Financial Data and Key Metrics - Revenue for Q3 2024 was $681 million, with net income of $58 million and adjusted EBITDA of $310 million, representing a 46% adjusted EBITDA margin [23] - Combined revenue for Q3 2024, including WWE activity from July 1 to September 11, 2023, was $685 million, with combined adjusted EBITDA of $298 million and a 44% margin [23] - Revenue decreased by 1%, while adjusted EBITDA increased by 4% and adjusted EBITDA margin increased by 2 percentage points compared to the prior year [23] - Free cash flow for the quarter was $226 million, including $11 million in capital expenditures [34] - The company ended the quarter with $2.736 billion in debt and $457 million in cash and cash equivalents [36] Business Line Performance - UFC segment generated $355 million in revenue, a decrease of 11% YoY, with adjusted EBITDA of $196 million, down 18% YoY, and an adjusted EBITDA margin of 55% [23] - Media rights and content revenue for UFC decreased by 19% to $216 million, while live events revenue decreased by 1% to $51 million, and sponsorship revenue increased by 16% to $74 million [25][26] - WWE segment generated $326 million in revenue, an increase of 14% YoY, with adjusted EBITDA of $117 million, up 72% YoY, and an adjusted EBITDA margin of 36% [29] - WWE live events revenue increased by 31% to $51 million, media rights and content revenue increased by 8% to $227 million, and sponsorship revenue increased by 54% to $22 million [30][31][32] Market Performance - UFC 306 at Sphere Las Vegas set records for highest grossing live event, highest merchandise and sponsorship sales, with 89% of ticket buyers coming from outside Nevada [12] - UFC 304 in Manchester became the highest grossing event at Co-op Live, and UFC 305 in Perth set a record for RAC Arena's highest grossing event [13] - WWE held 18 shows outside the U.S. in Q3 2024, up from 11 in the same period last year, with record-breaking ticket sales in markets like Japan and Germany [14][15] - SummerSlam in Cleveland became WWE's highest grossing non-WrestleMania event in history [16] Strategic Direction and Industry Competition - The company is executing a pure-play sports strategy, focusing on global sports rights, experiences, and hospitality, with the acquisition of PBR, On Location, and IMG [9][10] - On Location extended its partnership with the NFL through 2036, ensuring it remains the official hospitality provider for premier NFL events [11] - The company is leveraging its iconic properties like UFC and WWE to drive global fan engagement and economic benefits to host cities [12][13] - WWE's partnership with Netflix for Raw's launch in January 2025 is expected to expand WWE's global reach [17] Management Commentary on Operating Environment and Future Outlook - The company expects to achieve the upper end of its full-year guidance for revenue and adjusted EBITDA, driven by strong operating performance in live events and sponsorship [8][41] - The company is confident in the strength of its iconic properties and the momentum towards significant milestones, including the acquisition of PBR, On Location, and IMG [18] - The company is focused on driving value at UFC and WWE while planning for the integration of newly acquired assets [40] - The company reaffirmed its expectation for full-year 2024 free cash flow conversion to be in excess of 40% of adjusted EBITDA [44] Other Important Information - The company authorized a $2 billion share repurchase program and a $75 million quarterly cash dividend program [8][36][38] - The company refinanced its credit facility with a new 7-year $2.75 billion term loan and a 5-year $205 million revolver [39] - The company recorded a $40 million charge related to the Lee UFC antitrust lawsuit settlement, bringing the total expense to $375 million [20] Q&A Session Summary Question: UFC Domestic Rights Renewal and Potential Pay-Per-View Model [46] - The company is focused on maximizing value in UFC media rights renewals and is open to creative models to achieve higher pricing [53][54] - Pay-per-view remains a strong model for UFC, both domestically and internationally, with a proven track record of driving subscriptions and revenue [60][61] Question: WWE Margins and Cost Synergies [47] - WWE's strong margins in Q3 were driven by cost-saving measures, higher-margin revenue contributors, and efficient production execution [49][50] - The company expects further margin accretion as integration synergies between UFC and WWE continue to materialize [51] Question: UFC Fight Pass and Title Sponsorships [71] - UFC Fight Pass is expected to remain a proprietary asset, with plans to increase live events and original content to drive subscriber growth [73] - Title sponsorships, like the Riyadh Season deal for UFC 306, will be pursued when they align with the brand and provide authentic value [75] Question: Evolution of UFC Marquee Events and On Location's NFL Deal [77] - The company does not plan to host another event at the Sphere but will continue to innovate and create spectacles for UFC events globally [78][79] - The NFL partnership with On Location is a key driver of growth, with significant potential for operating leverage and future deals with other sports leagues [84][85] Question: WWE Sponsorship Growth with Netflix Deal [93] - The Netflix deal is expected to drive additional sponsorship growth for WWE, leveraging Netflix's global reach and innovative advertising opportunities [96][99] Question: Free Cash Flow and Talent Retention [101] - The company expects normalized free cash flow conversion to exceed 60% over time, driven by strong cash generation and low capital intensity [105] - Talent retention has been strong due to the company's focus on storytelling, star-building, and maintaining a competitive edge in the industry [107][109] Question: Endeavor Asset Sales and TKO's Focus on Sports [113] - TKO will not bid on any non-sports assets from Endeavor, maintaining its focus as a pure-play sports company [114][118] - The company is committed to integrating its core assets (UFC and WWE) and newly acquired sports properties to drive long-term value [122][123]
TKO (TKO) - 2024 Q3 - Earnings Call Transcript