TKO Group Holdings, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Momentum and Milestones: TKO's momentum continued with strong execution, live event milestones, enhanced event economics, and new brand partnerships. The ESPN domestic media rights deal for WWE's premium live events was highlighted as a key recurring revenue stream.
• UFC and WWE: UFC saw 6 out of 8 live audience events supported by incentives, and global brand partnerships grew double-digit. WWE had record-setting premium live events, including WrestleMania 41 and SummerSlam, with robust viewership on Netflix and strong brand partnerships.
• IMG, On Location, PBR: IMG's global production capabilities were on display with coverage of major events. On Location saw strong hospitality sales for upcoming Olympics and World Cup. PBR's tours concluded with record attendance, and focus shifted to the Camping World Team series.
• Guidance and Strategy: Raised full-year 2025 guidance, focusing on executing strategy, integrating segments, and delivering on updated guidance. Planned share repurchase program in Q3.

Segment Performance

• UFC Segment: Generated revenue of $416 million, a 5% increase. Adjusted EBITDA was $245 million, up 6%, with an adjusted EBITDA margin of 59%. Partnerships and marketing revenue increased 39% to $86 million. Media Rights production and content revenue rose 4% to $261 million. Live events and hospitality revenue decreased 15% to $59 million.
• WWE Segment: Revenue was $556 million, a 22% increase. Adjusted EBITDA was $330 million, up 31%, with a margin of 59%. Live events and hospitality revenue increased 29% to $186 million. Partnerships and marketing revenue soared 136% to $58 million. Media rights, production and content revenue grew 7% to $279 million.
• IMG Segment: Revenue was $307 million, a 4% decrease. Adjusted EBITDA was $29 million, up $120 million, with a margin of 9% (improved from negative 29% prior year). The revenue decline was due to losing FA Cup rights, partially offset by new production agreements.
• Corporate and Other: Revenue was $45 million, a 9% increase. Adjusted EBITDA was negative $77 million, an improvement from negative $91 million prior year. Driven by management fees from Zuffa Boxing.

Guidance

• Raised full-year 2025 guidance for revenue to $4.63 billion to $4.69 billion and adjusted EBITDA to $1.54 billion to $1.56 billion, an increase from prior guidance.
• Targets full-year 2025 free cash flow conversion rate in excess of 60%.
• Q3 expectations: UFC expected to have 10 events, 2 numbered events, and 8 live audience events; WWE's SummerSlam expansion to 2 nights to impact revenue streams; IMG expected revenue and adjusted EBITDA increase due to signature events and Canelo vs. Crawford event.

Risks

• No specific detailed risks discussed, but general disclaimer about forward-looking statements and potential material differences from results.

Question and Answer

• Q: Congratulations on the WWE deal. Thoughts on halo effect and multiple partners? A: Mark Shapiro noted balancing monetization and reach, ESPN's brand, reach, platform, and D2C strategy were key. WWE's content travels well, and there are monetization opportunities with retained NXT PLEs, documentaries, and content archive.
• Q: Moving from WWE PLE to UFC, timing and impact on deals? A: Mark Shapiro stated no more challenge for UFC than initially thought, in-market with multiple deals, and UFC rights in home stretch with focus on maximizing monetization and reach.
• Q: Non-PLE content and sponsorship opportunities? A: Mark Shapiro emphasized more monetization opportunities with NXT PLEs, documentaries, and archive, and WWE's sponsorship potential with family-friendly audience and strong partnerships team.
• Q: WWE sponsorship and future execution? A: Nick Khan stated sponsorship is a high priority, with significant room to increase sponsorship dollars, and ESPN B2C to further aid this.
• Q: Profitability and growth algorithm? A: Andrew Schleimer discussed strong H1 performance and margin accretion. Ariel Emanuel highlighted integration of IMG, On Location, PBR, Netflix momentum, and future rights renewals and boxing as growth drivers.
• Q: Boxing progress and legislation? A: Mark Shapiro discussed boxing as a fourth sports asset, JV with Sela, super fights, and media rights negotiations. Lawrence Epstein mentioned bipartisan support for Muhammad Ali Boxing Revival Act to benefit athletes and create value.