Sign in
TG

TKO Group Holdings, Inc. (TKO)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $629.7M with Adjusted EBITDA of $282.2M (45% margin); GAAP net loss of $249.5M was driven by a $335M UFC antitrust settlement charge .
  • TKO raised FY 2024 guidance: revenue to $2.610–$2.685B and Adjusted EBITDA to $1.185–$1.205B; Free Cash Flow conversion target revised to >40% due to $200M settlement payments in 2024 .
  • Segment strength: UFC revenue +2% YoY to $313.0M with 62% Adj. EBITDA margin; WWE revenue $316.7M with 44% Adj. EBITDA margin and robust live events/site fees; corporate costs rose as public company/Endeavor fees ramped .
  • Near-term catalysts: management flagged Q2 2024 as the highest revenue and EBITDA quarter (more numbered UFC events, Saudi site fee; WrestleMania impact) and confirmed a Q4 2024 USA Network agreement for Raw adding ~$25M revenue/EBITDA in Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • Record live-event momentum: WWE’s Royal Rumble/Elimination Chamber set event records; WrestleMania XL delivered 145,298 total attendance over two nights and became the highest-grossing WWE event ever (+78% vs prior record) .
    • UFC sponsorship reacceleration: Anheuser-Busch deal launched and helped lift UFC sponsorship +$10.6M YoY in Q1; overall UFC sponsorship +28% YoY per call commentary .
    • Guidance raised on operational strength and the USA Network Raw stub deal: “Based on outperformance…we are raising guidance…includes $25 million of revenue and adjusted EBITDA in Q4” .

  • What Went Wrong

    • GAAP loss and cash headwind from legal: $335M UFC antitrust settlement booked in Q1; $200M of cash payments in 2024 reduced FCF conversion target from >50% to >40% .
    • Corporate expense step-up: Corporate Adj. EBITDA loss widened to $(53.1)M vs $(13.7)M YoY on executive comp, public company costs and Endeavor services fees .
    • Mix impact at UFC media rights: Fewer numbered events pressured media rights/content; management cited a 4% decline (transcript shows a transcription artifact “$25M,” press release shows $214.5M) .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($M)$449.1 $614.0 $629.7
Net Income (Loss) ($M)$22.0 $(16.1) $(249.5)
Diluted EPS ($)$(0.26) $(0.16) $(1.26)
Adjusted EBITDA ($M)$239.7 $223.2 $282.2
Adjusted EBITDA Margin (%)53% 36% 45%

Segment breakdown (Revenue and Adj. EBITDA):

SegmentQ3 2023Q4 2023Q1 2024
UFC Revenue ($M)$397.5 $282.8 $313.0
WWE Revenue ($M)$287.3 (combined) $331.2 $316.7
UFC Adj. EBITDA ($M)$238.3 $142.9 $195.1
WWE Adj. EBITDA ($M)$102.0 (combined) $141.0 $140.2
Corporate Adj. EBITDA ($M)$(42.1) (combined) $(60.7) $(53.1)

KPIs and operating highlights (Q1 2024):

  • UFC held 11 events (5 with live audiences); UFC 300 gate $16.5M; attendance 20,067 (T-Mobile Arena) .
  • WWE held 47 events, including two PLEs; WrestleMania XL total attendance 145,298 (+78% gate vs WrestleMania 39) .
  • Cash & equivalents $245.8M; gross debt $2.752B at 3/31/24 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$2.575–$2.650B $2.610–$2.685B Raised
Adjusted EBITDAFY 2024$1.150–$1.170B $1.185–$1.205B Raised
Free Cash Flow ConversionFY 2024>50% >40% (due to $200M settlement payments in 2024) Lowered
Raw (USA stub)Q4 2024N/A~$25M revenue and Adj. EBITDA added to Q4 New item
Intra-year hintsQ2 2024N/AHighest revenue/Adj. EBITDA quarter expected (event timing, Saudi site fee, WrestleMania effect) Qualitative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’23, Q4’23)Current Period (Q1’24)Trend
Media rights/streaming strategySmackDown to USA (+40% AAV); NXT to CW (+70% AAV); Raw process “robust” ; Netflix $5B+ Raw global deal announced in Jan (Q4 call) Short-term USA deal for Raw Q4 2024 ($25M); reaffirmed Netflix momentum and distribution trials (WrestleMania on NZ Netflix) Strengthening
Site fees & international expansionAbu Dhabi extension; first UFC event in Saudi; WWE Perth/Germany PLEs; site fees a major lever Q2 to include Saudi Fight Night with meaningful site fee; WrestleMania 41 to Las Vegas with site fee/incentives Accelerating
Sponsorship monetizationAB InBev “largest” UFC deal; unified partnerships team; high-margin revenue Fast start across categories; WWE in-ring sponsor (Prime Hydration); UFC sponsorship +28% YoY Positive
Legal/regulatoryUFC antitrust trial timing and mediation discussed Settled all UFC antitrust claims for $335M; 2024 cash outflows of $200M; deductible for tax; Q1 GAAP hit Overhang reduced
Capital allocationExploring buybacks/dividends; leverage up to ~3x tolerable; repurchased $100M in Q4’23 Repurchased $165M in April; total $265M since merger; selective M&A (MotoGP bid) Active/Selective
Live events demand/“experience economy”Multiple sellouts; record gates; Perth/Australia partnership WWE 54 market records in Q1; UFC 297/298/299 arena records; Sphere one-off event planned Robust

Management Commentary

  • “TKO is off to a solid start in 2024…record-setting live events…landmark global deal for WWE with Netflix…We settled all claims in the UFC antitrust lawsuits…we are raising our full year guidance.” – Ariel Emanuel, CEO .
  • “Aggregate [antitrust] settlement is $335 million…paid in 3 installments: $100M this quarter, $100M in Q4, and $135M in Q2 2025…anticipated to be deductible for tax purposes…we won’t realize an adverse dollar-for-dollar impact to cash.” – Andrew Schleimer, CFO .
  • “We expect the second quarter to be our highest revenue and adjusted EBITDA quarter of the year…4 numbered UFC events vs 3 prior year…one incremental Fight Night in Saudi Arabia will include a meaningful site fee. At WWE, results will reflect WrestleMania 40…” – Andrew Schleimer .
  • On sports rights environment: “Everywhere you look, it says otherwise [than decline]…NASCAR, CFP, NBA…we feel good about where we are…demand for live sports is outstripping supply of premium sports content.” – Mark Shapiro, President/COO .
  • On Sphere: “UFC 306…will be a one and done…expensive event to put on…the Sphere…wasn’t necessarily built for UFC events” – Mark Shapiro .

Q&A Highlights

  • Sports rights/Raw/NBA read-through: Management sees a robust market aided by multiple bidders; optimistic on UFC and WWE positioning and the Netflix precedent .
  • Settlement and cash: $200M of 2024 cash payments are tax-deductible within Up-C structure, reducing net cash impact to members .
  • M&A posture (MotoGP): Selective and disciplined; TKO expects significant free cash generation and capacity; prioritize ROI, net debt reduction, and returns of capital .
  • Middle East strategy: WWE maintains two annual Saudi events; UFC adding Saudi events (meaningful site fee), coordinated with Abu Dhabi partnership .
  • Operational mix: UFC balancing Apex vs on-the-road events for margin vs fan growth; bias toward more on-the-road to build the base .

Estimates Context

  • We attempted to pull S&P Global consensus for Q1 2024 EPS and revenue as well as prior quarters, but the request failed due to provider rate limits (Primary EPS Consensus Mean; Revenue Consensus Mean for Q1 2024, Q4 2023, Q3 2023) – estimates were unavailable at time of analysis. We therefore cannot quantify beats/misses versus consensus for this quarter [Values intended from S&P Global].

Key Takeaways for Investors

  • Guidance raise despite a sizable legal charge signals underlying operating strength; both UFC and WWE delivered YoY growth in Q1 segment profitability and strong event metrics .
  • Legal overhang diminished: UFC antitrust suits settled; known cash schedule and tax deductibility help visibility (FCF conversion >40% in 2024; likely improves post-2024 as payments roll off) .
  • Near-term catalyst density: Q2 flagged as peak quarter on events/site fees; expect elevated revenue/EBITDA prints which could reset expectations upward if execution continues .
  • Media rights and distribution optionality: Netflix global Raw deal validates WWE’s value; USA stub adds $25M in Q4; UFC domestic window opens mid-January with ESPN rights flexibility (exclusive vs multi-partner under evaluation) .
  • Sponsorship flywheel: AB InBev launch, unified partnerships team, and first-ever WWE in-ring sponsor should support high-margin growth, particularly on WWE where runway resembles UFC’s trajectory .
  • Capital returns: $165M buyback in April; cumulative $265M since merger; management reiterates balanced capital allocation and comfort operating up to ~3x leverage over time .
  • Watch mix dynamics: UFC numbered event cadence affects media line; management acknowledged a transcript artifact—press release confirms UFC media rights/content at $214.5M in Q1, down 4% YoY due to one fewer numbered event .