Bloody Elbow previously went over the UFC finances for the last 6 months as revealed in TKO’s recent S-1 filing. For this article I am going to look over how important the UFC has been for Endeavor’s — and some of its executives’ — bottom line.
It’s hard to exaggerate how important the UFC has been for Endeavor’s finances. Not only did the UFC make up by far the largest portion of their Owned Sports Property segment, but thanks to the MMA promotion, that segment made up the largest share of Endeavor’s EBITDA.
This proved particularly important during the recent COVID pandemic. According to Ari Emanuel, these distributions from the UFC to Endeavor were essential for keeping the company afloat, with the UFC responsible for “about 70 percent of [their] revenue in the COVID year.”
Endeavor got billions in distributions from UFC
During 2020, when 50.1% of the UFC was held by Endeavor at that time, the Company paid out distributions of $312.3 million, $300 million of which was to shareholders, and another $12.3 million related to tax distributions.
In 2021, after Endeavor acquired 100% ownership of the UFC, the Company paid the Endeavor Operating Company, LLC and its subsidiaries an incredible $1.096 billion in distributions, part of which was the result of a $600 million loan the UFC took out to pass on to Endeavor. This was followed up in 2022 with another $270.3 million in distributions.
Thus, over a 3-year period, the UFC paid out more than $1.5 billion in distributions to Endeavor. Without that cash infusion, it is unlikely that Endeavor, which saw $650 million in losses in 2021 alone, would have made it through the Pandemic.
The UFC continues to pay dividends (literally and figuratively) even after the merger with the WWE. The new company, TKO Group Holdings, announced a one-time special dividend for payment on September 29th to all stockholders who held Class A common stocks as of September 22. The dividend would be $3.86 per share, of which Endeavor currently held 76,712,059 shares.
The Company has warned investors, though, that they should not expect any more cash dividends for the foreseeable future. Instead, “capital appreciation, if any, will be your sole source of gains.”
In addition to distributions of profits from the UFC, Endeavor Group Holdings and its subsidiaries also benefit from providing various services to the UFC. The UFC uses Endeavor Streaming, for which the it pays fees for revenue generated using their platform, as well as for work performed in updating and maintaining it. The UFC also pays Endeavor for production and consulting services, as well as commissions fees, which totaled $2.5 million last year.
In addition, since acquiring the UFC in 2016, Endeavor has received a management fee of $25 million every year. This service fee will rise to $35 million next year. The WWE will also be paying Endeavor a $25 million service fee starting next year, which too will rise to $35 million a year later. After which the service fee for both of them will rise 1% annually.
Ari Emanuel’s salary and bonuses from TKO
While Endeavor has benefitted greatly from the steady revenues of the UFC, its executives stand to profit greatly from the new TKO venture. None more so than Endeavor CEO Ari Emanuel.
While retaining his position — and income — as the head of Endeavor, Ari Emanuel will also serve as the CEO of TKO, for which he will received a separate, but very lucrative, pay package.
Ari Emanuel’s employment agreement with TKO provides for an annual base salary of $3 million, which will be pro-rated for any partial calendar year (if applicable) and subject to increase from time to time as approved by the Board.
For 2023, he is eligible for a guaranteed annual cash bonus equal to $1.75 million. Starting next year, this annual bonus, which is to be based on achievement of a performance metric, rises to a target of $7 million.
Much like UFC fighters, Ari Emanuel will also be eligible for discretionary bonuses, the amount of which would be determined by the governing board.
In addition, Ari Emanuel is eligible this year for an equity award of restricted stock units worth $2.5 million. Beginning in 2024, Ari Emanuel will be eligible to receive an annual equity awards with a targeted amount amount of $10 million and “to consist of restricted stock units or similar awards.”
With the launch of TKO, Ari Emanuel is to receive a transaction bonus of $20 million, which will be paid within 30 days following TKO being registered with the Securities and Exchange Commission (SEC).
He is also set to receive a “one-time equity award comprised of restricted stock, restricted stock units or similar awards with respect to a number of shares of TKO common stock equal to $40,000,000 divided by the closing price of TKO common stock on the date on which the effective time occurred.”
Mark Shapiro’s salary and bonuses from TKO
Mark Shapiro will also have the same job title he has from Endeavor on TKO. Like Ari Emanuel, he will also be paid handsomely with this new company, on top of his pay from Endeavor.
Filings show that for his role as COO, Shapiro will receive an annual base salary of $2.5 million.
He is also set to receive a target annual bonus of $5.5 million, depending on certain performance metrics such as company profitability or finalizing medial deals.
He is also eligible to receive a separate cash bonus “in the Company’s sole discretion” for the year. Like Ari Emanuel, he is also in line for additional discretionary bonuses “determined by the Governing Body.”
For the TKO launch, he is set to receive a transaction bonus of $5 million. Similar to Ari Emanuel’s deal, Shapiro will also get a “one-time equity award” comprised of stock, but with a value of $6,250,000.
Mark Shapiro’s employee agreement also includes language about using private aircrafts and “commuting expenses,” along with lucrative severance payments…
Related: WWE execs got huge bonuses, while hundreds of employees and dozens in the roster get laid off after UFC merger.
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