paid from the promotion’s profits, they also received large payments that were mostly financed through loans. $199 million of the original $300 million, 2007 loan was earmarked as a dividend payment to Zuffa’s owners. Another $305 million in distributions was paid out in 2009, according to Dana White’s deposition. During that year, Zuffa had taken out another $100 million loan of which $70 million was reportedly going to be used to pay the owners. The Fertittas and White also sold 10% of Zuffa to Flash Entertainment that year for an undisclosed amount.

While aspects of the sale have changed since the original announcement, the 2016 Lender’s Presentation described the details as follows:

On July 8, 2016, WME | IMG, in partnership with Silver Lake Partners (“SLP”) and Kohlberg Kravis Roberts & Co. (“KKR”), signed an agreement to acquire Zuffa, LLC, the parent company of the Ultimate Fighting Championship (“UFC”)

–Headline TEV of $4,025M including $3,775M upfront and $250M of earn outs (guaranteed by WME | IMG)

•$175M paid contingent upon achieving $275M of LTM EBITDA(1), but no earlier than June 30, 2017

•$75M paid contingent upon achieving $350M of LTM EBITDA(1), but no earlier than December 31, 2018

The transaction will be financed with:

–$1,300M of funded First Lien Term Loan and $150M unfunded Revolver

–$500M of funded Senior Unsecured Notes

–Note: New credit group at the UFC will be outside of the WME | IMG credit group

–$2,145M of total equity contribution (c. 55% of PF capitalization)

•$400M of funded Preferred Equity (perpetual, PIK)

•$1,420M of new cash equity from WME | IMG, SLP and KKR

•$325M of rollover from management and existing investors

It seems likely that future filings in the antitrust lawsuit may reveal even more information. If so, we will update this article. We should also be posting an article that looks at the economics of individuals events soon.

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