TKO - NYSE

Good afternoon. Thank you for attending today's TKO Group Holdings, Inc. Q1 2025 Earnings Call. My name is Cole, and I'll be the moderator for today's call.

Good afternoon. And welcome to TKO Group Holdings, Inc.'s First Quarter 2025 Earnings Call. A short while ago, we issued a press release, which you can view on our Investor Relations website. A recording of this call will also be available via our website for at least thirty days. After prepared remarks from Ari Emanuel, TKO Group Holdings, Inc.'s Executive Chair and Chief Executive Officer, Andrew Schleimer, TKO Group Holdings, Inc.'s Chief Financial Officer, will open the call for questions. Mark Shapiro, our President and Chief Operating Officer, and Andrew will be handling the Q&A. The purpose of this call is to provide you with information regarding our first quarter 2025 performance. I want to remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties, and assumptions. Please see our filings with the Securities and Exchange Commission for further detail. If these risks or uncertainties were to materialize, or any assumptions prove incorrect, our results may differ materially from those expressed or implied on this call. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events, except as legally required. Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics can be found in our press release issued today as well as the information posted on our IR website. With that, I'll now turn the call over to Ari.

Thanks, Seth. We are off to a good start in 2025, driven by continued momentum at UFC and WWE. Our first quarter revenue and profitability beat our internal expectations, and as a result, we are raising our guidance for the full year. During Q1, we also completed our acquisition of industry-leading assets IMG, On Location, and PBR. And we're now hard at work on integrating the properties into our flywheel and identifying synergies to drive top-line growth and cut costs. Andrew will share more on our updated outlook for 2025 inclusive of these businesses. Turning to the UFC, live events and global partnerships continue to deliver solid performance and drive meaningful growth. Live events set new records in Q1, including our fight night in London, delivering the highest-grossing fight night in company history, and UFC 312 in Sydney setting the record for Australia's highest-grossing indoor arena event. Global demand for our live events further underscores our conviction in the site fee model. Evidence of the potential here was seen in the announcement of our partnership with the Western Australian government to host five major UFC and WWE events in Perth through 2026. Our global partnerships team also secured several major innovative deals as leading brands continue to see value in UFC's worldwide and highly engaged fan base. We renewed our long-standing partnership with Monster Energy in a multiyear agreement that is the largest sponsorship deal in company history. We also entered into a groundbreaking multiyear partnership with Meta, designed to bring UFC content to life in immersive new ways, from AI-enhanced fighter rankings to next-gen in-arena experiences and exclusive content across Meta's platforms. At WWE, the year started with the spectacle debut of our Netflix partnership, which will put our content in front of the streamer's 300 million global subscribers each week. Raw is now a mainstay on the global top 10, and we're seeing significant engagement and viewership increases internationally in weekly WWE programming and premium live events on Netflix, especially in Mexico, the UK, Australia, and Brazil. As global territories roll off existing rights deals, WWE's international footprint on Netflix will continue to expand. In fact, India has now joined the Netflix WWE family and brings with it one of the world's most passionate and engaged fan bases. Overall, WWE's live events similarly outperformed with 35 individual market records for ticket sales and 17 sold-out events in the quarter. Elimination Chamber in Toronto became WWE's highest-grossing event in Canada. Royal Rumble set a new milestone as the highest-grossing non-WrestleMania event in company history. And the Road to WrestleMania tour achieved gate records at each of its 12 European events and drew over 116,000 fans collectively. That charge culminated in a record-breaking WrestleMania 41 in Las Vegas last month. Allegiant Stadium welcomed 24,000 fans across two nights, and WrestleMania 41 became WWE's most successful event ever, breaking all-time records in gate, premium hospitality, viewership, sponsorship, merchandise, and social engagement. Turning now to some highlights from IMG, On Location, and PBR. IMG announced several major renewals that underscore their unmatched capabilities, expertise, and global reach in sports. We renewed our partnership with Conmebol, South American Football Confederation, covering sponsorship and media rights through 2030. We extended our strategic partnership with Euroleague Basketball through the 2035-36 season, building on a successful joint venture that has driven significant growth in media rights value and production quality since 2016. And we renewed and expanded our partnership with Major League Soccer to deliver live match and studio coverage of more than 600 games each year on Apple TV, all produced from WWE's state-of-the-art studio facilities in Stamford, Connecticut. And at On Location, our partnership with the NFL, the leading sports and entertainment property across the US, delivered more than 32,000 fan experiences, including at Super Bowl 59 in New Orleans. A tremendous result in the very first year of a new contract extension with the league that runs through 2036. I should mention that in terms of trends, WrestleMania 41, held just a few weeks ago, was no different. On Location hospitality package revenue surged 75% over WrestleMania 40. Having this experiential hospitality capability now in-house at TKO Group Holdings, Inc. bodes well for not only the growth of our owned assets but the partnership opportunities across the 200 global sports league and team clients served by IMG. Finally, PBR's Unleash the Beast and Velocity Tours stretched the live events demand we are witnessing with a strong showing in the quarter, drawing 640,000 fans to their 40 events and selling out more than 30. Almost right out of the gate, we are capitalizing on the strength and capabilities of these new TKO Group Holdings, Inc. businesses to accelerate value creation across UFC and WWE. The TKO takeover, as we call it, last month in Kansas City, marked the first time all three businesses appeared in the same arena in the city over a single weekend, showcasing our unified live event strategy and seamless coordination across scheduling, ticketing, and the fan experience. Our conviction in our businesses is as strong as ever. We remain focused on creating value for shareholders through integrating and driving synergies across our newly expanded sports portfolio, delivering a media rights deal for UFC that positions the brand and the business for long-term audience and financial success, and executing our capital return programs. With that, I'll turn the call over to Andrew.

Good afternoon. As Ari highlighted, 2025 is off to a great start. We have delivered strong operating financial performance at UFC and WWE and have raised our expectations for performance for the remainder of the year. I'll provide more detail on the outlook later in my remarks. Before I review our financial statements, I'll briefly touch upon the basis of presentation. As we mentioned on our last earnings call, the acquisition of IMG, On Location, and PBR is accounted for as a merger between entities under common control. As a result, our first quarter results include three months of activity, even though the acquisition closed on February 28, and we only owned and controlled these businesses for one month. In addition, our first quarter 2024 results have been recast to include activity for these businesses. The financial results for the periods that we did not own the acquired businesses were prepared by Endeavor and include allocations of expenses to the businesses based on Endeavor's overall corporate expense profile. This presentation is consistent with the carve-out financial statements for the acquired businesses included in our information statement on Form 14C filed in connection with the transaction. These expenses consisted of certain support functions that were provided on a centralized basis, such as finance, human resources, information technology, facilities, and legal, among others. Endeavor allocated these corporate expenses on a pro-rata basis of headcount and gross profit. In total, such corporate allocations in Q1 were $21.7 million and represent the amounts solely from January 1 to February 28, the two months that we did not own the businesses. The corporate allocations were $30.7 million for the three months ended March 31, 2024, reflecting a full three months of Endeavor ownership a year ago. To be clear, under TKO Group Holdings, Inc. ownership effective February 28 of this year, such corporate allocations will no longer occur. With respect to segment reporting, in connection with the acquisition, we performed a review to determine the optimal reporting structure for the company. Based on this review, we've added a third reporting segment, IMG, which consists of the operations of the IMG business and On Location. To that end, we included PBR within our corporate group and have renamed it Corporate and Other. With respect to UFC and WWE, both will remain standalone reporting segments, and there is no change in how we are presenting these businesses in our financial statements. UFC and WWE remain core drivers of TKO Group Holdings, Inc., and we will provide the exact same presentation and disclosure as we have since the inception of the company. In connection with our review of segmentation, we've also reviewed our various revenue verticals, as well as key performance indicators, and have updated our disclosure. With respect to revenue verticals, we've made some small tweaks to the nomenclature. Most notably, we've revised sponsorship revenue to partnerships and marketing revenue, which better reflects the strategic and operational functions of this area of our business. With respect to the select KPIs to be disclosed in our 10-Q, we've added KPIs for the acquired businesses that provide additional transparency for several important metrics, such as the number of events, clients, and hospitality packages sold. When we announced the acquisition, we represented that we would work hard to assist the investment community in better understanding the drivers of the financial results for these businesses. We plan to periodically reference these metrics in future discussions as warranted. Before I get into more detail on our financial results, I wanted to comment on the macroeconomic environment. As we know, this is a topic on investors' minds. We're paying close attention to consumer behavior, but to date, we're not seeing any signs of a slowdown across our portfolio, including our premium hospitality business On Location. As I'll discuss in more detail in a moment, we continue to see significant strength, particularly with respect to live events and partnerships. As for tariffs, we are largely insulated as the vast majority of our revenue is not expected to be directly impacted. One area of our business with a limited impact is consumer products. However, since WWE and UFC rely heavily on a license model and have minimal self-manufactured goods, the impact is not expected to be in any way significant. Now turning to our consolidated financial results for the first quarter, inclusive of the acquired businesses. We generated revenue of $1.269 billion, an increase of 4%. Adjusted EBITDA was $417 million, an increase of 23%. Our adjusted EBITDA margin was 33%, an increase from 28% in the prior year period. Our UFC segment generated revenue of $360 million, an increase of 15%. Adjusted EBITDA was $227 million, an increase of 17%. UFC's adjusted EBITDA margin was 63%, an increase from 62% in the prior year period. UFC had 11 total events, including three numbered events, in both the first quarter of this year and last year. As we previewed on our last call, the mix shifted to a higher proportion of events with live audiences, with seven in the first quarter compared to five last year, including two additional international events. Live events and hospitality revenue increased 66% to $59 million. The increase reflected higher site fee revenue, primarily related to the Fight Night held in Saudi Arabia, as well as an increase in ticket sales, which reflected the two additional events with live audiences, as well as strong underlying trends in pricing and attendance. Partnerships and marketing revenue increased 32% to $64 million. The increase was driven by new partnerships as well as partnership renewals. We continue to make significant progress in growing this area of our business, as highlighted by our recent renewal with long-standing partner, Monster Energy. This agreement was the largest partnership deal in UFC history. We also signed a groundbreaking new nine-figure multiyear partnership agreement with Meta. Media rights production and content revenue increased 4% to $224 million. The increase was primarily driven by the contractual escalation of media rights fees. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher production, marketing, athlete costs, and direct cost of revenue due to the mix of event venues and territories. SG&A increased primarily due to higher personnel costs and travel expenses compared to the prior year period. Our WWE segment generated revenue of $392 million, an increase of 24%. Adjusted EBITDA was $194 million, an increase of 38%. Adjusted EBITDA margin was 50%, up from 44% in the prior year period. Live events and hospitality revenue increased 52% to $76 million. As with UFC, we continue to see strong underlying trends for WWE live events. The increase was primarily related to an increase in ticket sales, which more than offset a decrease in site fees. That is purely time-related. As a reminder, we received a meaningful site fee for Elimination Chamber in Perth, Australia, in the first quarter of last year. Partnerships and marketing revenue increased 86% to $26 million due to new partnerships and renewals across multiple categories, including financial services, telecom, beer, wine, spirits, and QSR, among others. While it occurred in April, WrestleMania 41 was emblematic of the momentum we're seeing in this area. The event, which featured a record 28 total partners, including a partner sponsor for each of the 14 matches over the two nights, set an all-time record for partnership's revenue, more than double the previous record from last year's event, as well as records for ticket sales, premium hospitality, and consumer products. Media rights production and content revenue increased 14% to $252 million. As expected, results reflected the expansion of SmackDown to a three-hour format for the first half of the year, resulting in a shift in quarterly revenue recognition but has no impact on the full-year amounts. The increase was also driven by the contractual escalation of media rights fees, including the January commencement of our long-term agreement with Netflix to distribute Raw in the US and all of WWE's content internationally. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher talent costs. SG&A increased due to higher travel expenses, primarily related to the mix of venues and territories, including a three-week eleven-city tour across Europe leading up to WrestleMania. Our IMG segment generated revenue of $476 million in the quarter, a decrease of 13%. Adjusted EBITDA was $74 million, a decrease of 10%. Adjusted EBITDA margin was 15% in both periods. The decline in revenue primarily related to On Location for the Super Bowl and Collegiate Bowl games. The venue location, New Orleans, compared to Las Vegas for the Super Bowl, and the matchups, notably the third straight Super Bowl appearance for the Kansas City Chiefs, as well as a quarter-final Rose Bowl in 2025 compared to a semifinal game in 2024, impacted the year-over-year performance. Adjusted EBITDA primarily reflected the decrease in revenue, partially offset by a decrease in expenses. The decrease in expenses primarily reflected the absence of media rights costs for the FA Cup, which was no longer part of the IMG business in Q1 2025. Corporate and other revenue was $54 million, an increase of $2 million. The activity related to PBR and reflected growth in live events and partnerships, partially offset by a decrease in media rights related to the early termination of the Meritree Media content distribution deal. Corporate and other adjusted EBITDA was a negative $77 million, essentially flat with the prior year period. This amount includes the $22 million of costs related to corporate allocations of Endeavor corporate expenses for the two-month period prior to the close of the acquisition. For the avoidance of doubt, from February 28 forward, there'll be no additional corporate allocation expenses of this nature. Also in connection with the acquisition, we've evaluated the treatment of various costs at these businesses and made certain adjustments to conform the presentation to the methodology used for UFC and WWE. In aggregate, this resulted in a reclassification of approximately $10 million of costs in the quarter from the IMG segment to Corporate and Other. Now moving on to our capital structure. In the first three months of the year, we generated $136 million of free cash flow. Our free cash flow conversion of adjusted EBITDA was 32%. Free cash flow included $27 million of capital expenditures. As we discussed on our February earnings call, we expect 2025 free cash flow to include the impact of approximately $300 million of nonrecurring payments related to the recent UFC antitrust settlement and M&A. In Q1, we realized $175 million of these payments, the second $125 million installment payment under the settlement agreement, as well as transaction costs. As such, our free cash flow was adversely impacted. Free cash flow for the quarter was positively impacted by $100 million of prepayments related to On Location and the 2026 FIFA World Cup. These amounts are included in cash flows from operations and, therefore, are a part of our cash flow calculation. We expect the World Cup prepayments to be a substantial source of cash over the course of 2025, followed by a substantial use of cash in 2026 as payments are due nearer to the tournament taking place. As we did this quarter, we intend to separately identify this item going forward so investors can follow the underlying cash flow generation of our business. As previously disclosed, on March 31, we made our first quarterly cash dividend payment out of TKO OpCo of approximately $75 million. We ended the quarter with $2.776 billion in debt and $471 million in cash and cash equivalents, as well as $159 million of restricted cash. With respect to our previously announced $2 billion share repurchase program, we continue to expect the program to commence in the second or third quarter of this year, with our timing and level of activity ultimately subject to market conditions and related factors. In the meantime, we continue to accumulate cash and carefully evaluate our capital needs. We're monitoring market conditions closely and are mindful of recent volatility. I would like to underscore that in this environment, Ari, Mark, and the board believe we should remain prudent and conservative for the time being. That said, we remain committed to a robust and sustainable capital return program that balances return of capital to shareholders with organic investment, such as our entry into boxing, and maintaining our strong balance sheet. As per boxing, in early March, we announced that we entered into a multiyear partnership to establish a new boxing venture. We will serve as the managing partner, providing day-to-day operational management and oversight of the promotion. We've commenced operationalizing the JV and will provide updates as and when appropriate. Now turning to our outlook. As we've discussed in the past, we manage the business with a focus on full-year performance. Therefore, we believe results are best evaluated on a full-year basis given the quarterly fluctuations that are inherent in our operations. As noted in our press release, based on strong performance at UFC and WWE through the first three months of the year and our anticipated performance for the balance of the year, we are increasing our expectations for TKO Group Holdings, Inc., excluding the impact of the acquired businesses. We are now targeting revenue of $3.005 to $3.75 billion and adjusted EBITDA of $1.39 to $1.43 billion, an increase of $75 million and $40 million, respectively, as compared to the guidance we issued in February. The increase was driven by continued strength across each vertical of our businesses. We are also updating our guidance to include the acquired businesses and the associated transaction impacts. For full-year 2025, we are targeting revenue of $4.49 to $4.56 billion and adjusted EBITDA of $1.49 billion to $1.53 billion. When we announced the deal last October, we presented an expected full-year 2025 revenue and adjusted EBITDA contribution from these acquired businesses, inclusive of expected run-rate cost savings, of approximately $1.555 billion and $165 million, respectively. The amounts included in our guidance represent an expected full-year 2025 revenue and adjusted EBITDA contribution of approximately $1.45 billion and $100 million, respectively. The updated contribution is a result of the following: Number one, the previously mentioned $21.7 million corporate allocations from Endeavor for January and February. Given the fact that our carve-out financial statements were not yet prepared, the quantum was unknown at the time. The $21.7 million is a nonrecurring accounting adjustment and does not reflect the ongoing cost base of the acquired businesses. Number two, our prior cost savings and transaction impacts target of $30 million plus. We've been hard at work identifying and actioning upon these synergies. I'm pleased to report that we have identified $40 million plus of estimated run-rate cost savings, of which approximately $15 million are expected to be realized in 2025, with the vast majority expected by year-end 2026. The $15 million in-year 2025 contribution comps to the prior $30 million plus run rate. Number three, at PBR, the previously disclosed loss of our domestic media rights agreement with Merit Street Media. While we remain in active discussions with various parties, our 2025 outlook excludes any revenue or adjusted EBITDA related to a new rights agreement. With respect to the IMG and On Location businesses, the expected contribution is essentially consistent with the amounts we disclosed when we announced the transaction. In terms of free cash flow, as we discussed on our last call, while we have not given formal guidance, excluding the impact of approximately $300 million of nonrecurring amounts, our targeted full-year 2025 free cash flow conversion rate would be in excess of 60%. This is exclusive of the benefit of any restricted cash. Including the impact of the acquired businesses, our view remains unchanged. Consistent with our prior calls, while we are not providing quarterly guidance, we want to highlight a few notable items as we look to the second quarter. At UFC, results will reflect the mix of events in the quarter. UFC is currently scheduled to have 11 total events, including four numbered events, which is comparable to the second quarter of last year. We also expect one additional fight night with a live audience and one less Apex Event compared to the prior year. With respect to live events revenue, the Fight Night scheduled to take place in Baku, Azerbaijan, carries a meaningful site fee. But as a reminder, the second quarter of 2024 included a site fee related to UFC's first-ever event in Saudi Arabia. At WWE, given the timing of our event calendar, including WrestleMania as well as a premium live event in Saudi Arabia, we expect the second quarter to be the highest revenue and adjusted EBITDA quarter of the year in terms of absolute dollars. At the IMG segment, the first quarter of the year is historically the most profitable due to the timing of events, most notably the Super Bowl. As a result, we expect a quarter-over-quarter decline in adjusted EBITDA in terms of absolute dollars. In conclusion, we generated strong first-quarter results that reflect continued momentum across our businesses, in particular, UFC and WWE. While we still have a lot of work ahead of us, the integration of IMG, On Location, and PBR is well underway and yielding meaningful early benefits. We are extremely excited about the road ahead and our prospects for the remainder of the year and beyond. With that, I'll turn it back to Seth.

Thanks, Andrew. Operator? We're ready to open the call for questions.

Great. If you'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad. If for any reason you'd like to remove your question, it's Our first question is from Ben Swinburne with Morgan Stanley. Your line is now open.

Good afternoon, guys. I should ask Mark about the UFC rights renewal. Now that you guys are, I believe, out of the exclusive window, you give us any update on that process? How you're thinking about the pros and cons of splitting those rights or keeping them all with one partner and sort of any update on ESPN as a go-forward partner. And then Andrew, don't know if you can be any more specific. You gave us a lot there at the end on the acquired but just trying to get the free cash flow for 25 now that you've closed the Endeavor acquisitions or anything else you can tell us to sort of help us think about free casual conversion, including acquired businesses now that that deal's all done. Thank you very much.

Thanks, Ben. You know, I'll keep my commentary light. Then we can get into the free cash flow. Just because of the nature and sensitivity of all the conversations we're having. We're in discussions Yeah. At this time. Various third parties regarding the UFC rights. I would term the conversations as thoughtful and strategic. Nothing to announce at this time. And ESPN is still heavily included in the mix. I think we've been pretty vocal about how great of a partner they've been and how instrumental they've been to our growth and success. And I still believe they're one of the best marketing machines in the business. Let alone the brand and, of course, all the excitement around ESPN flagship and whatever it's going to be called, come next week. Jimmy Vitarro and Bob Iger both fans of the UFC, and personally showed up to events. And, you know, would be thrilled to continue with them and they're definitely part of the equation. But as I said, at the time, or for the time being, just various conversations, various parties, and no real update beyond that. Andrew, on the free cash flow?

Yeah, Ben. As I stated in my prepared remarks, and I kinda tacked back to our last call while we haven't given formal guidance, we do have $300 million or so of nonrecurring amounts that will impact the entirety of 2025. And absent those amounts, our cash flow conversion rate would be in excess of 60%. I did make the statement that including the impact of the acquired business our view remains unchanged. So, therefore, that the read through The one thing I would note is I also articulated that this is exclusive of the benefit of any restricted cash. Restricted cash is largely associated with the presales for our FIFA arrangement, and we anticipate grow over the course of the year. So there will be a benefit from that, which we have not sort of forecast our model. So consistent with our prior thoughts, absent the $300 million. And and just a good story for us. I mean, obviously, our adjusted EBITDA margin will change once we're talking about just the newly formed company, if you will. But to Andrew's point, you know, not not changing our free cash flow conversion It's something we're pretty excited about.

That's helpful. Thank you, guys.

Thank you, Ben. Our next question is from Brandon Ross with LightShed Partners. Your line is now open.

Hi, thanks. A couple of topics. First, we all saw the Canelo announcement assume that Canelo falls under the bucket of one-offs in your commentary about boxing last quarter. Can you just tell us how the economics work on that versus the main promotion that you're building? And, where will these fights get distributed, and will you get paid? And is there a strategic tie-in to what you're doing with other media rights? And then just to follow-up on Ben's first question, it will be helpful. Here we go. Brandon. Brandon. Save some for the fish. I'm giving you a few olive alright. Give me two hollow ups. Ask a follow-up. Exactly.

Okay. I was just telling you that look. We're you know, we're expecting with the new boxing organization that we're launching to put on an average of call it, 12 fights a year, 12 cards a year for the next each of the next five years. Like, you're still putting that plan together and obviously working hand in hand with our friends from Saudi. Irrespective of those, we will look to do anywhere from one to four sorta super fights per year. We'll see how that plays out. But, obviously, we would term the Canelo Crawford September matchup as as one of those. And then on that undercard, we would have a number of those undercard fights that would likely air on the the television partner the media partner we would have for our newly formed boxing organization. And I should mention, it's not going to be called TKO Boxing. We'll know, that seems like the soup of the day here. We'll be unveiling our name for our business fairly soon here. So but it will not be TKO Boxing. And as you look at those, those are two separate businesses. Right? The Saudis are funding what would be these you know, super fight cards. We'll work with them. On media rights deals and and take a commission. We'll work with them obviously, on global partnerships. We'll work with them on ticketing. We'll handle the production. We'll look to potentially promote all of them with the Dana White and Nick Khan, you know, driving much of that. But then separately, we'll have our boxing organization, our JV with them where we're going out and doing, as I mentioned, 12 cards a year on average. And getting a separate media rights fee selling global partnerships, through those cards, And, of course, promoting and and producing those cards with our and on whatever media platform we ultimately choose to to tie with. So that's kind of the the the state of boxing, if that makes sense. Any follow-up on that before we go to your other one?

No. I think I think I'm good there. And then it's just on the UFC media. Right? Can you comment maybe on how the market and your approach to the numbered sites and the fight nights might differ in this negotiation. Are you looking to have the same balance of reach and dollars for each? Do you have the same objectives for each?

Nothing's really changed from our previous commentary. We I mean, we remained highly flexible I mean, that's the beauty of owning your own league, That's the beauty of having a an executive management team that's as nimble and as as tight as we are you know, we're you know, as we like to say, I mean, we're we're the owners. You know, and we're the commissioner at the same time. So we'll make decisions that are best for the long-term future of of the sport and the brand, We have to continue to balance monetizing this rights deal while at the same time doing what's best for our reach, our engagement, and the growth of the brand. We the market, I believe, remains quite strong or, you know, our our content is year-round. It's it's young men. Unbelievable numbers 18, and our believe it or not, our high school numbers are off the charts, and we're we're tied with the NBA for the biggest draw when it comes to 18 from the major sports. And, you know, we're still an antidote to churn, and and I believe a a serum a proven formula that works for subscriber acquisition. So we're you know, cautiously optimistic. In no rush. This is a a volatile economy. Right now. Lot of uncertainty out there. We also understand there aren't a lot of major sports rights hitting the market anytime soon. So we will we will be opportunistic, but at the same time, responsible when it comes to the right home for the growth of our brand.

Great. Thank you very much.

Thanks, Brandon. We have a question from Stephen Laszczyk with Goldman Sachs. Your line is now open.

Hey guys, thanks for taking the questions. Maybe first for Andrew on the guide. For the core business, UFC and WWE, it sounds like both outperformed your internal expectations heading into the year. I would just be curious if you could talk a little bit more about what specific areas of outperformance were captured in in the first quarter within those two businesses, and to what degree the increase in the guidance for the year factors, any continuation of that outperformance into the back half of the year, or if you're still maintaining perhaps some degree of conservatism there?

Yeah. I I think I would say that each revenue vertical in our business is strong. Right now. The outperformance in Q1 for core slash legacy TKO Group Holdings, Inc., which is UFC and WWE, leading to the $75 million revenue increase and $40 million adjusted EBITDA increase was largely driven by two things. Number one, outperformance to our own internal expectations on live event and global partnerships in the first quarter. You know, much of which we flowed through to the balance of the year. And then continued tailwinds in both those areas anchored by a strong WrestleMania in April gives us confidence into the visibility for now through December. So we feel really good top to bottom. And that's reflected in our guide.

Yeah. I just add, Steven. I mean, there's there's definitely not there's no conservative play from us. In our numbers or any kind of sandbagging. I mean, there's just a lot of uncertainty out there. I mean, you know, there isn't a a morning we're waking up and reading about Toyota or GE all of a sudden raining in their marketing budget now. It's a good thing because we haven't closed in an auto partner yet. That's still an open category for us. But it's just that the market's definitely tightening up. Marketing is always one of the first things to get throttled. Premium experiences, by the way, is high up on that list as well. You know? So while we feel good and historically, the WWE and UFC business models, particularly the sports rights business at IMG have proven resilient in times of economic uncertainty and we're encouraged by the strength of our portfolio we're keeping an eye on all the the trends and sectors. Taking nothing for granted. We expect you know, at some point, something comes home to roost. We're not trying to be paranoid, but we're just trying to be responsible for our shareholders. And our numbers reflect that.

Thanks for that. And maybe just a quick follow-up question on capital returns. It sounds like share repurchases should should kick in the second or maybe third quarters here. Anything more you can say on how you're thinking about the pacing of that $2 billion share repurchase program? Should we expect you to be consistent on execution? Or more opportunistic, more price sensitive in the marketplace?

We're sticking to that our plan on capital return, and and Andrew can underscore that again for everybody on the on the phone with regard to dividend and share repurchase and timing. But having said that, we're well aware that we are accumulating cash at a feverish pace. That's going to continue we're going to keep our powder dry. We think that's the prudent thing to do at this time. So we're not we're not in the market yet buying back any stock. Andrew, why don't you underscore our our plan?

Yeah. I think that's you know, that that really sums it up. The only other color I would I would add, Steven, in terms of sort of know, the nature of the buyback, it's really gonna be market driven and, you know, the form of which that buyback can take. When we initially announced the $2 billion share repurchase, I think we articulated to be fairly linear over the three to four year period. I don't think we're coming off that commentary, but, again, you know, we can be opportunistic to the extent these opportunities present themselves. So we're watching it closely. We're in the enviable position to be able to, as Mark said, commute accumulate cash and then carefully evaluate our capital needs. So good place to be.

Thanks, Steven.

Thank you, Bhaskan. We have a question from Peter Supino with Wolfe Research. Your line is now open.

Hi. Thank you. And first, Mark, I just wanna come to Brandon's defense. That was nothing compared to some of the compound questions hear on media conference calls. I wanted to ask you a question about the IMG segment. How should we think about modeling that segment's growth across the subcomponents of media, live events, sponsorships, products? Got nothing. And then how might we think about incremental EBITDA margins?

So we know, the first thing that we wanna double down on here Peter, is the fact that we intend to be more transparent. And provide information and KPIs as we did. I'm not sure if had the opportunity to come through our 10-Q yet, but we did add some tables on the IMG segment. We also added a table on PBR analogous to our historical KPI tables for UFC and WWE on location of events type of event, numbers of events, etcetera. And then on the IMG business, particularly on location, we have put some information in the financial statements on number of hospitality package sold. Numbers of number of events, etcetera. So we we anticipate over time that that information would be a guide to how best to think about the growth and profitability profile, of these businesses. At 50% margins and effective cost savings plan, we anticipate growth over the course of the year. Both top line and a margin perspective. That being said, Q1 is generally the largest adjusted EBITDA contribution quarter for the IMG segment and for PBR. Which is in the corporate group. The IMG segment obviously has the on location business and the Super Bowl is the anchor of the year. And we see that positively impacting revenue and adjusted EBITDA in the quarter. And for PVR, you know, the most profitable tour is in the first quarter as well. The balance of this year, will be impacted by the prespend for our Milan Olympics program, and that will have a negative impact to EBITDA and EBITDA margin. Hence, when when we announced the acquisition in October, we presented numbers on a normalized basis. Which would have added a hundred million dollars roughly of adjusted EBITDA to the year and had a positive impact on margin. So what we can expect from us over the course of this year is, a, an update on the growth profitability profile of the IMG segment, growth, and profitability of PVR, and some more commentary on the expenses related to the Olympics.

I think too, Peter, just to underscore, I think, Andrew's comments. On the prerecord. You know, just the idea that we're we're now out in the marketplace. Fingers crossed, but, obviously, a lot of work and gut and grit and strategy underneath it But we're out in the marketplace on Milan, and the FIFA World Cup And so far, the activity is in line with our expectations. So another good sign for the business, another reason why we're bullish about our forecast and raising guidance. But as I mentioned, we're we're keeping a close eye close watch on on all of it with these changing times.

Thank you, boss. Thank you. Our next question is from Eric Handler with Roth Capital. Your line is now open.

Thank you. Good afternoon. Thanks for the question. Wonder if you could talk a little bit about some of the directional activity you're seeing with site fee deals? You know, it seems like there's been more this year. Can you maybe talk about directionally the volume of deals that you're doing? Maybe, you know, the percentage increase that you're seeing, and sort of, like, how do you determine location by location? Like, what the value is of that site fee deal?

Look. We do a lot of it's a you know, economic impact studies. And, Eric, frankly, the a lot of negotiations, a lot of conversations. I mean, more deals you don't hear of than deals that are being done. We're out there surveying the market. We're aggressive in the space. It helps to have offices in as many countries as we do. And IMG is obviously enhanced our position there. We're we're making a couple of hires coming up, some big hires on the government relations side. That will help us both with relationships c suite activity, and track record to capitalize in the space. It's no different. Every office we walk into, it's no different than f one was either there the day before or coming in the next day. So we're we're constantly on the lookout for cash And, of course, in kind is often just as good. We announced at the February our new deal with Tourism Western Australia, which will see us bring multiple UFC and WDV w d events to Perth over the next two years. And we're very excited about our event coming up in June of twenty five in Baku. And that's just for a fight night. So we often talk about we need to capitalize on-site fees for all of our numbered events. Then capitalized on-site fees for all the PLEs But when we're done with that, we still have raws. SmackDown's, NXT's, Fight Nights, And this will be a, you know, a year multiple year strategy where we see benefits to the bottom line. And Baku is an example of that. We will get a meaningful multimillion dollar site fee for taking a fight night to Azerbaijan.

Great. That's helpful. I guess just to follow-up to that, can you make what percentage of you know, your events would you say actually have site fees? Just try to get a sense of, like, what inning you're in here.

Yeah. Eric, I don't think we're gonna disclose that publicly We're relatively new at this effort. And I think our excess our success outside The Middle East is really starting to pick up. The site view model is anchored in our historic relationships with our partners at DCT in Abu Dhabi, and, obviously, our partners in Saudi Arabia. So international markets, we've seen meaningful success over the last six to twelve months in Australia, We have historical relationships in Singapore. And the list goes on. But this effort is relatively new. So I you know, not gonna quote a percentage penetration at this point in time. But a lot of work that's going to pay, pay off in the coming years.

And a lot of inventory. That Kansas City takeover we did, in April was you know, just a big win for us. I mean, put aside the the the fee and the and the in kind the amount of earned media we received for that promotion, I would say, PBR, raw, UFC, I mean, just just extraordinary, and and, frankly, helps us on our marketing spend. Money we we don't have to spend because we're able to make so much hay and so much noise with that promotion. So look for more of that and and just realize that internally, we've got a team solely dedicated to just surveying the market, identifying the opportunities, and negotiating using the leverage we have with the economic impact we've historically brought.

Very helpful. Thank you.

Got it. Thanks, Eric.

We have a question from Ryan Gravett with UBS.

Great. Thanks. Just on the announced acquisition of AAA wrestling in Mexico, Mark, curious what you see as the the biggest opportunity here in terms of improving monetization and and integration with the WWE And are there similar tuck in opportunities like this one around the world?

Yeah. Thanks, Ryan. I would just say I I'm I'm I'm gonna let Nick Conjure at the table. Lawrence have for the UFC is at the table. I'm gonna let Andrew and Nick dig into some detail here. But I'll tell you, I am really excited about this. This is an opportunity that, frankly, that Nick and Paul Levesque unearthed This is a major property in Mexico, enormous following, avid fan base, extremely young, with a a bunch of events, you know, starting with the in Los Angeles, starting with an event that we're gonna do there at the Clipper Stadium, that is just just really gonna be, you know, the the the touch, the lead off hit, if you will. This is something that's gonna catch a lot of fire and our partnership is is well structured to see us capitalize in all those different business KPIs we talk about already across UFC and WWE and So this is this is a fastball you know, right down the middle for us.

Yeah. So a couple of things to add to that. The triple a for us, if you look at some of the recent wrestlers who came into WWE, Menta and his real life brother Phoenix, in particular, Both social media impressions and on his debut almost a hundred million social media impressions We see a spike in Latino viewership. When he comes out something we noticed a few years ago when Bad Bunny came in. On his run with WWE. Was that the Latino audience would be there if there was someone like their them who was there. So we think, number one, it's a new influx of wrestlers. It's added to a demographic where we're already strong. And as Mark said, for the June 7 event, at the forum, which will be a new specific followed up by WWE premium live event 4PM that same day right across the street at the Intuit Dome. A doubleheader wrestling event for us. Produced from one truck, There's efficiencies there. There's good dollars there, and we're excited about the overall opportunity.

Look. The only thing I would add Ryan, is that strategically, we do this as a significant opportunity. Pull down on what Mark and Nick said. The short-term financial impact is not meaningful to the overall picture, But just as we've done with the UFC and WWE, this was a family-operated promotion. That we think we can leverage institutionalize, low lowering our expertise, to create value. We will increase media rights. We will increase live events revenue. We will increase partnership revenue, and we'll increase consumer products and licensing opportunities. So this fits squarely in our warehouse on top of just the rich cultural heritage and the strategic importance to WWE.

First week, we came out of the gate with Pentel when he first debuted, you know, he led all merchandise sales that week. Just just new to the party, and he was number one. So we're, you know, we're we're looking to mine these opportunities everywhere. Obviously, this an established league. But to the latter part of your question, nothing else on the horizon from an m and a standpoint, if you will, very similar to the capital repurchase program. Now we're we're holding our powder. Let's accumulate cash. Let's see what happens with this economy.

That's great. And just to confirm, this would be incremental to the the current guidance?

Yeah. We don't there's there's no real short-term financial impact, but any impact would be incremental. Yes. Very marginal.

Great. Thanks, guys.

Operator, let's take one last question, please. Our last question will be from Jason Bazinet with Citi. Your line is now open.

I just had a very simple question. You know, the market really likes the assets that you guys are managing, and they the way you're managing them. The one I guess, slight concern that I have, and I I don't know if it's valid, is that once we get through the UFC renewal and the WWPLEs, My my fear is that your equity turns into, a bond, meaning it's well run. It generates a lot of cash, but there's not as much enthusiasm for the equity just because there aren't as many needle moving things that you can do. You think that that's a valid concern, or do you think there's enough with boxing and sponsorship and site fees? Sort of keep keep the growth as exciting as it has been. Thanks.

Thanks, Jason. Interesting perspective. What I would just say is if you know our management team, we don't sit still. There will always be a lot of gas in this car. Call it rocket fuel. So yes, significant upside on the on the global partnerships front, Still a ways to go. On the live ticket revenue, especially on the WWE front. New properties we're going to launch. New franchises, new promotions, new leagues we will unearth like the JV with AAA, wrestling, digging into the Hispanic market, You know, IMG is not working with 200 different partners across the world. Some massive events on the horizon. Euroleague gaining some steam and conversations with hopefully, the NBA at some point here. Kama ball and CAF and the World Cup, women's sports, and where that's going. On location, adding new partners every day setting up all-time record with WrestleMania, in in Las Vegas and what's what's to come there. And PBR, while certainly niche and it's just Western lifestyle, a lot more we can do there. And and it's another situation where where the owner and the commissioner all in one. So kinda put that aside. You know, we're Ari Emanuel is our partner here and our fearless leader. I can promise you that you know, we're not gonna be sitting still and whatever new media deals we get, they will have annual increases baked into them. And opportunities for new programming and more ancillary programming. With not only drives our storytelling, and our stars, but opens up new programming vehicles for us to monetize.

That's super helpful. Thank you for that context.

Yep. Point, we'll have a lot a lot more cash going. Hopefully do more on the dividend front and more on the share repurchase program we're going to be active. We're we wanna see the the the story play out in the way that I think our shareholders expect it to over the next five to seven years. Thanks, Jason.

Thank you very much.

Alright. Well, thank you everyone for joining us on today's call and for your interest in TKO Group Holdings, Inc.