TKO Group Holdings, Inc. Q4 FY2025 Earnings Call

Good afternoon. Thank you for joining the TKO Fourth Quarter and Full Year 2025 Earnings Call. My name is Cameron, and I will be your moderator today. I would now like to hand it over to your host, Seth Zaslow, Head of Investor Relations. Please proceed.

Good afternoon, and welcome to TKO's Fourth Quarter and Full Year 2025 Earnings Call. A short while ago, we issued a press release, which you can view on our Investor Relations website. A recording of this call will also be available via our website for at least 30 days. After prepared remarks from Ari Emanuel, TKO's Executive Chair and Chief Executive Officer; Mark Shapiro, TKO's President and Chief Operating Officer; and Andrew Schleimer, TKO's Chief Financial Officer, will open the call for questions. Mark and Andrew will be handling the Q&A. The purpose of this call is to provide you with information regarding our fourth quarter and full year 2025 performance. I want to remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties, and assumptions. Please see our filings with the Securities and Exchange Commission for further detail. If these risks or uncertainties were to materialize or any assumptions prove incorrect, our results may differ materially from those expressed or implied on this call. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events, except as legally required. Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics can be found in our press release issued today as well as the information posted on our IR website. With that, I'll now turn the call over to Ari.

Thanks, Seth. 2025 was a catalytic year for TKO as we established meaningful momentum across both UFC and WWE in particular. TKO sits squarely at the center of a robust sports and entertainment ecosystem. Our properties command attention with must-see content and no off-season, capturing a coveted young, diverse audience and reaching more than 1 billion households globally. In 2025, we signed 2 historic U.S. media rights deals for our marquee assets, UFC's $7.7 billion deal with Paramount, where it joins the NFL, NCAA Final Four, UEFA Champions League and the Masters, and WWE's $1.6 billion deal with ESPN to become the exclusive home of all premium live events, including WrestleMania. While still early innings, we're thrilled to partner with Paramount and ESPN to expand our fan bases and drive growth for our premium IP. While delivering these transformational deals, we launched a capital return program, first initiating and then doubling our quarterly cash dividend. We have also nearly completed $1 billion of share repurchases and today announced our intent to repurchase up to $1 billion of additional shares. Our accomplishments in 2025 validate the industrial logic of TKO and ensure we are well positioned for 2026 and beyond. We remain extremely optimistic about our position in the content marketplace, and our conviction in TKO has never been stronger. In closing, I know that our M&A intentions are always a topic of interest, so I thought I would address that formally. While we will always be opportunistic, I want to reiterate past commentary that 2026 is a year of execution for us. We are an execution story. With that, I will have Mark get into the details.

Thanks, Ari. 2025 was indeed a landmark year for TKO. We secured media rights deals in excess of street expectations, delivered innovative global partnerships, record-setting live events and premium experiences, integrated IMG, On Location, and PBR into our portfolio, prepared for the launch of Zuffa Boxing, and returned meaningful capital to shareholders. Today, we will dive deeper into why these achievements further strengthened our foundation in 2025 and how they inform our roadmap for driving continued growth in the years ahead. First, I'd like to highlight our media rights deals. Including those deals signed in 2025, we now have more than $15 billion of long-term media rights agreements secured across UFC, WWE, PBR, and Zuffa Boxing with leading streaming and linear platforms. Importantly, this is high-margin revenue with annual escalators that provide visibility and predictability. We launched WWE on Netflix in January 2025. Over the course of the first year of this 10-year deal, viewers streamed 525 million hours of content with Raw becoming a mainstay on the platform's weekly top 10 in the U.S. and in more than 30 other countries worldwide. That level of engagement reinforces the staying power of WWE and expands our opportunity to unlock value from a growing global fan base, particularly as we bring our premium live events and tours to existing and new international markets. In September, we brought WWE PLEs to ESPN, kicking off the 5-year partnership with the first-ever Wrestlepalooza live from Indianapolis. We are thrilled with this deal, which represents a 1.8x increase and includes expanded monetizable rights for TKO. Beyond that, this deal is about what we can build with ESPN, a long-time partner that sports fans across the country consider their first stop destination for premium sports content. As we move into our first full year together, we believe ESPN will drive greater awareness for WWE, resulting in an expanded audience, deeper engagement, and ultimately allow us to unlock new partnership opportunities that will fuel revenue growth. Additionally, our 7-year agreement for UFC with Paramount ushers in a new era, making UFC's 43 annual events available to all Paramount+ subscribers in the U.S. Our goal was to grow our fan base by making UFC content more accessible and by removing the double paywall, which previously existed with ESPN+, that strategy is playing out as intended. UFC 324's debut on Paramount+ grew nearly 5 million streaming views and became the largest exclusive live event in Paramount+ history with the broadest reach for a UFC event in nearly a decade. The TKO and Paramount teams are working hand in hand, and we're looking forward to the debut of our first CBS simulcast with UFC 326 on March 7. With these media rights agreements in place, TKO is rapidly evolving into one of the most durable and monetizable global sports rights platforms with a business mix further shifting toward a more recurring contractual revenue profile. We are now squarely focused on execution and revenue generation across each of our primary business drivers, beginning with global partnerships. In 2025, we exceeded well over $450 million of our stated global partnerships revenue target through a healthy combination of expanded renewals with market-leading brands like Monster Energy and innovative new category alliances with Meta, IBM, Polymarket, DoorDash, and Ram. Double-digit growth in partnerships and live events is achievable in 2026 as engagement in sports broadens out and premium activations become more coveted by large brands across a wide range of categories. With these positive tailwinds firmly at our backs over the coming 12 to 24 months and the addition of new broadcast commercial inventory, we recently raised our 2030 partnerships revenue target across the TKO portfolio from $1 billion to $1.2 billion. We have the right strategy, and we have the right team to hit this mark. Pivoting to live events, I would say the experience economy is alive and kicking. In Q4 alone, UFC sold out 6 events and WWE delivered its highest grossing arena record of all time at John Cena's final match in Washington, D.C. We still have pricing elasticity, especially with several markets eager, sometimes years eager for our premium content. By example, 2026 started off strong with sold-out UFC events in Las Vegas and Sydney and WWE Royal Rumble's debut in Saudi Arabia. That momentum is scripted to continue as we build up to the spectacle at the White House on June 14. To be clear, we see this once-in-a-lifetime stage as a strategic investment to drive subscriber acquisition at Paramount+, massive audience sampling for the UFC overall, and Super Bowl-like earned media across the globe. The event will cost us upwards of $60 million. However, we are working to secure sellable inventory in and around the weekend of events that should cover approximately half that cost. As you've heard us discuss, site fees are a high-margin lever in our live event economics and a key driver of our growth strategy. Now we recognize this is a topic of interest for investors, so we wanted to provide greater clarity and transparency on how we're thinking about the opportunity today. First off, in refining our approach, we believe the term site fees doesn't capture the full scope of these deals as agreements often include a combination of cash, noncash subsidies, and value-in-kind support. As such, going forward, we'll be referring to these site fees more broadly as financial incentive packages or as we like to call them, FIPs. In 2025, approximately half of our marquee UFC and WWE events were supported by meaningful financial incentive packages. Our multiyear plan calls for us to achieve FIPs for each of our roughly 25 marquee events in addition to other calendar attractive UFC fight nights, WWE main roster events, PBR majors, and Zuffa Boxing cards. In 2026, across TKO, we expect to realize over $300 million in aggregate value from these packages, roughly double what we were receiving when we formed TKO initially in 2023. Now keep in mind, the $300 million forecasted for 2026 includes some one-timers that when normalized puts the total around $240 million. That in mind, we expect to achieve a range of $380 million to $420 million by the year 2030. The thesis of our FIP strategy is plain and simple. Our premium content is in high demand, and governmental and private financial incentives should reflect the economic and cultural impact we deliver. 2025 was also an important year for activating IMG and On Location inside TKO, integrating their capabilities, fueling growth in our core IP and reinforcing our position at the intersection of sports and entertainment. In addition to advising on UFC and WWE's media rights renewals and Zuffa Boxing's new domestic and international deals, IMG delivered meaningful multiyear deals for CONMEBOL, Euroleague Basketball, the WTA, the RNA, and the Saudi Pro League. IMG also expanded its relationships with the USTA, MLS, and NWSL to include domestic and international media rights representation, media production, and archive rights management, respectively. On Location capitalized on fan enthusiasm for UFC and WWE, delivering premium hospitality at more than 65 total events in 2025, and we renewed our relationship with leading sports properties, including a significant contract extension with the NFL across the Super Bowl, Pro Bowl, NFL Draft, and their ever-expanding international slate of games. Building on that momentum, On Location takes center stage this year for 2 of the world's biggest events, the Milano Cortina Olympics, which just concluded on Sunday, and this summer's FIFA World Cup. Finally, let's talk about Zuffa Boxing. All I can say is look out. Our aim is to build this into a juggernaut. We're encouraged by our initial progress in 2025, securing a media rights deal with Paramount+ across the U.S., Canada, and Latin America. We have a handful of other territories in negotiation, and we only launched roughly a month ago. We are signing a strong portfolio of boxers to our roster and already planning to schedule a 2026 calendar of fight cards that takes us outside the United States. As we enter 2026, we are brimming with optimism. We have high visibility into revenue and EBITDA growth given the long-term structure of TKO's deals across segments. We are insulated from AI disruption. We have strong free cash flow conversion that will expand significantly over the next 5 years, and we are seizing now on the opportunity to further return capital to shareholders via share repurchases. As we said in our press release, TKO is a high-quality execution story with multiple avenues for outperformance. With that, I will turn it over to our CFO, Mr. Andrew Schleimer.

Good afternoon. As Ari and Mark highlighted, 2025 was a very strong year for us. We delivered solid operating and financial performance across our businesses, and we expect the positive momentum to continue. Last year, we generated revenue of $4.735 billion and adjusted EBITDA of $1.585 billion, both of which exceeded the upper end of the revised guidance range we provided on our last earnings call. Our adjusted EBITDA margin was 33.5%. In 2024, revenue was $4.884 billion and adjusted EBITDA was $1.082 billion, and our adjusted EBITDA margin was just over 22%. On a reported basis, revenue decreased 3%, adjusted EBITDA increased 47% and adjusted EBITDA margin increased over 11 percentage points. Our year-over-year results reflected strength at UFC and WWE. In particular, margins continued to expand at WWE, delivering over 50% for the first time in 2025. We've come a long way in a short time, growing WWE's margins from less than 40% just a few years ago. That said, and as noted on our Q3 call, the impact of the 2024 Paris Olympics led to the decrease in revenue and contributed meaningfully to the increase in adjusted EBITDA and adjusted EBITDA margin as the event was loss-making. Moving to our consolidated results for the fourth quarter. We generated revenue of $1.038 billion. Adjusted EBITDA was $281 million. Our adjusted EBITDA margin was 27%. Revenue increased 12%, adjusted EBITDA increased 30% and adjusted EBITDA margin increased approximately 4 percentage points as compared to the prior year. Now turning to our UFC segment. UFC had 10 total events, including 4 numbered events in both the fourth quarter of 2025 and 2024. Event location mix shifted slightly as 4 events were held internationally in the quarter compared to 3 in the prior year period. UFC generated $401 million of revenue in the quarter, an increase of 17% or $58 million. Adjusted EBITDA was $213 million, an increase of 20% or $35 million. UFC's adjusted EBITDA margin was 53%, an increase from 52% in the prior year period. Partnerships and marketing revenue increased 39% to $93 million. The increase was driven by the addition of new partners and renewals of existing partners at higher rates. As Mark discussed, we continue to make significant progress, adding new categories and growing existing ones, including recently announced deals with Ram Trucks, Polymarket, and DoorDash. Media rights production and content revenue increased 12% to $223 million. The increase was driven by the contractual escalation of media rights fees. Live events and hospitality revenue increased 12% to $72 million. The increase was due to higher revenue from financial incentive packages driven by the timing and mix of international events. UFC held the numbered event in Abu Dhabi in both periods as well as its first event in Qatar in the current period. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses primarily reflected an increase in marketing, production, and other event-related costs, all related to mix, partially offset by a decrease in athlete costs. SG&A increased primarily due to higher personnel and travel costs compared to the prior year period. Our WWE segment generated revenue of $360 million in the quarter, an increase of 21% or $61 million. Adjusted EBITDA was $165 million, an increase of 44% or $51 million. Adjusted EBITDA margin was 46%, up from 38% in the prior year period. As expected, results reflected the favorable impact of the Raw domestic rights deal. As a reminder, the fourth quarter of this year included revenues from our long-term agreement with Netflix compared to the short-term domestic rights deal that was in place with USA Network in the prior year period. This had a favorable impact of approximately $50 million on both revenue and adjusted EBITDA as compared to Q4 2024. As we previewed on our Q3 call, the timing of the calendar significantly offset the aforementioned benefit. WWE held 2 nights of main roster PLE programming in the fourth quarter compared to 3 nights in the prior year. Most notably, Q4 2024 had 1 PLE in Saudi Arabia, but there was no comparable event in Q4 2025, given its shift to January 2026. Media rights production and content revenue increased 42% to $221 million. The increase was primarily related to the Raw rights deal I mentioned a moment ago as well as an increase in media rights fees related to the new domestic PLE agreement with ESPN. Partnerships and marketing revenue increased 57% to $36 million due to new partnerships and renewals across multiple categories, including deals with Riyadh Season, Minute Maid, Comcast, and Seagram's, among others. Live events and hospitality revenue decreased 27% to $68 million. Results reflected a decrease in revenue from financial incentive packages related to the shift in timing of the Saudi PLE, partially offset by an increase in ticket revenue. We continue to see strong underlying trends for WWE Live events. Results in the current period benefited from the mix of venues and cards, including John Cena's farewell tour and a record date for Survivor Series, which was held for the first time in a higher capacity stadium venue. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher talent costs, partially offset by a decrease in production costs, most notably related to the absence of the Saudi PLE, which, of course, carries a higher cost structure. SG&A increased primarily due to higher travel and personnel costs. Our IMG segment generated revenue of $248 million, a decrease of 9%. Adjusted EBITDA was a loss of $4 million, a decrease of $20 million. Adjusted EBITDA margin was negative 2%, down from 6% in the prior year period. As we previewed on our last call, the anticipated decline in revenue primarily related to the absence of the Arabian Gulf Cup at the IMG business, which is a biennial event. This decline was partially offset by an increase in studio revenue. Revenue at On Location was essentially flat over the prior year period. As expected, adjusted EBITDA primarily reflected the decrease in revenue, partially offset by a decrease in expenses. Expenses reflected a decrease in direct operating expenses, partially offset by an increase in SG&A. Corporate and other generated revenue of $37 million, an increase of $14 million. Adjusted EBITDA was negative $93 million, flat with the prior year period. The increase in revenue was primarily driven by higher media rights revenue at PBR from new distribution deals we announced in 2025 with Paramount, Fox Nation, and the CW, as well as higher management and promotional fees for services related to Zuffa Boxing. Adjusted EBITDA primarily reflected the increase in revenue and a $27 million decrease in costs related to the absence of allocations of Endeavor corporate expenses under their ownership of IMG, On Location, and PBR. As we discussed on prior calls, from the close of the acquisition on February 28 of this year forward, there are no Endeavor corporate expense allocations included in our financial results. These improvements were offset by costs incurred to replicate services previously provided by Endeavor as well as an increase in personnel and travel costs. Now moving on to our capital structure. In 2025, we generated $1.159 billion of free cash flow. Our free cash flow conversion of adjusted EBITDA was 73%. Free cash flow included the favorable impact of $297 million of net collections related to on location for the 2026 FIFA World Cup. Free cash flow also included the unfavorable impact of approximately $300 million, consisting of $250 million in payments related to the UFC antitrust lawsuit settlement as well as payments for professional fees related to the acquisition of IMG, On Location, and PBR. Normalizing for these non-recurring items, free cash flow conversion of adjusted EBITDA remained ahead of our stated target of in excess of 60%. For the fourth quarter, we generated $249 million of free cash flow. As we saw in 2024, free cash flow for both fourth quarter and full year 2025 was positively impacted by the timing of cash receipts and payments, most notably the collection of customer payments in 2025 that were not contractually due until 2026, as well as a delay into Q1 2026 of the transfer of a portion of the proceeds to Sela related to the Canelo versus Crawford event held in September 2025. We ended the year with $3.783 billion in debt and $831 million in cash and cash equivalents in addition to $355 million of restricted cash. Year-end 2025 net leverage was 1.9x based on net debt of $2.952 billion and adjusted EBITDA of $1.585 billion. As both Ari and Mark have conveyed, maintaining a robust and sustained capital return program remains a top priority for us. On December 30, we paid a quarterly cash dividend payment from TKO OpCo of approximately $150 million or $0.78 per share. For the full year, we made approximately $452 million in cash dividend payments. We intend to continue to fund quarterly cash dividends with cash flow from operations or cash on hand. Regarding our share repurchase program, during 2025, we repurchased approximately $867 million of our Class A common stock through a combination of an $800 million ASR agreement, $26 million through a privately negotiated transaction, and $41 million under the 10b5-1 plan that commenced last November and expires tomorrow. From January 1 through yesterday, we repurchased an additional $37 million of our Class A common stock under the 10b5-1 plan and as such, have retired approximately $900 million of Class A common stock available under the $2 billion program authorized by our Board in October 2024. As we disclosed in our earnings release, by mid-March, we intend to commence the repurchase of up to an additional $1 billion of our Class A common stock. We expect to fund the repurchases with cash on hand as well as proceeds from incremental term loan borrowings. The timing and amounts are subject to market conditions and related factors. Now turning to our outlook. As we say consistently, 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, most notably related to the timing of our live events and the mix of locations, venues, and cards. For full year 2026, we are targeting revenue of $5.675 billion to $5.775 billion and adjusted EBITDA of $2.24 billion to $2.29 billion. This outlook reflects a step function change in revenue and profitability, primarily related to our recently completed media rights agreements. We are anticipating revenue growth of 21%, adjusted EBITDA growth of 43%, and margin expansion of approximately 600 basis points to 39.6% at the midpoint of our guidance range. There are 6 notable drivers of this outlook that are important to underscore. #1, media rights. As we've previously discussed, our 2026 financials will include significant step-ups in connection with the UFC rights deals with Paramount as well as the WWE agreement with ESPN DTC. As Mark highlighted, these agreements, along with other recently completed long-term agreements, total more than $15 billion in value and provide attractive visibility, predictability, and stability into a high-margin contractual revenue stream with annual escalators for years to come. #2, global partnerships. We continue to make meaningful progress, adding new partners and categories while also growing existing deals. We expect to see significant growth in high-margin revenue as we work toward achieving our previously communicated target of $1.2 billion in total company partnerships revenue by 2030. #3, live events. As Mark discussed, we see a significant opportunity with respect to financial incentive packages or FIPs. This is a high-margin lever in our live event economics and a key driver of our overall growth strategy. We expect to realize over $300 million in aggregate value from these packages this year. Most notably, our outlook includes the favorable impact of 3 WWE PLEs in Saudi Arabia as well as further traction in the strategy Mark articulated. #4, the mix of events, particularly at UFC. As has been widely reported, on June 14, we're planning to hold an event at the White House in celebration of America's 250th anniversary. We expect this to be a once-in-a-lifetime event that will showcase our brand on an unmatched scale. While it is expected to generate tremendous awareness and earned media for us, the financial profile is unique. We expect the event to cost upwards of $60 million. However, as Mark highlighted, we're working to secure sellable inventory in and around the weekend of events that should cover roughly half of that amount. #5, the World Cup and Olympics and On Location. We're extremely excited about the prospects for the FIFA 2026 World Cup, and our plan includes a contribution of approximately $75 million of adjusted EBITDA. As for the Olympics, despite the well-publicized challenges with the readiness of infrastructure, we're pleased with the outcome from Milano Cortina. While we're still finalizing the financial results, our outlook includes approximately $170 million of revenue related to the games. With respect to the adjusted EBITDA contribution, given the meaningful ramp in pre-spend required for LA28, namely to support our increasing sales efforts, we anticipate a negative impact to On Location's adjusted EBITDA related to our Olympics properties. #6, boxing. To further emphasize, this is an important strategic and operational priority for us, one that we expect will create meaningful value over time. As mentioned on prior calls, we account for our interest in Zuffa Boxing under the equity method and hence, do not consolidate results. We receive a management fee for services that we provide the JV, and our forecast includes a full year of such management fees as opposed to the partial year that we recorded in 2025. Also, in 2025, we earned into 25% of our total expected equity interest. Based on our expected performance, we assume we will earn into the next tranche upon the achievement of certain financial targets. Separate from the JV, we expect to continue to work with our partner, Sela, to bring large-scale fights to fans, generally 2 to 4 per year. The next fight will be in April featuring Tyson Fury for which we've secured the global media distribution rights with Netflix. In addition to these 6 items, we continue to focus on realizing incremental revenue and cost efficiencies, which could be additive to our plan. Through 2025 and into early 2026, we have made meaningful investment in our procurement function to further streamline costs across our portfolio of companies. Consistent with our prior calls, while we are not providing quarterly guidance, we want to highlight a few notable items as we look to the first quarter. At UFC, media rights revenue will reflect the commencement of the Paramount Rights deal. The mix of live events in the quarter will also impact results. We expect to stage 9 events as compared to 11 in the prior year period. Within these 9, 3 will be numbered events, which is comparable to the prior year. However, Q1 2025 included a Fight Night in Saudi Arabia that carried a meaningful financial incentive package. Q1 2026 will not. At WWE, results will also be driven by the timing and mix of live events, most notably the favorable impact of Royal Rumble being held in Saudi Arabia. The first quarter will also benefit from the financial profile of our new domestic rights agreement with ESPN. At the IMG segment, we expect first quarter results will include the Milano Olympics as well as the seasonally favorable impact of the Super Bowl and college bowl games. In terms of free cash flow, as Mark noted, we expect free cash flow conversion to expand significantly over the next 5 years. In 2026, free cash flow is expected to reflect the impact of 2 notable items. The first is net payments related to the World Cup. These payments will reflect the distribution of net collections realized in prior periods. Following the tournament and prior to the end of the year, we expect substantially all of the cash collected to be distributed to FIFA and other partners. In addition, as we disclosed in August, the payment schedule for UFC's new rights deal with Paramount is weighted more toward the back end of the deal. As a result, we expect a negative working capital impact in 2026. Excluding these 2 items, our targeted free cash flow conversion rate would be in excess of 60%. Furthermore, we are expecting a meaningful year-over-year increase in taxable net income, primarily due to the significant increase in adjusted EBITDA as well as the absence of the tax deductibility benefit realized in 2025 related to the UFC antitrust settlement payments. This increase in taxable income is expected to result in both a significant increase in cash tax payments at TKO PubCo as well as mandatory cash tax distributions from TKO OpCo to its owners. Similar to prior periods, we plan to disclose information related to these distributions in our 10-Q and 10-K filings. In conclusion, as we look ahead, we remain focused on operational execution across all of our businesses and maintaining our robust capital return program. Anchored by our premium content, TKO is extremely well positioned within the sports and entertainment ecosystem to build on our momentum and deliver incremental value for all of our shareholders. With that, I'll turn it back to Seth.

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

The first question comes from Brandon Ross with LightShed Partners.

I have a couple. Paramount has their earnings tonight, so we know they're not listening. We could talk about them. Two of your partners are bidding for WBD. Are there any advantages to one of them winning versus the other in your mind?

I'm not getting pulled into that trap. Look, Brandon, we're just an observer like everybody else.

It was more of a joke. It's...

Yes, we do meaningful business, as you know, with both Paramount and Netflix across TKO. We have great working relationships with teams at both companies, including hand-to-hand with David Ellison and Ted Sarandos. We obviously have no input or control on what happens. That is ultimately for the Warner Bros. shareholders to decide. And we're just watching as it runs its course. I will say we see pros for TKO with either side winning.

Okay. Now my real questions. On Zuffa, what does the $15 million Conor Benn deal signal about Zuffa's strategy? And obviously, that deal upset some UFC fighters and competition. Obviously, Eddie Hearn was a little upset. How should investors assess any risk or potential repercussions of giving out those types of deals right now?

Well, first off, I would say this story, to your point, has taken on a life of its own. And that's largely because Eddie Hearn is stirring the pot in a very fictional way. So as you know, our partner in Zuffa Boxing is Sela. They're the financial backer of the entity. Beyond the year-long series of Fight Cards that will appear exclusively on Paramount+, we've described again and again on these calls and at conferences that we also plan to stage approximately 2 to 4 super fights per year, Canelo-Crawford being an example, some of which TKO will promote and/or sell the media rights for, of course, incremental fees. We, at TKO with Sela collectively identified Conor Benn as someone we wanted to sign for one of those super fights in 2026. That's it. One fight in 2026. Conor was a free agent. Dana White and Nick Khan in that order went out and signed Conor. Now let me be clear. We signed him for just one fight. That's all we're talking about here. Now of course, we hope eventually, he'll fight in our Zuffa boxing series exclusively on Paramount+. But for now, this is just one fight, no different than what we did with Canelo and Crawford. No different than other super fights we're currently planning with Sela. I would add that the reported purse, I believe, was around $15 million, but the reported purse, I'm not confirming or denying that Conor will be paid for this super fight in 2026 is not TKO going out of pocket. Sela, led by our great partner, Turki Alalshikh, is covering the purse. Once again, no different than exactly what he did with the Canelo-Crawford fight.

Okay. And finally, just more of a housekeeping. I'm double checking on Andrew's comments on the White House. Did you face a $30 million loss on that event and you're doing it for visibility? Or should we otherwise think about the ROI of that event?

No, that's a great question, and it is important to many of our shareholders. So it's good that we talk about it in more detail. Look, at the moment, the UFC event at the White House is expected to cost over $60 million. By the time we finalize everything related to the event, including fighter payments and the fan fest, that figure could increase. It's definitely not going to decrease; it could increase. The bottom line is it's still uncertain. We are working on developing a package of inventory around the weekend of events that we can monetize mainly with corporate partners and B2B players, which will cover half of the expenses. Even if that $60 million increases, we believe we can cover half of the costs. Currently, we see it as $60 million with $30 million offset. Additionally, we have several current and prospective partners looking to establish multiyear partnerships with TKO assets, likely including the White House event. Many current and potential partners are interested in being involved and are inquiring about inventory as part of their larger partnership deals that they currently have or are negotiating with us for the future. However, I want to be clear about something. We will not profit from the White House event on its own. We will not make money from America's 250th anniversary. This is a long-term investment. This is about earned media, attracting new fans, reaching casual viewers, and creating a spectacle that will ultimately expand our audience, viewership, and success on Paramount+.

The next question comes from the line of Stephen Laszczyk with Goldman Sachs.

Maybe starting first for Mark and Andrew, just on the '26 guide. I'm curious if you would be willing to unpack that in a little bit more detail for us, perhaps in terms of what you would expect to see from revenue and adjusted EBITDA growth across the core UFC and WWE businesses and how that compares to the performance you expect out of IMG this year, given some of the onetime items you called out in your prepared remarks.

We're not going to delve too deeply into each segment. However, I want to reiterate what I mentioned earlier: at the midpoint of our guidance, we have seen a 21% increase in revenue and a 43% increase in adjusted EBITDA. Our adjusted EBITDA margins are growing to just under 40%, specifically to 39.6% at the midpoint. Regarding the Olympic properties, we anticipate approximately $170 million in revenue for Milan, with a positive EBITDA contribution, which will be somewhat offset by pre-spending for L.A. in preparation for the games, impacting IMG/On Location's adjusted EBITDA. For the World Cup, we expect an adjusted EBITDA contribution of $75 million, which we believe is reasonably achievable, with the potential for some upside not included in our plan. We are optimistic about the growth of UFC and WWE, primarily driven by increased media rights at both segments and ongoing support from global partnerships, along with new financial incentive packages. This year, we are particularly excited about WWE, which will hold three events in Saudi Arabia compared to one last year.

That's helpful. Maybe just to dig in a bit on the partnership growth opportunity. Any key points or key drivers that you would encourage investors to keep in mind just as they think about 2026. I think you have some broadcast inventory coming in this year. It seems like there was some nice momentum on the signings front, exiting '25 into '26. Anything to point out or help you can give us on just thinking about the drivers and white space to go after on the partnership front?

I believe people have historically underestimated the growth potential of this division, even though we are significantly ahead of plan. For 2025, we initially set a target of $450 million, which we've surpassed. For 2030, we raised our target from $1 billion to $1.2 billion. There's a concern about exhausting categories, but then we introduced DUDE Wipes, showing that opportunities are limitless. We primarily attract men through sports, and we also have a solid female audience, particularly at WWE, where female viewership is around 40%. This reminds me of my time at ESPN, where we knew young men aged 18 to 34 made it a must-watch destination. We strongly believe that TKO is appealing to these elusive young men, and marketers are recognizing this, achieving a solid return on investment and coming back for increased spending. We're off to a great start this year in reaching our targets and progressing towards our goals; this is reflected in our guidance. Furthermore, we're projecting our margin to increase from 33.5% at the end of 2025 to nearly 40% for 2026, primarily driven by the success of our Global Partnerships division.

The next question comes from the line of Ben Swinburne with Morgan Stanley.

I couldn't help but notice Ari seemed to make in his prepared remarks a point to talk about this year as a year of execution and I think, tried to make effectively a comment around M&A this year. I just figured I'd ask you if you can maybe flesh that out. Is there a message there? Are you trying to signal something to the market about sort of inorganic versus organic? And then, Andrew, I just wanted to understand for sure on the financial incentive numbers you threw out this year and long term, are those revenues from a revenue recognition point of view in terms of how we forecast the business? Or is there some accounting thing you want us to be thinking about relative to those dollar numbers you provided?

Why don't you start?

Yes, most of that growth comes from what we would typically recognize as revenue. Some of these packages offer cost savings, tax incentives, or other benefits. However, it's important to focus on the revenue impact of those packages, which almost entirely affects the cost side. There is a case to be made, although not reflected in these numbers, that the cost incentives, which aren't cash-based or other non-cash value, could incrementally impact the EBITDA flow-through. So, we are primarily discussing revenues here and their substantial flow-through to EBITDA.

And then Ben, regarding your second question, yes, that was intentional. It's a frequently asked question we encounter in meetings, and TKO's name often comes up in the media concerning rumors about NASCAR, F1, or various sports properties. We want to ensure that our investors and the market understand that we are not actively pursuing these rumors. While we will always be opportunistic, we also prioritize being prudent. This year is focused on execution, tightening our operations to achieve our near 40% adjusted EBITDA margin. I appreciate that Ari emphasized this to clarify that we won't be sidetracked by rumors.

The next question comes from the line of David Karnovsky with JPMorgan.

Maybe following up on Zuffa, it would be great to hear more on the promotion so far in terms of fan engagement, viewers, or anything else we should be looking at. And Mark, you had mentioned at a conference getting the 50-50 ownership over some period. Maybe you could just speak a bit more to the milestones to get there and any kind of financial disclosures investors could expect in the interim?

Yes, it's still early for our partnerships with ESPN and UFC on Paramount+. It's also a bit premature to evaluate Zuffa Boxing as we're just starting out and implementing our plan. We anticipate hosting up to 16 fights this year and, as I noted in the prepared remarks, we're exploring opportunities beyond the U.S. We're actively signing boxers and receiving significant interest from Dana and Nick, which is encouraging. We're engaged in discussions and negotiations, but many inquiries are coming to us. There's excitement about the asset we're developing, based on a strategy similar to what we established with the UFC. We are just beginning with a few fights at the Apex in Las Vegas. While we don't have any viewership numbers to share yet, we feel very positive about integrating Zuffa Boxing into our portfolio of FIPs, global partnerships, and international media deals, with some announcements expected soon. We're dedicated to this effort because companies like UFC and WWE maintain long-term media rights deals, and we believe this could evolve into something significant for us. That's why we're having Nick and Dana share responsibilities, alongside Lawrence Epstein, who plays a significant role in our efforts. As mentioned in the prepared remarks, we are making strides and there is a lot of opportunity with many fight fans eager for our arrival.

And on the equity, we've disclosed previously that the first gate to vest into our equity interest was signing a media rights deal. I did articulate in my prepared remarks that we anticipate based on 2026 financial performance that we will vest into the next tranche of equity. So things are moving well towards our stated goal of getting to our equity interest.

Okay. I just have one more. On Royal Rumble in Riyadh, I think that was the first international tent-pole PLE you've done abroad. So I was just interested in what the operational or commercial lessons learned were and how do this kind of inform your plans to host WrestleMania 2027 there? And I don't know, Andrew, if there's anything you could say about the FIP kind of relative to a normal Saudi Arabia event.

I'll take that part first. So Andrew will answer the FIP, and then Nick Khan is sitting here with us, and we'll let him talk about Royal Rumble, WrestleMania, and our partners in Saudi.

So as we articulated in and throughout 2025 and now on our conversation today, we did have one shift, one Saudi event shift from 2025 into 2026, such that we had 1 last year, we'll have 3 this year, all which carry the same revenue recognition and cost profile despite one being branded as it was in January.

Just to add on the learning side from Royal Rumble, Royal Rumble in Riyadh was the first event at that venue ever. So when you're the first event ever, there's a lot of things to be learned, not only for the operator but for the venue. When you look at WrestleMania 2027 in 14 months from now, that will be coming off of the Asia Cup, which will be held at the same venue WrestleMania 2027 will be held at. So that's 3.5 weeks of international football/soccer action, which there'll be a lot of learnings coming out of that in terms of the look of the venue, the feel of the venue, how to light it properly, and how to get all of those nuances down. So assume our team will be there for the entirety of that soccer tournament and we'll be ready to go for WrestleMania 2027.

I should also mention that IMG produces the Saudi League soccer. So we have some institutional knowledge of the arena and the atmosphere there.

The next question comes from the line of Peter Supino with Wolfe Research.

I'll mimic my colleagues here and ask you 5 questions. I wanted to ask you first about the White House and the Sphere events. They're really great evidence of the growth opportunity of the UFC and the ability to spend money to develop that brand and that audience. I'm wondering if we should think about these big events as something that you would love to keep doing. And assuming that there are opportunities out there, just treat them as a normal cost of doing business and model that accordingly rather than sort of adding them back to the expense structure every year. And then a question on capital allocation. Obviously, you have been a massive buyer of your own stock, and it's been a great stock. You can return capital with recurring dividends, special dividends, buybacks. And today, your stock trades at a premium to a lot of other businesses. I'm wondering if you kind of have a point of view on what the right way to return capital going forward and whether you look at your stock relatively or absolutely in terms of its opportunity as something to buy back.

Take the last one first.

I believe you've made a valid point. Today, we announced our intention to repurchase an additional $1 billion as part of the previously authorized $2 billion share repurchase plan, with the aim of completing this by October 2024. In the past year, we've already repurchased about $900 million worth of shares. With this new $1 billion, we will be close to fulfilling our prior authorization. We will assess what is best for the company and its stakeholders, and determine when stock repurchases may no longer add value, particularly based on our expectations for share performance. Currently, we are still within a range where this is beneficial for the company and its shareholders. Additionally, I want to highlight that in calendar 2025, we returned around $1.3 billion to shareholders, including our dividend, which we increased in Q3 from $75 million to $150 million per quarter. We are very focused on this issue, and given the company's cash flow profile, we have various options available.

We are indeed focused on capital allocation that prioritizes our shareholders by returning cash to them, and we are committed to this goal. Initially, we set a three to four-year authorization period, but we plan to complete it in just two years while also doubling the dividend. We generate strong free cash flow, with a normalized conversion rate of about 60%, and we expect to significantly increase this over the next five years. This will give us considerable flexibility, which we will discuss with our Board. Regarding major events, we were fortunate to be the first at the Sphere, which was a significant success for us, and we will also be the first, potentially the only, event on the South Lawn of the White House. While we don't have any events planned at the Kremlin, we will continue to seek unique opportunities, although you shouldn't speculate on these. We anticipate a one-time loss of around $30 million from the White House event in June, and this should not be seen as a long-term trend in your planning.

The next question comes from the line of Ryan Gravett with UBS.

I wanted to follow up on the current demand for live events across the portfolio, especially with the World Cup coming up in a few months. Last year, WWE experienced good momentum with the premium events and Cena's farewell tour. Can you confirm if you believe underlying gate revenues will continue to grow in 2026 for WWE?

We're experiencing strong growth in ticket yield and financial incentive packages. We've reiterated our target of $380 million to $420 million by 2030 for these financial incentives. We're equally optimistic about live events. The men's and women's hockey gold medal games recently achieved the highest viewership for a major sporting event in the U.S. before 9:00 a.m. ever recorded. Sports engage audiences, unite people, and create must-see moments. Our live events capitalize on this, appealing to diverse demographics with short, engaging content, and fans want to experience them live. We're not only avoiding a slowdown; we're witnessing an uptick. We're very confident about our continued growth, drawing parallels with the success we've seen at UFC. Overall, we are a growth-oriented company with strong momentum across our businesses. Our media rights deals are secure, providing high margins and visibility for investors. Our global partnerships are thriving, aiming for $1.2 billion by 2030. We've discussed the importance of live events, which drive economic impact as fans eagerly await our shows in their areas. Additionally, we're excited about the transformative potential of Zuffa Boxing and our robust capital allocation plan. We're set to generate significant free cash flow, and our margins are strong. We have a unique opportunity with an upcoming White House event that is truly exceptional, and we are focusing on operational efficiency rather than pursuing mergers and acquisitions. I'm very proud of our management team and their understanding of the key metrics in this business, shaping a strategy that meets the critical needs of our investors.

Great. I think that's probably a good place to wrap the call. Thank you, everyone, for joining and for your interest in TKO. Operator, you can now conclude the call.

Thank you. That concludes today's call. Thank you for your participation and enjoy the rest of your day.