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TKO Group Holdings, Inc. (TKO)·Q2 2024 Earnings Summary

Executive Summary

  • Record quarter: Revenue $851.2M (+179% reported; +19% combined YoY) and Adjusted EBITDA $420.9M (+34% combined YoY), with consolidated Adjusted EBITDA margin of 49% .
  • Guidance raised for the second time: FY24 revenue to $2.670B–$2.745B and Adjusted EBITDA to $1.220B–$1.240B; Free Cash Flow conversion reaffirmed at >40% .
  • UFC and WWE both delivered record live event revenue; UFC benefited from a $20M Saudi site fee and 4 numbered events; WWE drove pricing/yield and cost efficiencies lifting margins to 55% .
  • Capital return and balance sheet: Q2 Free Cash Flow $218.6M; repurchased ~1.9M shares for $165.0M; cash $277.5M and gross debt $2.744B at quarter-end .
  • Near-term catalysts: Raised FY24 guide, momentum in sponsorship/site fees, and media rights tailwinds; watch headwind from elevated production costs for UFC 306 at Sphere (direct EBITDA impact) and antitrust settlement process uncertainty .

What Went Well and What Went Wrong

What Went Well

  • “Record quarterly revenue and Adjusted EBITDA” reflecting strong demand for premium content and experiences; guidance raised again with “great conviction” in long-term value creation .
  • Live events outperformance and site fee momentum: UFC Live Events revenue +114% YoY to $69M, including $20M Saudi site fee; WWE delivered record quarterly Live Events revenue of $144.1M and higher ticket yields .
  • Sponsorship integration wins and synergy progress: UFC signed the largest single-event sponsorship (Riyadh Season) and TKO now expects to exceed $100M annualized net savings from integration initiatives .

What Went Wrong

  • UFC margin compression: Adjusted EBITDA margin fell to 59% (from 62%) due to higher production/marketing/athlete costs and one additional numbered event .
  • Corporate expenses increased: Corporate Adjusted EBITDA loss widened to $(62.3)M vs $(47.0)M combined prior-year, reflecting Endeavor services fees, executive comp, and public company costs .
  • Legal overhang and cost adjustments: Court denied preliminary approval of the $335M UFC antitrust settlement (new trial date set); Q2 included $6.0M legal costs, $2.4M M&A costs, and $29.8M restructuring/impairment (including $24.3M write-down of WWE assets held for sale) .

Financial Results

Consolidated Results by Quarter

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$614.0 $629.7 $851.2
Net Income (Loss) ($USD Millions)$(16.1) $(249.5) $150.7
Diluted EPS ($USD)$(0.16) $(1.26) $0.72
Adjusted EBITDA ($USD Millions)$223.2 $282.2 $420.9
Adjusted EBITDA Margin (%)36% 45% 49%
Free Cash Flow ($USD Millions)$184.7 $27.8 $218.6

Q2 Year-over-Year (Combined) vs Prior Year and Estimates

MetricQ2 2023 CombinedQ2 2024 ReportedYoY ChangeS&P Global ConsensusSurprise
Revenue ($USD Millions)$716.0 $851.2 +19% N/A*N/A*
Adjusted EBITDA ($USD Millions)$314.0 $420.9 +34% N/A*N/A*
Adjusted EBITDA Margin (%)44% 49% +5 ppt N/A*N/A*

*Values retrieved from S&P Global were unavailable due to data access limits.

Segment Revenue Breakdown (Q2)

SegmentCategoryQ2 2023 ($USD Millions)Q2 2024 ($USD Millions)
UFCMedia Rights & Content$211.7 $250.6
UFCLive Events$32.4 $69.1
UFCSponsorship$46.2 $61.7
UFCConsumer Products$14.9 $13.0
UFCTotal$305.2 $394.4
WWEMedia Rights & ContentIllustrative prior-year provided; WWE $410.3 total in Q2 2023 $260.7
WWELive Events— (combined illustrative) $144.1
WWESponsorship— (combined illustrative) $24.7
WWEConsumer Products— (combined illustrative) $27.3
WWETotal$410.3 (illustrative) $456.8

Segment Adjusted EBITDA (Q2)

SegmentQ2 2023 ($USD Millions)Q2 2024 ($USD Millions)
UFC$188.2 $231.9
WWE$173.1 $251.3
Corporate$(47.0) combined $(62.3)
Total Adjusted EBITDA$314.0 combined $420.9

KPIs and Balance Sheet

KPIQ2 2023Q2 2024
UFC Total Events (Quarter)11 11
UFC Numbered Events (Quarter)3 4
UFC Saudi Site Fee ($USD Millions)—$20
Free Cash Flow ($USD Millions)$106.4 $218.6
Cash & Cash Equivalents ($USD Millions)—$277.5
Gross Debt ($USD Billions)—$2.744
Share Repurchases (Q2)—~1.9M shares; $165.0M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$2.610B–$2.685B (May) $2.670B–$2.745B (Aug) Raised
Adjusted EBITDAFY 2024$1.185B–$1.205B (May) $1.220B–$1.240B (Aug) Raised
Free Cash Flow ConversionFY 2024>40% (May) >40% (Aug) Maintained

Context: Initial FY24 guidance in Feb was $2.575B–$2.650B revenue and $1.150B–$1.170B Adjusted EBITDA, and FCF conversion >50% (revised in May to >40% to reflect anticipated antitrust payments) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
Live Events demand & pricingWWE attendance +34% in 2023; record gates; Q1 WWE PLE site fee in Perth; UFC sold out 5 live-audience events and set arena records Record WWE Live Events revenue ($144.1M) and higher ticket yields; UFC Live Events +114% YoY with $20M site fee Accelerating
Sponsorship momentumAnheuser-Busch (UFC) launched; first-ever WWE in-ring sponsor (Prime); unified partnerships team Riyadh Season title sponsorship for UFC 306; new sponsors across categories; Call of Duty cross-property deals Strong/upward
Media rights outlookNetflix global deal for WWE Raw; Q4 Raw extension to USA Network for 4Q24; international UFC renewals at healthy step-ups NBA renewals seen as secular tailwind; UFC window opens Jan; ESPN rights flexibility acknowledged Favorable setup
Legal/regulatoryQ1 booked $335M charge for UFC antitrust settlement; expected installment payments Court denied preliminary approval; new trial date set; evaluating options; Q2 legal costs $6.0M Mixed/uncertain
Integration & synergiesUpper end of $50–$100M expected; cost focus in production Expect to exceed $100M annualized net savings Improving
International expansionWWE PLEs in Australia; UFC Mexico City Performance Institute; global site fee partnerships Expanded Saudi relationships; more overseas PLEs and events; targeting LatAm growth with Sphere Expanding
Production/technology—Sphere event: unprecedented production investment; costs higher than expected; transformational fan experience One-off cost headwind; brand investment

Management Commentary

  • Ariel Emanuel (CEO): “TKO delivered record revenue and profitability in the second quarter… we are again raising our full year 2024 guidance… great conviction in TKO’s ability to deliver sustainable long-term value” .
  • Andrew Schleimer (CFO): “We now expect to exceed $100 million in annualized net savings” and highlighted Q2 combined YoY growth (+19% revenue, +34% Adjusted EBITDA; margin +5ppt) .
  • Mark Shapiro (President/COO): “Site fees are becoming the norm… we’re pitting cities against each other… driving the best economics and multi-day ‘festivalized’ events” .
  • On UFC PPV pricing: “ESPN… probably went a little quicker and higher than we would have liked… piracy jacked up… discount promotion adopted; sustaining PPV buys” .
  • On Sphere costs: “Single largest investment we’re making in an event… more expensive than originally anticipated… direct dollar-for-dollar impact on EBITDA” .

Q&A Highlights

  • Live events optimization and pricing: Management sees continued runway for ticket yield and multi-night/stadium events; synergies from integrated production lowered costs while increasing saleable inventory .
  • UFC PPV pricing and piracy: ESPN adopted advance-purchase discounts after discussions; PPV buys holding up despite prior higher pricing .
  • Site fees strategy: Balanced volume and value, competitive bidding among cities, with increased international opportunities (tourism boards) .
  • Media rights: Favorable market backdrop (NBA, NASCAR, etc.); UFC window with ESPN opens mid-Jan; exclusivity vs multi-partner left open .
  • Sphere event economics: Expect record gate but unusually high production spend; viewed as long-term brand investment targeting LatAm fan growth .
  • Legal and FCF conversion: FY24 FCF conversion kept at >40% due to settlement cash outflows; potential timing changes could raise conversion, but no updates yet .

Estimates Context

  • Comparison to Wall Street consensus from S&P Global could not be retrieved (API limit). As a result, estimate-based “beat/miss” analysis is unavailable at this time; directionally, management characterized the quarter as record with raised FY24 guidance .
  • If/when S&P Global consensus data becomes available, we would anchor comparisons on revenue, EPS, and EBITDA for Q2 2024 and update the “Surprise” metrics accordingly.

Key Takeaways for Investors

  • Momentum across both properties: Q2 set records in revenue and Adjusted EBITDA; both UFC and WWE live events are benefitting from pricing and site fee dynamics .
  • FY24 guidance raised again: Revenue and Adjusted EBITDA guidance increases reflect stronger YTD operations, especially Live Events and UFC sponsorship; watch incremental production costs (Sphere) .
  • Margin trajectory favorable at WWE: Q2 WWE Adjusted EBITDA margin reached 55% on cost reductions and production efficiencies; UFC margins strong though modestly compressed due to event mix/costs .
  • Capital allocation flexibility building: Strong FCF in Q2 and ongoing share repurchases; medium-term potential for dividends/buybacks as EBITDA grows and settlement cash timing clarifies .
  • Media rights tailwinds: Netflix deal (WWE) and secular strength in sports rights (NBA comp) provide a supportive backdrop for upcoming UFC renewals; IMG global footprint aiding international step-ups .
  • Legal process risk remains: Court denial of preliminary settlement approval introduces uncertainty and potential timeline shifts; management is evaluating options .
  • Near-term watch items: Execution on sponsorship/site fees, cost discipline vs Sphere production spend, event calendars (UFC: fewer events in Q3 vs prior year), and any updates on settlement timing or auditor transition to KPMG .

Other Relevant Press Releases (Q2 Timeframe)

  • Stancé partnership: UFC limited-edition designer toy collaboration launched ahead of UFC 303, expanding consumer products activations and brand monetization .

Notes:

  • The WEKA/Sphere technology partner announcement occurred in September (Q3) and underscores the scale and technical complexity of UFC 306’s production ; management commentary in Q2 already highlighted higher-than-anticipated production costs .