TKO - NYSE

Good afternoon. Thank you for attending the TKO Fourth Quarter and Full Year 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host, Seth

Good afternoon, and welcome to TKO's Fourth Quarter and Full Year 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 30 days. After prepared remarks from Ari Emanuel, TKO's Executive Chair and Chief Executive Officer; Mark Shapiro, TKO's President and Chief Operating Officer; and Andrew Schleimer, TKO's Chief Financial Officer, will open the call for questions. Mark and Andrew will be handling the Q&A. The purpose of this call is to provide you with information regarding our fourth quarter and full year 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 results 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. 2025 was a catalytic year for TKO as we established meaningful momentum across both UFC and WWE in particular. TKO sits squarely at the center of a robust sports and entertainment ecosystem. Our properties command attention with must-see content and no off-season, capturing a coveted young, diverse audience and reaching more than 1 billion households globally. In 2025, we signed 2 historic U.S. media rights deals for our marquee assets, UFC's $7.7 billion deal with Paramount, where it joins the NFL, NCAA Final Four, UEFA Champions League and the Masters and WWE's $1.6 billion deal with ESPN to become the exclusive home of all premium live events, including WrestleMania. While still early innings, we're thrilled to partner with Paramount and ESPN to expand our fan bases and drive growth for our premium IP. While delivering these transformational deals, we launched a capital return program, first initiating and then doubling our quarterly cash dividend. We have also nearly completed $1 billion of share repurchases and today announced our intent to repurchase up to $1 billion of additional shares. Our accomplishments in 2025 validate the industrial logic of TKO and ensure we are well positioned for 2026 and beyond. We remain extremely optimistic about our position in the content marketplace, and our conviction in TKO has never been stronger. In closing, I know that our M&A intentions are always a topic of interest, so I thought I would address that formally. While we will always be opportunistic, I want to reiterate past commentary that 2026 is a year of execution for us. We are an execution story. With that, I will have Mark get into the detail.

Thanks, Ari. 2025 was indeed a landmark year for TKO. We secured media rights deals in excess of Street expectations, delivered innovative global partnerships, record-setting live events and premium experiences, integrated IMG, On Location, and PBR into our portfolio, prepared for the launch of

Good afternoon. As Ari and Mark highlighted, 2025 was a very strong year for us. We delivered solid operating and financial performance across our businesses, and we expect the positive momentum to continue. Last year, we generated revenue of $4.735 billion and adjusted EBITDA of $1.585 billion, both of which exceeded the upper end of the revised guidance range we provided on our last earnings call. Our adjusted EBITDA margin was 33.5%. In 2024, revenue was $4.884 billion and adjusted EBITDA was $1.082 billion, and our adjusted EBITDA margin was just over 22%. On a reported basis, revenue decreased 3%, adjusted EBITDA increased 47% and adjusted EBITDA margin increased over 11 percentage points. Our year-over-year results reflected strength at UFC and WWE. In particular, margins continued to expand at WWE, delivering over 50% for the first time in 2025. We've come a long way in a short time, growing WWE's margins from less than 40% just a few years ago. That said, and as noted on our Q3 call, the impact of the 2024 Paris Olympics led to the decrease in revenue and contributed meaningfully to the increase in adjusted EBITDA and adjusted EBITDA margin as the event was loss-making. Moving to our consolidated results for the fourth quarter. We generated revenue of $1.038 billion. Adjusted EBITDA was $281 million. Our adjusted EBITDA margin was 27%. Revenue increased 12%, adjusted EBITDA increased 30% and adjusted EBITDA margin increased approximately 4 percentage points as compared to the prior year. Now turning to our UFC segment. UFC had 10 total events, including 4 numbered events in both the fourth quarter of 2025 and 2024. Event location mix shifted slightly as 4 events were held internationally in the quarter compared to 3 in the prior year period. UFC generated $401 million of revenue in the quarter, an increase of 17% or $58 million. Adjusted EBITDA was $213 million, an increase of 20% or $35 million. UFC's adjusted EBITDA margin was 53%, an increase from 52% in the prior year period. Partnerships and Marketing revenue increased 39% to $93 million. The increase was driven by the addition of new partners and renewals of existing partners at higher rates. As Mark discussed, we continue to make significant progress, adding new categories and growing existing ones, including recently announced deals with Ram Trucks, Polymarket and DoorDash. Media rights production and content revenue increased 12% to $223 million. The increase was driven by the contractual escalation of media rights fees. Live events and hospitality revenue increased 12% to $72 million. The increase was due to higher revenue from financial incentive packages driven by the timing and mix of international events. UFC held the numbered event in Abu Dhabi in both periods as well as its first event in Qatar in the current period. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses primarily reflected an increase in marketing, production and other event-related costs, all related to mix, partially offset by a decrease in athlete costs. SG&A increased primarily due to higher personnel and travel costs compared to the prior year period. Our WWE segment generated revenue of $360 million in the quarter, an increase of 21% or $61 million. Adjusted EBITDA was $165 million, an increase of 44% or $51 million. Adjusted EBITDA margin was 46%, up from 38% in the prior year period. As expected, results reflected the favorable impact of the raw domestic rights deal. As a reminder, the fourth quarter of this year included revenues from our long-term agreement with Netflix compared to the short-term domestic rights deal that was in place with USA Network in the prior year period. This had a favorable impact of approximately $50 million on both revenue and adjusted EBITDA as compared to Q4 2024. As we previewed on our Q3 call, the timing of the calendar significantly offset the aforementioned benefit. WWE held 2 nights of main roster PLE programming in the fourth quarter compared to 3 nights in the prior year. Most notably, Q4 2024 had 1 PLE in Saudi Arabia, but there was no comparable event in Q4 2025, given its shift to January 2026. Media rights production and content revenue increased 42% to $221 million. The increase was primarily related to the Raw rights deal I mentioned a moment ago as well as an increase in media rights fees related to the new domestic PLE agreement with ESPN. Partnerships and Marketing revenue increased 57% to $36 million due to new partnerships and renewals across multiple categories, including deals with Riyadh Season, Minute Maid, Comcast and Seagram's, among others. Live events and hospitality revenue decreased 27% to $68 million. Results reflected a decrease in revenue from financial incentive packages related to the shift in timing of the Saudi PLE, partially offset by an increase in ticket revenue. We continue to see strong underlying trends for WWE Live events. Results in the current period benefited from the mix of venues and cards, including John Cena's farewell tour and a record date for Survivor Series, which was held for the first time in a higher capacity stadium venue. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher talent costs, partially offset by a decrease in production costs, most notably related to the absence of the Saudi PLE, which, of course, carries a higher cost structure. SG&A increased primarily due to higher travel and personnel costs. Our IMG segment generated revenue of $248 million, a decrease of 9%. Adjusted EBITDA was a loss of $4 million, a decrease of $20 million. Adjusted EBITDA margin was negative 2%, down from 6% in the prior year period. As we previewed on our last call, the anticipated decline in revenue primarily related to the absence of the Arabian Gulf Cup at the IMG business, which is a biennial event. This decline was partially offset by an increase in studio revenue. Revenue at On Location was essentially flat over the prior year period. As expected, adjusted EBITDA primarily reflected the decrease in revenue, partially offset by a decrease in expenses. Expenses reflected a decrease in direct operating expenses, partially offset by an increase in SG&A. Corporate and Other generated revenue of $37 million, an increase of $14 million. Adjusted EBITDA was negative $93 million, flat with the prior year period. The increase in revenue was primarily driven by higher media rights revenue at PBR from new distribution deals we announced in 2025 with Paramount, Fox Nation and the CW as well as higher management and promotional fees for services related to

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

[Operator Instructions] The first question comes from the line of Brandon Ross with LightShed Partners.

I have a couple. Paramount has their earnings tonight, so we know they're not listening. We could talk about them. Two of your partners are bidding for WBD. Are there any advantages to one of them winning versus the other in your mind?

I'm not getting pulled into that trap. Look, we're just -- Brandon, we're just an observer like everybody else.

It was more of a joke. It's...

Yes, we do meaningful business, as you know, with both Paramount and Netflix across TKO. We have great working relationships with teams at both companies, including hand-to-hand with David Ellison and Ted Sarandos. We obviously have no input or control on what happens. That is ultimately for the Warner Bros. shareholders to decide. And we're just watching as it runs its course. I will say we see pros for TKO with either side winning.

Okay. Now my real questions. On

Well, first off, I would say this story, to your point, has taken out of life of its own. And that's largely because Eddie Hearn is stirring the pot in a very fictional way. So as you know, our partner in

Okay. And finally, just more of a housekeeping. I'm double checking on Andrew's comments on the White House. Did you face a $30 million loss on that event and you're doing it for visibility? Or should we otherwise think about the ROI of that event?

No, that's a great question, and it is important to many of our shareholders. So it's good that we talk about it in more detail. Look, at the moment, the UFC event at the White House is slated to cost upwards of $60 million. I think by the time we get done -- all is said and done with the event and the -- what we pay the fighters and the fan fest we're going to have, that could move north. It's definitely not moving south. It could move north. Bottom line is it's still a moving target. We are working to determine on a parallel track a package of inventory in and around the weekend of events that we can monetize primarily with corporate partners, B2B players, which will offset half of the spend. Even if that $60 million goes up or rides up on us, we believe we can offset half of the spend. Today, we see it as $60, offsetting $30, now I would mention we have several current and prospective partners that are pursuing multiyear partnerships with TKO assets that likely will be inclusive of the White House event. We have a lot of current and prospective partners that would like to be involved and are inquiring about inventory as part of their greater partnership deals they already -- they either already have or are negotiating with us for the future. But I want to be clear about something. We will not profit from the White House event independently. We will not be making money on America's 250th anniversary. This is an investment for the long term. This is about earned media. This is about sampling, new fans, casual viewers, a spectacle on a stage that will ultimately expand our audience, our viewership and our success on Paramount+.

The next question comes from the line of Stephen Laszczyk with Goldman Sachs.

Maybe starting first for Mark and Andrew, just on the '26 guide. I'm curious if you would be willing to unpack that in a little bit more detail for us, perhaps in terms of what you would expect to see from revenue and adjusted EBITDA growth across the core UFC and WWE businesses and how that compares to the performance you expect out of IMG this year, given some of the onetime items you called out in your prepared remarks.

Look, we're not going to get into much detail on each of the segments. But what I can tell you and kind of reiterating what I mentioned in my prepared remarks, at the midpoint of our guide, we're up 21% on revenue and 43% on adjusted EBITDA. We're growing our adjusted EBITDA margins to just under 40% or 600 basis points to 39.6% at the midpoint. As it relates to the contribution of both the Olympics properties, which we have Milan revenue recognition and EBITDA contribution, and we have L.A. pre-spend, which we're ramping up significantly this year in advance of the games. I articulated on the call that we have roughly $170 million for Milan on the top line and then the aggregate Milan EBITDA contribution, which was positive, offset by the L.A. pre-spend will be a drag on IMG/On Location's adjusted EBITDA. As it relates to the World Cup, we're expecting a contribution of $75 million of adjusted EBITDA. So we feel very comfortable and confident that that's reasonably achievable and perhaps something that there could be some upside against and not in our plan. So we feel strongly about the growth in UFC and WWE, largely attributable to the step-up in media rights at both those segments and then just continued tailwinds for global partnerships, as Mark articulated in his prepared remarks as well as the new site fee/PIF -- excuse me, FIP definition, financial incentive packages. And I know we articulated in Mark's prepared remarks the long-term growth prospects for that business. So we're fairly bullish there, which the most notable increases this year at WWE, where we'll have 3 events in Saudi Arabia versus 1 last year.

That's helpful. Maybe just to dig in a bit on the partnership growth opportunity. Any key points or key drivers that you would encourage investors to keep in mind just as they think about 2026. I think you have some broadcast inventory come in this year. It seems like there was some nice momentum on the signings front, exiting '25 into '26. Anything to point out or help you can give us on just thinking about the drivers and white space to go after on the partnership front?

Yes, look, I would just tell you that it seems that -- I would even say over time, folks have underestimated the growth potential of this division despite the fact that we're well ahead of plan, right? We put out a target for '25, and we well exceeded the $450 million. We put out a target for 2030 of $1 billion, and we announced last quarter that we're taking that to $1.2 billion. There's always a fear we're running out of categories and then we pull out DUDE Wipes. I mean there's just -- there's no end to the opportunity here. Our -- we own men with the sports, by and large. We have healthy female audiences, which is terrific, especially at WWE, where we're at about 40%. But we have -- this is back to my ESPN days; this is like you knew you had young men 18 to 34 that made ESPN an appointment and a destination. And we feel real strong that those hard-to-reach young men are sitting right here at TKO for marketers. And fortunately, marketers are seeing that again and again, getting the ROI and coming back for healthy increases. So we're off to a really strong start this year on hitting our target and growing to that one too, and that's baked into our guidance. But obviously, our margin jumping from end of year 2025 of 33.5% to almost 40% margins for 2026 at the midpoint of our guidance. That's being fueled and sparked by the success of our Global Partnerships division.

The next question comes from the line of Ben Swinburne with Morgan Stanley.

I couldn't help but notice Ari seemed to make in his prepared remarks a point to talk about this year as a year of execution and I think, tried to make effectively a comment around M&A this year. I just figured I'd ask you if you can maybe flesh that out. Is there a message there? Are you trying to signal something to the market about sort of inorganic versus organic? And then, Andrew, I just wanted to understand for sure on the financial incentive numbers you threw out this year and long term, are those revenues from a revenue recognition point of view in terms of how we forecast the business? Or is there some accounting thing you want us to be thinking about relative to those dollar numbers you provided?

Why don't you start?

Yes, I think we -- the lion's share of that growth comes from what we would otherwise recognize as revenue. Some of these packages in the aggregate do have cost savings, tax incentives or otherwise. But the way to think about those packages and the guide are the revenue impact and almost entirely flow through to the cost side. There's arguably a case to be made, although not in these numbers that the cost incentives that would not be noncash or sort of other value in kind would be incremental on the EBITDA flow-through. So we're talking about revenues here and almost entire flow-through to EBITDA.

And then Ben, on your second question, yes, that was purposeful. It's an often-asked popular inquiry that we get in meetings and TKO's name gets bandied about in the press with regard to rumors of NASCAR or F1 or any number really of small and large sports properties. And we just want to make sure that our investors and the marketplace knows that we're not hunting. We will always be opportunistic. At the same time, we will always be prudent. But this is a year of execution. This is a year of battening down the hatches and operating the business so that we can reach that near 40% EBITDA -- adjusted EBITDA margin. And I like that Ari really underscored that to make sure the marketplace understood we were not going to be distracted by rumors.

The next question comes from the line of David Karnovsky with JPMorgan.

Maybe following up on

Yes. Look, it's early. It's early on our PLEs with ESPN. It's early on UFC with Paramount+. So it's definitely early, a little premature on

And on the equity, we've disclosed previously that the first gate to vest into our equity interest was signing a media rights deal. I did articulate in my prepared remarks that we anticipate based on 2026 financial performance that we will vest into the next tranche of equity. So things are moving well towards our stated goal of getting to our equity interest.

Okay. I just have one more. On Royal Rumble in Riyadh, I think that was the first international tent-pole PLE you've done abroad. So I was just interested in what the operational or commercial lessons learned were and how do this kind of inform your plans to host WrestleMania 2027 there? And I don't know, Andrew, if there's anything you could say about the FIP kind of relative to a normal Saudi Arabia event.

I'll take that part first. So Andrew will answer the FIP and then Nick Khan is sitting here with us, and we'll let him talk about Royal Rumble, WrestleMania and our partners in Saudi.

So as we articulated in and throughout '25 and now on our conversation today, we did have one shift, one Saudi event shift from 2025 into 2026, such that we had 1 last year, we'll have 3 this year, all which carry the same revenue recognition and cost profile despite one being branded as it was in January.

Just to add on the learning side from Royal Rumble, Royal Rumble in Riyadh was the first event at that venue ever. So when you're the first event ever, there's a lot of things to be learned, not only for the operator, but for the venue. When you look at WrestleMania 2027 in 14 months from now, that will be coming off of the Asia Cup, which will be held at the same venue WrestleMania 2027 will be held at. So that's 3.5 weeks of international football/soccer action, which there'll be a lot of learnings coming out of that in terms of the look of the venue, the feel of the venue, how to light it properly and how to get all of those nuances down. So assume our team will be there for the entirety of that soccer tournament, and we'll be ready to go for WrestleMania 2027.

I should also mention that IMG produces the Saudi League soccer. So we have some institutional knowledge of the arena and the atmosphere there.

The next question comes from the line of Peter Supino with Wolfe Research.

I'll mimic my colleagues here and ask you 5 questions. I wanted to ask you first about the White House and the Sphere events. They're really great evidence of the growth opportunity of the UFC and the ability to spend money to develop that brand and that audience. I'm wondering if we should think about these big events as something that you would love to keep doing. And assuming that there are opportunities out there, just treat them as a normal cost of doing business and model that accordingly rather than sort of adding them back to the expense structure every year. And then a question on capital allocation. Obviously, you have been a massive buyer of your own stock, and it's been a great stock. You can return capital with recurring dividends, special dividends, buybacks. And today, your stock trades at a premium to a lot of other businesses. I'm wondering if you kind of have a point of view on what the right way to return capital going forward and whether you look at your stock relatively or absolutely in terms of its opportunity as something to buy back.

Take the last one first.

So yes, I think, you hit the nail on the head. I mean we have announced today our intent for now to increase -- excuse me, to repurchase another $1 billion under the $2 billion of previously authorized share repurchase in October of 2024. Over the last 12 months, as I stated, we've repurchased approximately $900 million. So with this $1 billion, we'll have all but satisfied our prior authorization. We will obviously look at what makes the most sense for our company and all of its constituents and at what point based upon how we envision the shares performing, repurchasing stock may no longer be accretive. So we're still within the band of where this is beneficial for the company and its shareholders. And also, I'd note that we did return in calendar 2025, approximately $1.3 billion to shareholders, which is inclusive of our dividend, which we had doubled in Q3 from $75 million a quarter to $150 million a quarter. So look, we're laser-focused on this. And just given the cash flow profile of this company, nothing is off the table.

Yes, look, we are laser-focused is right. I mean we said we were committing to capital allocation in the tune -- to the tune of putting our shareholders first and returning cash to our shareholders, and we meant it. 3 to 4 years was the initial authorization, and we're going to finish the entire authorization in the space of 2 years, while -- all the while doubling the dividend. So more to come on that front. Obviously, we are highly cash flow -- free cash flow generative. We're normalized free cash flow conversion about 60%. And over the next 5 years, going to materially increase. So we will have a lot of optionality, and we'll weigh all of that with our Board. As far as these big-time events, look, we were lucky in the sense that we were the first one at the sphere and that was a big win for us. We'll be the first one and maybe the only one ever on the South Lawn of the White House. I can't tell you that we have any events coming up at the Kremlin, but we will definitely be looking for more one-time events, but nothing you should necessarily model, right? We'll lose in the neighborhood of $30 million on this event at the White House in June, and it's a one-timer, and that's it. It's not indicative of anything long term that you should put into the plan.

The next question comes from the line of Ryan Gravett with UBS.

I just wanted to follow up on what you're seeing now in terms of demand for live events across the portfolio, particularly with the World Cup at -- on location coming up in a few months. And you had some very nice momentum last year at the WWE with the premium events and Cena's farewell tour. I just want to confirm if you think underlying gate revenues can continue to grow in 2026 at the WWE.

Yes. Look, we're continuing to see strong growth in ticket yield. And financial incentive packages. As you know, today, we underscored again, put out a real transparent target of $380 million to $420 million by 2030 for those financial incentive packages. And we feel just as strong about live events. I mean it's -- when I look at the success of the men's and women's hockey gold medal games at different hours for the U.S., right? I mean this is like the highest viewership of a major sporting event in the neighborhood of what we saw before 9:00 a.m. in the U.S. ever, like ever on record. Sports drives audience. Sports brings people together. It is appointment viewing. And our live events benefit from all of that, from age and demos, social diversity, geographic region, short clips, snackable content, but they don't -- they can't consume enough of it, and they want to be able to say they were there. And we're seeing -- not just are we not seeing a slowdown, I mean we're seeing an uptick. So we still feel very bullish about the elasticity across the WWE and it ultimately coming in line with the success we've had at the UFC. So a real good story for us. And I think just overall, and I know I was pretty optimistic and energized in my prepared remarks, but I would just underscore when asked like what kind of company are we? We are a model growth story and we're seeing strong momentum across the entire businesses. Our media rights deals are locked in across the board, high margin, high visibility for investors. Our global partnerships absolutely on fire with a great target by 2030 of $1.2 billion. We've talked about the live events and being able to take these shows on the road and see economic contribution because of the demand our fans have for those events coming to their towns. And then we have a transformative opportunity with

Great. I think that's probably a good place to wrap the call. Thank you, everyone, for joining and for your interest in TKO. Operator, you can now conclude the call.