NYSE:TKO TKO Group Q3 2024 Earnings Report $157.27 +1.99 (+1.28%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$156.61 -0.66 (-0.42%) As of 04/25/2025 07:56 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast TKO Group EPS ResultsActual EPS$0.28Consensus EPS $0.56Beat/MissMissed by -$0.28One Year Ago EPS$0.52TKO Group Revenue ResultsActual Revenue$681.20 millionExpected Revenue$665.12 millionBeat/MissBeat by +$16.08 millionYoY Revenue Growth+51.70%TKO Group Announcement DetailsQuarterQ3 2024Date11/6/2024TimeAfter Market ClosesConference Call DateWednesday, November 6, 2024Conference Call Time5:00PM ETUpcoming EarningsTKO Group's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by TKO Group Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 6, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Good afternoon, and thank you for joining today's Q3 2024 TKO Earnings Call. My name is Reagan, and I'll be your moderator today. All lines will be muted during the presentation portion of this call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Seth Zaslow, Head of Investor Relations. Seth, you may now proceed. Speaker 100:00:24The 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 Schleimer, 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 and A. The purpose of this call is to provide you with the information regarding our Q3 2024 performance. I want to remind everyone that the information discussed will include forward looking statements and or projections that involve risks, uncertainties and assumptions. Speaker 100:01:05Please 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. Speaker 100:01:55Reconciliations 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. Speaker 200:02:08Thanks, Seth. Just over a year since UFC and WWE came together to form TKO, our conviction in this business is as strong as ever. We're executing on our strategy and delivering record results, while realizing greater integration and synergy opportunities than initially expected. On the heels of TKO's solid Q3 performance and with our visibility through year end, we're now expecting to come in at the upper end of our full year guidance range for both revenue and adjusted EBITDA. Additionally, 2 weeks ago, we made 2 announcements that we believe reinforce our commitment to creating long term value for shareholders. Speaker 200:02:47First, we authorized a capital return program featuring a $2,000,000,000 share repurchase program and a quarterly cash dividend program of $75,000,000 2nd, TKO announced an agreement to acquire industry leading sports assets, Professional Bull Riders or PBR, premium sports hospitality provider on location, and global sports rights and production powerhouse IMG. I cannot impress enough how bullish we are about this deal, which aligns with the pure play sports strategy TKO will execute and be known for. This acquisition strengthens our global position in sports rights, experiences, and hospitality, and it adds PBR to our portfolio as another valuable and growing sports league. These assets will power our profile, give us greater scale, strengthen our position in the sports marketplace, and accelerate returns for shareholders. We're also proud and pleased to share that On Location has extended its partnership with the NFL through 2,036, ensuring it remains the official hospitality provider at premier events, including the Super Bowl, NFL Draft, and NFL International Games for years to come. Speaker 200:03:59Turning to the quarter, our results highlight sustained demand for UFC and WWE live events and underscore our business' ability to reach new heights and attract fans globally. UFC 306 at Sphere Las Vegas is a prime example. The sold out event not only set the record for UFC's highest grossing live event, but also became Sphere's highest grossing single event and achieved UFC's highest event merchandise and sponsorship sales. Notably, 89% of ticket buyers came from outside Nevada, one of the highest out of town attendance rates for any UFC or Sphere event. This turnout underscores UFC's appeal as a destination event, drawing fans from across regions and delivering economic benefits to host cities. Speaker 200:04:45Beyond these impressive metrics, this event also showcases what TKO is truly all about, innovating and revolutionizing the way fans consume and engage with live sports. Internationally, UFC events also delivered. UFC 304 in Manchester became the highest grossing event at Co op Live and drew the largest attendance for a UFC event in the UK. In Perth, UFC 305 marked a successful start to our multiyear partnership with the Western Australian government, setting the record for RAC Arena's highest grossing event. And in Paris, our September fight night became a core arena's highest grossing event to date. Speaker 200:05:26At WWE, live events outperformed in the Q3 and set 42 individual market records for ticket sales, evidence that the strategies we have been implementing around ticket pricing and event routing are bearing fruit. While the U. S. Remains strong, momentum is increasingly evident in international markets, where WWE continues to sell out venues and draw record crowds. In the Q3, WWE held 18 shows outside the U. Speaker 200:05:53S, up from 11 in the same period last year. Highlights included a highly anticipated return to Japan after a 5 year hiatus, selling out in Tokyo with a record gate and Germany's first ever premium live event, which became WWE's highest grossing arena event, a record that we have broken 3 times this year. Meanwhile, in Cleveland, SummerSlam achieved record breaking results, becoming WWE's highest grossing non WrestleMania event in history. WWE also had successful debuts on USA Network for SmackDown and The CW Network for NXT. In fact, through the 1st 5 weeks, NXT is up 12% in viewership versus USA last year. Speaker 200:06:37Meanwhile, SmackDown's return to USA Network under our 5 year domestic media rights agreement with NBCUniversal has already driven strong and sustained viewership. Without a doubt, this partnership further strengthens our long standing relationship with NBCU, we're anticipating a strong draw for the upcoming debut of quarterly primetime specials starting December 14th with Saturday Night's main event on NBC. And with Raw's launch on Netflix nearing, both WWE and Netflix are actively preparing for an impactful debut on January 6, which will expand the reach of WWE and deliver our flagship content to a global audience. As we close out the year and look to 2025, we're confident in the strength of our iconic properties and the momentum we're building towards significant milestones. From an exciting lineup of live events that include UFC 309 at Madison Square Garden later this month, WrestleMania in Las Vegas, and the first ever 2 night SummerSlam at MetLife Stadium to closing our acquisition of PBR, On Location and IMG, all of which fuel further growth. Speaker 200:07:43With that, I'll turn the call over to Andrew. Good Speaker 300:07:47afternoon. As we previously disclosed, on September 26, we reached revised agreement to settle all claims asserted in the Lee UFC antitrust lawsuit for 375,000,000 dollars In the Q3, we recorded an incremental $40,000,000 charge to bring the aggregate expense on our books to $375,000,000 On October 22, the court granted preliminary approval of the settlement. As a result, we made the first of 3 payments for $125,000,000 into escrow in late October. We expect to pay the remaining $250,000,000 in 2025, dollars 125,000,000 in the 1st quarter 125 by the end of Q2. As we've mentioned, the settlement is anticipated to be deductible for tax purposes as and when paid. Speaker 300:08:36As a result, our tax distributions to members in the Q3 will reduce to reflect the settlement payment such that we didn't realize an adverse dollar for dollar impact to cash on hand. 3rd quarter reported results included 3 months of activity for both UFC and WWE. The reported results for the Q3 of 2023 include WWE activity for the period from September 12 through September 30, 2023. To assist with comparability, we've presented supplemental financial information in our press release and IR website that includes WWE activity and the portion of WWE related to the corporate group for the period from July 1 through September 11, 2023, as well as each quarterly period from January 1, 2022 through September 11, 2023. For the Q3 of 2024, we generated revenue of $681,000,000 Net income was $58,000,000 Adjusted EBITDA was $310,000,000 and our adjusted EBITDA margin was 46%. Speaker 300:09:42Including WWE activity for July 1 through September 11, 2023, combined revenue for the Q3 was $685,000,000 combined adjusted EBITDA was 298,000,000 and our combined adjusted EBITDA margin was 44%. Inclusive of these amounts, revenue decreased 1%, adjusted EBITDA increased 4% and adjusted EBITDA margin increased 2 percentage points. Our UFC segment generated revenue of $355,000,000 in the quarter, a decrease of 11% or $43,000,000 Adjusted EBITDA was $196,000,000 a decrease of 18% or 43,000,000 dollars UFC's adjusted EBITDA margin was 55%, down from 60% in the prior year period. As expected, revenue was impacted by the timing of the events calendar. UFC had 10 total events in the Q3 of this year compared to 13 total events in the prior year period. Speaker 300:10:43As Ari mentioned, the health of the business remains extremely strong and UFC continues to benefit from the meaningful tailwinds of the experience economy. Media rights and content revenue decreased 19% to $216,000,000 The decrease was driven by 1 less numbered event and 2 fewer fight nights as compared to the prior year period. The contractual escalation of media rights partially offset the decrease from the timing of the events calendar. Live events revenue decreased 1% to 51,000,000 Ticket sales reflected the decline in the number of total events in the Q3 as compared to the prior year. This headwind was essentially offset by strong underlying trends in pricing and attendance for high profile events such as UFC 306 at Sphere as well as an increase in site fees. Speaker 300:11:34Results in the quarter included a site fee related to our fight night in Abu Dhabi. Sponsorship revenue increased 16% to 74,000,000 dollars Despite the unfavorable mix of events in the quarter, new partnerships and renewals drove the increase. UFC 306 was the highest grossing event in UFC's history and the first event to feature a title partner sponsor, which we sold to Riyadh Season. Adjusted EBITDA reflected the decrease in revenue. Expenses were essentially flat year over year. Speaker 300:12:07Direct operating expenses decreased primarily due to lower marketing, athlete costs and direct cost of revenue due to 1 less numbered event and 2 fewer fight nights. These decreases were partially offset by higher production costs, primarily related to UFC 306. Given the unique nature of the venue and production elements associated therewith, we incurred production costs for UFC 306 that were meaningfully higher than our historical norm for a numbered event, which resulted in reduced adjusted EBITDA and reduced adjusted EBITDA margin in the quarter. However, as Ari highlighted, UFC 306 was a once in a lifetime experience and a highly successful event for UFC. SG and A increased primarily due to higher cost of personnel as compared to the prior year period. Speaker 300:12:57WWE delivered strong quarterly revenue and adjusted EBITDA. The financial results continue to reflect healthy creative momentum in the business as well as the benefits to both the top and bottom line from the initiatives we implemented since the formation of TKO. Our WWE segment generated revenue of $326,000,000 in the quarter. Adjusted EBITDA was $175,000,000 and adjusted EBITDA margin was 54%. The following commentary on the Q3 includes comparisons to activity for the period from July 1 through September 30, 2023. Speaker 300:13:32In the Q3 of 'twenty three, revenue was $287,000,000 Adjusted EBITDA was $102,000,000 and adjusted EBITDA margin was 36%. Revenue increased 14% or 39,000,000 dollars Adjusted EBITDA increased 72 percent or $73,000,000 and adjusted EBITDA margin increased 18 percentage points. Revenue growth was led by continued strong performance for live events. Live events revenue increased 31 percent to $51,000,000 The increase was primarily related to an increase in ticket sales. Since the formation of TKO, we've been focused on increasing ticket yield and this strategy favorably impacted our results in the quarter, not only in connection with the premium live events such as SummerSlam, which was the highest grossing non WrestleMania event of all time, but for the balance of WWE's live events in the aggregate. Speaker 300:14:27Media rights and content revenue increased 8% to $227,000,000 The increase was primarily related to the contractual escalation of media rights fees as well as the timing of our weekly programming, which resulted in one additional episode of Raw in the quarter compared to the prior year. Sponsorship revenue increased 54 percent to $22,000,000 due to new partnerships and renewals across multiple categories, including beverage, QSR, spirits, entertainment and communications. Of note, SummerSlam was highly successful and included for the first time 3 interim sponsors as well as a record number of partners. It's early days, but we have and expect to continue to realize benefits from the unified global partnerships team we put in place at the beginning of the year. Adjusted EBITDA reflected the increase in revenue and a decrease in expenses. Speaker 300:15:17The decrease in expenses primarily reflected lower personnel costs and production costs related to our planned cost reduction initiatives implemented following the formation of TKO. Corporate expenses were $61,000,000 for the Q3 of 2024. On a combined basis, corporate expenses were $42,000,000 for the Q3 of 2023. The increase was primarily due to higher personnel costs, including executive compensation and other G and A expenses following the formation of TKO in September of last year. The increase also reflected the impact of the services fee that UFC and WWE paid to Endeavor, which commenced for WWE in March of 2024. Speaker 300:15:58Now moving to our capital structure. We define free cash flow as net cash provided by operating activities less capital expenditures. Free cash flow excludes the majority of the mandatory tax distributions to our owners, but does include the portion of cash taxes paid by TKO PubCo. For the quarter, we generated $226,000,000 of free cash flow. This includes $11,000,000 of capital expenditures, approximately $3,000,000 of which related to WWE's new headquarters. Speaker 300:16:26The quarter was favorably impacted by the timing of working capital, most notably the collection of the site fee associated with our WWE Saudi event, King and Queen of the Ring that was held in May. We ended the quarter with $2,736,000,000 in debt and $457,000,000 in cash and cash equivalents. Given the strength of our balance sheet and financial profile, the implementation of a robust and sustained capital return program has and will continue to be a top priority for us. As we announced on October 24, our Board of Directors authorized the share repurchase program of up to $2,000,000,000 of our Class A common stock. We expect the program to commence following the close of the acquisition of PBR on location and IMG in the first half of twenty twenty five, but is not conditioned on the closure of this transaction. Speaker 300:17:14Once the program does commence, we anticipate that the pace of the repurchase activity will be fairly linear and expect to complete the program within a period of 3 to 4 years. We also announced that our Board authorized a $75,000,000 quarterly cash dividend program. The dividend program will involve a quarterly distribution by TKO OpCo and holders of TKO Class A common stock will receive their pro rata share of distributions. We intend to make the 1st dividend payment on March 31, 2025. As with the share repurchase program, the dividend is not conditioned on the close of the PBR on location and IMG transaction. Speaker 300:17:51Earlier today, we announced the refinancing of our credit facility, seeking a new 7 year $2,750,000,000 term loan and a new 5 year $205,000,000 revolver, which are approximately the same balances as we currently have. The facility will continue to include significant capacity for incremental term loan add ons, which we anticipate will be a source of funding the share repurchase program. As we previously articulated, our target for net leverage remains up to 3x. Given our strong balance sheet, expected growth in adjusted EBITDA and free cash flow generation, we expect to have additional financial capacity. However, our primary focus continues to be driving value at UFC and WWE, while also planning for the integration of PBR, On Location and IMG into TKO. Speaker 300:18:40As we noted when we announced the transaction, PBR, on location and IMG are the only assets that TKO will acquire from Endeavour. As we've discussed in the past, we manage the business with a focus on full year performance. Therefore, we believe our results are best evaluated on a full year basis given the quarterly fluctuations that are inherent in our operations related to the timing of our events and content deliveries among other items. As we noted on October 24 and in our press release today, we are revising our full year 2024 guidance for revenue and adjusted EBITDA. We are now targeting the upper end of the previously provided ranges for both revenue of $2,670,000,000 to $2,745,000,000 and adjusted EBITDA of $1,220,000,000 to $1,240,000,000 The increase is related primarily to strong operating performance on a year to date basis, particularly in live events and sponsorship at both of our businesses and visibility through the end of the year. Speaker 300:19:41On our last call, we noted that we expected the Q3 to be the most challenging quarter of the year for UFC given the unfavorable timing of events, and it was. As we look to the Q4 of 2024, we want to highlight a few notable items. At UFC, results are expected to improve as the current calendar includes an additional event and 2 additional events with live audiences compared to the prior year period. At WWE, as we've previously discussed, results will reflect the short term domestic rights deal we reached earlier this year with USA Network for Raw for the Q4. This will have an unfavorable impact of approximately $50,000,000 to both revenue and adjusted EBITDA as compared to Q4 2023. Speaker 300:20:23As a reminder and for the avoidance of doubt, this is purely timing related. In January 2025, our long term agreement with Netflix to distribute raw commences. In terms of expenses, we expect results to continue to reflect the benefit of the initiatives we've implemented to take costs out of the business. Today, we also reaffirmed our expectation for full year 2024 free cash flow conversion to be in excess of 40 percent of adjusted EBITDA. Our outlook includes the payment of $125,000,000 for the UFC lawsuit settlement and transaction costs related to the strategic acquisition of Endeavor Assets, both of which are included in operating cash flow. Speaker 300:21:03In conclusion, we generated solid Q3 results that reflected continued strength in both of our businesses. We are extremely excited about the road ahead and our prospects for 2024 and beyond. With that, I'll turn it back to Seth. Speaker 100:21:17Thanks, Andrew. Operator, we're ready to open the call for questions. Operator00:21:23Thank you so much. We will now be moving on to our Q and A session. Our first question comes from Ben Swinburne of Morgan Stanley. Ben, your line is now open. Speaker 400:21:50Great. Hey, good afternoon, everybody. Thanks for taking the question. Maybe I'd like to start with Mark on sort of the UFC, which is right around the corner with the domestic rights. I think you've made some comments recently about potentially splitting up the rights, taking back pay per views. Speaker 400:22:08I think as a public company, you certainly benefit from sort of their predictability of licensing out those pay per view fights to ESPN. But I'm wondering how you think about that relative to the potential upside of distributing those yourself. And then I'd love to hear, Andrew, the WWE margins this quarter were particularly impressive. I think your expenses were down like 20%, even though revenues were up 13%. You mentioned merger synergies. Speaker 400:22:33Anything else you'd flag? Because even live events, I think the event count was up, I think, at least internationally. So, surprised to how strong of a margin you had in Q3. I'd love any more details you might share. Thanks so much. Speaker 500:22:46Thanks, Ben. Good to hear from you. Andrew will start since it's just fresh off your long second part of the question, then I'll come back in the first one. Speaker 300:22:52Look, I think the market benefit from actually one additional Raw event in the quarter. So almost like for like from an event calendar perspective on WWE. But what I think you're seeing here is just the continued cost savings measures and initiatives that we set out to put in place when we launched TKO really in flowing through us just being more efficient top to bottom, getting a bit more on the production side as Nick and Lee fitting are laser focused on execution there. And really, I'd like to focus on growth in the ad sales and sponsorship department, 54% growth over prior year Q3, and those deals are being structured at higher margins than they had been in the past. So you're seeing just growth from high margin revenue contributors and even more so than they were contributing Q3 in 2023. Speaker 300:23:48Early innings on the sales side, but really encouraged by what we're seeing. Speaker 500:23:52Yes. And I would just say, Ben, just to add to that, I mean, you can just expect more margin accretion as we flow through. I'd like to remind folks, we're still in at least mid innings, if not early innings, on the integration of these two assets of WWE and UFC. I mean, we're, of course, already guiding to the fact that we'll beat our net cost synergies of $100,000,000 But as we succeed with our strategy of having these events on the same week or same weekend or subsequent weekends, now with PBR as well, our margins are only going to be better because we're going to save on that cost side. I mean, we'll sell triple header sponsorships as we like to call them, somebody that comes in and sponsors all three events. Speaker 500:24:42That will be huge for us and it will drive local ad sales. But on the cost side, are going to benefit there. And I can tell you that to Andrew's point, Nick Khan and Pete Tropic who runs all of our ticket operations and Lawrence Epstein, I mean they are working on this night and day, city by city, region by region, country by country, where can we bring all three to town. There's that as well. So on the first part, look, here's what I would tell you. Speaker 500:25:06In terms of what really benefits to your point, what benefits us and our shareholders is maximizing value on these renewals. That's the bottom line. So we're not looking to upend or change for change sake or unorthodox models. We are looking to maximize our rights, end of story. UFC is mainstream, incredibly popular. Speaker 500:25:32I see some of the struggles going on with other leagues right now, both linear and digital, leagues that have started new seasons and are not off to a rocket start like we're accustomed to. That's not the case with UFC. We're still driving subs on ESPN plus When we're on ESPN, ESPN2 or ABC, we're a ratings winner and driving more advertising for those platforms. And on the WWE side, as Andrew talked about in his and Ari talked about in the prepared comments, across the board from CW to, of course, Comcast, WWE is still a stalwart. So we're flying. Speaker 500:26:12And if we have to be creative to help potential partners or bring other suitors in the door so that we get a higher price or live up to the guide that The Street has been giving us on the renewals, not the one we're giving them, but the one they're giving us, then we're going to do it. And that's all we're trying to signal to our shareholders and all we're trying to signal to the media suitors, the platforms, the companies that are going to be chasing us relatively soon. Speaker 200:26:41Thanks so much. Speaker 500:26:43Thank you. Operator00:26:47Thank you. Our next question comes from Brandon. I'm so sorry, say it one more time. Speaker 500:26:55No, go ahead. Go ahead. Sorry. Operator00:26:58No problem. Our next question comes from Brandon Ross of LightShed. Brandon, your line is now open. Speaker 600:27:04Thanks very much. And for the record that faux pas was not my fault this time. Maybe just to start with a follow-up on Ben's UFC renewal question. I've been thinking a lot about how different the approach to distributing your top content is between WWE and UFC right now. For WWE, the PLEs, you're going with the broadest possible reach on Netflix and Peacock. Speaker 600:27:37There's no discrete transaction to watch your content. But on UFC, you're in this high cost pay per view model. And you've said, and I think maybe alluded to it with the last answer, you don't want to shake anything up really and you prefer to re up your deal with Disney. Why is the continuation of a pay per view model the best path, especially given how MMA is still in its relative infancy compared to wrestling? Speaker 500:28:10Yes. Look, I would just tell you, Brandon, I mean, just a reminder, obviously, internationally, we sell pay per view for the UFC, but we do not sell the pay per view domestically. That's ESPN's job. And what I can tell you as we enter into these negotiations, at the end of the day, it's what the market will bear. That's really what it is. Speaker 500:28:30And we're next up. We're the next big thing on the block, if you will. We have a proven track record. Our demos are insane. I mean, really just across TKO, where 50% of our audience is 18% to 34%, which is what most platforms and companies are chasing. Speaker 500:28:49So we're in good stead there. We have terrific diversification and we drive a very strong Hispanic audience when it comes to the UFC and we're gender neutral. And we're not just talking about women watching women's fight. That's not the case. We have a strong base of women watching all of our fights. Speaker 500:29:08So we're sitting in a pretty good position. Pay per view is still a strong model. It worked to build ESPN plus It's worked for us internationally. We've got great history with it. DIRECTV and DISH may be coming together. Speaker 500:29:23So who knows the kind of opportunity there. Paramount and CBS are obviously getting their act together. They'll be closing next year. I believe they'll be at the table if and when it comes to them because they've already signaled both Jeff Shell and David Ellison that sports will be a banner vehicle of content for them. So we will not have a shortage of suitors. Speaker 500:29:50We feel great. But we love Disney. I can't underscore it enough. And Jimmy Pitaro and Bob Iger get UFC and very much were architects in our deal. Kevin Mayer was still at the time, but they were very much part of us crafting how we were going to do that deal. Speaker 500:30:07Things change, models change, viewing patterns change, broadcast is now kind of back in, if you will. Cable is obviously having its struggles, but still nothing to frown at and streaming is on fire and new platforms and fast channels are coming all the time. So it's really just demonstrating and signaling to the market that we have flexibility and a willingness to play ball on a myriad of business models. And Ari and I in particular are very focused on not just communicating that, but actively discussing those potential models with all of the partners and then some. Speaker 600:30:48Okay. And then Dana White recently talked about getting into boxing and said that it would be with guns blazing. Can you expand on that? Just wondering how this can be done in a way that's in sync with your current margin profile. And will this be happen organically by perhaps letting UFC fighters box under your banner? Speaker 600:31:11Or is this one of those instances where we could see some M and A at play? Speaker 500:31:18Yes. No, look, first of all, some off the cuff comments from Dana White do not translate into a strategy that we're communicating to The Street, right? Dana says a lot of things and has a lot of passions and that's why we love him. He's also the best promoter, the sport of MMA and frankly, if it was boxing, has or will ever see. What I can tell you is boxing at its best is confused and fragmented, at its worst is broken. Speaker 500:31:52And we think the sport presents an interesting growth opportunity for us. Dana White and I should mention Nick Khan have deep expertise in long standing relationships in what they call the sweet science, otherwise known as boxing. And if we were to get involved in boxing, we would expect to do so in an organic way, not an M and A way. So I. E, we're not writing a check. Speaker 500:32:15And if we launch the vertical at any time, we kind of see it as doing it with a partner who would fund it and pay us to operate. So nothing to announce today, but this is one area we're going to continue to explore. We've talked about the dearth of leagues that are out there. Obviously, we're acquiring PBR. There's not much else. Speaker 500:32:36We don't necessarily need to add anything to our model, but boxing is ripe. It is ripe for a fix. And we're blessed to have 2 experts in the field. And if an opportunity presents itself or we can chase one down that does not put much risk or any risk for that matter on us financially, then we're going to pursue it. And in terms of models and league and how we structure it and etcetera, etcetera, that's way down the road. Speaker 500:33:07And once we have something, if we have something, you'll be the first to know. Speaker 200:33:12Thank you very much. Speaker 500:33:15Thank you. Operator00:33:19Thank you. Our next question comes from David Karnovsky of JPMorgan. David, your line is now open. Speaker 700:33:27Hey, thank you for the question. Maybe just following up on the UFC renewal. Mark, interested to know how you're positioning UFC Fight Pass potentially as Speaker 800:33:35part of Speaker 700:33:35negotiations. Last time that was kept separate, is that the intention this time around or is there kind of an opportunity to roll the service or content into a partner platform and receive better economics? And then just staying with UFC, wanted to know you're thinking about title sponsorship as potential inventory. Was this fear kind of unique one off? Or you make more use of the pay per views ahead? Speaker 500:34:01Yes. Thanks, David. Look, I'll tell you, as we sit here today, we're really pleased with the growth of UFC Fight Pass. In fact, internationally, we're really seeing subs tick up, especially in Brazil where we finally got our act together after a slow start. We see keeping that separate. Speaker 500:34:21I'll tell you that there is truly untapped potential when it comes to UFC fight pass. And the secret to driving subs on UFC Fight Pass is just quite simply more live events, period, end of story. And so in any renewal, we're going to explore the ability for us to potentially have exclusive fights on UFC Fight Pass, but then also lean further into the combat space with regard to karate, jujitsu, wrestling itself, boxing potentially, more live events that we can program around the clock that really drive demand in terms of sub acquisition and fan base. So to answer your question, we expect to keep that as a proprietary asset that we control. It's not for sale, but it will have more original content, less taped programming and more live events. Speaker 500:35:15That's the first part. As regard to the second, the title sponsors, look, yes, that was a tremendous deal we did with Riyadh season and the Saudis to sponsor the Sphere event. I think everybody got a good deal out of that one because that was such a spectacle for them and for us. And if there are opportunities to sell more title sponsors, we're going to pursue them. And I can tell you in the bag of inventory that Grant Norris Jones, who runs our Global Partnerships team and his Lieutenant, Luc Escobalis, as they go to the street, door to door, brand to brand, category to category, knocking down business, which I'll remind you is almost kicking the door of $300,000,000 this year between UFC and WWE. Speaker 500:36:05So we're heading north fast. They will absolutely deploy title sponsorship inventory if it makes sense. It has to be authentic. It has to be seamless. And we certainly don't want to over commercialize the UFC. Speaker 500:36:20But I think it was a pretty good suit and a good fit as it relates to the Sphere event. Speaker 200:36:28Thank you. Operator00:36:34Thank you. Our next question comes from Steven Lejuez of Goldman Sachs. Steven, your line is now open. Speaker 900:36:43Hey, great. Thanks for taking the questions. Mark, in the past, you've spoken about the impact the Sphere event has had on the UFC brand. I'm curious now post fear, how you're thinking about the evolution of some of these marquee UFC events that you put on, maybe the opportunity to elevate more select pay per view fights, perhaps potentially through a sphere like event in the future, perhaps even through stadium like events that you host in the WWE side similar to WrestleMania? And then second on location, Ari called out the NFL deal through 2,036, I think. Speaker 900:37:18I was curious if you just talk a little bit more about the financial profile of that deal, the extent to which you might be operating leverage if you outperform on selling NFL Premium Hospitality and if you think a deal like NFL 1 could be a good template for similar deals going forward with Sports Leaks? Thank you. Speaker 500:37:37Great. So first off, I just want to remind everyone that we do not intend to do another event at The Sphere. That was a one and done. I think we've signaled that to the market. Of course, anything can change just like rock bands do their farewell tours and seem to stick around for another 20 years. Speaker 500:37:54But Dana is pretty intent that this was a one and done. That's why we spent so much. That's why we made so much out of it. By the way, it took a lot out of us in terms of focus to pull it off in the way we did. But in terms of creating more spectacles, like that's our job, period. Speaker 500:38:10And globally, that's our job. And frankly, much of that responsibility to create those spectacles falls to Laurence Epstein, who's running the UFC business with Dana day to day. Laurence happens to be in the room, and I'd like him to opine on and comment on your first part of Speaker 1000:38:28the question. Laurence? Thanks, Mark. Just a couple of things to add to what Mark just had to say. First of all, huge achievements, really was a challenge, as Mark indicated, but a huge achievement for our UFC team to put on that. Speaker 1000:38:39What we view is really a seminal event in the history of sports and entertainment. It's the first time anything like this has ever been done in the world of sport, the world of entertainment and the entire world is really looking at this event. So huge achievement, huge success for our entire team. It's really, I think, part of our be first mentality. We're the 1st group to ever do this. Speaker 1000:38:58Maybe we'll be the only one, but we're certainly the first so far. And we're really proud of the achievement and, of course, the leadership that we showed. And as I said, this event was a game changer. I think as we look at future events and as arenas, and I'll coin this term, spherize themselves, add more LED, add more technology to their facilities. We're going to continue to up the game with respect to our production. Speaker 1000:39:21The first facility that has really done this outside the sphere, of course, is Speaker 300:39:25the Intuit Dome in California where Speaker 1000:39:28the Clippers are going to be playing. And you can expect to see us there very soon taking advantage of that great technology there. Speaker 500:39:34By the way, last time I checked, the Sphere is launching in Abu Dhabi. Dana did say no more events at the Sphere in Vegas, but that doesn't mean we can't go to Abu Dhabi. So I'm looking forward to pursuing that when that gets built probably 2 decades from now. Andrew, go ahead. Yes, look, Speaker 300:39:52thanks for the questions, Steven, on obviously on location in the NFL. There was a press release that Endeavor actually issued yesterday as in advance of the acquisition, Endeavor is responsible for extensions with their current customer on location in the NFL. But us at TKO, the acquirer of this business, are obviously thrilled with the extension of that agreement through 2,036. Obviously, NFL best in class sports brand and the opportunity to continue that relationship is obviously extraordinarily beneficial for us at On Location, TKO and will benefit us through the balance of our portfolio. We're not going to comment on the economics of the deal. Speaker 300:40:35Those are not public nor will they be in the future. But that being said, I do want to pivot the conversation for a moment just to visibility and what we discussed last week when we announced the acquisition of these assets. We are going to go to extraordinary lengths to ensure that both our external and internal constituents have as much information and tools to understand the revenue and profitability profiles of these businesses. Whether they be on a standalone basis or within our portfolio, it's important to understand not only how they grow, but how they benefit the other assets in our portfolio. So rest assured, we'll be able to give you information as time goes on and the NFL relationship is core to OLE and its future revenue and growth prospects. Speaker 500:41:19Yes, I would just underscore that. We Andrew and I have too much experience here at Endeavor with the lumpiness of on location and how difficult that was for The Street to model. The transparency and visibility is going to be significant. Starting with our investor presentation, which in the appendix on Page 16, we laid out specifically the Olympics, what we expect to make year over year, year after year, over a 4 year span and then also World Cup FIFA. So you're going to get more of that and then some. Speaker 500:41:51We don't want any confusion. We don't want to money this. We don't want to clutter it. We want clarity. As far as the NFL, just the relationship, I would just say because we're fresh off of meetings with the commissioner and Brian Rolak, who is their Chief Revenue Officer this week. Speaker 500:42:07I mean, I can't say enough about this partnership. Obviously, we do better in years when the Super Bowl is in Los Angeles or Las Vegas versus in New Orleans, but nonetheless, we do well period. The draft, the Super Bowl, I mean significant properties, big rating straws and these international games are quickly becoming bellwethers. I mean the commissioner has already signaled, he'd like to get to as many as 18 in the next few years. I recently went out to the game in London and we had a jam packed house of almost 500 patrons that flew out with on location to see the Chicago Bears, Jacksonville Jaguars game, airfare, hotel, F and B, personal services, customized programs. Speaker 500:42:52I mean, we're just seeing more and more demand for this. So we're really excited. And I will tell you just further quote in the press release, this deal, Ari and I have been working on this for a while, it came to fruition because they were really excited about being in a sports pure play company like TKO. Speaker 200:43:14That's great. Thank you, guys. Thank you. Operator00:43:21Thank you. Our next question comes from Robert Fishman of MoffettNathanson. Robert, your line is now open. Speaker 200:43:31Hi, good afternoon. Two questions for you guys. Mark, with the Netflix deal fast approaching, can you share more about your excitement to drive additional growth in WWE sponsorship dollars in 25, maybe in the U. S. And internationally? Speaker 200:43:46And then Andrew, if I can follow-up on the costs from earlier, any way you can break out WWE and UFC cost synergies to date? And how you think about the trajectory of each cost bucket, thinking about 2025 and beyond? Thank you. Speaker 300:44:04Look, I'll take the second question first and then defer to Mark. But as we've said on countless occasions, the best way to look at our businesses on a full year basis and when we articulated our cost savings guide of $50,000,000 to $100,000,000 initially and then articulated the upper end of that range and then came back and said we're going to exceed the upper end of that range, You should assume that the lion's share of that is implicit in our full year guide in 2024. We are knee deep in our 2025 planning right now and intend to be back to the street with some insight into 2025 when we report our full year results sometime at the end of February. On that call, we'll be giving further insight and information as to additional efficiencies that we intend to achieve in 2025 with months of planning behind us. But rest assured, we are sharpening our pencils and we are looking for additional means to grow well in excess of $100,000,000 But to date, our upper end a little bit in excess of that upper end are implicit in our 2024 numbers. Speaker 500:45:10Great. And Robert, just on the first part of your question, I would say that, yes, it's actually been pretty amazing as we go to the Street. Keep in mind with our UFC deal, we go to the Street with ESPN. So we're out there with advertisers for 3.60 holistic packages. They're buying in arena, right? Speaker 500:45:33They're buying media inventory on ESPN, so on and so forth, not to mention the ancillary programming we have leading up to the fight like the weigh in. So those packages allow us to get a higher CPM. Netflix has been terrific out of the gate, very creative, very innovative and because they're new at it, they really want to explore. So we're out there trying to sell combination packages with them, of course, media inventory on Netflix as well as what it is we do around the event. And just recently, Grant Norris Jones and his team, second mention of Speaker 200:46:10Grant Norris Jones Speaker 500:46:11today, have sold a Minute Maid deal as an example, where Minute Maid is a sponsor, comes in as a global partner of WWE, but also are buying inventory in the Netflix programming, like in their wheel, if you will. And that's a deal we drove, not them. But it works both ways. And I can tell you, Nick Khan, who is also sitting here today, of course, the President of WWE, he's knee deep with the ad sales teams, both Netflix and our internal team to drive more of these 3 60 deals. And I'll let him make a few comments. Speaker 500:46:46Nick? Speaker 1100:46:46Yes. So thank you, Mark, very much. If you think about it in perspective, 20 years ago, Monday Night Raw was on national network, which became the national network, which became CNN, which became Spike, which is now Paramount. Now we're going to Netflix. So forget their sub count that they have at this moment, it's 650,000,000 potential viewers globally for our product. Speaker 1100:47:13So the ability to go out, Andrew Schleimer mentioned in his prepared remarks and then slightly after that, the growth year over year in WWE Sponsorship. We're expecting even more growth once Netflix kicks in, in January because of the global reach and because of the power of Netflix in so many different markets. Speaker 500:47:33Thanks, Speaker 200:47:37Robert. Operator00:47:42Thank you. Our next question is from Peter Cipino of Wolfe Research. Peter, your line is now open. Speaker 800:47:53Hi, thank you. A question on cash flow. Your portfolio of businesses is obviously a good cash generator. We think and have made the case that it's a great cash generator. And some of the numerical comments you've published on free cash flow conversion in the 40% range this year and maybe normalizing around 60%, if my memory serves, seem really beatable to us. Speaker 800:48:22So I'm just wondering if you'd comment on that bullish challenge for free cash flow. And then separately, if you just comment on the environment for hiring and retaining talent. It's just amazing. A year ago, we were being asked to model the impact on talent costs of the equity capital raised by one of your competitors and that doesn't come up anymore. So if you could update us there, it would be great. Speaker 800:48:43Thank you. Speaker 300:48:47Thanks, Peter. I think when we initially put a presentation together in April of '23, we showed on a pro form a combined basis, I believe it was 'twenty two trailing, north of 60% of EBITDA, adjusted EBITDA conversion to free cash flow. When we initially guided this year, we had a number roughly in the 50% range that was impacted by some timing of working capital, some additional investments in the headquarters here, WWE and some other one time items. And we doubled back pro form a for the antitrust settlement, which obviously are payments that come out of operating cash flow and reduced free cash flow, albeit having a positive impact on our tax distributions given their tax deductible at 40%. Now candidly, things have moved around because of the one time nature of some of these large scale events in our business. Speaker 300:49:38But I think we stand by on a normalized basis 60% number and in excess of that 60% number over time. You're not looking at hugely capital intensive businesses here. We will make investments organic investments to further fuel our growth. But when we look to 2026, and we've had a lot of questions and commentary around the media rights renewals and the potential step function change in our revenue and profitability, we have a clear path to continued conversion in an excess of the numbers that we've said historically. So look, stay tuned. Speaker 300:50:10We'll be back in February, late February to talk about 25, but know that we also have to the 'twenty six rules, which will further impact the profile of this business positive. Speaker 500:50:22Thanks, Andrew. And then Peter, on the talent question, I'll just hit this briefly. The reason why you don't hear about it a lot, and we say this in all modesty, you don't hear about it because of the work of Paul Levesque and Dana White and Nick Khan and Lawrence Epstein. That's just fact of the matter. They are experts in storytelling, period. Speaker 500:50:46They are experts in creating rivalries, period. They are experts like David Stern was in building and marketing stars. And when your platforms, when your businesses, when your leagues become known for that, talent aspires to be with those leagues. So we haven't had those challenges as of late, because frankly the talent wants to get to the UFC and WWE level. Now we don't take that for granted. Speaker 500:51:15We're not arrogant about it, and we want to incentivize all of our fighters at the UFC and all of our superstars at the WWE to put out their best every day and aim for the top of the mountain. But we're prudent about it and we want to keep those costs under control. And as long as we do our job of continuing with that storytelling, continuing to build our fan base, continuing to surround ourselves with the right partners, then talent will gravitate towards the UFC and the WWE. Speaker 800:51:47Thanks so much. Speaker 500:51:49Thank you, Peter. Operator00:51:57Thank you. Our next question is from Ryan Gabbard of UBS. Ryan, your line is now open. Speaker 500:52:20I think we lost Ryan during Andrew's commentary. Operator00:52:26For the interest of time, we can move on. But Ryan, if you want to queue back in for a question. I'm so sorry, say it one more time. Speaker 500:52:34Why don't we go to the next question? Operator00:52:38Sounds good. Our next question is from Richard Greenfield of Light Shed Partners. Richard, your line is now open. Speaker 1200:52:47Hey, thanks guys for taking the question. Mark, I know this is a TKO call, but I actually had an Endeavor question. Endeavor as part of the transactions a couple of weeks ago that they're looking to sell Freeze, Madrid opened, Miami opened and opened that. And I was actually in a couple of conversations earlier this week and we had heard that Ari Emmanuel is actually looking at buying these assets. Is that with his own money personally or could that involve any TKO money? Speaker 1200:53:18And I ask that question because I think there's a lot of investors in TKO who are wondering whether you have any interest in buying or investing in any other non sports leagues as part of TKO? Speaker 500:53:33Thanks, Rich. You never shy away from the tough ones. I would just tell you that I want to stress again that TKL will not bid on any other Endeavor assets, period, none whatsoever. We won't sign an NDA, we won't explore, we won't read materials, nothing whatsoever. To your specific question on Ari, I would tell you that Ari, in his personal capacity, yes, he could be a bidder for any of the assets Endeavor is selling. Speaker 500:54:06I would also just remind you that Endeavor, although it is a TKO, I think, call it apropos, Endeavor is only exploring asset sales. So to your point, the sports betting assets, Madrid Open, Miami Open and the Freeze Art Fair, which they've announced they're exploring potential asset sales. They haven't made any definitive decisions. I assume they'll walk down the process. I say that assume because obviously Silver Lake Partners is playing a big role in that. Speaker 500:54:32And they'll decide what to do if and when the road leads to something. But yes, to your question, Ari and his personal capacity could be a bidder for any of the assets Endeavor sell. Speaker 1200:54:44And then just on the non sports piece, no other non sports assets is in your purview whether owned by TKO or others? Speaker 500:54:53We are sports pure play, end of story. And I'm glad you said that because we did after the announcement of the Endeavor assets that we did or we are working to close and acquire, it's a question of, hey, are you staying sports pure play? I can't stress enough. These are sports pure play. This does not break away from our model or our strategy. Speaker 500:55:14Sports rights, ticketing and premium experiences and another sports league. It's right in our wheelhouse, right? We know these properties extremely well because of our history. The deal was value accretive. As the business goes, we're still knee deep in integration, which we've talked about today. Speaker 500:55:34As you can see from the quarter, WME had I mean, excuse me, WWE had 54% EBITDA margins. I mean, that's up 18 percentage points year over year. Our global sponsorships, our partnerships kicking strong, I think what gets lost sometimes is WWE, keep in mind, we came into the year with a little over $20,000,000 in sponsorships coming into the year because some fell off from last year and we're now up to $70,000,000 dollars or that's where it will be end of year. So we're making significant progress with the integration, but there's clearly still a lot of wood to chop on the core integration. We see more opportunity and we're laser focused on it. Speaker 500:56:12Also, just finally, just going forward, when you look at why we're focused on these 2 battleships, because that's the business. These other PBR are small, obviously, but it's a rising sports league and the other two assets are going to fuel these 2 battleships. 85% to 90% of our adjusted EBITDA going forward is UFC and WWE. So our eyes are on the ball. We're going to finish the integration on the 2 core assets of WWE and UFC. Speaker 500:56:40We're going to then move sort of simultaneously on apparel attracted the integration of the new three assets. We're going to keep our head down. We're going to score numbers. We're going to keep this thing a cash flow gusher and we're going to be focused on returning capital to shareholders. Speaker 100:56:56I think that's a good Speaker 1200:56:57Thanks for taking the question. Speaker 100:56:58That's a good wrap for the call. Speaker 500:57:00Thanks, Rich. I think that's a Speaker 100:57:01good step to wrap the call. Thank you, everyone, for your interest and for joining us on today's call. Operator, you can conclude the call. Operator00:57:11Thank you so much. That concludes today's Q3 20 24 TKO earnings call. Thank you for your participation. You may now disconnect your line.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTKO Group Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) TKO Group Earnings HeadlinesTKO Group CEO Ari Emanuel's 2024 Pay Falls 72% to $18.1 MillionApril 26 at 12:26 PM | msn.comAri Emanuel’s TKO Compensation Falls to $18.1M, Mark Shapiro’s Rises to $32MApril 26 at 12:26 PM | msn.comTrump’s tariffs just split the AI market in twoTrump’s tariff just split the AI market – among others – in two. One group of AI companies—the ones relying on cheap foreign hardware—just saw their costs shoot through the roof. For the other group of AI companies, they were just handed a massive competitive advantage. Make no mistake, AI as a whole is still a game-changer for the global economy. But within the AI sector, Trump’s tariffs have created a huge divergence.April 26, 2025 | Traders Agency (Ad)Ari Emanuel's 2024 Pay As CEO Of TKO Group Drops To $18.1M From $64.9M In 2023April 26 at 12:26 PM | msn.comTKO Group CEO Ari Emanuel’s 2024 Pay Falls to $18.1 Million, President Mark Shapiro’s Compensation Nearly Doubles to $32 MillionApril 26 at 12:26 PM | msn.comWhat is Roth Capital's Forecast for TKO Group Q1 Earnings?April 26 at 1:35 AM | americanbankingnews.comSee More TKO Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like TKO Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on TKO Group and other key companies, straight to your email. Email Address About TKO GroupTKO Group (NYSE:TKO) operates as a sports and entertainment company. The company produces and licenses live events, television programs, and long-form and short-form content, reality series, and other filmed entertainment on digital and linear channels and via pay-per-view. It is involved in the merchandising of video games, apparel, equipment, trading cards, memorabilia, digital goods, and toys, as well as sale of travel packages and tickets. In addition, the company engages in the corporate sponsorships and advertising business, which offers sale of in-venue and in-broadcast advertising assets, content product integration, and digital impressions. The company was incorporated in 2023 and is based in New York, New York. TKO Group Holdings, Inc. is a subsidiary of Endeavor Group Holdings, Inc.View TKO Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 13 speakers on the call. Operator00:00:00Good afternoon, and thank you for joining today's Q3 2024 TKO Earnings Call. My name is Reagan, and I'll be your moderator today. All lines will be muted during the presentation portion of this call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Seth Zaslow, Head of Investor Relations. Seth, you may now proceed. Speaker 100:00:24The 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 Schleimer, 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 and A. The purpose of this call is to provide you with the information regarding our Q3 2024 performance. I want to remind everyone that the information discussed will include forward looking statements and or projections that involve risks, uncertainties and assumptions. Speaker 100:01:05Please 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. Speaker 100:01:55Reconciliations 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. Speaker 200:02:08Thanks, Seth. Just over a year since UFC and WWE came together to form TKO, our conviction in this business is as strong as ever. We're executing on our strategy and delivering record results, while realizing greater integration and synergy opportunities than initially expected. On the heels of TKO's solid Q3 performance and with our visibility through year end, we're now expecting to come in at the upper end of our full year guidance range for both revenue and adjusted EBITDA. Additionally, 2 weeks ago, we made 2 announcements that we believe reinforce our commitment to creating long term value for shareholders. Speaker 200:02:47First, we authorized a capital return program featuring a $2,000,000,000 share repurchase program and a quarterly cash dividend program of $75,000,000 2nd, TKO announced an agreement to acquire industry leading sports assets, Professional Bull Riders or PBR, premium sports hospitality provider on location, and global sports rights and production powerhouse IMG. I cannot impress enough how bullish we are about this deal, which aligns with the pure play sports strategy TKO will execute and be known for. This acquisition strengthens our global position in sports rights, experiences, and hospitality, and it adds PBR to our portfolio as another valuable and growing sports league. These assets will power our profile, give us greater scale, strengthen our position in the sports marketplace, and accelerate returns for shareholders. We're also proud and pleased to share that On Location has extended its partnership with the NFL through 2,036, ensuring it remains the official hospitality provider at premier events, including the Super Bowl, NFL Draft, and NFL International Games for years to come. Speaker 200:03:59Turning to the quarter, our results highlight sustained demand for UFC and WWE live events and underscore our business' ability to reach new heights and attract fans globally. UFC 306 at Sphere Las Vegas is a prime example. The sold out event not only set the record for UFC's highest grossing live event, but also became Sphere's highest grossing single event and achieved UFC's highest event merchandise and sponsorship sales. Notably, 89% of ticket buyers came from outside Nevada, one of the highest out of town attendance rates for any UFC or Sphere event. This turnout underscores UFC's appeal as a destination event, drawing fans from across regions and delivering economic benefits to host cities. Speaker 200:04:45Beyond these impressive metrics, this event also showcases what TKO is truly all about, innovating and revolutionizing the way fans consume and engage with live sports. Internationally, UFC events also delivered. UFC 304 in Manchester became the highest grossing event at Co op Live and drew the largest attendance for a UFC event in the UK. In Perth, UFC 305 marked a successful start to our multiyear partnership with the Western Australian government, setting the record for RAC Arena's highest grossing event. And in Paris, our September fight night became a core arena's highest grossing event to date. Speaker 200:05:26At WWE, live events outperformed in the Q3 and set 42 individual market records for ticket sales, evidence that the strategies we have been implementing around ticket pricing and event routing are bearing fruit. While the U. S. Remains strong, momentum is increasingly evident in international markets, where WWE continues to sell out venues and draw record crowds. In the Q3, WWE held 18 shows outside the U. Speaker 200:05:53S, up from 11 in the same period last year. Highlights included a highly anticipated return to Japan after a 5 year hiatus, selling out in Tokyo with a record gate and Germany's first ever premium live event, which became WWE's highest grossing arena event, a record that we have broken 3 times this year. Meanwhile, in Cleveland, SummerSlam achieved record breaking results, becoming WWE's highest grossing non WrestleMania event in history. WWE also had successful debuts on USA Network for SmackDown and The CW Network for NXT. In fact, through the 1st 5 weeks, NXT is up 12% in viewership versus USA last year. Speaker 200:06:37Meanwhile, SmackDown's return to USA Network under our 5 year domestic media rights agreement with NBCUniversal has already driven strong and sustained viewership. Without a doubt, this partnership further strengthens our long standing relationship with NBCU, we're anticipating a strong draw for the upcoming debut of quarterly primetime specials starting December 14th with Saturday Night's main event on NBC. And with Raw's launch on Netflix nearing, both WWE and Netflix are actively preparing for an impactful debut on January 6, which will expand the reach of WWE and deliver our flagship content to a global audience. As we close out the year and look to 2025, we're confident in the strength of our iconic properties and the momentum we're building towards significant milestones. From an exciting lineup of live events that include UFC 309 at Madison Square Garden later this month, WrestleMania in Las Vegas, and the first ever 2 night SummerSlam at MetLife Stadium to closing our acquisition of PBR, On Location and IMG, all of which fuel further growth. Speaker 200:07:43With that, I'll turn the call over to Andrew. Good Speaker 300:07:47afternoon. As we previously disclosed, on September 26, we reached revised agreement to settle all claims asserted in the Lee UFC antitrust lawsuit for 375,000,000 dollars In the Q3, we recorded an incremental $40,000,000 charge to bring the aggregate expense on our books to $375,000,000 On October 22, the court granted preliminary approval of the settlement. As a result, we made the first of 3 payments for $125,000,000 into escrow in late October. We expect to pay the remaining $250,000,000 in 2025, dollars 125,000,000 in the 1st quarter 125 by the end of Q2. As we've mentioned, the settlement is anticipated to be deductible for tax purposes as and when paid. Speaker 300:08:36As a result, our tax distributions to members in the Q3 will reduce to reflect the settlement payment such that we didn't realize an adverse dollar for dollar impact to cash on hand. 3rd quarter reported results included 3 months of activity for both UFC and WWE. The reported results for the Q3 of 2023 include WWE activity for the period from September 12 through September 30, 2023. To assist with comparability, we've presented supplemental financial information in our press release and IR website that includes WWE activity and the portion of WWE related to the corporate group for the period from July 1 through September 11, 2023, as well as each quarterly period from January 1, 2022 through September 11, 2023. For the Q3 of 2024, we generated revenue of $681,000,000 Net income was $58,000,000 Adjusted EBITDA was $310,000,000 and our adjusted EBITDA margin was 46%. Speaker 300:09:42Including WWE activity for July 1 through September 11, 2023, combined revenue for the Q3 was $685,000,000 combined adjusted EBITDA was 298,000,000 and our combined adjusted EBITDA margin was 44%. Inclusive of these amounts, revenue decreased 1%, adjusted EBITDA increased 4% and adjusted EBITDA margin increased 2 percentage points. Our UFC segment generated revenue of $355,000,000 in the quarter, a decrease of 11% or $43,000,000 Adjusted EBITDA was $196,000,000 a decrease of 18% or 43,000,000 dollars UFC's adjusted EBITDA margin was 55%, down from 60% in the prior year period. As expected, revenue was impacted by the timing of the events calendar. UFC had 10 total events in the Q3 of this year compared to 13 total events in the prior year period. Speaker 300:10:43As Ari mentioned, the health of the business remains extremely strong and UFC continues to benefit from the meaningful tailwinds of the experience economy. Media rights and content revenue decreased 19% to $216,000,000 The decrease was driven by 1 less numbered event and 2 fewer fight nights as compared to the prior year period. The contractual escalation of media rights partially offset the decrease from the timing of the events calendar. Live events revenue decreased 1% to 51,000,000 Ticket sales reflected the decline in the number of total events in the Q3 as compared to the prior year. This headwind was essentially offset by strong underlying trends in pricing and attendance for high profile events such as UFC 306 at Sphere as well as an increase in site fees. Speaker 300:11:34Results in the quarter included a site fee related to our fight night in Abu Dhabi. Sponsorship revenue increased 16% to 74,000,000 dollars Despite the unfavorable mix of events in the quarter, new partnerships and renewals drove the increase. UFC 306 was the highest grossing event in UFC's history and the first event to feature a title partner sponsor, which we sold to Riyadh Season. Adjusted EBITDA reflected the decrease in revenue. Expenses were essentially flat year over year. Speaker 300:12:07Direct operating expenses decreased primarily due to lower marketing, athlete costs and direct cost of revenue due to 1 less numbered event and 2 fewer fight nights. These decreases were partially offset by higher production costs, primarily related to UFC 306. Given the unique nature of the venue and production elements associated therewith, we incurred production costs for UFC 306 that were meaningfully higher than our historical norm for a numbered event, which resulted in reduced adjusted EBITDA and reduced adjusted EBITDA margin in the quarter. However, as Ari highlighted, UFC 306 was a once in a lifetime experience and a highly successful event for UFC. SG and A increased primarily due to higher cost of personnel as compared to the prior year period. Speaker 300:12:57WWE delivered strong quarterly revenue and adjusted EBITDA. The financial results continue to reflect healthy creative momentum in the business as well as the benefits to both the top and bottom line from the initiatives we implemented since the formation of TKO. Our WWE segment generated revenue of $326,000,000 in the quarter. Adjusted EBITDA was $175,000,000 and adjusted EBITDA margin was 54%. The following commentary on the Q3 includes comparisons to activity for the period from July 1 through September 30, 2023. Speaker 300:13:32In the Q3 of 'twenty three, revenue was $287,000,000 Adjusted EBITDA was $102,000,000 and adjusted EBITDA margin was 36%. Revenue increased 14% or 39,000,000 dollars Adjusted EBITDA increased 72 percent or $73,000,000 and adjusted EBITDA margin increased 18 percentage points. Revenue growth was led by continued strong performance for live events. Live events revenue increased 31 percent to $51,000,000 The increase was primarily related to an increase in ticket sales. Since the formation of TKO, we've been focused on increasing ticket yield and this strategy favorably impacted our results in the quarter, not only in connection with the premium live events such as SummerSlam, which was the highest grossing non WrestleMania event of all time, but for the balance of WWE's live events in the aggregate. Speaker 300:14:27Media rights and content revenue increased 8% to $227,000,000 The increase was primarily related to the contractual escalation of media rights fees as well as the timing of our weekly programming, which resulted in one additional episode of Raw in the quarter compared to the prior year. Sponsorship revenue increased 54 percent to $22,000,000 due to new partnerships and renewals across multiple categories, including beverage, QSR, spirits, entertainment and communications. Of note, SummerSlam was highly successful and included for the first time 3 interim sponsors as well as a record number of partners. It's early days, but we have and expect to continue to realize benefits from the unified global partnerships team we put in place at the beginning of the year. Adjusted EBITDA reflected the increase in revenue and a decrease in expenses. Speaker 300:15:17The decrease in expenses primarily reflected lower personnel costs and production costs related to our planned cost reduction initiatives implemented following the formation of TKO. Corporate expenses were $61,000,000 for the Q3 of 2024. On a combined basis, corporate expenses were $42,000,000 for the Q3 of 2023. The increase was primarily due to higher personnel costs, including executive compensation and other G and A expenses following the formation of TKO in September of last year. The increase also reflected the impact of the services fee that UFC and WWE paid to Endeavor, which commenced for WWE in March of 2024. Speaker 300:15:58Now moving to our capital structure. We define free cash flow as net cash provided by operating activities less capital expenditures. Free cash flow excludes the majority of the mandatory tax distributions to our owners, but does include the portion of cash taxes paid by TKO PubCo. For the quarter, we generated $226,000,000 of free cash flow. This includes $11,000,000 of capital expenditures, approximately $3,000,000 of which related to WWE's new headquarters. Speaker 300:16:26The quarter was favorably impacted by the timing of working capital, most notably the collection of the site fee associated with our WWE Saudi event, King and Queen of the Ring that was held in May. We ended the quarter with $2,736,000,000 in debt and $457,000,000 in cash and cash equivalents. Given the strength of our balance sheet and financial profile, the implementation of a robust and sustained capital return program has and will continue to be a top priority for us. As we announced on October 24, our Board of Directors authorized the share repurchase program of up to $2,000,000,000 of our Class A common stock. We expect the program to commence following the close of the acquisition of PBR on location and IMG in the first half of twenty twenty five, but is not conditioned on the closure of this transaction. Speaker 300:17:14Once the program does commence, we anticipate that the pace of the repurchase activity will be fairly linear and expect to complete the program within a period of 3 to 4 years. We also announced that our Board authorized a $75,000,000 quarterly cash dividend program. The dividend program will involve a quarterly distribution by TKO OpCo and holders of TKO Class A common stock will receive their pro rata share of distributions. We intend to make the 1st dividend payment on March 31, 2025. As with the share repurchase program, the dividend is not conditioned on the close of the PBR on location and IMG transaction. Speaker 300:17:51Earlier today, we announced the refinancing of our credit facility, seeking a new 7 year $2,750,000,000 term loan and a new 5 year $205,000,000 revolver, which are approximately the same balances as we currently have. The facility will continue to include significant capacity for incremental term loan add ons, which we anticipate will be a source of funding the share repurchase program. As we previously articulated, our target for net leverage remains up to 3x. Given our strong balance sheet, expected growth in adjusted EBITDA and free cash flow generation, we expect to have additional financial capacity. However, our primary focus continues to be driving value at UFC and WWE, while also planning for the integration of PBR, On Location and IMG into TKO. Speaker 300:18:40As we noted when we announced the transaction, PBR, on location and IMG are the only assets that TKO will acquire from Endeavour. As we've discussed in the past, we manage the business with a focus on full year performance. Therefore, we believe our results are best evaluated on a full year basis given the quarterly fluctuations that are inherent in our operations related to the timing of our events and content deliveries among other items. As we noted on October 24 and in our press release today, we are revising our full year 2024 guidance for revenue and adjusted EBITDA. We are now targeting the upper end of the previously provided ranges for both revenue of $2,670,000,000 to $2,745,000,000 and adjusted EBITDA of $1,220,000,000 to $1,240,000,000 The increase is related primarily to strong operating performance on a year to date basis, particularly in live events and sponsorship at both of our businesses and visibility through the end of the year. Speaker 300:19:41On our last call, we noted that we expected the Q3 to be the most challenging quarter of the year for UFC given the unfavorable timing of events, and it was. As we look to the Q4 of 2024, we want to highlight a few notable items. At UFC, results are expected to improve as the current calendar includes an additional event and 2 additional events with live audiences compared to the prior year period. At WWE, as we've previously discussed, results will reflect the short term domestic rights deal we reached earlier this year with USA Network for Raw for the Q4. This will have an unfavorable impact of approximately $50,000,000 to both revenue and adjusted EBITDA as compared to Q4 2023. Speaker 300:20:23As a reminder and for the avoidance of doubt, this is purely timing related. In January 2025, our long term agreement with Netflix to distribute raw commences. In terms of expenses, we expect results to continue to reflect the benefit of the initiatives we've implemented to take costs out of the business. Today, we also reaffirmed our expectation for full year 2024 free cash flow conversion to be in excess of 40 percent of adjusted EBITDA. Our outlook includes the payment of $125,000,000 for the UFC lawsuit settlement and transaction costs related to the strategic acquisition of Endeavor Assets, both of which are included in operating cash flow. Speaker 300:21:03In conclusion, we generated solid Q3 results that reflected continued strength in both of our businesses. We are extremely excited about the road ahead and our prospects for 2024 and beyond. With that, I'll turn it back to Seth. Speaker 100:21:17Thanks, Andrew. Operator, we're ready to open the call for questions. Operator00:21:23Thank you so much. We will now be moving on to our Q and A session. Our first question comes from Ben Swinburne of Morgan Stanley. Ben, your line is now open. Speaker 400:21:50Great. Hey, good afternoon, everybody. Thanks for taking the question. Maybe I'd like to start with Mark on sort of the UFC, which is right around the corner with the domestic rights. I think you've made some comments recently about potentially splitting up the rights, taking back pay per views. Speaker 400:22:08I think as a public company, you certainly benefit from sort of their predictability of licensing out those pay per view fights to ESPN. But I'm wondering how you think about that relative to the potential upside of distributing those yourself. And then I'd love to hear, Andrew, the WWE margins this quarter were particularly impressive. I think your expenses were down like 20%, even though revenues were up 13%. You mentioned merger synergies. Speaker 400:22:33Anything else you'd flag? Because even live events, I think the event count was up, I think, at least internationally. So, surprised to how strong of a margin you had in Q3. I'd love any more details you might share. Thanks so much. Speaker 500:22:46Thanks, Ben. Good to hear from you. Andrew will start since it's just fresh off your long second part of the question, then I'll come back in the first one. Speaker 300:22:52Look, I think the market benefit from actually one additional Raw event in the quarter. So almost like for like from an event calendar perspective on WWE. But what I think you're seeing here is just the continued cost savings measures and initiatives that we set out to put in place when we launched TKO really in flowing through us just being more efficient top to bottom, getting a bit more on the production side as Nick and Lee fitting are laser focused on execution there. And really, I'd like to focus on growth in the ad sales and sponsorship department, 54% growth over prior year Q3, and those deals are being structured at higher margins than they had been in the past. So you're seeing just growth from high margin revenue contributors and even more so than they were contributing Q3 in 2023. Speaker 300:23:48Early innings on the sales side, but really encouraged by what we're seeing. Speaker 500:23:52Yes. And I would just say, Ben, just to add to that, I mean, you can just expect more margin accretion as we flow through. I'd like to remind folks, we're still in at least mid innings, if not early innings, on the integration of these two assets of WWE and UFC. I mean, we're, of course, already guiding to the fact that we'll beat our net cost synergies of $100,000,000 But as we succeed with our strategy of having these events on the same week or same weekend or subsequent weekends, now with PBR as well, our margins are only going to be better because we're going to save on that cost side. I mean, we'll sell triple header sponsorships as we like to call them, somebody that comes in and sponsors all three events. Speaker 500:24:42That will be huge for us and it will drive local ad sales. But on the cost side, are going to benefit there. And I can tell you that to Andrew's point, Nick Khan and Pete Tropic who runs all of our ticket operations and Lawrence Epstein, I mean they are working on this night and day, city by city, region by region, country by country, where can we bring all three to town. There's that as well. So on the first part, look, here's what I would tell you. Speaker 500:25:06In terms of what really benefits to your point, what benefits us and our shareholders is maximizing value on these renewals. That's the bottom line. So we're not looking to upend or change for change sake or unorthodox models. We are looking to maximize our rights, end of story. UFC is mainstream, incredibly popular. Speaker 500:25:32I see some of the struggles going on with other leagues right now, both linear and digital, leagues that have started new seasons and are not off to a rocket start like we're accustomed to. That's not the case with UFC. We're still driving subs on ESPN plus When we're on ESPN, ESPN2 or ABC, we're a ratings winner and driving more advertising for those platforms. And on the WWE side, as Andrew talked about in his and Ari talked about in the prepared comments, across the board from CW to, of course, Comcast, WWE is still a stalwart. So we're flying. Speaker 500:26:12And if we have to be creative to help potential partners or bring other suitors in the door so that we get a higher price or live up to the guide that The Street has been giving us on the renewals, not the one we're giving them, but the one they're giving us, then we're going to do it. And that's all we're trying to signal to our shareholders and all we're trying to signal to the media suitors, the platforms, the companies that are going to be chasing us relatively soon. Speaker 200:26:41Thanks so much. Speaker 500:26:43Thank you. Operator00:26:47Thank you. Our next question comes from Brandon. I'm so sorry, say it one more time. Speaker 500:26:55No, go ahead. Go ahead. Sorry. Operator00:26:58No problem. Our next question comes from Brandon Ross of LightShed. Brandon, your line is now open. Speaker 600:27:04Thanks very much. And for the record that faux pas was not my fault this time. Maybe just to start with a follow-up on Ben's UFC renewal question. I've been thinking a lot about how different the approach to distributing your top content is between WWE and UFC right now. For WWE, the PLEs, you're going with the broadest possible reach on Netflix and Peacock. Speaker 600:27:37There's no discrete transaction to watch your content. But on UFC, you're in this high cost pay per view model. And you've said, and I think maybe alluded to it with the last answer, you don't want to shake anything up really and you prefer to re up your deal with Disney. Why is the continuation of a pay per view model the best path, especially given how MMA is still in its relative infancy compared to wrestling? Speaker 500:28:10Yes. Look, I would just tell you, Brandon, I mean, just a reminder, obviously, internationally, we sell pay per view for the UFC, but we do not sell the pay per view domestically. That's ESPN's job. And what I can tell you as we enter into these negotiations, at the end of the day, it's what the market will bear. That's really what it is. Speaker 500:28:30And we're next up. We're the next big thing on the block, if you will. We have a proven track record. Our demos are insane. I mean, really just across TKO, where 50% of our audience is 18% to 34%, which is what most platforms and companies are chasing. Speaker 500:28:49So we're in good stead there. We have terrific diversification and we drive a very strong Hispanic audience when it comes to the UFC and we're gender neutral. And we're not just talking about women watching women's fight. That's not the case. We have a strong base of women watching all of our fights. Speaker 500:29:08So we're sitting in a pretty good position. Pay per view is still a strong model. It worked to build ESPN plus It's worked for us internationally. We've got great history with it. DIRECTV and DISH may be coming together. Speaker 500:29:23So who knows the kind of opportunity there. Paramount and CBS are obviously getting their act together. They'll be closing next year. I believe they'll be at the table if and when it comes to them because they've already signaled both Jeff Shell and David Ellison that sports will be a banner vehicle of content for them. So we will not have a shortage of suitors. Speaker 500:29:50We feel great. But we love Disney. I can't underscore it enough. And Jimmy Pitaro and Bob Iger get UFC and very much were architects in our deal. Kevin Mayer was still at the time, but they were very much part of us crafting how we were going to do that deal. Speaker 500:30:07Things change, models change, viewing patterns change, broadcast is now kind of back in, if you will. Cable is obviously having its struggles, but still nothing to frown at and streaming is on fire and new platforms and fast channels are coming all the time. So it's really just demonstrating and signaling to the market that we have flexibility and a willingness to play ball on a myriad of business models. And Ari and I in particular are very focused on not just communicating that, but actively discussing those potential models with all of the partners and then some. Speaker 600:30:48Okay. And then Dana White recently talked about getting into boxing and said that it would be with guns blazing. Can you expand on that? Just wondering how this can be done in a way that's in sync with your current margin profile. And will this be happen organically by perhaps letting UFC fighters box under your banner? Speaker 600:31:11Or is this one of those instances where we could see some M and A at play? Speaker 500:31:18Yes. No, look, first of all, some off the cuff comments from Dana White do not translate into a strategy that we're communicating to The Street, right? Dana says a lot of things and has a lot of passions and that's why we love him. He's also the best promoter, the sport of MMA and frankly, if it was boxing, has or will ever see. What I can tell you is boxing at its best is confused and fragmented, at its worst is broken. Speaker 500:31:52And we think the sport presents an interesting growth opportunity for us. Dana White and I should mention Nick Khan have deep expertise in long standing relationships in what they call the sweet science, otherwise known as boxing. And if we were to get involved in boxing, we would expect to do so in an organic way, not an M and A way. So I. E, we're not writing a check. Speaker 500:32:15And if we launch the vertical at any time, we kind of see it as doing it with a partner who would fund it and pay us to operate. So nothing to announce today, but this is one area we're going to continue to explore. We've talked about the dearth of leagues that are out there. Obviously, we're acquiring PBR. There's not much else. Speaker 500:32:36We don't necessarily need to add anything to our model, but boxing is ripe. It is ripe for a fix. And we're blessed to have 2 experts in the field. And if an opportunity presents itself or we can chase one down that does not put much risk or any risk for that matter on us financially, then we're going to pursue it. And in terms of models and league and how we structure it and etcetera, etcetera, that's way down the road. Speaker 500:33:07And once we have something, if we have something, you'll be the first to know. Speaker 200:33:12Thank you very much. Speaker 500:33:15Thank you. Operator00:33:19Thank you. Our next question comes from David Karnovsky of JPMorgan. David, your line is now open. Speaker 700:33:27Hey, thank you for the question. Maybe just following up on the UFC renewal. Mark, interested to know how you're positioning UFC Fight Pass potentially as Speaker 800:33:35part of Speaker 700:33:35negotiations. Last time that was kept separate, is that the intention this time around or is there kind of an opportunity to roll the service or content into a partner platform and receive better economics? And then just staying with UFC, wanted to know you're thinking about title sponsorship as potential inventory. Was this fear kind of unique one off? Or you make more use of the pay per views ahead? Speaker 500:34:01Yes. Thanks, David. Look, I'll tell you, as we sit here today, we're really pleased with the growth of UFC Fight Pass. In fact, internationally, we're really seeing subs tick up, especially in Brazil where we finally got our act together after a slow start. We see keeping that separate. Speaker 500:34:21I'll tell you that there is truly untapped potential when it comes to UFC fight pass. And the secret to driving subs on UFC Fight Pass is just quite simply more live events, period, end of story. And so in any renewal, we're going to explore the ability for us to potentially have exclusive fights on UFC Fight Pass, but then also lean further into the combat space with regard to karate, jujitsu, wrestling itself, boxing potentially, more live events that we can program around the clock that really drive demand in terms of sub acquisition and fan base. So to answer your question, we expect to keep that as a proprietary asset that we control. It's not for sale, but it will have more original content, less taped programming and more live events. Speaker 500:35:15That's the first part. As regard to the second, the title sponsors, look, yes, that was a tremendous deal we did with Riyadh season and the Saudis to sponsor the Sphere event. I think everybody got a good deal out of that one because that was such a spectacle for them and for us. And if there are opportunities to sell more title sponsors, we're going to pursue them. And I can tell you in the bag of inventory that Grant Norris Jones, who runs our Global Partnerships team and his Lieutenant, Luc Escobalis, as they go to the street, door to door, brand to brand, category to category, knocking down business, which I'll remind you is almost kicking the door of $300,000,000 this year between UFC and WWE. Speaker 500:36:05So we're heading north fast. They will absolutely deploy title sponsorship inventory if it makes sense. It has to be authentic. It has to be seamless. And we certainly don't want to over commercialize the UFC. Speaker 500:36:20But I think it was a pretty good suit and a good fit as it relates to the Sphere event. Speaker 200:36:28Thank you. Operator00:36:34Thank you. Our next question comes from Steven Lejuez of Goldman Sachs. Steven, your line is now open. Speaker 900:36:43Hey, great. Thanks for taking the questions. Mark, in the past, you've spoken about the impact the Sphere event has had on the UFC brand. I'm curious now post fear, how you're thinking about the evolution of some of these marquee UFC events that you put on, maybe the opportunity to elevate more select pay per view fights, perhaps potentially through a sphere like event in the future, perhaps even through stadium like events that you host in the WWE side similar to WrestleMania? And then second on location, Ari called out the NFL deal through 2,036, I think. Speaker 900:37:18I was curious if you just talk a little bit more about the financial profile of that deal, the extent to which you might be operating leverage if you outperform on selling NFL Premium Hospitality and if you think a deal like NFL 1 could be a good template for similar deals going forward with Sports Leaks? Thank you. Speaker 500:37:37Great. So first off, I just want to remind everyone that we do not intend to do another event at The Sphere. That was a one and done. I think we've signaled that to the market. Of course, anything can change just like rock bands do their farewell tours and seem to stick around for another 20 years. Speaker 500:37:54But Dana is pretty intent that this was a one and done. That's why we spent so much. That's why we made so much out of it. By the way, it took a lot out of us in terms of focus to pull it off in the way we did. But in terms of creating more spectacles, like that's our job, period. Speaker 500:38:10And globally, that's our job. And frankly, much of that responsibility to create those spectacles falls to Laurence Epstein, who's running the UFC business with Dana day to day. Laurence happens to be in the room, and I'd like him to opine on and comment on your first part of Speaker 1000:38:28the question. Laurence? Thanks, Mark. Just a couple of things to add to what Mark just had to say. First of all, huge achievements, really was a challenge, as Mark indicated, but a huge achievement for our UFC team to put on that. Speaker 1000:38:39What we view is really a seminal event in the history of sports and entertainment. It's the first time anything like this has ever been done in the world of sport, the world of entertainment and the entire world is really looking at this event. So huge achievement, huge success for our entire team. It's really, I think, part of our be first mentality. We're the 1st group to ever do this. Speaker 1000:38:58Maybe we'll be the only one, but we're certainly the first so far. And we're really proud of the achievement and, of course, the leadership that we showed. And as I said, this event was a game changer. I think as we look at future events and as arenas, and I'll coin this term, spherize themselves, add more LED, add more technology to their facilities. We're going to continue to up the game with respect to our production. Speaker 1000:39:21The first facility that has really done this outside the sphere, of course, is Speaker 300:39:25the Intuit Dome in California where Speaker 1000:39:28the Clippers are going to be playing. And you can expect to see us there very soon taking advantage of that great technology there. Speaker 500:39:34By the way, last time I checked, the Sphere is launching in Abu Dhabi. Dana did say no more events at the Sphere in Vegas, but that doesn't mean we can't go to Abu Dhabi. So I'm looking forward to pursuing that when that gets built probably 2 decades from now. Andrew, go ahead. Yes, look, Speaker 300:39:52thanks for the questions, Steven, on obviously on location in the NFL. There was a press release that Endeavor actually issued yesterday as in advance of the acquisition, Endeavor is responsible for extensions with their current customer on location in the NFL. But us at TKO, the acquirer of this business, are obviously thrilled with the extension of that agreement through 2,036. Obviously, NFL best in class sports brand and the opportunity to continue that relationship is obviously extraordinarily beneficial for us at On Location, TKO and will benefit us through the balance of our portfolio. We're not going to comment on the economics of the deal. Speaker 300:40:35Those are not public nor will they be in the future. But that being said, I do want to pivot the conversation for a moment just to visibility and what we discussed last week when we announced the acquisition of these assets. We are going to go to extraordinary lengths to ensure that both our external and internal constituents have as much information and tools to understand the revenue and profitability profiles of these businesses. Whether they be on a standalone basis or within our portfolio, it's important to understand not only how they grow, but how they benefit the other assets in our portfolio. So rest assured, we'll be able to give you information as time goes on and the NFL relationship is core to OLE and its future revenue and growth prospects. Speaker 500:41:19Yes, I would just underscore that. We Andrew and I have too much experience here at Endeavor with the lumpiness of on location and how difficult that was for The Street to model. The transparency and visibility is going to be significant. Starting with our investor presentation, which in the appendix on Page 16, we laid out specifically the Olympics, what we expect to make year over year, year after year, over a 4 year span and then also World Cup FIFA. So you're going to get more of that and then some. Speaker 500:41:51We don't want any confusion. We don't want to money this. We don't want to clutter it. We want clarity. As far as the NFL, just the relationship, I would just say because we're fresh off of meetings with the commissioner and Brian Rolak, who is their Chief Revenue Officer this week. Speaker 500:42:07I mean, I can't say enough about this partnership. Obviously, we do better in years when the Super Bowl is in Los Angeles or Las Vegas versus in New Orleans, but nonetheless, we do well period. The draft, the Super Bowl, I mean significant properties, big rating straws and these international games are quickly becoming bellwethers. I mean the commissioner has already signaled, he'd like to get to as many as 18 in the next few years. I recently went out to the game in London and we had a jam packed house of almost 500 patrons that flew out with on location to see the Chicago Bears, Jacksonville Jaguars game, airfare, hotel, F and B, personal services, customized programs. Speaker 500:42:52I mean, we're just seeing more and more demand for this. So we're really excited. And I will tell you just further quote in the press release, this deal, Ari and I have been working on this for a while, it came to fruition because they were really excited about being in a sports pure play company like TKO. Speaker 200:43:14That's great. Thank you, guys. Thank you. Operator00:43:21Thank you. Our next question comes from Robert Fishman of MoffettNathanson. Robert, your line is now open. Speaker 200:43:31Hi, good afternoon. Two questions for you guys. Mark, with the Netflix deal fast approaching, can you share more about your excitement to drive additional growth in WWE sponsorship dollars in 25, maybe in the U. S. And internationally? Speaker 200:43:46And then Andrew, if I can follow-up on the costs from earlier, any way you can break out WWE and UFC cost synergies to date? And how you think about the trajectory of each cost bucket, thinking about 2025 and beyond? Thank you. Speaker 300:44:04Look, I'll take the second question first and then defer to Mark. But as we've said on countless occasions, the best way to look at our businesses on a full year basis and when we articulated our cost savings guide of $50,000,000 to $100,000,000 initially and then articulated the upper end of that range and then came back and said we're going to exceed the upper end of that range, You should assume that the lion's share of that is implicit in our full year guide in 2024. We are knee deep in our 2025 planning right now and intend to be back to the street with some insight into 2025 when we report our full year results sometime at the end of February. On that call, we'll be giving further insight and information as to additional efficiencies that we intend to achieve in 2025 with months of planning behind us. But rest assured, we are sharpening our pencils and we are looking for additional means to grow well in excess of $100,000,000 But to date, our upper end a little bit in excess of that upper end are implicit in our 2024 numbers. Speaker 500:45:10Great. And Robert, just on the first part of your question, I would say that, yes, it's actually been pretty amazing as we go to the Street. Keep in mind with our UFC deal, we go to the Street with ESPN. So we're out there with advertisers for 3.60 holistic packages. They're buying in arena, right? Speaker 500:45:33They're buying media inventory on ESPN, so on and so forth, not to mention the ancillary programming we have leading up to the fight like the weigh in. So those packages allow us to get a higher CPM. Netflix has been terrific out of the gate, very creative, very innovative and because they're new at it, they really want to explore. So we're out there trying to sell combination packages with them, of course, media inventory on Netflix as well as what it is we do around the event. And just recently, Grant Norris Jones and his team, second mention of Speaker 200:46:10Grant Norris Jones Speaker 500:46:11today, have sold a Minute Maid deal as an example, where Minute Maid is a sponsor, comes in as a global partner of WWE, but also are buying inventory in the Netflix programming, like in their wheel, if you will. And that's a deal we drove, not them. But it works both ways. And I can tell you, Nick Khan, who is also sitting here today, of course, the President of WWE, he's knee deep with the ad sales teams, both Netflix and our internal team to drive more of these 3 60 deals. And I'll let him make a few comments. Speaker 500:46:46Nick? Speaker 1100:46:46Yes. So thank you, Mark, very much. If you think about it in perspective, 20 years ago, Monday Night Raw was on national network, which became the national network, which became CNN, which became Spike, which is now Paramount. Now we're going to Netflix. So forget their sub count that they have at this moment, it's 650,000,000 potential viewers globally for our product. Speaker 1100:47:13So the ability to go out, Andrew Schleimer mentioned in his prepared remarks and then slightly after that, the growth year over year in WWE Sponsorship. We're expecting even more growth once Netflix kicks in, in January because of the global reach and because of the power of Netflix in so many different markets. Speaker 500:47:33Thanks, Speaker 200:47:37Robert. Operator00:47:42Thank you. Our next question is from Peter Cipino of Wolfe Research. Peter, your line is now open. Speaker 800:47:53Hi, thank you. A question on cash flow. Your portfolio of businesses is obviously a good cash generator. We think and have made the case that it's a great cash generator. And some of the numerical comments you've published on free cash flow conversion in the 40% range this year and maybe normalizing around 60%, if my memory serves, seem really beatable to us. Speaker 800:48:22So I'm just wondering if you'd comment on that bullish challenge for free cash flow. And then separately, if you just comment on the environment for hiring and retaining talent. It's just amazing. A year ago, we were being asked to model the impact on talent costs of the equity capital raised by one of your competitors and that doesn't come up anymore. So if you could update us there, it would be great. Speaker 800:48:43Thank you. Speaker 300:48:47Thanks, Peter. I think when we initially put a presentation together in April of '23, we showed on a pro form a combined basis, I believe it was 'twenty two trailing, north of 60% of EBITDA, adjusted EBITDA conversion to free cash flow. When we initially guided this year, we had a number roughly in the 50% range that was impacted by some timing of working capital, some additional investments in the headquarters here, WWE and some other one time items. And we doubled back pro form a for the antitrust settlement, which obviously are payments that come out of operating cash flow and reduced free cash flow, albeit having a positive impact on our tax distributions given their tax deductible at 40%. Now candidly, things have moved around because of the one time nature of some of these large scale events in our business. Speaker 300:49:38But I think we stand by on a normalized basis 60% number and in excess of that 60% number over time. You're not looking at hugely capital intensive businesses here. We will make investments organic investments to further fuel our growth. But when we look to 2026, and we've had a lot of questions and commentary around the media rights renewals and the potential step function change in our revenue and profitability, we have a clear path to continued conversion in an excess of the numbers that we've said historically. So look, stay tuned. Speaker 300:50:10We'll be back in February, late February to talk about 25, but know that we also have to the 'twenty six rules, which will further impact the profile of this business positive. Speaker 500:50:22Thanks, Andrew. And then Peter, on the talent question, I'll just hit this briefly. The reason why you don't hear about it a lot, and we say this in all modesty, you don't hear about it because of the work of Paul Levesque and Dana White and Nick Khan and Lawrence Epstein. That's just fact of the matter. They are experts in storytelling, period. Speaker 500:50:46They are experts in creating rivalries, period. They are experts like David Stern was in building and marketing stars. And when your platforms, when your businesses, when your leagues become known for that, talent aspires to be with those leagues. So we haven't had those challenges as of late, because frankly the talent wants to get to the UFC and WWE level. Now we don't take that for granted. Speaker 500:51:15We're not arrogant about it, and we want to incentivize all of our fighters at the UFC and all of our superstars at the WWE to put out their best every day and aim for the top of the mountain. But we're prudent about it and we want to keep those costs under control. And as long as we do our job of continuing with that storytelling, continuing to build our fan base, continuing to surround ourselves with the right partners, then talent will gravitate towards the UFC and the WWE. Speaker 800:51:47Thanks so much. Speaker 500:51:49Thank you, Peter. Operator00:51:57Thank you. Our next question is from Ryan Gabbard of UBS. Ryan, your line is now open. Speaker 500:52:20I think we lost Ryan during Andrew's commentary. Operator00:52:26For the interest of time, we can move on. But Ryan, if you want to queue back in for a question. I'm so sorry, say it one more time. Speaker 500:52:34Why don't we go to the next question? Operator00:52:38Sounds good. Our next question is from Richard Greenfield of Light Shed Partners. Richard, your line is now open. Speaker 1200:52:47Hey, thanks guys for taking the question. Mark, I know this is a TKO call, but I actually had an Endeavor question. Endeavor as part of the transactions a couple of weeks ago that they're looking to sell Freeze, Madrid opened, Miami opened and opened that. And I was actually in a couple of conversations earlier this week and we had heard that Ari Emmanuel is actually looking at buying these assets. Is that with his own money personally or could that involve any TKO money? Speaker 1200:53:18And I ask that question because I think there's a lot of investors in TKO who are wondering whether you have any interest in buying or investing in any other non sports leagues as part of TKO? Speaker 500:53:33Thanks, Rich. You never shy away from the tough ones. I would just tell you that I want to stress again that TKL will not bid on any other Endeavor assets, period, none whatsoever. We won't sign an NDA, we won't explore, we won't read materials, nothing whatsoever. To your specific question on Ari, I would tell you that Ari, in his personal capacity, yes, he could be a bidder for any of the assets Endeavor is selling. Speaker 500:54:06I would also just remind you that Endeavor, although it is a TKO, I think, call it apropos, Endeavor is only exploring asset sales. So to your point, the sports betting assets, Madrid Open, Miami Open and the Freeze Art Fair, which they've announced they're exploring potential asset sales. They haven't made any definitive decisions. I assume they'll walk down the process. I say that assume because obviously Silver Lake Partners is playing a big role in that. Speaker 500:54:32And they'll decide what to do if and when the road leads to something. But yes, to your question, Ari and his personal capacity could be a bidder for any of the assets Endeavor sell. Speaker 1200:54:44And then just on the non sports piece, no other non sports assets is in your purview whether owned by TKO or others? Speaker 500:54:53We are sports pure play, end of story. And I'm glad you said that because we did after the announcement of the Endeavor assets that we did or we are working to close and acquire, it's a question of, hey, are you staying sports pure play? I can't stress enough. These are sports pure play. This does not break away from our model or our strategy. Speaker 500:55:14Sports rights, ticketing and premium experiences and another sports league. It's right in our wheelhouse, right? We know these properties extremely well because of our history. The deal was value accretive. As the business goes, we're still knee deep in integration, which we've talked about today. Speaker 500:55:34As you can see from the quarter, WME had I mean, excuse me, WWE had 54% EBITDA margins. I mean, that's up 18 percentage points year over year. Our global sponsorships, our partnerships kicking strong, I think what gets lost sometimes is WWE, keep in mind, we came into the year with a little over $20,000,000 in sponsorships coming into the year because some fell off from last year and we're now up to $70,000,000 dollars or that's where it will be end of year. So we're making significant progress with the integration, but there's clearly still a lot of wood to chop on the core integration. We see more opportunity and we're laser focused on it. Speaker 500:56:12Also, just finally, just going forward, when you look at why we're focused on these 2 battleships, because that's the business. These other PBR are small, obviously, but it's a rising sports league and the other two assets are going to fuel these 2 battleships. 85% to 90% of our adjusted EBITDA going forward is UFC and WWE. So our eyes are on the ball. We're going to finish the integration on the 2 core assets of WWE and UFC. Speaker 500:56:40We're going to then move sort of simultaneously on apparel attracted the integration of the new three assets. We're going to keep our head down. We're going to score numbers. We're going to keep this thing a cash flow gusher and we're going to be focused on returning capital to shareholders. Speaker 100:56:56I think that's a good Speaker 1200:56:57Thanks for taking the question. Speaker 100:56:58That's a good wrap for the call. Speaker 500:57:00Thanks, Rich. I think that's a Speaker 100:57:01good step to wrap the call. Thank you, everyone, for your interest and for joining us on today's call. Operator, you can conclude the call. Operator00:57:11Thank you so much. That concludes today's Q3 20 24 TKO earnings call. Thank you for your participation. You may now disconnect your line.Read morePowered by