TKO, the parent company of UFC and WWE, is on the upswing, delivering solid Q1 results and enough momentum for both franchises that the company opted to boost its full-year revenue and earnings guidance for Wall Street.
TKO disclosed that it has reached a $25 million deal with NBCUniversal to allow WWE’s “Monday Night Raw” wrestling franchise to remain on USA Network through the end of this year. In January, TKO struck a massive 10-year deal with Netflix to bring “Raw” and other WWE content to the streamer’s platform as of next year.
At the time, WWE’s pact with NBCU for “Raw” ran through the end of the third quarter. That forced TKO leaders to acknowledge on the company’s Q4 earnings call in February that “Raw” might not have a TV home for the last three months of this year and with that, no revenue coming in. But as expected, NBCU and TKO came to terms on a short-term extension before the WWE grapplers head off to new pastures at Netflix.
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In March, TKO reached a $335 million settlement in a long-running antitrust battle with former UFC fighters, who accused the company of using illegal means to prevent them from working for other MMA leagues. The settlement will be paid out in two parts, starting with a $200 million payment this year and the rest in 2025. But the full cost of the settlement was recorded on TKO’s books in Q1. Without that charge, the company would have posted positive net income. TKO’s stock price has climbed significantly since the UFC settlement was disclosed. For the year to date, shares are up 21%, closing Tuesday at $98.80.
“TKO is off to a strong start in 2024 with multiple record-setting live events, new brand partnerships, and media rights deals for WWE Raw,” said Ariel Emanuel, executive chair and CEO of TKO. “With our momentum in the first quarter and solid financial results, we have raised our full year 2024 guidance. We also reached an agreement to settle all claims asserted in both UFC antitrust lawsuits. These positive developments, along with the strength in our underlying businesses, give us more conviction than ever in the combination of UFC and WWE, and in TKO’s ability to deliver sustainable long-term value for shareholders.”
For the quarter, TKO delivered revenue of $629.7 million and earnings before interest, taxes, depreciation and amortization of $282.2 million. Net income was in the red at $249.5 million. Year-to-year comparisons for the quarter are thrown off by the fact that WWE and UFC were brought together in a merger under the TKO umbrella last September.
The strength of demand for UFC and WWE events, from fans and from advertisers and sponsors, encouraged TKO to raise its guidance for full-year 2024 revenue to come it at $2.610 billion to $2.685 billion, while adjusted EBITDA is projected to reach of $1.185 billion to $1.205 billion. That compares to the guidance issued in February of full-year revenue in the $2.575 billion to $2.650 billion range and adjusted EBITDA of $1.150 billion to $1.170 billion. However, TKO downscaled its guidance for free cash flow conversion — a key Wall Street metric for media and entertainment firms in a period of transition — to “in excess of 40%” rather than more than 50% as projected in February.
More to come
