TKO Group Holdings, Inc.

Good afternoon. Thank you for attending today's TKO Q1 2025 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'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad. I'd now like to hand it over to Seth Zaslow, head of investor relations. Please go ahead.

Good afternoon and welcome to TKO's first quarter 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, and Andrew Schwimer, TKO's chief financial officer, we'll open the call for questions. Mark Shapiro, our president and chief operating officer, and Andrew will be handling the Q&A. The purpose of this call is to provide you with information regarding our first quarter 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. Reconciliation 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. We are off to a good start in 2025, driven by continued momentum at UFC and WWE. Our first quarter revenue and profitability beat our internal expectations, and as a result, we are raising our guidance for the full year. During Q1, we also completed our acquisition of industry-leading assets IMG, On Location, and PBR, and we're now hard at work on integrating the properties into our flywheel and identifying synergies to drive top-line growth and cut costs. Andrew will share more on our updated outlook for 2025 inclusive of these businesses. Turning to the UFC, live events and global partnerships continue to deliver solid performance and drive meaningful growth. Live events set new records in Q1, including our Fight Night in London, delivering the highest-grossing Fight Night in company history, and UFC 312 in Sydney setting the record for Australia's highest-grossing indoor arena event. Global demand for our live events further underscores our conviction in the Site-Z model. Evidence of the potential here was seen in the announcement of our partnership with the Western Australian government to host five major UFC and WWE events in Perth through 2026. Our global partnerships team also secured several major innovative deals, as leading brands continue to see value in UFC's worldwide and highly engaged fan base. We renewed our long-standing partnership with Monster Energy in a multi-year agreement that is the largest sponsorship deal in company history. We also entered into a groundbreaking multi-year partnership with Metta, designed to bring UFC content to life in immersive new ways, from AI-enhanced fighter rankings to next-gen in-arena experiences and exclusive content across Metta's platforms. At WWE, the year started with the spectacle debut of our Netflix partnership, which will put our content in front of the streamer's 300 million global subscribers each week. Raw is now a mainstay on the global top 10, and we're seeing significant engagement and viewership increases internationally for weekly WWE programming and premium live events on Netflix, especially in Mexico, the UK, Australia, and Brazil. As global territories roll off existing rights deals, WWE's international footprint on Netflix will continue to expand. In fact, India has now joined the Netflix WWE family and brings with it one of the world's most passionate and engaged fan bases. Overall, WWE's live events similarly outperformed, with 35 individual market records for ticket sales and 17 sold-out events in the quarter. Elimination Chamber in Toronto became WWE's highest-grossing event in Canada. Royal Rumble set a new milestone as the highest-grossing non-WrestleMania event in company history, and the Road to WrestleMania tour achieved gate records at each of its 12 European events and drew over 116,000 fans collectively. That charge culminated in a record-breaking WrestleMania 41 in Las Vegas last month. Allegiant Stadium welcomed 124,000 fans across two nights, and WrestleMania 41 became WWE's most successful event ever, breaking all-time records in gate, premium hospitality, viewership, sponsorship, merchandise, and social engagement. Turning now to some highlights from IMG, On Location, and PBR. IMG announced several major renewals that underscore their unmatched capabilities, expertise, and global reach in sports. We renewed our partnership with CONMABALL, the South American Football Confederation covering sponsorship and media rights through 2030. We extended our strategic partnership with EuroLeague Basketball through the 2035-36 season, building on a successful joint venture that has driven significant growth in media rights value and production quality since 2016. And we renewed and expanded our partnership with Major League Soccer to deliver live match and studio coverage of more than 600 games each year on Apple TV, all produced from WWE's -the-art studio facilities in Stanford, Connecticut. And at On Location, our partnership with the NFL, the leading sports and entertainment property across the U.S., delivered more than 32,000 fan experiences, including at Super Bowl 59 in New Orleans. A tremendous result in the very first year of a new contract extension with the league that runs through 2036. I should mention that in terms of trends, WrestleMania 41, held just a few weeks ago, was no different. On Location, hospitality package revenue surged 75% over WrestleMania 40. Having this experiential hospitality capability now in-house at TKO bodes well for not only the growth of our owned assets, but the partnership opportunities across the 200 global sports league and team clients served by IMG. Finally, PBR's Unleash the Beast and Velocity tours stretched the live events demand we are witnessing with a strong showing in the quarter, drawing 640,000 fans to their 40 events and selling out more than 30. Almost right out of the gate, we are capitalizing on the strengths and capabilities of these new TKO businesses to accelerate value creation across UFC and WWE. The TKO takeover, as we call it, last month in Kansas City, marked the first time all three businesses appeared in the same arena and city over a single weekend, showcasing our unified live event strategy and seamless coordination across scheduling, ticketing, and the fan experience. Our conviction in our businesses is as strong as ever. We remain focused on creating value for shareholders through integrating and driving synergies across our newly expanded sports portfolio, delivering a media rights deal for UFC that positions the brand and the business for long-term audience and financial success, and executing our capital return programs. With that, I'll turn the call over to Andrew.

Good afternoon. As Ari highlighted, 2025 is off to a great start. We have delivered strong operating financial performance at UFC and WWE and have raised our expectations for performance for the remainder of the year. I'll provide more detail on the outlook later in my remarks. Before I review our financial statements, I'll briefly touch upon basis of presentation. As we mentioned on our last earnings call, the acquisition of IMG on location and PBR is accounted for as a merger between entities under common control. As a result, our first quarter results include three months of activity, even though the acquisition closed on February 28, and we only owned and controlled these businesses for one month. In addition, our first quarter 2024 results have been recast to include activity for these businesses. The financial results for the periods that we did not own the acquired businesses were prepared by Endeavor and include allocations of expenses to the businesses based on Endeavor's overall corporate expense profile. This presentation is consistent with the carve out financial statements for the acquired businesses included in our information statement on Form 14C filed in connection with the transaction. These expenses consisted of certain support functions that were provided on a centralized basis, such as finance, human resources, information technology, facilities, and legal, among others. Endeavor allocated these corporate expenses on a pro rata basis of headcount and gross profit. In total, such corporate allocations in Q1 were $21.7 million and represent the amounts solely from January 1 to February 28, the two months that we did not own the businesses. The corporate allocations were $30.7 million for the three months ended March 31, 2024, reflecting a full three months of Endeavor ownership a year ago. To be clear, under TKO ownership effective February 28 of this year, such corporate allocations will no longer occur. With respect to segment reporting, in connection with the acquisition, we performed a review to determine the optimal reporting structure for the company. Based on this review, we've added a third reporting segment, IMG, which consists of the operations of the IMG business and on location. To that end, we included PBR within our corporate group and have renamed it corporate and other. With respect to UFC and WWE, both will remain standalone reporting segments and there is no change in how we are presenting these businesses in our financial statements. UFC and WWE remain core drivers of TKO and we will provide the exact same presentation and disclosure as we have since the inception of the company. In connection with our review of segmentation, we've also reviewed our various revenue verticals as well as key performance indicators and have updated our disclosure. With respect to revenue verticals, we've made some small tweaks to the nomenclature. Most notably, we've revised sponsorship revenue to partnerships and marketing revenue, which better reflects the strategic and operational functions of this area of our business. With respect to the select KPIs to be disclosed in our 10Q, we've added KPIs for the acquired businesses that provide additional transparency for several important metrics, such as number of events, clients, and hospitality packages sold. When we announced the acquisition, we represented that we would work hard to assist the investment community in better understanding the drivers of the financial results for these businesses. We plan to periodically reference these metrics in future discussions as warranted. Before I get into more detail on our financial results, I wanted to comment on the macroeconomic environment, as we know this is a topic on investors' minds. We're paying close attention to consumer behavior, but to date, we're not seeing any signs of a slowdown across our portfolio, including our premium hospitality business on location. As I'll discuss in more detail in a moment, we continue to see significant strength, particularly with respect to live events and partnerships. As for tariffs, we are largely insulated, as the vast majority of our revenue is not expected to be directly impacted. One area of our business with a limited impact is consumer products. However, since WWE and UFC rely heavily on a licensed model and have minimal self-manufactured goods, the impact isn't expected to be in any way significant. Now turning to our consolidated financial results for the first quarter, inclusive of the acquired businesses. We generated revenue of $1.269 billion, an increase of 4%. Adjusted EBITDA was $417 million, an increase of 23%. Our adjusted EBITDA margin was 33%, an increase from 28% in the prior year period. Our UFC segment generated revenue of $360 million, an increase of 15%. Adjusted EBITDA was $227 million, an increase of 17%. UFC's adjusted EBITDA margin was 63%, an increase from 62% in the prior year period. UFC had 11 total events, including three numbered events, in both the first quarter of this year and last year. As we previewed on our last call, mix shifted to a higher proportion of events with live audiences with seven in the first quarter compared to five last year, including two additional international events. Live events and hospitality revenue increased 66% to $59 million. The increase reflected higher site fee revenue, primarily related to the Fight Night held in Saudi Arabia, as well as an increase in ticket sales, which reflected the two additional events with live audiences, as well as strong underlying trends in pricing and attendance. Partnerships and marketing revenue increased 32% to $64 million. The increase was driven by new partnerships as well as partnership renewals. We continued to make significant progress in growing this area of our business, as highlighted by our recent renewal with long-standing partner Monster Energy. This agreement was the largest partnership deal in UFC history. We also signed a groundbreaking new nine-figure multi-year partnership agreement with Metta. Media rights production and content revenue increased 4% to $224 million. The increase was primarily driven by the contractual escalation of media rights fees. Adjusted EBITDAO reflected the increase in revenue partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher production, marketing, athlete costs, and direct costs of revenue due to the mix of event venues and territories. SG&A increased primarily due to higher personnel costs and travel expenses compared to the prior year period. Our WWE segment generated revenue of $392 million, an increase of 24%. Adjusted EBITDAO was $194 million, an increase of 38%. Adjusted EBITDAO margin was 50%, up from 44% in the prior year period. Live events and hospitality revenue increased 52% to $76 million. As with UFC, we continued to see strong underlying trends for WWE live events. The increase was primarily related to an increase in ticket sales, which more than offset a decrease in site fees that is purely timing related. As a reminder, we received a meaningful site fee for elimination chamber in Perth, Australia in the first quarter of last year. Partnerships in marketing revenue increased 86% to $26 million due to new partnerships and renewals across multiple categories, including financial services, telecom, beer, wine, spirits, and QSR, among others. While it occurred in April, WrestleMania 41 was emblematic of the momentum we're seeing in this area. The event, which featured a record 28 total partners, including a partner sponsor for each of the 14 matches over the two nights, set an all-time record for partnerships revenue, more than double the previous record from last year's event, as well as records for ticket sales, premium hospitality, and consumer products. Media rights production and content revenue increased 14% to $252 million. As expected, results reflected the expansion of SmackDown to a three-hour format for the first half of the year, resulting in a shift in quarterly revenue recognition, but has no impact on the full year amounts. The increase was also driven by the contractual escalation of media rights fees, including the January commencement of our long-term agreement with Netflix to distribute raw in the US and all of WWE's content internationally. Adjusted EBITDA reflected the increase in revenue partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher talent costs. SG&A increased due to higher travel expenses, primarily related to the mix of venues and territories, including a three-week 11-city tour across Europe leading up to WrestleMania. Our IMG segment generated revenue of $476 million in the quarter, a decrease of 13%. Adjusted EBITDA was $74 million, a decrease of 10%. Adjusted EBITDA margin was 15% in both periods. The decline in revenue primarily related to on-location activity for the Super Bowl and Collegiate Bowl games. The venue location, New Orleans, compared to Las Vegas for the Super Bowl, and the matchups, notably the third straight Super Bowl appearance for the Kansas City Chiefs, as well as a quarterfinal Rose Bowl in 2025 compared to a semi-final game in 2024, impacted the -over-year performance. Adjusted EBITDA primarily reflected the decrease in revenue partially offset by a decrease in expenses. The decrease in expenses primarily reflected the absence of media rights costs for the FA Cup, which was no longer part of the IMG business in Q1 2025. Corporate and other revenue was $54 million, an increase of $2 million. The activity related to PBR and reflected growth in live events and partnerships, partially offset by a decrease in media rights related to the early termination of the Merit Street media content distribution deal. Corporate and other adjusted EBITDA was a negative $77 million, essentially flat with the prior year period. This amount includes the $22 million of costs related to corporate allocations of Endeavor corporate expenses for the two-month period prior to the close of the acquisition. For the avoidance of doubt, from February 28th forward, there will be no additional corporate allocation expenses of this nature. Also in connection with the acquisition, we've evaluated the treatment of various costs at these businesses and made certain adjustments to conform the presentation to the methodology used for UFC and WWE. In aggregate, this resulted in a reclassification of approximately $10 million of costs in the quarter from the IMG segment to corporate and other. Now moving on to our capital structure. In the first three months of the year, we generated $136 million of free cash flow. Our free cash flow conversion of adjusted EBITDA was 32%. Free cash flow included $27 million of capital expenditures. As we discussed on our February earnings call, we expect 2025 free cash flow to include the impact of approximately $300 million of non-recurring payments related to the recent UFC antitrust settlement and M&A. In Q1, we realized approximately $175 million of these payments, the second $125 million installment payment under the settlement agreement, as well as transaction costs. As such, our free cash flow was adversely impacted. Free cash flow for the quarter was positively impacted by approximately $100 million of prepayments related to on-location and the 2026 FIFA World Cup. These amounts are included in cash flows from operations and therefore are a part of our free cash flow calculation. We expect the World Cup prepayments to be a substantial source of cash over the course of 2025, followed by a substantial use of cash in 2026, as payments are due nearer to the tournament taking place. As we did this quarter, we intend to separately identify this item going forward so investors can follow the underlying cash flow generation of our business. As previously disclosed, on March 31st, we made our first quarterly cash dividend payment out of TKO Opco of approximately $75 million. We ended the quarter with $2.776 billion in debt and $471 million in cash and cash equivalents, as well as $159 million of restricted cash. With respect to our previously announced $2 billion share repurchase program, we continue to expect the program to commence in the second or third quarter of this year, with our timing and level of activity ultimately subject to market conditions and related factors. In the meantime, we continue to accumulate cash and carefully evaluate our capital needs. We're monitoring market conditions closely and are mindful of recent volatility. I would like to underscore that in this environment, Ari, Mark, and the board believe that we should remain prudent and conservative for the time being. That said, we remain committed to a robust and sustainable capital return program that balances return of capital to shareholders with organic investment, such as our entry into boxing and maintaining our strong balance sheet. As for boxing, in early March, we announced that we entered into a multi-year partnership to establish a new boxing promotion. We will serve as the managing partner, providing -to-day operational management and oversight of the promotion. We've commenced operationalizing the JV and will provide updates as and when appropriate. Now turning to our outlook. As we've discussed in the past, we manage the business with a focus on full year performance. Therefore, we believe results are best evaluated on a full year basis, given the quarterly fluctuations that are inherent in our operations. As noted in our press release, based on strong performance at UFC and WWE through the first three months of the year and our anticipated performance for the balance of the year, we are increasing our expectations for TKO, excluding the impact of the acquired businesses. We are now targeting revenue of $3.005 to $3.075 billion and adjusted to $1.39 to $1.43 billion, an increase of $75 million and $40 million respectively, as compared to the guidance we issued in February. The increase was driven by continued strength across each vertical of our businesses. We are also updating our guidance to include the acquired businesses and the associated transaction impacts. For full year 2025, we are targeting revenue of $4.49 to $4.56 billion and adjusted EBITDA of $1.49 to $1.53 billion. When we announced the deal last October, we presented an expected full year 2025 revenue and adjusted EBITDA contribution from these acquired businesses, inclusive of expected run rate cost savings of approximately $1.555 billion and $165 million respectively. The amounts included in our guidance represent an expected full year 2025 revenue and adjusted EBITDA contribution of approximately $1.485 billion and $100 million respectively. The updated contribution is a result of the following. Number one, the previously mentioned $21.7 million of corporate allocations from Endeavor for January and February. Given the fact that our carve-out financial statements were not yet prepared, the quantum was unknown at the time. The $21.7 million is a non-recurring accounting adjustment and does not reflect the ongoing cost base of the acquired businesses. Number two, our prior cost savings and transaction impacts target of $30 million plus. We've been hard at work identifying and actioning upon these synergies. I'm pleased to report that we have identified $40 million plus of estimated run rate cost savings, of which approximately $15 million are expected to be realized in 2025, with the vast majority expected by year end 2026. The $15 million in year 2025 contribution comps to the prior $30 million plus run rate. Number three, at PBR, the previously disclosed loss of our domestic media rights agreement with Merritt Street Media. While we remain in active discussions with various parties, our 2025 outlook excludes any revenue or adjusted EBITDA related to a new rights agreement. With respect to the IMG and on location businesses, the expected contribution is essentially consistent with the amounts we disclose when we announce the transaction. In terms of free cash flow, as we discussed on our last call, while we have not given formal guidance, excluding the impact of approximately $300 million of non-recurring amounts, our targeted full year 2025 free cash flow conversion rate would be in excess of 60%. This is exclusive of the benefit of any restricted cash. Including the impact of the acquired businesses, our view remains unchanged. Consistent with our prior calls, while we are not providing quarterly guidance, we want to highlight a few notable items as we look to the second quarter. At UFC, results will reflect the mix of events in the quarter. UFC is currently scheduled to have 11 total events, including four numbered events, which is comparable to the second quarter of last year. We also expect one additional fight night with a live audience and one less Apex event compared to the prior year. With respect to live events revenue, the fight night scheduled to take place in Baku, Azerbaijan, carries a meaningful site fee, but as a reminder, the second quarter of 2024 included a site fee related to UFC's first ever event in Saudi Arabia. At WWE, given the timing of our event calendar, including WrestleMania as well as a premium live event in Saudi Arabia, we expect the second quarter to be the highest revenue and adjusted EBITDA quarter of the year in terms of absolute dollars. At the IMG segment, the first quarter of the year is historically the most profitable due to the timing of events, most notably the Super Bowl. As a result, we expect a quarter over quarter decline in adjusted EBITDA in terms of absolute dollars. In conclusion, we generated strong first quarter results that reflect continued momentum across our businesses, in particular UFC and WWE. While we still have a lot of work ahead of us, the integration of IMG, On Location, and PBR is well underway and yielding meaningful early benefits. We are extremely excited about the road ahead and our prospects for the remainder of the year and beyond. With that, I'll turn it back to Seth.

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

Great. If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad. If for any reason you'd like to remove your question, it's star two. But again, to join the question queue, please press star one. Our first question is from Ben Swinburne with Morgan Stanley. Your line is now open.

Hey, good afternoon, guys. I should ask Mark about the UFC rights renewal. Now that you guys are, I believe, out of the exclusive window. Can you give us any update on that process? How you're thinking about the pros and cons of splitting those rights or keeping them all with one partner and sort of any update on ESPN as a go-forward partner? And then, Andrew, I don't know if you can be any more specific. You gave us a lot there at the end on the acquired assets, but just trying to get the free cash flow for 25 now that you've closed the endeavor acquisitions or anything else you can tell us to sort of help us think about free casual conversion, including acquired businesses now that that deal is all done. Thank you very much.

Thanks, Ben. You know, I'll keep my commentary light. Then we can get into the free cash flow just because of the nature and sensitivity of all the conversations we're having. We're in discussions at this time. Various third parties regarding the UFC rights. I would term the conversations as thoughtful and strategic. Nothing to announce at this time. And ESPN is still heavily included in the mix. We've been pretty vocal about how great of a partner they've been and how instrumental they've been to our growth and success. And I still believe they're one of the best marketing machines in the business, let alone the brand. And, of course, all the excitement around ESPN flagship and whatever is going to be called come next week. Jimmy Vittaro and Bob Iger, both fans of the UFC and personally showed up to events and, you know, would be thrilled to continue with them. And they're definitely part of the equation. But as I said at the time or for the time being, just various conversations, various parties and no real update beyond that. Andrew on the free cash flow.

Yeah, Ben, as I as I stayed in my prepared remarks and I kind of tack back to our last call, while we haven't given formal guidance, we do have 300 million or so of non-recurring amounts that will impact the entirety of 2025. And absent those amounts, our free cash flow conversion rate would be in excess of 60 percent. I did make the statement that including the impact of the acquired business, our view remains unchanged. So therefore that's the read through. The one thing I would note is I also articulated that this is exclusive of the benefit of any restricted cash. Restricted cash is largely associated with the pre-sales for our fee for arrangement. And we anticipate that to grow over the course of the year. So there will be a benefit from that, which we have not sort of forecast or modeled. So consistent with our prior thoughts, absent the 300 million.

And just a good story for us. Our adjusted EBITDA margin will change once we're talking about just the newly formed company, if you will. But to Andrew's point, you know, not changing our free cash flow conversion is something we're pretty excited

about. Yep. That's helpful. Thank you guys.

Thank you. Thank you,

Ben. Our next question is from Brandon Ross with Lightshed Partners. Your line is now open.

Hi, thanks. A couple of topics. First, we all saw the Canelo announcement. Assume that Canelo falls under the bucket of one-offs in your commentary about boxing last quarter. Can you just tell us how the economics work on that versus the main promotion that you're building? And where will these fights get distributed and will you get paid? And is there a strategic tie-in to what you're doing with other media rights? And then just to follow up on Ben's first question, it will be helpful. Here we go.

Brandon, Brandon, save some for the fish. I'm giving it to you all at once. All right.

Give me Canelo and then I'll ask to follow up.

Exactly. Okay. I was just telling you that, look, we're, you know, we're expecting with the new boxing organization that we're launching to put on an average of call it 12 fights a year, 12 cards a year for the next, each of the next five years. We're still putting that plan together and obviously working hand in hand with our friends from Saudi. Irrespective of those, we will look to do anywhere from one to four sort of super fights per year. We'll see how that plays out. But obviously we would term the Canelo Crawford September matchup is one of those. And then on that undercard, we would have a number of those undercard fights that would likely air on the television partner, the media partner we would have for our newly formed boxing organization. And I should mention it's not going to be called TKL boxing. We'll, you know, that seems like the soup of the day here. We'll be unveiling our name for our business fairly soon here. So, but it will not be TKL boxing. And as you look at those, those are two separate businesses, right? The Saudis are funding what would be these, you know, super fight cards. We'll work with them on meteorite deals and tech commission. We'll work with them, obviously, on global partnerships. We'll work with them on ticketing. We'll handle the production. We'll look to potentially promote all of them with Dana White and Nick Khan, you know, driving much of that. But then separately, we'll have our boxing organization, our JV with them, where we're going out and doing, as I mentioned, 12 cards a year on average and getting a separate media rights fee, selling global partnerships through those cards. And of course, promoting and producing those cards with our and on whatever media platform we ultimately choose to tie with. So that's kind of the state of boxing, if that makes sense. Any follow up on that before we go to your other one?

No, I think I think I'm good there. And then just on the UFC media rights, can you comments maybe on how the market and your approach to the numbered fights and the fight nights might differ in this negotiation? Are you looking to have the same balance of reach and dollars for each? Do you have the same objectives for each?

Nothing's really changed from our previous commentary. We remained highly flexible. I mean, that's the beauty of owning your own league. That's the beauty of having a an executive management team that is nimble and is as tight as we are. You know, we're, you know, as we like to say, I mean, we're the owners, you know, and we're the commissioner at the same time. So we'll make decisions that are best for the long term future of the sport and the brand. We have to continue to balance monetizing this rights deal while at the same time doing what's best for our reach, our engagement and the growth of the brand. We the market, I believe, remains quite strong. You know, our content is year round. It's young men. Unbelievable numbers under 18 and believe it or not, our high school numbers are off the charts. And we're we're tied with the NBA for the biggest draw when it comes to under 18 from the major sports. And, you know, we're still an antidote to churn. And and I believe a serum, a proven formula that works for subscriber acquisition. So we're, you know, cautiously optimistic. We're in no rush. This is a volatile economy right now. A lot of uncertainty out there. We also understand there aren't a lot of major sports rights hitting the market anytime soon. So we will we will be opportunistic, but at the same time, responsible when it comes to the right home for the growth of our brand.

Great. Thank you very much.

Thanks, Brandon.

We have a question from Stephen Laschick with Goldman Sachs. Your line is now open.

Hey, guys, thanks for taking the questions. Maybe first for Andrew on the guide for the core business, USC and WWE. Sounds like both outperformed your internal expectations heading into the year. I would just be curious if you could talk a little bit more about what specific areas of outperformance were captured in in the first quarter within those two businesses and to what degree the increase in the guidance for your factors in the continuation of that outperformance into the back half of the year or if you're still maintaining perhaps some degree of conservatism there.

Yeah, I think I would say that each revenue vertical in our business is strong right now. The outperformance in Q1 for core slash legacy TKO, which is USC and WWE leading to the seventy five million dollar revenue increase in forty million dollar adjusted EVA die increase was largely driven by two things. Number one, outperformance to our own internal expectations on live event and global partnerships in the first quarter, you know, much of which we flowed through to the balance of the year and then continued tailwinds in both those areas anchored by a strong wrestling mania in April gives us confidence into the visibility for now through December. So we feel real good top to bottom. And that's reflected in our guide.

Yeah, I just add, Steven. I mean, there's

there's

definitely not. There's no conservative play from us in our numbers or any kind of sandbag. I mean, there's just a lot of uncertainty out there. I mean, there isn't a morning we're waking up and reading about Toyota or GE all of a sudden raining in the marketing budget. Now, it's a good thing because we haven't closed an auto partner yet. That's still an open category for us. But it's just the market definitely tightening up. Marketing is always one of the first things to get throttled. Premium experiences, by the way, is high up on that list as well. You know, so why we feel good and historically the WWE and UFC business models and particularly sports rights business at IMG have proven resilient in times of economic uncertainty. And we're encouraged by the strength of our portfolio. We're keeping an eye on all the trends and sectors, taking nothing for granted. We expect, you know, at some point something comes home to roost. We're not trying to be paranoid, but we're just trying to be responsible for our shareholders. And our numbers reflect that.

Thanks. Thanks for that. And maybe just a quick follow up question on capital returns. It sounds like share purchases kick in the second or maybe third quarters here. Anything more you can say on how you're thinking about the pacing of that two billion dollar share repurchase program? Should we expect you to be consistent on execution or more opportunistic, more price sensitive in the marketplace?

But we're sticking to that. Our plan on capital return and Andrew can underscore that again for everybody on the on the phone with regard to dividend and share repurchase and timing. But having said that, we're well aware that we are accumulating cash at a feverish pace. That's going to continue, but we're going to keep our powder dry. We think that's the prudent thing to do at this time. So we're not we're not in the market yet. Buying back any stock. Andrew, why don't you underscore our plan?

Yeah, I think that's that really sums it up. The only other color I would I would add, Steven, in terms of sort of the nature of the buyback, it's really going to be market driven. And the form of which that buyback can take when we initially announced the two billion dollar share repurchase, I think we articulated would be fairly linear over the three to four year period. I don't think we're coming off that commentary. But again, we can be opportunistic to these opportunities present themselves. So we're watching it closely. We're in the end, the goal position to be able to, as Mark said, accumulate cash and then carefully evaluate our capital needs. So

good

place

to

be.

Thanks, Steven. Thank you both.

We have a question from Peter Supino with Wolf Research. Your line is now open.

Hi, thank you. And first, Mark, I just want to come to Brandon's defense. That was nothing compared to some of the compound questions we hear on media conference calls. I wanted to ask you a question about the IMG segment. How should we think about modeling that segment's growth across the subcomponents of media, live events, sponsorships, products, and then how might we think about incremental to the damages?

So we, you know, the first thing that we want to double down on here, Peter, is the fact that we intend to be more transparent and provide information in KPIs as we did. I'm not sure if you've had the opportunity to come through our 10 Q yet, but we did add some tables on the IMG segment. We also added a table on PBR analogous to our historical KPI tables for UFC and WWE on location of events, type of event, numbers of events, et cetera. And then on the IMG business, particularly on location, we have put some information in the financial statements on number of hospitality packages sold, numbers of number of events, et cetera. So we anticipate over time that that information would be a guide to how best to think about the growth and profitability profile of these businesses at 50% margins and effective cost savings plan. We anticipate growth over the course of the year, both top line and a margin perspective. That being said, Q1 is generally the largest adjusted EBITDA contribution quarter for the IMG segment and for PBR, which is in the corporate group. The IMG segment obviously has the on location business and the Super Bowl is the anchor of the year. And we see that positively impacting revenue and adjusted EBITDA in the quarter. And for PBR, you know, the most profitable tour is in the first quarter as well. The balance of this year will be impacted by the pre-spend for our Milan Olympics program, and that will have a negative impact to EBITDA and EBITDA margin. Hence, when we announced the acquisition in October, we presented numbers on a normalized basis, which would have added $100 million roughly of adjusted EBITDA to this year and had a positive impact on margin. So what we can expect from us over the course of this year is a an update on the growth and profitability profile of the IMG segment, growth and profitability of PBR and some more commentary on the expenses related to the Olympics.

I think too, Peter, just to underscore, I think, Andrew's comments on the pre-record. You know, just the idea that we're we're now out in the marketplace, fingers crossed, but obviously a lot of work and gut and grit and strategy underneath it. But we're out in the marketplace on Milan and the FIFA World Cup. And so far, the activity is in line with our expectations. So another good sign for the business, another reason why we're bullish about our forecast and raising guidance. But as I mentioned, we're keeping a close eye, close watch on on all of it with these changing times.

Thank

you, both.

Thank you.

Our next question is from Eric Handler with Roth Capital. Your line is now open.

Thank you. Good afternoon. Thanks for the question. I wonder if you could talk a little bit about some of the directional activity you're seeing with site fee deals. It seems like there's been more this year. Can you maybe talk about directionally the volume of deals that you're doing, maybe the percentage increase that you're seeing and sort of like, how do you determine location by location? Like what the value is of that site fee deal?

We do a lot of economic impact studies and, Eric, frankly, it's a lot of negotiations, a lot of conversations. I mean, more deals you don't hear of than deals that are being done. We're out there surveying the market. We're aggressive in the space. It helps to have offices in as many countries as we do. And IMG has obviously enhanced our position there. We're making a couple of hires coming up, some big hires on the government relations side that will help us both with relationships, C-suite activity and track record to capitalize in the space. But it's no different every office we walk into. It's no different than F1 was either there the day before or coming in the next day. So we're constantly on the lookout for cash. And, of course, in kind is often just as good. We announced at the end of February our new deal with tours in Western Australia, which will see us bring multiple UFC and WWE events to Perth over the next two years. And we're very excited about our event coming up in June of 25 in Baku. And that's just for a fight night. So we often talk about we need to capitalize on site fees for all of our numbered events and capitalize on site fees for all the PLEs. But when we're done with that,

we still have

Raw's, Smackdown's, NXT's, Fight Nights. And this will be a, you know, a year, multiple year strategy where we see benefits to the bottom line. And Baku is an example of that. We will get a meaningful multimillion dollar site fee for taking a fight night to Azerbaijan.

Great. That's helpful. I guess just to follow up to that, can you make what percentage of, you know, your events would you say actually have site fees? Just try to get a sense of like what meeting you're in here.

Yeah, I don't think we're going to disclose that publicly. We're relatively new at this effort. And I think our success outside the Middle East is really starting to pick up. The site fee model is anchored in our historic relationships with our partners at DCT in Abu Dhabi and obviously our partners in Saudi Arabia. So international markets, we've seen meaningful success over the last six to 12 months in Australia. We have historical relationships in Singapore and the list goes on. But this effort is relatively new. So I'm not going to quote a percentage penetration at this point in time, but a lot of work that's going to pay off in the coming years.

And a lot of inventory. That Kansas City takeover we did in April was, you know, just a big win for us. I mean, put aside the fee and the in kind, the amount of earned media we received for that promotion, I would say, PBR, RAW, UFC, I mean, just extraordinary. And frankly, it helps us on our marketing expense. Money we don't have to spend because we're able to make so much hay and so much noise with that promotion. So I look for more of that and just realize that internally we've got a team solely dedicated to just surveying the market, identifying the opportunities and negotiating using the leverage we have with the economic impact we've historically brought.

Very helpful. Thank you.

Got it. Thanks, Eric.

We have a question from Ryan Gravitt with UBS. Your line is now open. Great. Thanks. So,

some of the announced acquisition of AAA Wrestling in Mexico. Mark, curious what you see as the biggest opportunity here in terms of improving monetization and integration with the WWE. And are there similar tucking opportunities like this one around the world?

Yeah. Thanks, Ryan. I would just say I'm going to let Nick Conjure at the table, Lawrence Epstein for the UFCs at the table. I'm going to let Andrew and Nick dig into some detail here. But I'll tell you, I am really excited about this. This is an opportunity that frankly that Nick and Paul Levesque unearthed. This is a major property in Mexico. Enormous following. Abid fan base. Extremely young. With a bunch of events, you know, starting with the in Los Angeles, starting with an event that we're going to do there at the Clipper Stadium that is just really going to be the touch, the lead off hit, if you will. This is something that's going to catch a lot of fire. And our partnership is well structured to see us capitalize in all those different business KPIs we talk about already across UFC and WWE and PBR. So this is a fastball right down the middle for us.

Nick? Yeah, so a couple of things to add to that. The AAA acquisition for us. If you look at some of the recent wrestlers who came into WWE, Enta and his real life brother Phoenix in particular. Both social media impressions and on his debut, almost 100 million social media impressions. We see a spike in Latino viewership when he comes out. It's something we noticed a few years ago with Bad Bunny came in on his run with WWE was that the Latino audience would be there if there was someone like them who was there. So we think number one, it's a new influx of wrestlers. It's added to a demographic where we're already strong. And as Mark said, for the June 7 event at the forum, which will be at noon specific followed up by WWE premium live event. 4 p.m. That same day right across the street at the Intuit Dome, a doubleheader wrestling event for us produced from one truck. There's efficiencies there. There's good dollars there and we're excited about the overall opportunity.

The only thing I would add, Ryan, is that strategically we do this as a significant opportunity to hold down on what Mark and Nick said. The short term financial impact is not meaningful to the overall picture. But just as we've done with the UFC and WWE, this was a family operated promotion that we think we can leverage institutionalized, low on our expertise to create value. We will increase meteorites, we will increase live events revenue, we will increase partnership revenue and will increase consumer products and licensing opportunities. So this fits squarely in our warehouse on top of just the rich cultural heritage and the strategic importance to WWE.

First week we came out of the gate with Penta when he first debuted, you know, he led all merchandise sales that week, just new to the party and he was number one. So we're looking to mine these opportunities everywhere. Obviously this is an established league. But to the latter part of your question, nothing else on the horizon from an M&A standpoint, if you will. Very similar to the capital repurchase program. We're holding our powder. Let's accumulate cash and let's see what happens with this economy.

That's great. Just to confirm this would be incremental to the current guidance.

Yeah, we don't have to. There's no real short term financial impact, but any impact would be incremental. Very marginal. Great. Thanks, Jess.

Operator, let's take one last question,

please. Our last question will be from Jason Bazinet with Citi. Your line is now open.

I just had a very simple question. You know, the market really likes the assets that you guys are managing and they love the way you're managing them. The one, I guess, slight concern that I have, and I don't know if it's valid, is that once we get through the UFC renewal and the WWE PLEs, my fear is that your equity turns into like a bond, meaning it's well run, it generates a lot of cash, but there's not as much enthusiasm for the equity just because there aren't as many needle moving things that you can do. Do you think that that's a valid concern or do you think there's enough with boxing and sponsorship and site fees to sort of keep the growth as exciting as it has been?

Thanks. Thanks, Jason. Interesting perspective. What I would just say is if you know our management team, we don't sit still. There will always be a lot of gas in this car. Call it rocket fuel. So, yes, significant upside on the global partnerships front. Still a ways to go on the live ticket revenue, especially on the WWE front. New properties were going to launch, new franchises, new promotions, new leagues we will unearth, like the JV with AAA, wrestling, digging into the Hispanic market. You know, IMG is not working with 200 different partners across the world. Some massive events on the horizon, EuroLeague gaining some steam and conversations with hopefully the NBA at some point here. Coma ball and calf and the World Cup, women's sports and where that's going on location, adding new partners every day, setting an all time record with WrestleMania in Las Vegas and what's to come there. And PBR, while certainly niche and it's just Western lifestyle, a lot more we can do there and it's another situation where we're the owner and the commissioner all in one. So kind of put that aside. You know, we're already manuals, our partner here and our fearless leader. I can promise you that, you know, we're not going to be sitting still and whatever new media deals we get, they will have annual increases baked into them. And opportunities for new programming and more ancillary programming, which not only drives our storytelling and our stars, but opens up new programming vehicles for us to monetize.

That's super helpful. Thank you for that context.

That point will have a lot more cash going and hopefully do more on the dividend front and more on the share repurchase program. We're going to be active. We want to see the story play out in the way that I think our shareholders expected to over the next five to seven years. Thanks, Jason.

Thank

you

very much.

All right.

Well, thank you everyone for joining us on today's call and for your interest in TKO operator. You can conclude the call.

That concludes today's call. Thank you all for your participation. You may now disconnect your line.