TKO (TKO) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2024, TKO generated revenue of $630 million, a significant increase from$298 million in Q1 2023, reflecting a 6% growth year-over-year [11][13] - The net loss for the quarter was $250 million, primarily due to a$335 million charge related to a legal settlement [11][10] - Adjusted EBITDA was $282 million with a margin of 45$117 million and a 39% margin in the previous year [11][13] - Free cash flow for the quarter was $28 million, with capital expenditures of$32 million [15] Business Line Data and Key Metrics Changes - The UFC segment generated revenue of $313 million, a 2$195 million [29] - WWE's revenue was $317 million with an adjusted EBITDA of$140 million, maintaining a 44% margin [160] - Media rights and content revenue for TKO decreased by 4% to 215 million, attributed to one less numbered event [12] Market Data and Key Metrics Changes - WrestleMania 40 set a WWE gate record with 145,000 fans over two days, indicating strong market demand [5] - UFC 300 became one of the highest-grossing events in UFC history, showcasing the brand's market strength [5] - The company secured a short-term agreement with USA Network to extend RAW through Q4 2024, indicating ongoing media rights negotiations [8] Company Strategy and Development Direction - TKO is focused on integrating UFC and WWE operations to realize revenue and cost synergies [9] - The company aims to explore M&A opportunities selectively, particularly in premium sports content and live events [34][62] - TKO raised its full-year 2024 guidance for revenue and adjusted EBITDA, targeting revenue of 2.61 billion to $2.685 billion [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance of both UFC and WWE, citing record attendance and revenue growth [22][138] - The company anticipates continued strength in live events and brand partnerships, particularly with the upcoming UFC events [6][35] - Management highlighted the importance of site fees and partnerships with local governments to maximize revenue opportunities [115][128] Other Important Information - The company settled all claims in UFC antitrust lawsuits, which is expected to have no adverse impact on existing business operations [10][152] - TKO ended the quarter with$2.752 billion in debt and $246 million in cash, indicating a focus on financial capacity and shareholder value [16] Q&A Session Summary Question: How does the NBA deal impact TKO's future? - Management noted that TKO is off to a solid start in 2024, with strong performance across both UFC and WWE, and emphasized the positive outlook for media rights renewals [21][22] Question: What is TKO's strategy regarding media rights? - Management stated they are open to discussions but are not looking to reduce commitments, focusing on maximizing value for UFC [51][53] Question: How does TKO view potential acquisitions? - Management expressed interest in exploring M&A opportunities selectively, particularly in premium sports content, while maintaining a disciplined approach [60][62] Question: What are the expectations for events in Saudi Arabia? - Management confirmed a strong relationship with the Kingdom and indicated plans for additional events, emphasizing the importance of site fees [64][66] Question: How does TKO plan to manage its capital structure? - Management highlighted the intention to generate significant free cash flow and consider various opportunities to enhance shareholder value, including share repurchases and dividends [16][42]