Q1 2025 TKO Group Holdings Inc Earnings Call
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Cole: Good afternoon. Thank you for attending today's Teekay O Q1, 2025 earnings call. My name is cole and I'll be the moderator for today's call.
Cole: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Cole: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Speaker Change: I would now like to hand, it over to Seth Zaslow head of Investor Relations. Please go ahead.
Seth Zaslow: Good afternoon, and welcome to <unk> first quarter 2025 earnings call shortly.
Seth Zaslow: A short while ago, we issued a press release, which you can do on our Investor Relations website.
Seth Zaslow: <unk> of this call will also be available via our website for at least 30 days.
Ari Emanuel: After prepared remarks from Ari Emanuel TKO as executive Chair, and Chief Executive Officer, and Andrew Schleimer, Teekay <unk>, Chief Financial Officer will open the call for questions.
Speaker Change: Marc Shapiro, our president and Chief operating officer, and Andrew will be handling the Q&A.
Speaker Change: Purpose of this call is to provide you with information regarding our first quarter 2025 performance.
Speaker Change: I want to remind everyone that the information discussed will include forward looking statements and projections that involve risks uncertainties and assumptions. Please.
Speaker Change: Please see our filings with the Securities and Exchange Commission for further detail.
Speaker Change: or any assumptions proven correct, our results may differ materially from those expressed or implied on this call.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with Gap.
Speaker Change: Reconciliation between gap and non-GAAP metrics can be found in our press release issue today, as well as the information posted on our IR website.
With that, I'll now turn the call over to Ari.
Ari Emanuel: Thanks, Seth. We are off to a good start in 2025, driven by continued momentum at USC and WWE.
Ari Emanuel: Our first quarter revenue and profitability beat our internal expectations and as a result we are raising our guidance for the full year.
Ari Emanuel: During Q1, we also completed our acquisition of industry leading assets IMG on-location and PBR, and we're now hard at work on integrating the properties into our flywheel and identifying synergies to drive top line growth and cut costs.
Ari Emanuel: Andrew will share more on our updated outlook for 2025 inclusive of these businesses.
Ari Emanuel: Turning to the USC, live events and global partnerships continue to deliver solid performance and drive meaningful growth.
Ari Emanuel: Live events set new records in Q1, including our Fight Night in London, delivering the highest grossing Fight Night in company history, and UFC 312 in Sydney setting the record for Australia's highest grossing indoor arena event.
Ari Emanuel: Global demand for our live events further underscores our conviction in the Site-C model. Evidence of the potential here was seen in the announcement of our partnership with the Western Australian government to host five major UFC and WWE events in first through 2026.
Ari Emanuel: Our Global Partnerships team also secured several major innovative deals, as leading brands continue to see value in UFC's worldwide and highly engaged fanbase. We renewed our long-standing partnership with Monster Energy in a multi-year agreement that is the largest sponsorship deal in company history.
Ari Emanuel: <unk> is now a mainstay on the global top 10, and we're seeing significant engagement and viewership increases internationally for weekly WWE programming and premium live events on Netflix, especially in Mexico, The U K, Australia and Brazil.
Ari Emanuel: As global territories roll off existing rights deals Wwe's international footprint on Netflix will continue to expand in fact, India has now joined the Netflix WWE family and brings with it one of the world's most passionate and engaged fan bases.
Ari Emanuel: Overall WWE live events. Similarly, outperformed with 35 individual market records for ticket sales and 17 sold out events in the quarter.
Ari Emanuel: Elimination chamber in Toronto became Wwe's highest grossing event in Canada.
Ari Emanuel: Royal Rumble set a new milestone as the highest grossing non restful mania event in company history, and the road to Wrestlemania Tour achieved gate records at each of its 12 European events and drew over 116000 fans collectively.
Ari Emanuel: That charge culminated in a record breaking Wrestlemania 41 in Las Vegas last month, Allegiant Stadium welcomed 124000 fans across two nights and Wrestlemania 41 became Wwe's. Most successful event ever breaking all time records in gate premium hospitality viewership sponsorship merchandise and social engage.
Ari Emanuel: <unk>.
Speaker Change: Turning now to some highlights from IMG on location and PBR.
Speaker Change: <unk> announced several major renewals that underscore their unmatched capabilities expertise and global reach in sports.
Speaker Change: We renewed our partnership with Carnival, the South American football Confederation, covering sponsorship and media rights through 2030, we extended.
Speaker Change: Our strategic partnership with yearly basketball through the 2035% to 36 season building on our successful joint venture that has driven significant growth in media rights value and production quality since 2016.
Speaker Change: And we renewed and expanded our partnership with major League soccer to deliver live match and studio coverage of more than 600 games each year on Apple TV all produced from WWE state of the art studio facilities in Stanford, Connecticut.
Speaker Change: And at our location our partnership with the NFL, the leading sports and entertainment property across the U S delivered more than 32000 and fan experiences, including at Super Bowl 59 in New Orleans, a tremendous result in the very first year of a new contract extension with the league that runs through 2036.
Speaker Change: I should mention that in terms of trends Wrestlemania 41 held just a few weeks ago was no different on location hospitality package revenue surged, 75% over Wrestlemania 40, having this experiential hospitality capability now in house at TKO bodes well for not only the growth of our owned assets but.
Speaker Change: The partnership opportunities across the 200 Global Sports League and team clients served by IMG.
Speaker Change: Finally, <unk> unleash the Beast and velocity tours stretch the live events demand, we are witnessing with a strong showing in the quarter, drawing 640000 fans to their 40 events and selling out more than 30.
Speaker Change: Almost right out of the gate, we are capitalizing on the strengths and capabilities of these new TKO businesses to accelerate value creation across UFC and WWE. The TK Oh takeover as we call. It last month in Kansas City, Mark. The first time, all three businesses appeared in the same arena and city over a single weekend.
Speaker Change: Showcasing our unified live event strategy and seamless coordination across scheduling ticketing and the fan experience.
Speaker Change: Our conviction in our businesses is as strong as ever we remain focused on creating value for shareholders through integrating and driving synergies across our newly expanded sports portfolio delivering a media rights deal for UFC that positions the brand and the business for long term audience and financial success and executing our capital return programs.
Andrew: With that I'll turn the call over to Andrew.
Andrew: Good afternoon.
Andrew: As already highlighted 2025 is off to a great start.
Andrew: We have delivered strong operating financial performance at UFC, and WWE and have raised our expectations for performance for the remainder of the year I'll provide more detail on the outlook later in my remarks.
Andrew: Before I review, our financial statements I'll briefly touch upon basis of presentation.
Andrew: As we mentioned on our last earnings call. The acquisition of IMG on location in PBR is accounted for as a merger between entities under common control.
Andrew: As a result, our first quarter results include three months of activity, even though the acquisition closed on February 28, and we only owned and controlled these businesses for one month.
Andrew: In addition, our first quarter 2024 results have been recast to include activity for these businesses.
Andrew: The financial results for the periods that we did not own the acquired businesses were prepared by Endeavour and include allocations of expenses the businesses based on Endeavour's overall corporate expense profile.
Andrew: This presentation is consistent with the carve out financial statements for the acquired businesses included in our information statement on form <unk> filed in connection with the transaction.
Andrew: These expenses consisted of certain support functions that were provided on a centralized basis, such as finance human resources information technology facilities and legal among others.
Andrew: Never allocated these corporate expenses on a pro rata basis of head count and gross profit.
Andrew: In total such corporate allocations in Q1 were $21 7 million and represent the amounts solely from January one to February 28, the two months that we did not own the businesses.
Andrew: The corporate allocations were $30 7 million for the three months ended March 31, 2024, reflecting a full three months of endeavour ownership a year ago.
Andrew: To be clear under <unk> ownership effective February 28 of this year, such corporate allocations will no longer occur.
Andrew: With respect to segment reporting in connection with the acquisition, we performed a review to determine the optimal reporting structure for the company.
Andrew: Based on this review we have added a third reporting segment IMG, which consists of the operations of the IMG business and on location.
Andrew: To that end, we included PBR within our corporate group and have renamed it corporate and other.
Andrew: With respect to UFC and WWE, both will remain Standalone reporting segments and there is no change in how we are presenting these businesses in our financial statements.
Andrew: UFC and WWE remain core drivers of detail and we will provide the exact same presentation and disclosure as we have since the inception of the company.
Andrew: In connection with our review of segmentation. We have also reviewed our various revenue verticals as well as key performance indicators and have updated our disclosure.
Andrew: With respect to revenue verticals, we've made some small tweaks to the nomenclature.
Andrew: Notably, we've revised sponsorship revenue to partnerships and marketing revenue, which better reflects the strategic and operational functions of this area of our business.
Andrew: With respect to the select kpis to be disclosed in our 10-Q, we've added kpis for the acquired businesses that provide additional transparency for several important metrics such as number of events clients and hospitality packages sold when.
Andrew: When we announced the acquisition we represented that we would work hard to assist the investment community and better understanding the drivers of the financial results for these businesses, we plan to periodically referenced these metrics in future discussions as market.
Andrew: Before I get into more detail on our financial results I wanted to comment on the macroeconomic environment. As we know this is a topic on investors' minds.
Andrew: Close attention to consumer behavior, but to date, we're not seeing any signs of a slowdown across our portfolio, including our premium hospitality business on location.
Andrew: As I'll discuss in more detail in a moment, we continue to see significant strength, particularly with respect to live events and partnerships.
Andrew: As for tariffs, we are largely insulated as the vast majority of our revenue is not expected to be directly impacted.
Andrew: One area of our business with a limited impact as consumer products.
Andrew: However, since WWE UFC rely heavily on our license model and have minimal self manufactured goods the impact isn't expected to be in any way significant.
Andrew: Now turning to our consolidated financial results for the first quarter inclusive of the acquired businesses.
Andrew: We generated revenue of 1.2 dollars 69 billion, an increase of 4% adjusted.
Andrew: Adjusted EBITDA was $417 million, an increase of 23% our adjusted EBITDA margin was 33% an increase from 28% in the prior year period.
Andrew: How are you FC segment generated revenue of $360 million, an increase of 15%.
Andrew: Adjusted EBITDA was $227 million, an increase of 17%.
Andrew: <unk> adjusted EBITDA margin was 63% an increase from 62% in the prior year period.
Andrew: UFC had 11 total events, including three number of events in both the first quarter of this year and last year as we previewed on our last call mix shifted to a higher proportion of events with live audiences with seven in the first quarter compared to five last year, including two additional international events.
Andrew: Live events in hospitality revenue increased 66% to $59 million the increase reflected higher side fee revenue primarily related to the fight night held in Saudi Arabia, as well as an increase in ticket sales, which reflected the two additional events with live audiences as well as strong underlying trends in pricing and attendance.
Andrew: Partnerships and marketing revenue increased 32% to $64 million.
Andrew: The increase was driven by new partnerships as well as partnership renewals.
Andrew: We continued to make significant progress in growing this area of our business as highlighted by our recent renewal with long standing partner Monster Energy. This agreement was the largest partnership deal and UFC history. We also signed a groundbreaking new nine figure multi year partnership agreement with meta.
Andrew: Media rights production and content revenue increased 4% to $224 million.
Andrew: The increase was primarily driven by the contractual escalation of media rights fees.
Andrew: Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses direct operating expenses increased primarily due to higher production marketing athlete costs and direct cost of revenue due to the mix of event venues and territories.
Andrew: SG&A increased primarily due to higher personnel costs and travel expenses compared to the prior year period.
Andrew: Our <unk> segment generated revenue of $392 million, an increase of 24%.
Andrew: Adjusted EBITDA was $194 million, an increase of 38% adjusted EBITDA margin was 50% up from 44% in the prior year period.
Andrew: Live events in hospitality revenue increased 52% to $76 million as with UFC. We continued to see strong underlying trends for WWE live events. The increase was primarily related to an increase in ticket sales, which more than offset a decrease in site fees that is purely timing related as a reminder, we received meaningful side fee.
Andrew: For elimination chamber in Perth, Australia in the first quarter of last year.
Andrew: Partnerships and marketing revenue increased 86% to $26 million due to new partnerships and renewals across multiple categories, including financial services Telecom beer wine spirits and <unk> among others.
Andrew: While it occurred in April Wrestlemania 41 was emblematic of the momentum we're seeing in this area. The event, which featured a record 28 total partners, including our partner sponsor for each of the 14 matches over the two nights set an all time record for partnerships revenue more than doubled the previous record from last year's event as well as records for ticket sales prime.
Andrew: Some hospitality and consumer products.
Andrew: Media rights production and content revenue increased 14% to $252 million as expected results reflected the expansion of Smackdown to a three hour format for the first half of the year, resulting in a shift in quarterly revenue recognition, but has no impact on the full year amounts.
Andrew: The increase was also driven by the contractual escalation of media rights fees, including the January commencement of our long term agreement with Netflix to distribute raw in the U S and all of WWE content internationally.
Andrew: Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses direct operating expenses increased primarily due to higher talent costs.
Andrew: SG&A increased due to higher travel expenses, primarily related to the mix of venues and territories, including a three week 11 City tour across Europe, leading up to Wrestlemania.
Andrew: Our IMG segment generated revenue of $476 million in the quarter, a decrease of 13% adjusted.
Andrew: Adjusted EBITDA was $74 million a decrease of 10%.
Andrew: <unk> EBITDA margin was 15% in both periods.
Andrew: The decline in revenue primarily related to on location activity for the Super Bowl and Collegial Bowl games the.
Speaker Change: The venue location, New Orleans, compared to Las Vegas, with the Super Bowl and the match ups, notably the third straight Super Bowl appearance for the Kansas City Chiefs as well as our quarter final Rosebowl in 2025 compared to a semi final games in 2024 impacted the year over year performance.
Speaker Change: Adjusted EBITDA, primarily reflected the decrease in revenue, partially offset by a decrease in expenses. The decrease in expenses, primarily reflected the absence of media rights costs for the FA Cup, which was no longer part of the IMG business in Q1 2025.
Andrew: Corporate and other revenue was $54 million, an increase of $2 million.
Speaker Change: The activity related to PBR and reflected growth in live events and partnerships, partially offset by a decrease in media rights related to the early termination of the merch REIT media content distribution deal.
Speaker Change: Corporate and other adjusted EBITDA was a negative $77 million essentially flat with the prior year period.
Speaker Change: This amount includes the $22 million of costs related to corporate allocations of endeavour corporate expenses for the two month period prior to the close of the acquisition.
Speaker Change: For the avoidance of doubt from February 28th forward there'll be no additional corporate allocation expenses of this nature.
Speaker Change: Also in connection with the acquisition, we've evaluated the treatment of various costs at these businesses and made certain adjustments to conform the presentation to the methodology used for UFC and WWE.
Speaker Change: In aggregate. This resulted in a reclassification of approximately $10 million of costs in the quarter from the AMG segment to corporate and other.
Speaker Change: Now moving on to our capital structure in the first three months of the year, we generated $136 million of free cash flow.
Speaker Change: Our free cash flow conversion of adjusted EBITDA was 32%.
Speaker Change: Free cash flow included $27 million of capital expenditures.
Speaker Change: As we discussed on our February earnings call. We expect 2025 free cash flow to include the impact of approximately $300 million of nonrecurring payments related to the recent UFC antitrust settlement and M&A.
Speaker Change: In Q1, we realized approximately $175 million of these payments the second $125 million installment payment under the settlement agreement as well as transaction costs as such our free cash flow was adversely impacted.
Speaker Change: Free cash flow for the quarter was positively impacted by approximately $100 million of prepayments related to on location and the 2026 FIFA World Cup.
Speaker Change: These amounts are included in cash flows from operations and therefore are a part of our free cash flow calculation.
Speaker Change: We expect the World Cup prepayments to be a substantial source of cash over the course of 2025.
Speaker Change: Followed by a substantial use of cash in 2026 as payments are due nearer to the tournament taking place.
Speaker Change: As we did this quarter, we intend to separately identify this item going forward. So investors can follow the underlying cash flow generation of our business.
Speaker Change: As previously disclosed on March 31, we made our first quarterly cash dividend payment out of <unk> of approximately $75 million.
Speaker Change: We ended the quarter with $2 776 billion in debt and $471 million in cash and cash equivalents as well as $159 million of restricted cash.
Speaker Change: With respect to our previously announced $2 billion share repurchase program. We continue to expect the program to commence in the second or third quarter of this year with our timing and level of activity ultimately subject to market conditions and related factors.
Speaker Change: In the meantime, we continue to accumulate cash and carefully evaluate our capital needs.
Speaker Change: We're monitoring market conditions closely and are mindful of recent volatility I would like to underscore that in this environment Ari Mark and the board believes we should remain prudent and conservative for the time being that said, we remain committed to a robust and sustainable capital return program that balances return of capital to shareholders with organic.
Speaker Change: <unk>, such as our entry into boxing and maintaining our strong balance sheet.
Speaker Change: As for boxing in early March we announced that we entered into a multiyear partnership to establish a new Boston promotion.
Speaker Change: We will serve as the managing partner, providing day to day operational management and oversight of the promotion we've commenced.
Speaker Change: Operationalized in the JV, and we'll provide updates as and when appropriate.
Speaker Change: Now turning to our outlook as we've discussed in the past we manage the business with a focus on full year performance. Therefore, we believe results are best evaluated on a full year basis, given the quarterly fluctuations that are inherent in our operations.
Speaker Change: As noted in our press release based on our strong performance at USC and WWE through the first three months of the year and our anticipated performance for the balance of the year, we are increasing our expectations for <unk>, excluding the impact of the acquired businesses.
Speaker Change: We are now targeting revenue of 3.05 to $3 75 billion and adjusted EBITDA of $1 39 to $1 43 billion, an increase of $75 million and $40 million, respectively as compared to the guidance we issued in February.
Speaker Change: The increase was driven by continued strength across each vertical of our businesses.
Speaker Change: We are also updating our guidance to include the acquired businesses and the associated transaction impacts for.
Speaker Change: For full year 2025, we are targeting revenue of $4 49 to $4 $5 6 billion and adjusted EBITDA of $1 49 to $1 $5 3 billion.
Speaker Change: We announced the deal last October we presented an expected full year 2025 revenue and adjusted EBITDA contribution from these acquired businesses inclusive of expected run rate cost savings of approximately one $5 55 billion and $165 million respectively.
Speaker Change: The amounts included in our guidance represent an expected full year 2025 revenue and adjusted EBITDA contribution of approximately $1 45 billion and $100 million respectively.
Speaker Change: The updated contribution as a result of the following.
Speaker Change: Number one.
Speaker Change: The previously mentioned $21 7 million of corporate allocations from endeavor for January and February.
Speaker Change: Given the fact that our carve out financial statements. We are not yet prepared to quantum was unknown at the time.
Speaker Change: The $21 $7 million is a nonrecurring accounting adjustment and does not reflect the ongoing cost base of the acquired businesses.
Speaker Change: Number two our prior cost savings and transaction impacts target of $30 million plus.
Speaker Change: We've been hard at work identifying and Actioning. Upon these synergies I am pleased to report that we have identified $40 million plus of estimated run rate cost savings of which approximately $15 million are expected to be realized in 2025 with the vast majority expected by year end 2026.
Speaker Change: $15 million in year, 2025 contribution comps to the prior $30 million plus run rate.
Speaker Change: Number three.
Speaker Change: At PBR, the previously disclosed loss of our domestic media rights agreement with Merritt Street media.
Speaker Change: While we remain in active discussions with various parties, our 2025 outlook excludes any revenue or adjusted EBITDA related to our new rights agreement.
Speaker Change: With respect to the IMG and application businesses. The expected contribution is essentially consistent with the amounts we disclosed when we announced the transaction.
Speaker Change: In terms of free cash flow as we discussed on our last call. While we have not given formal guidance, excluding the impact of approximately $300 million of nonrecurring amounts our targeted full year 2025 free cash flow conversion rate would be in excess of 60%.
Speaker Change: This is exclusive of the benefit of any restricted cash.
Speaker Change: Including the impact of the acquired businesses our view remains unchanged.
Speaker Change: Consistent with our protocols, while we are not providing quarterly guidance, we want to highlight a few notable items as we look to the second quarter.
Speaker Change: At UFC results will reflect the mix of events in the quarter.
Speaker Change: UFC is currently scheduled to have 11 total events, including for number of events, which is comparable to the second quarter of last year.
Speaker Change: We also expect one additional fight Tonight with a live audience and one less apex event compared to the prior year.
Speaker Change: With respect to live events revenue.
Speaker Change: <unk> scheduled to take place in Baku, Azerbaijan and meaningful site fee, but as a reminder, the second quarter of 2024 included a site fee related to the Ufc's first ever event in Saudi Arabia.
Speaker Change: At WWE, given the timing of our event calendar, including Wrestlemania as well as the premium live event in Saudi Arabia, We expect the second quarter to be the highest revenue and adjusted EBITDA quarter of the year in terms of absolute dollars.
Speaker Change: At the AMG segment, the first quarter of the year is historically, the most profitable due to the timing of events, most notably the Super Bowl.
Speaker Change: As a result, we expect a quarter over quarter decline in adjusted EBITDA in terms of absolute dollars.
Speaker Change: In conclusion, we generated strong first quarter results that reflect continued momentum across our businesses in particular UFC and WWE.
Speaker Change: While we still have a lot of work ahead of us the integration of IMG on location in PBR is well underway and yielding meaningful early benefits. We are extremely excited about the road ahead and our prospects for the remainder of the year and beyond with that I'll turn it back to Seth.
Seth Zaslow: Thanks, Andrew operator, we're ready to open the call for questions.
Speaker Change: Great if you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Speaker Change: If for any reason you'd like to remove your question at Star two.
Speaker Change: But again to join the question queue. Please press star one.
Speaker Change: Our first question is from Ben Swinburne with Morgan Stanley. Your line is now open.
Ben Swinburne: Hey, good afternoon guys.
Ben Swinburne: I should ask Mark about the UFC rights renewal now that you guys are I believe out of the exclusive window.
Ben Swinburne: Can you give us any update on that process.
Ben Swinburne: How youre thinking about the pros and cons of splitting those rates are keeping them all with one partner.
Ben Swinburne: Sort of any update on <unk>.
Ben Swinburne: SPN as a as it go forward partner.
Ben Swinburne: Then.
Ben Swinburne: Andrew I don't know if you can be any more specific you can give us a lot there at the end on the acquired assets, but just trying to get to free cash flow for 25 now that you've closed the endeavour acquisition is there anything else you can tell us sort of help us think about free cash flow conversion, including.
Ben Swinburne: Acquired businesses now that debt deals.
Speaker Change: Thank you very much.
Ben Swinburne: Thanks Ben.
Ben Swinburne: I'll keep my commentary light.
Ben Swinburne: And then we can get into the free cash flow.
Ben Swinburne: Just because of the nature and sensitivity of all the conversations we're having we're in discussions at this time.
Ben Swinburne: Various third parties regarding the Yossi rights.
Ben Swinburne: I would term the conversations as thoughtful and strategic.
Ben Swinburne: Nothing to announce at this time.
Ben Swinburne: And ESPN is still heavily included in the mix.
Ben Swinburne: Ben.
Speaker Change: Pretty vocal about how.
Speaker Change: Great have a partner they've been and how instrumental they've been to our growth and success.
Speaker Change: We still believe that one of the best marketing machines in the business, let alone the brand and of course, all the excitement around ESPN flagship.
Speaker Change: Whatever its going to be called come next week.
Speaker Change: Yeah, Jimmy Pitaro, and Bob Iger, both fans and the UFC in.
Speaker Change: Firstly showed up to events and.
Speaker Change: Would be thrilled to continue with them and they are definitely part of the equation, but as I said at the time for the time being.
Speaker Change: Just various conversations various parties.
Andrew: We'll update beyond that Andrew on the free cash flow yes.
Ben Swinburne: Yes, Ben as I as I stated in my prepared remarks and.
Ben Swinburne: Jack back to our last call, while we haven't given formal guidance, we do have $300 million or so of nonrecurring amounts that will impact.
Ben Swinburne: The entirety of 2025 and absent those amounts are free cash flow conversion rate would be in excess of 60%.
Ben Swinburne: I didn't make the statement that including the impact of the acquired business our view remains unchanged.
Ben Swinburne: So therefore that the read through the one thing I would note is I also articulated that this is exclusive of the benefit of any restricted cash.
Ben Swinburne: And cash is largely associated with the pre sales for our FIFA arrangement and we anticipate that to grow over the course of the year. So there will be a benefit from that which we have.
Ben Swinburne: I have not sort of forecast or model, so consistent with our prior thoughts.
Ben Swinburne: Absent the $300 million and just a good story for US I mean, obviously, our adjusted EBITDA margin will change.
Ben Swinburne: Once we're talking about just the <unk>.
Ben Swinburne: Newly formed company, if you will but to Andrew's point.
Ben Swinburne: Not not changing our free cash flow.
Ben Swinburne: Conversion.
Ben Swinburne: It's something we're pretty excited about.
Ben Swinburne: Yes, no that's helpful. Thank you guys.
Beth: Thank you thank you Beth.
Speaker Change: Our next question is from Brandon Ross with light shed partners. Your line is now open.
Beth: Alright, Thanks, a couple of topics.
First we all saw the canelo announcement soon.
Speaker Change: Canelo falls under the bucket of one offs and your commentary about boxing last quarter can you just tell us how the economics work on that versus the main promotion that Youre building and where will these spikes get distributed and will you get paid and then is there a strategic tie into what Youre doing.
Speaker Change: With other media right and then just a follow up on <unk> first question.
Speaker Change: This will be helpful.
Speaker Change: Brandon.
Thanks, Tom.
Speaker Change: Kevin.
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: I'll ask a follow up.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I would just tell you that.
Speaker Change: Look where we're.
Speaker Change: <unk> with the new boxing Org.
Speaker Change: Organization that we're launching to put on an average of <unk>.
Speaker Change: Call. It 12 fights a year 12 cards a year for the next each of the next five years.
Speaker Change: We're still putting that plan together and obviously working.
Speaker Change: Hand in hand, with our friends from Saudi.
Speaker Change: Irrespective of those we will look to do anywhere from one to four sort of super fights per year, we will see how that plays out, but obviously, we would term the canelo Crawford.
Speaker Change: September matchup is one of those and then on the undercard, we would have a number.
Speaker Change: Of those undercard fights that would likely error on the television partner media partner, we would have for our newly formed box in the organization and I should mention it's not going to be called Teekay all boxing.
Speaker Change: We will.
Speaker Change: It seems like the <unk>.
Speaker Change: Soup of the day here will be unveiling our name for our business fairly soon here, so, but it will not be TKL boxing and as you look at those those are two separate businesses right. The Saudis are funding what would be these super fight cards will work with them on media rights deals and ticket.
Speaker Change: Mission, we will work with them, obviously on global partnerships will work with them on ticketing will handle the production, we will look to potentially promote all of them with.
Speaker Change: Dana White, Nick on driving much of that but then separately, we will have our boxing organization, our JV with them, where we're going out and doing as I mentioned 12 cards, a year on average and getting a separate media rights fee selling global partnerships through those cards and of course promoting and <unk>.
Speaker Change: Producing those cards with our <unk>.
Speaker Change: On whatever media platform, we ultimately choose to to tie with so that's kind of the state of boxing if that makes sense any follow up on that before we go to your other one.
Speaker Change: No I think I think I'm good there.
Speaker Change: And then just on the UFC media rights and you can you comment.
Speaker Change: On how the market and your approach to the number of sites and the fight nights by differ in this differentiation.
Speaker Change: Are you looking to have the same balance of reach and dollars for each year of the same objectives for each.
Speaker Change: Nothing's really changed from our previous commentary we remained highly flexible I mean, that's the beauty of owning your own league.
Speaker Change: The beauty of having a an executive management team. This is nimble and is as tight.
Speaker Change: As we are.
Speaker Change: We're.
Speaker Change: So we'd like to say I mean, we're the owners.
Speaker Change: And where the commissioner at the same time so.
Speaker Change: We'll make decisions that are best for the long term future of the sport and the brand we have to continue to balance.
Speaker Change: <unk> there's rights deal.
Speaker Change: At the same time doing what's best for our reach our engagement and the growth of the brand.
Speaker Change: The market I believe remains quite strong are our content is year round.
Speaker Change: Young men unbelievable numbers under 18, and I believe it or not a high school numbers are off the charts.
Speaker Change: We're tied with the NBA for the biggest draw when it comes to under eight genes and the major sports and we're still an antidote to churn in and I believe a serum.
Speaker Change: Our proven formula that works for subscriber acquisition. So we're.
Speaker Change: Cautiously optimistic we're in no rush this is a volatile economy.
Speaker Change: Right now a lot of uncertainty out there. We also understand there arent a lot of major sports rights hitting the market anytime soon.
Speaker Change: So we will we will be opportunistic but at the same time responsible when it comes to the right home for the growth of our brand.
Speaker Change: Great. Thank you very much.
Speaker Change: Thanks Brandon.
Speaker Change: We have a question from Steven last checked with Goldman Sachs. Your line is now open.
Steven: Hey, guys. Thanks for taking the questions.
Speaker Change: Maybe first for Andrew on the guide for the core business you have seen WWE. It sounds like both outperformed your internal expectations heading into the year.
Steven: I would just be curious if you could talk a little bit more about.
Speaker Change: What specific areas of outperformance were captured in.
Steven: In the first quarter within those two businesses and to what degree.
Steven: The increase in the guidance for the year factors any continuation of that outperformance into the back half of the year or if youre still maintaining perhaps some degree of conservatism there.
Steven: Yes, I think I would say that each revenue vertical in our business is strong right now.
Steven: The outperformance in Q1 for core Slash legacy <unk>, which is USD and WWE, leading to $75 million revenue increased from $40 million. Adjusted EBITDA increase was largely driven by two things number one outperformance to our own internal expectations on live event and global partnerships in the first.
Steven: <unk>.
Steven: Much of which we flowed through to the balance of the year and then continued tailwind in both those areas anchored by a strong Wrestlemania in April.
It gives us confidence into the visibility for now through December So we feel real good top to bottom.
Steve: And that's reflected in our guidance I would just add Steve It I mean, there is definitely not.
Steve: There's no conservative play from us in our numbers or any kind of sandbagging I mean, theres just a lot of uncertainty out there I mean, there isn't a morning, we're waking up and reading about Toyota or GE all of a sudden raining in their marketing budget now.
Speaker Change: Good thing is we haven't closed in an auto partner, yet that's still an open category for us.
Speaker Change: But it's just the market is definitely tightening up marketing is always one of the first things to get throttled premium experiences by the way.
Speaker Change: Is high up on that list as well.
Speaker Change: <unk>.
Ari Emanuel: We feel good and historically, the WWE UFC business models, and particularly the sports rights business at IMG have proven resilient in times of economic uncertainty and we are encouraged by the strength of our portfolio, we're keeping an eye on all the trends and sectors, taking nothing for granted.
Speaker Change: Yeah.
Speaker Change: We expect.
Speaker Change: At some point.
Speaker Change: Something comes home to roost.
Speaker Change: Not trying to be paranoid, but we're just trying to be responsible for our shareholders.
Speaker Change: And our numbers reflect that.
Speaker Change: Thanks for that and maybe just a quick follow up question on capital returns at sounds like share repurchases should kick in in the second or maybe third quarters here.
Speaker Change: More you can say on how youre thinking about the pacing of that $2 billion share repurchase program should we expect you to be consistent on execution or more opportunistic more price sensitive in the marketplace.
Speaker Change: But we're sticking to that.
Speaker Change: Our plan on capital return and Andrew can underscore that again for everybody on the on the phone with regard to dividend and share repurchase and timing, but having said that we're well aware that we are accumulating cash at a feverish pace that's going to continue.
Speaker Change: We're going to keep our powder dry we think that's the prudent thing to do at this time. So we're not we're not in the market yet.
Speaker Change: Buying back any stock Andrew why don't you I underscore our plan, yes, I think thats it.
Speaker Change: It really sums it up the only other color I would add Stephen in terms of sort of the nature of the buyback its really going to be market driven in the form of which that buyback can take.
Speaker Change: When we initially announced the $2 billion.
Share repurchase I think we articulated it'd be fairly linear.
Speaker Change: Over the three to four year period, I don't think we are coming off that commentary, but again.
Speaker Change: We can be opportunistic.
Speaker Change: Opportunities present themselves. So we're watching it closely.
Speaker Change: The enviable position to be able to as Mark said can we accumulate cash and then carefully evaluate our capital needs. So good place to be.
Speaker Change: Thanks Steven.
Beth: Thank you Beth.
Speaker Change: We have a question from Peter <unk> with Wolfe Research. Your line is now open.
Beth: Hi, Thank you first.
Mark: Mark I just wanted to come.
Mark: That's a brand new as defense that was nothing compared to some of the compound questions. We hear on media conference calls.
Speaker Change: I wanted to ask you a question about the IMG segment, how should we think about modeling that segment's growth across the sub components of media live events sponsorships product.
Mark: And then how might we think about any incremental EBITDA margins.
Speaker Change: So we the first thing that we want to double down on here. Peter is the fact that we intend to be more transparent.
Speaker Change: And provide information and Kpis as we did I'm not sure if you've had the opportunity to get some through our 10-Q, yet, but we did add some tables.
Speaker Change: On the <unk> segment, we also added a table on PBR analogous to.
Speaker Change: Our historical Kpis tables for UFC and WWE on location of events type of event numbers of events et cetera.
Speaker Change: Then on the IMG business, particularly on location we have.
Speaker Change: Some information in the financial statements on number of hospitality packages sold numbers, if the number of events et cetera. So we anticipate over time that that information would be a guide to how best to think about the growth and profitability profile of these businesses at.
Speaker Change: At 15% margins and effective cost savings plan, we anticipate growth over the course of the year, both top line and a margin perspective that being said Q1.
Is generally the largest adjusted EBITDA contribution quarter for the IMT segment and for PBR.
Speaker Change: As in the corporate group of the AMG segment, obviously has the application business and the Super Bowl is the anchor of the year and we see that positively impacting revenue and adjusted EBITDA in the quarter and for PBR.
Speaker Change: The most profitable tours in the first quarter as well the balance of this year will be impacted by the pre spend for our Milan Olympics program and that will have a negative impact to EBITDA and EBITDA margin, hence when we announced the acquisition in October we.
Speaker Change: Presented numbers on a normalized basis, which would have added $100 million roughly of adjusted EBITDA to this year and had a positive impact on margin. So what we can expect from us over the course of this year is a an update on the growth and profitability profile of the IMT segment growth and profitability of PBR and some.
Speaker Change: More commentary on the expenses related to the Olympics.
Speaker Change: I think to Peter just to underscore I think Andrew's comments.
Speaker Change: On the free record.
Speaker Change: Just the idea that were.
Speaker Change: We're now out in the marketplace.
Speaker Change: <unk> crossed but obviously a lot of work and gotten grit and strategy underneath it.
Speaker Change: But we're out in the marketplace on Milan.
Speaker Change: And the FIFA World Cup and so far the activity is in line with our expectations. So.
Speaker Change: Another good sign for the business. Another reason why we're bullish.
Speaker Change: About our forecast and raising guidance.
Speaker Change: As I mentioned, we're keeping a close eye close watch on on all of that with these changing times.
Speaker Change: Thank you both.
Speaker Change: Thank you.
Speaker Change: Our next question is from Eric Handler with Roth Capital. Your line is now open.
Speaker Change: Thank you good afternoon, and thanks for the question.
Speaker Change: Wonder if you could talk a little bit about some of the directional activity youre seeing.
Speaker Change: With type C deals it seems like Theres been more.
Speaker Change: This year can you maybe talk about.
Speaker Change: Directionally the volume of deals that you are doing maybe the percentage increase that youre seeing in sort of like how do you determine location by location like what the value is of that deal.
Speaker Change: Look we do a lot of economic impact studies and Eric frankly.
Speaker Change: A lot of negotiation is a lot of conversations I mean.
Speaker Change: More deals you don't hereof than deals that are being done we're out there surveying the market.
Speaker Change: Aggressive in the space.
Speaker Change: It helps to have offices in as many countries as we do an IMG is obviously.
Speaker Change: Enhanced our position there, where we're making a couple of hires coming up some big hires on the government relation side it will help us both with relationships.
Speaker Change: C suite activity.
Speaker Change: And track record to capitalize in this space, but it's no different every office, we walk into with no different than F. One was either they or the day before coming in the next day.
Speaker Change: So we're constantly on the lookout for cash and of course in kind is often just as good we announced.
Speaker Change: The end of February.
Speaker Change: Our new deal with tours in Western Australia, which will see us bring multiple UFC and W. W. W. W. <unk> events, the Perth over the next two years and we're very excited about our event coming up.
Speaker Change: In June 25 in Baku.
Speaker Change: And that's just for a fight night. So we often talk about we need to capitalize on site fees for all of our number of events and capitalize on site fees for all the lease but when we're done with that we still have raw Smackdown NXT.
Speaker Change: Fight nights and this will be.
Speaker Change: Multiple years strategy, where we see benefits to the bottom line and Bakken was an example of that we will get a meaningful multi million dollar site fee for taking a finite.
Speaker Change: The either by John.
Speaker Change: Right.
Speaker Change: Hi.
Great that's helpful I guess.
Speaker Change: A follow up to that can you give me what percentage of.
Speaker Change: Your events would you say actually have site things just trying to get a sense of like what inning you're in here.
Speaker Change: Yeah, Eric I don't think we're going to disclose that publicly we're relatively new with this effort and I think our access our success outside the middle East is really starting to pick up. Besides the model is anchored in our historic relationships with our partners at DCT in Abu Dhabi, and obviously our partners in Saudi Arabia.
Speaker Change: So international markets, we've seen meaningful success over the last six to 12 months in Australia, we have historical relationships in Singapore and the list goes on but this effort is relatively new so.
Speaker Change: Not going to quote a percentage penetration.
Speaker Change: At this point in time, but a lot of work that's going to pay pay off in the coming years and a lot of inventory that Kansas City takeover, we did.
Speaker Change: In April was.
Speaker Change: Just a big win for us.
Speaker Change: Put aside.
Speaker Change: The fee and.
Speaker Change: Yeah.
Speaker Change: In kind.
Speaker Change: Amount of earned media we received.
Speaker Change: For that.
Speaker Change:
Speaker Change: Promotion I would say PBR.
Speaker Change: Raw.
Speaker Change: FC.
Speaker Change: Just just extraordinary.
Speaker Change: Ordinary and frankly helps us on our marketing spend money, we don't have to spend because we were able to make so much hey, and so much noise with that promotion. So look for more of that and just realize that internally. We've got a team solely dedicated to just surveying the market identifying the.
Speaker Change: <unk>.
Speaker Change: And negotiating using the leverage we have.
Speaker Change: The economic impact we've historically bought.
Speaker Change: Yeah.
Speaker Change: Very helpful. Thank you.
Speaker Change: Got it.
Speaker Change: Thanks, Eric.
Speaker Change: We have a question from Ryan graduate with UBS. Your line is now open.
Ryan: Great. Thanks.
Speaker Change: Some of the announced acquisition.
Speaker Change: <unk> restaurant in new Mexico.
I'm curious what you see as the biggest opportunity here in terms of improving monetization and integration with the WWE.
Speaker Change: And are there similar tuck in opportunities.
Speaker Change: Mike just one around the world.
Speaker Change: Yes.
Speaker Change: Thanks, Brian I would just say.
Speaker Change: I'm going to let Nick answer the table Lawrence Epstein from UFC is at the table I'm going to let Andrew and Nick.
Speaker Change: Dig into some detail here, but I will tell you I am really excited about this this is an opportunity that frankly that Nick and Paula back on Earth.
Speaker Change: As a major property in Mexico enormous following avid fan base extremely young.
Speaker Change: With a bunch of events starting with.
In Los Angeles.
Speaker Change: It was an event that we're going to do there at the Clipper Stadium.
Speaker Change: It is just just really going to be.
Speaker Change: The touch the lead off if you will this is something that's going to catch a lot of fire and our partnership is as well.
Speaker Change: Well structured to see us capitalize in all those different business Kpis, we talk about already across UFC and WWE in PBR. So this is a fast ball.
Speaker Change: Right down the middle for us.
Speaker Change: Yes, so couple of things to add to that the AAA acquisition for US If you look at some of the recent Russell.
Speaker Change: Wrestlers who came into WWE and in his real life brother Phoenix in particular, both social media impressions and John is that you almost 100 million social media impressions.
Speaker Change: Spikes and Latino your ships when he comes out it's something we noticed a few years ago with that money came in.
Speaker Change: On his run with WWE was that the Latino audience would be there if there was someone like them.
Speaker Change: Was there so we think number one or two new influx of rustlers.
Speaker Change: <unk> added to the demographic, where we're already strong.
Mark: And as Mark said for the June 7th.
Speaker Change: At the forum, which will be at noon Pacific followed up by a WWE premium live event.
Speaker Change: That same day right across the street into adult.
<unk> had our wrestling event for US produced from one truck is efficiencies there theres. Good dollars there and we're excited about the overall opportunity look the only thing I would add.
Speaker Change: Ryan.
Speaker Change: Strategically we view this as a significant opportunity.
Speaker Change: On what market mix it.
Speaker Change: The short term financial impact is not meaningful to the overall picture.
Speaker Change: But just as we've done with the UFC and WWE. This was a family operated promotion.
Speaker Change: That we think we can leverage institutionalize lowered our expertise to create value. We will increase media rights increased live events revenue increased partnership revenue and will increase consumer products and licensing opportunities.
Speaker Change: Fit squarely in our wheelhouse on top of just the rich cultural heritage and the strategic importance to WWE first week, we came out of the gate with pent up money first debuted.
Speaker Change: That all merchandise sales that week, just new to the party and he was number one so we're looking to mine. These opportunities everywhere. Obviously this is an established Lee but the the latter part of your question nothing else on the horizon from an M&A standpoint, if you will very similar to the capital repurchase program.
Speaker Change: We're holding our powder lets accumulate cash, let's see what happens with this economy.
Speaker Change: That's great and just to confirm this would be incremental.
Speaker Change: Current guidance.
Speaker Change: Yes, we don't have there's no real short term financial impact just like any impact would be incremental very marginal.
All right great. Thanks, guys.
Speaker Change: Operator lets take one last question please.
Speaker Change: Our last question will be from Jason Bazinet with Citi. Your line is now open.
Jason Bazinet: I just had a very simple question.
Jason Bazinet: The market really likes the assets you guys are managing and they loved the way you are managing them.
Jason Bazinet: The one I guess slight concern that I have and I don't know if it's validates that.
Jason Bazinet: Once we get through the UFC renewal in the WWE <unk>.
Jason Bazinet: My fear is that your equity turns into like a bond, meaning it's rover on it generates a lot of cash, but there's not as much enthusiasm for the equity just because there arent as many needle moving things that you can do.
Jason Bazinet: Do you think that that's a valid concern or do you think theres enough with boxing and sponsorship and site fees.
Jason Bazinet: Keep the growth as exciting as it has been.
Jason Bazinet: Thanks, Jason.
Speaker Change: Interesting perspective.
Speaker Change: What I would just say is if you know our management team.
Speaker Change: We don't sit still.
Speaker Change: There will always be a lot of gas in this car.
Speaker Change: Call It rocket fuel so yes significant upside on the on the global partnerships front still a ways to go on the.
Speaker Change: Live ticket revenue, especially on the WWE front.
Speaker Change: New properties, we're going to launch new franchises, new promotions, new lease we will on Earth like the JV with with AAA wrestling digging into the Hispanic market.
Ari Emanuel: IMG is not working with 200 different partners across the world. Some massive events on the Horizon Euro League gaining some steam in conversations with hopefully the MBA at some point here comparable Caf and the World Cup Women's sports and where thats going on location.
Speaker Change: Adding new partners every day setting all time.
Record with Wrestlemania.
Speaker Change: In Las Vegas, and what's to come there and PBR wall, certainly niche and it's just western lifestyle.
Speaker Change: What more we can do there and it's another situation, where the owner and the commissioner all in one.
Speaker Change: Kind of put that aside already manuals our partner here in a field as leader I can promise you that.
Speaker Change: We're not going to be sitting still in whatever new media deals we get they will have annual increases baked into them.
Speaker Change: And opportunities for new programming and more ancillary programming.
Speaker Change: Not only drives our storytelling and our stars but opens up.
Speaker Change: New programming vehicles for us to monetize.
Speaker Change: That's super helpful. Thank you for that context.
Speaker Change: At that point, we'll have a lot more cash going and hopefully do more on the dividend front and more on the share repurchase program, we're going to be active.
Speaker Change: We want to see that the story play out in the way that I think our shareholders expected to over the next five to seven years.
Jason Bazinet: Thanks, Jason Thank.
Speaker Change: Thank you very much alright, well.
Speaker Change: Thank you everyone for joining us on today's call and for your interest in TKO operator, you can conclude the call.
Speaker Change: That concludes today's call. Thank you all for your participation you may now disconnect your lines.