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Endeavor crushes 2021 earnings with record-setting UFC haul, but Jake Paul has investors worried

UFC Fight Night: VanZant v Ostovich Photo by Josh Hedges/Zuffa LLC/Zuffa LLC via Getty Images

Endeavor Group Holdings, Inc. (EDR) held its fourth quarter earnings call on Wednesday (March 16) to brag about all the money it made, thanks largely to the best financial year in the 28-year history of Ultimate Fighting Championship (UFC).

Yes, the same UFC that still pays new fighters $10,000 per fight.

From the Endeavor press release:

Highlights

$1.5 billion Q4 2021 revenue, bringing total 2021 revenue to $5.1 billion, exceeding annual guidance

UFC delivered its best financial year in its 28-year history

Representation revenue in 2021 up double-digits compared to the last non-COVID-19 impacted year (2019), despite touring events still operating at reduced levels during 2021

Announced sale of 80% stake of Endeavor Content’s scripted business in a deal that valued the entire studio at nearly $1 billion on a post-money basis

Return to a full schedule of sports events benefitted our media and sports betting businesses, while attendance at events increased significantly across global events and experiences portfolio as COVID-19 restrictions were lifted

Announced intent to acquire sports betting platform and content leader OpenBet in Q3 2021; expected to close in Q3 2022

Initial 2022 revenue and Adjusted EBITDA guidance:

Revenue expected between $5.2 billion and $5.45 billion

Adjusted EBITDA expected between $1.07 billion and $1.12 billion

Q4 2021 Consolidated Financial Results

Revenue: $1.5 billion

Net Loss: $16.7 million

Adjusted EBITDA: $229.5 million

Full Year 2021 Consolidated Financial Results

Revenue: $5.1 billion

Net loss: $467.5 million

Adjusted EBITDA: $880.3 million

Not too shabby, though it’s getting harder to defend UFC on issues like this.

Endeavor’s latest numbers led to an interesting conversation between Brandon Ross, analyst from LightShed Partners, and Ari Emanuel, Chief Executive Officer (CEO) of Endeavor, along with Jason Lublin, Endeavor’s Chief Financial Officer (CFO) during Wednesday’s investor conference call.

Blame Jake Paul.

Ross: UFC fighter comp and benefits have become a real hot topic of conversation lately. I know that’s been elevated by Jake Paul. I was just wondering if you could give your perspective on why the overall split have ended up where they are and what your outlook is there, whether we should expect relative share that fighters are getting of that revenue pool to go up in time or stay kind of where it is.

Emanuel: On our last earnings call, I think this was a question also, well, not exactly this question but similar. We’ve increased fighter play. I want to make sure I’m right, about 400%?

Lublin: Six hundred percent.

Emanuel: Six hundred percent since 2005. So — and we’re investing in the business with Performance Institute, food, recovery. So we have done — and now participation in Dapper Labs and NFTs in the kits. So we think we’ve done very, very well. And as the revenue for the business increases has only benefited that business, and we’ve grown and the sport has grown and fighter pay has grown too, as I said, how much it’s gone up since 2005.

Ross: I think the pushback that’s out there, though, is that your overall revenue base at UFC has grown much more than that 600%, I believe, and what the overall relative share should be.

Emanuel: Well, I’m not commenting on that. I think we’ve done very well as it relates to the pay for the fighters.

Ross: Great. Thank you.

“Live from the UFC call: Ari Emanuel asked about fighter comp and benefits driven by the attention JAKE PAUL is bringing to it by LightShed,” Paul wrote on Twitter. “Ari refused to comment on the concern around percentage paid to UFC fighters versus other athletes in other leagues.”

Paul, a longtime critic of UFC fighter pay, recently assembled a team of investors to purchase Endeavor stock with the longterm goal of “increasing UFC fighter pay and providing them healthcare.”

“Change is coming,” Paul continued. “While some of y’all busy hating on me, I’m busy trying to better understand how UFC makes more money and margins than any other sports league in the world, to help y’all make the money you deserve.”

Maybe he can start with this disgruntled champion.