TKO Group Holdings, Inc.

Good afternoon. Thank you for attending TKO's full year 2023 earnings call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I'd now like to turn the conference over to our host, Seth Zaslow, head of investor relations. Please go ahead.

Good afternoon, and welcome to TKO's full-year 2023 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. Joining me on today's call are Ari Emanuel, TKO's Executive Chair and Chief Executive Officer, Mark Shapiro, our President and COO, and Andrew Schleimer, our CFO. After prepared remarks from Ari and Andrew, we'll open the call for questions. The purpose of this call is to provide you with the information regarding our full year 2023 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, and good afternoon, everyone. TKO's strong results reflect robust demand for our premium content and live events. Throughout 2023, we achieved multiple viewership and attendance records, including 10 highest-grossing event records for UFC, as well as viewership records at each WWE premium live event during the year. We inked significant partnership agreements across TKO, most notably with Anheuser-Busch. We secured domestic and international media rights increases for UFC and WWE, including for SmackDown and NXT in the US. We launched new international events with significant site fees in the Middle East and Australia. And we made meaningful progress in our integration efforts, including merging UFC and WWE's global partnerships teams to form a unified, best-in-class global partnerships organization. During this period, both businesses reached financial milestones. Based on the full year both UFC and WWE achieved their best financial performance ever for UFC 2023 also marks the fifth consecutive year with record financial performance in terms of both revenue and profitability. The positive momentum has extended into 2024 as powerfully demonstrated by our agreement with Netflix. to bring WWE's weekly flagship program, RAW, to the streaming giant's global platform in a deal worth approximately $5.2 billion over 10 years. This agreement will provide substantial and predictable economics for years to come, and it also demonstrates our ability to leverage the Endeavor flywheel to capitalize on the evolving media landscape and forge relationships with new and emerging partners. With regard to our TKO Global Partnerships Group, Our growth potential across both UFC and WWE is significant and already evident, reflected by recent deals with Anheuser-Busch and Slim Jim, and revenue upside in this category is showing strong promise. UFC has set new sponsorship revenue records each of the past six years, and we believe WWE has similar potential. These accomplishments underscore our conviction in the combination of UFC and WWE, as well as TKO's capacity to drive revenue growth and margin expansion, generate meaningful free cash flow, and deliver shareholder value over the long term. Now, turning to some business highlights. At UFC, we sold out at all five of our live events in the fourth quarter, including October's UFC 294 in Abu Dhabi. UFC and the Department of Culture and Tourism Abu Dhabi have a longstanding relationship, which we look forward to continuing through 2028 with the recent extension and expansion of our partnership. During UFC 295 in New York City, we set another record at Madison Square Garden, cementing UFC's position as the first, second, and third all-time highest-grossing events in the legendary arena's history. Meanwhile, our fight night in Austin, Texas, became the highest-grossing sporting event ever at Moody Center, as well as the highest-grossing U.S. fight night in UFC history. In 2023, UFC's live events continued to attract strong fan attendance. During the year, we sold out 20 events with live audiences, with seven of those events now ranking among the top 20 highest-grossing UFC events of all time. These events were equally successful on broadcast. For the full year, we had our highest ever average viewership on ESPN's linear networks for UFC's pay-per-view prelims, meaning the bouts before the main card, as well as the most watched year of pay-per-view prelims telecasts on record. Average viewership for all pay-per-view prelims in 2023 on ESPN and ESPN2 grew 35% over 2022. This is before factoring in simulcast viewership on ESPN Plus for those events. Turning to international rights. During the quarter and to start the year, we completed multiple renewals, including with Sportsnet and TVA Sports in Canada, ESPN in Australia and New Zealand, and Sony in India, in addition to renewals covering emerging markets like Sub-Saharan Africa and multiple European territories. And as I previously mentioned, our roster of leading sponsors continues to expand, delivering meaningful top-line growth over 2022. In addition to signing new partners like Anheuser-Busch as the official beer sponsor of the UFC in a record-breaking deal, we renewed commitments from longstanding partners, including Monster and Toyo Tires. Pivoting now to WWE, demand for WWE's live events was similarly robust. Nine premium live events in 2023 sold out and broke multiple sales records in the process. In the fourth quarter, these included Fastlane, which became the most watched and highest-grossing Fastlane in company history. and Survivor Series, which became the highest-grossing Survivor Series of all time. That momentum has continued into 2024. Last month's Royal Rumble attracted a venue record of more than 48,000 fans to St. Petersburg, Florida's Tropicana Field and had the largest gate of any premium live event in WWE history outside of WrestleMania. Turning to media rights, as previously mentioned, we recently announced a significant long-term deal with Netflix. This partnership will dramatically expand the reach of WWE and bring weekly live appointment viewing for the first time to the streamer. We're incredibly excited about this new relationship and what both brands can achieve together over the long run. Beginning in January 2025, Netflix will become the exclusive new home of RAW in the US and will also become the home for all WWE events and specials outside the US as they become available, inclusive of RAW and WWE's other weekly shows. SmackDown and NXT, as well as premium live events, including WrestleMania, SummerSlam, and Royal Rumble. The Raw deal follows our new rights agreements that have been announced following the close of the TKO transaction for SmackDown with USA Network and for NXT with CW Network, which widens WWE's overall domestic distribution to include streaming, cable, and broadcast. Together, these deals delivered an increase of more than 1.4x in AAV, Exceeding expectations on guidance and demonstrating our ability to capitalize on the evolving media landscape, as well as the quality and value of our premium content across TKO. Just five months in, we continue to make great progress across TKO. Looking ahead at 2024, we are optimistic about the opportunities on the horizon, which Andrew will now discuss in greater detail, along with our financial performance.