If any one from Strike Force is reading” I can be hired for professional consultation.

Anothe reason as to why UFC’s legal team is the largest component of their employment cost is simply due to all the intellectual property that is produced, maintaned, circulated, protected, and archived by the UFC. It’s outstanding amount and I wouldn’t be suprised that the historic value is less than 1/100 of a penny in comparison to its market value. No company comes close to the UFC in terms of intellectual property value for MMA.

“Their expansion efforts are largely based on their human capital constraints”

I respectfully disagree. I believe their employment structure and strategy is partially the reason why their business model is so successful, based on the following assumptions =D LOL … Let the speculating begin.

1. UFC may have outsourced a production team for all UFC events, and promotional material for print/media/communications. If they negotiated a long term contract with payments made on a per event basis or annual fee, they could get away with lower man power cost versus traditional employment for services.

The UFC holds an event every 2 out of 30 days (in production terms) per month, why would I retain full time services of staff when I need them to only work so many hours of the month.

2. I wouldn’t be suprised if the corporate or internal team of UFC was a boutique firm, say less than 25 staff members. All events are held at locations where the facility is licensed, not leased. Thus, no need for a real estate administration team to manage lease audits and management, and even a fully staffed accounting team. How much sizeable and non-liquidable equipment could the UFC possibly have?

3. I can suspect that their legal team is perhaps the deepest. With insurance issues concerning fighters, event days (just imagine the peril coverage and CGL amounts with all those fans + alcohol), state/local/government agency compliance issues, regulatory updates, senate advocacy, etc. Hire the sharks as in-house legal counsel versus outsourcing.

However, this all speculation, but If I were to stake my assumptions of why the UFC business model is as successful as it is today, it’s the operating model. Employment is probably below 15% of the revenue stream, maybe even 10% (Intuition tells me, and wouldn’t be suprised if Dana and Lorenzo accounted for more 80% of employment, lol).

PPV payouts for fighers and bonuses can be added to the cost of sales. While professional services are in the range of 10-20%. Thus combining the two equates to 30% at the highest point (Employment + Professional Services), and yet professional services is a variable cost which can easily swing downwards and can be absolutely controlled in the event of an upswing — termination with ease.

Those are just my thoughts, nothing concrete.

Contact your investment broker and have him/her contact a bond broker, or find out which firm performed the underwriter duties.

Thanks for the reply. It’s great to read a response that provokes thought and discussion. Nonetheless, regarding your comment:

“this action implies a predictable cash flow like you state, and is more in line with the view that the company is matured, not in rapid growth phase.”

Depends on how a company wishes to define rapid growth, but more importantly fund it. I know many investors who would incur debt to increase payment dividends because it is strategic approach to raise future monies (say 6-24 months away) from equity shareholders to be. So long as the ratio of Debt incurred to Shareholder payments does not exceed their forecasted infusion of cash from future shareholders, and of course without seriously adjusting their operating business model.

For all we know, Frank and Lorenzo own 90% while Dana owns 10%. Why not take so money off the table by inviting new investors with limited voting options and restricted management control but sizeable cash infusions? If it doesn’t disrupt the revenue and operating income, and more importantly their free cash flow, then it makes perfect sense to enact this strategy as method of attracting new investors.

Reasonable Debt Service ratio with Increased divdend payments would truly attract more investors, and in return allow the UFC to expand the growth of the business through equity distribution rather than debt issuance (such as bonds).

But regardlesss, difficult to speculate without seeing the books? LMAO Or seeing a similar business model. (ie Strikeforce)

Adrian

At the very least, it raises questions. Those that say it isn’t a consideration or otherwise meaningless are not correct, in my opinion.

Their expansion efforts are largely based on their human capital constraints (guys like Dana, Ratner, and Lorenzo travelling around and breaking down the regulatory resistance), rather than significant capital investments, so they may not require a ton of additional cash to continue the rapid growth – making the dividend payments a little less questionable.