Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TKO Group Holdings Inc (TKO, Financial) reported record revenue of $851 million and adjusted EBITDA of $421 million for Q2 2024, marking significant growth.
- The company raised its full-year 2024 guidance for revenue and adjusted EBITDA due to strong operating performance.
- UFC and WWE live events achieved record ticket revenue and viewership, highlighting strong demand for premium sports content.
- TKO successfully integrated UFC and WWE's live events groups, driving synergies and exceeding $100 million in annualized net savings.
- New brand partnerships, including a significant sponsorship deal with Riyadh Season, are expected to drive top-line revenue and audience growth.
Negative Points
- The UFC antitrust lawsuits remain unresolved, with the court denying preliminary approval of the settlement agreement.
- Deloitte will no longer serve as TKO's auditor due to SEC technical independence rules, necessitating a transition to KPMG.
- The third quarter of 2024 is expected to see fewer UFC events compared to the prior year, potentially impacting media rights and content revenue.
- Production costs for the upcoming UFC 306 event at the Sphere are higher than anticipated, posing a headwind to EBITDA.
- Free cash flow conversion guidance remains unchanged despite the raised revenue and EBITDA outlook, due to uncertainties around the antitrust settlement.
Q & A Highlights
Q: Can you provide insights into the optimization journey for WWE's live events, particularly regarding venue size and pricing?
A: Mark Shapiro, President and COO, highlighted that there are clear skies ahead for revenue synergies, with no detraction from consumers or sports fans. The company is seeing growth in ticket yields and site fees, and the Netflix deal for WWE is expected to bring new audiences and enhance sponsorship opportunities.
Q: How has UFC pay-per-view viewership and pricing evolved since the last deal, especially with recent trends?
A: Shapiro noted that ESPN and Disney have been aggressive with pay-per-view pricing, which led to increased piracy. They have since adjusted pricing strategies, offering discounts for early purchases, and are seeing good success with this approach. Despite pricing challenges, UFC is sustaining its pay-per-view buys.
Q: Can you explain the significant year-over-year growth in WWE's live events revenue and the decrease in expenses?
A: Andrew Schleimer, CFO, explained that WWE's live events were anchored by WrestleMania and other PLEs, which carry higher margins. The company has been successful in reducing production costs through detailed analysis and efficiency improvements, contributing to the impressive margins.
Q: How do you view the optimization of site fees for live events over the long term?
A: Shapiro emphasized a balance between volume and event value. The company is focused on enhancing the quality and duration of events to attract higher site fees from cities. They are leveraging competition among cities to secure favorable deals and are expanding internationally to grow this revenue stream.
Q: What are the prospects for international rights renewals for UFC, and how does the demand compare to the US?
A: Shapiro stated that while international rights are not as hot as in the US, they are seeing increases when deals roll off. The partnership with IMG provides valuable intelligence and local presence, aiding in securing favorable renewals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
