Good afternoon. Thank you for attending TKO's Full Year 2023 Earnings Call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] I'd now like to turn the conference over to our host, Seth Zaslow, Head of Investor Relations. Please go ahead.

Good afternoon and welcome to TKO's full year 2023 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. Joining me on today's call are Ari Emanuel, TKO's Executive Chair and Chief Executive Officer, Mark Shapiro, our President and COO, and Andrew Schleimer, our CFO. After prepared remarks from Ari and Andrew, we'll open the call for questions. The purpose of this call is to provide you with the information regarding our full year 2023 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, and good afternoon, everyone. TKO's strong results reflect robust demand for our premium content and live events. Throughout 2023, we achieved multiple viewership and attendance records, including 10 highest grossing event records for UFC as well as viewership records at each WWE premium live event during the year. We inked significant partnership agreements across TKO, most notably with Anheuser-Busch. We secured domestic and international media rights increases for UFC and WWE, including for SmackDown and NXT in the U.S. We launched new international events with significant site fees in the Middle East and Australia, and we made meaningful progress in our integration efforts, including merging UFC and WWE's global partnerships teams to form a unified, best-in-class global partnerships organization. During this period, both businesses reached financial milestones. Based on the full year, both UFC and WWE achieved their best financial performance ever. For UFC, 2023 also marks the fifth consecutive year with record financial performance in terms of both revenue and profitability. The positive momentum has extended into 2024, as powerfully demonstrated by our agreement with Netflix to bring WWE's weekly flagship program, Raw, to the streaming giant's global platform in a deal worth approximately $5.2 billion over ten years. This agreement will provide substantial and predictable economics for years to come. And it also demonstrates our ability to leverage the Endeavor flywheel to capitalize on the evolving media landscape and forge relationships with new and emerging partners. With regard to our TKO global partnerships group, our growth potential across both UFC and WWE is significant and already evident, reflected by recent deals with Anheuser-Busch and Slim Jim, and revenue upside in this category is showing strong promise. UFC has set new sponsorship revenue records each of the past six years, and we believe WWE has similar potential.…

I'll start with an update on integration and then shift to our financial results before discussing our capital structure and outlook for '24. As Ari highlighted, in the five months since launching this business, we've begun to realize the revenue and cost synergies that underpin the strategic and financial rationale for this transaction. Now that we've completed our first budgeting cycle, we have even greater conviction in the industrial logic of combining these two iconic brands and leveraging the capabilities of Endeavor. These businesses are highly complimentary, well positioned for success, and are delivering record financial results. On the revenue side, let's start with media rights. In addition to the meaningful wins we discussed on our last earnings call related to renewals for SmackDown and NXT, last month we entered into a transformative partnership to align WWE's content with the global reach and scale of Netflix. This long-term agreement will give us visibility and stability into a high margin revenue stream well into the future, in addition to a best-in-class marketing partner reaching hundreds of millions of fans around the world. With this latest deal, we have now positioned WWE media rights with the leading global streamer while continuing to take advantage of traditional distribution formats. Across both UFC and WWE, our distribution partners at Disney, Comcast, as well as Netflix, see the value of the strong viewership and engagement our premium live sports and entertainment products deliver. These relationships position us extremely well going forward, as we execute our plan to maximize fan engagement and monetization in the next cycle of renewals for our content in an ever evolving media landscape. In sponsorship, shortly after the New Year, we announced a unified global partnerships team focused on delivering unique, authentic integrations across our portfolio for brand partners. Global partnerships…

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

Perfect. [Operator Instructions] Our first question is from Ben Swinburne with Morgan Stanley. Please go ahead.

Hey, good afternoon, guys. Ari, maybe to start with you, a kind of a bigger picture question. This Netflix deal is sort of a seminal event for your company, but also the industry. Beyond the dollars, what excites you about bringing Raw and all the WWE content to Netflix globally? And what do you think it means for the business, over a longer period of time? And I just had a quick follow-up for Andrew on the guidance.

Listen, we're extremely excited about the relationship with Netflix. We do a ton of stuff with them on the movie and television and non-scripted side. We're very pleased with the financial terms. We're an entertainment sport. We think the strategic relationship and the benefits from the deal are significant. And as you have indicated based on your question, it's a transformative deal, which we're excited about. Like the deal we made first time with UFC and ESPN Plus, I think this is on the same level with them. They're the largest streamer on a global basis. So that global reach, I think, for our product is extremely important. We think we can benefit them and their strategy going forward with SVOD and AVOD. And so it's a good combination. And now, as you can see, we have, I think, a great assortment of deals. Comcast for SmackDown, CW for NXT, and now Netflix, and we have one deal left with the PLEs. So all in all, pretty incredible.

Thank you. And then Andrew, just to put a finer point on the fourth quarter, it sounds like you expect to have raw distributed and there will be revenue and cash flow. It's just at this point, can't quantify that. And so there's nothing in the guide. I just want to make sure I got that right.

Yeah. You got that right. We currently exclude any income from Q4, which on a run rate basis, based upon the existing deal terms, is equivalent to $75 million, approximately.

And I would just say the following, again, we don't have anything for them. We believe Raw will, in the fourth quarter, be aired. We have no further information than that. We feel pretty positive about it. But as Andrew said, he went through the numbers with you.

Yeah. Don't assume any numbers, Ben. So we're going to get on the best platform we can that's best for the brand and the content, the programming, the viewership and our following. But don't assume any dollars. That's why we pulled it out of there.

Gotcha. Thanks so much.

Our next question is from Brandon Ross with LightShed Partners. Your line is now open.

Hey everyone. Thanks for taking the question. First, I wanted to follow up with Andrew's commentary on capital allocation. Just wanted to double check that you said you're going to hold off on that generally until 2025. And you did mention in there that you would potentially look for special situations. If a very large shareholder were to sell a lot of stock at once, would you be open to buying that stock directly? And then my second question is, I'm trying to learn to be political.

Okay. What was your second question?

Okay. And then the second question is, you did this global deal with Netflix. I think you didn't give real clarity at the time on what international markets are not covered in the deal or contemplated over the long-term. So any clarity that you could give on that would be helpful.

Yeah. Let me take the first one, Brandon, in terms of capital allocation. What we did say is that we expect to have meaningful cash flow or cash on hand in 2025. We gave some guidance on adjusted EBITDA conversion to free cash flow. You look at our adjusted EBITDA range, [indiscernible], any income for Raw for Q4, that's rather healthy. We anticipate building up cash over the balance of this year. And I think the commentary was we'd be in a meaningful cash position by the end of '25. That doesn't by any means limit our exploration of potential things over the next six to 12 months, but the fine point was around just the cash balance. On the second question, look, I think we would generally be opportunistic or look to be opportunistic and we would view any opportunity through the lens of creating shareholder value. There was a shareholder that sold stock. As you know, we participated, as I mentioned, in our prepared remarks of the tune of $100 million, roughly 1.3 million shares.

I would just add, listen, as I said, based on the first answer with Ben and this, Netflix is an incredible partner. It's over $5 billion. I think in my opening remarks, I said 5.2. It's an unbelievable, it's a long-term deal. We've mitigated a lot of the risk in the business. We were very happy with it. I think certain people that we're talking to right now were questioning whether we would ever get a deal with raw after we made the SmackDown deal. And as you can see, it's an incredible deal, throwing off a ton of cash.

And Brandon, just, I mean, let's call it out. I mean, obviously we're talking about Vince McMahon specifically in terms of cashing stock. He still holds, I believe, 20 million shares. Exactly, it's all registered. And he'll do whatever he's going to do and we're on the sideline. We'll have a look, we'll see. We have no idea on timing. We're not having any discussion with him. He's given us no point of view on his motive or if he plans to sell or not sell, or if he does, how much. So we're going to wait around and find out just like you.

Perfect.

And I think the last part of your question on Netflix, Brandon, in terms of what's in and out of that deal, just to be clear and put a fine point on that one. Netflix has the right to all international territories as and when they become available.

But we're kicking off with LATAM.

Yeah. Well, obviously LATAM and Canada, some of the key markets that we put in our initial press release that were of core importance that are available as of January the 1st. Those that are not available as of that time would roll in if and when they become available subsequent to January the 1st, 25.

Yeah. And those were really premier markets for them, Brandon, U.K. was a definite priority for them. LATAM was a definite priority for them. So we're glad that kind of those deals are up and available. And as the rest come out over time, they'll be jumping in. They've shown they want to expose the WWE to their 260 million global subscribers. And obviously beyond the points Andrew and Ari have articulately laid out, we're all so excited about the fact that we exceeded our guidance, right? We told the street, we saw a one four across the board for these three properties. We just exceeded that guidance. And we got it with Netflix. I mean, that's the big headline when you're doing almost a 5.2 billion deal with the best platform in the world with the most biggest audience in the world, arguably one of the best media content brands in the world. And by the way, happen to be one of the best marketers in the world, just see the front page. The idea of seeing WWE Raw on the front page when you go to Netflix is something we're really excited about.

I agree. Thank you.

Our next question is from Eric Handler with Roth MKM. Your line is now open.

Good afternoon. Thank you for the question. Two questions actually. First, with regards to Netflix deal, how does this impact what you may or may not do with international brand extension, sort of like WWE Europe or what you have now with WWE U.K.? And I'll come back with a second question afterwards.

I really don't understand that first question.

Well, how does …

Go ahead.

I was just -- does partnering up with Netflix have any impact on what you may do with future brand extensions of WWE, sort of like what you have now with NXT U.K.? Does that help you at all with having one global partner? Does it help you as NXT U.K. maybe morphs into NXT Europe or NXT Latin America or something along those lines? And Nick Khan is also on the call from WWE and he can comment on it. Nick?

Yeah. So for us, a global localized product has always been a priority. We think Netflix helps us with that. So even if you look at the premium live events scheduled for this calendar year, Perth, Australia this past weekend, Berlin, Lyon, France, Riyadh, Canada, all over the world, look for down the road more local stars from those markets as we expand our tryouts to international markets, so we feel confident over time that that will all be covered and will be part of the Netflix deal.

Great. And then…

Also just remember, remember it doesn't -- our Netflix deal, it's important to know for everybody, our Netflix deal doesn't preclude us from creating new content and events and programming on a global basis. We just have some first look rights that they would have a window to essentially evaluate. So it doesn't, and NXT just across the board, we have an opportunity to create all kinds of new material, sell it for an incremental rights fee, but they're going to be first in line to pay that rights fee.

Like we have with UFC, we have the Contender Series, which we created after we had the Ultimate Fighter. So you can see we're creative as relates. And in bull riding, we had the individual and we created the team event. So we have the ability to do that within this deal.

And ESPN is very similar to Netflix on Ari's point because they have a first look as well in any new programming. They say, no, we're out there collecting incremental rights.

Got it. Okay, that's helpful. Secondly, you've talked in the past about, having weekend back-to-back events with UFC and WWE. You just did that. In Anaheim, I'm curious how you think about revenue and/or cost synergies when you do back-to-back events like that in the same city.

So as you know, we just did, as you pointed out, a Saturday night, Monday night. So it was UFC Saturday night in Anaheim, Raw only on Monday night. SmackDown was in Utah at the time. Those two alone -- there was significant savings on the box office, et cetera. And we now are looking at the calendar. This will be for 2025 with regard to all three. The revenue, you could imagine sponsorship, kind of a ticket package, site fees, which is growing significantly. There's significant revenue opportunity, licensing in the arena. And as you saw in Mexico City, there was a WWE star there. As you saw at the WWE event, Chandler was there promoting stuff. So there's a lot of crossover there. And there's some cost synergies that we recognize, but there will be more because that was just two of our events and there's more to come.

Yeah. Just to put a pin in that one, Ari, hit the top line, on the cost side, we benefit from venue rent economics by virtue of bringing both shows to the same building. And it doesn't necessarily have to be, Eric, the same weekend. We can bring both properties and negotiate a multi-visit deal, if you will, with that venue and realize the same beneficial or preferential rent economics as we did this past weekend. Ari talked about the top line, more beneficial ticket rebates by virtue of packaging these two programs together in the same venue. So look, it starts to get really interesting. And that's before any logistical savings on T&E, other production, event operation efficiencies and otherwise. So look, that's something that's well in the works here.

Eric, think just -- this is a good analogy here, kind of years back. This is very analogous to ESPN and ABC having Sunday night and Monday night football, right? So anytime there was back-to-back shows that were even in the same region, there was substantial cost savings, truck, personnel, satellite time, you name it. So we think there's a real halo effect for us on the production side of the cost synergies.

Helpful. Thank you so much.

Thanks, Eric.

Our next question is from David Karnovsky with JP Morgan. Your line is now open.

Hey, thanks for the question. Ari, we wanted to get your latest thoughts on just the sports rights landscape, given obviously the distribution agreement with Netflix, but also the sports joint venture for some legacy media firms, and then the continued pressure in linear. And how are you seeing upcoming renewals with UFC and WWE Network as positions?

Well, I mean, on the latter point, as you know, we have the PLEs and we have the UFC deal coming up. We feel very strongly about that and our partnerships that we currently have. But there's many players in the marketplace just based on the subs we have at Comcast with the PLEs and what we've done for ESPN/ESPN Plus with the UFC. Mark just completed a pretty good negotiation as it relates to the football playoffs. So -- and what we just did with regard to Netflix, I think they're now a player in this. And I think everybody is kind of paying attention to them and what they're going to do. And now with the new entry with the Fox, Warner Brothers and ESPN. That being said, I think they're all moving to a linear either AVOD or SVOD service. And I think our assets are going to be really important in that conversation. We're going to see what happens with the NBA. I think that's going positively. And so we feel very good about where sports rights in general are going. Mark can talk more specifically on college football, but it's all on an upward trend.

Yeah. I think, David, first of all, on the joint venture -- it's Mark. Ari and I have no comment on that. We're not going to get into the WBD, Disney, the whole combination. Just back on the sports rights fronts, I think, geez, for the better part since we bought the UFC, it's just been commentary about sports rights, the bubble, when's it going to burst? When's the cap coming? And we certainly faced a lot of those headwinds on the WWE renewals. But I'll just remind you, like they're just, the platforms are going to pay for premium content. And we're blessed by having two great premium content properties in the WWE. And when you have premium content and you have several bidders, which clearly they're out there, and you have a move from linear to digital, but you still have to keep linear alive, you've got a pretty robust marketplace. When Ari talks about the college football, he's talking about the NCAA deal and the renewal that ESPN did, it was three times, three X. Then also the CFP, as you know, they went from five games to 12 games. That was a healthy increase that ESPN bid off. And then Amazon takes the wild card NFL playoff game, which was a big hit on Peacock for $110 million. And they have first right of first refusal. They jump on it for next year and up at the $120 million. And then the NWSL, which also IMG and WME Sports did the negotiating on that end with a multitude of players, women's soccer, that went for a big number. So not to mention the NASCAR deal was a very healthy deal. Live sports, especially, when you have what we have, which is volume and year round, we're sitting in a really good place.

This conversation has been the same conversation with motion picture and television. When is the bubble going to burst with regard to content? I would just say to you, I appreciate everybody it's eventually got a burst, it's never going to be when exactly what Mark said. When you have premium content, which we sit on, whether it be at EDR or here, premium content sells for premiums.

Okay. And then just on a separate topic, I wanted to ask on a class auction lawsuit against UFC. My understanding is that this could be heading to the trial in coming months. I guess in that context, any update you could provide on your thinking here? And how do we look about the read through from this to what could happen with a second lawsuit representing a later period?

Yeah. Look, as we've always said, and this is our consistent message since we started talking about this case publicly, we believe strongly that the facts and the law are on our side. And we look forward -- in terms of timing to making our arguments to a jury at trial. But as is typical in a case like this, we've been engaged in private mediation simultaneously with our trial preparations. And that's what we're prepared to comment on at this time.

Thank you.

Operator, we can take the next question, please.

Our next question is from Peter Supino with Wolfe Research. Your line is now open.

Hi, thank you. Two, if I could. First, regarding UFC, are you worried at all about competing for Disney ESPN's programming budget in a two-year period of time in which they're going to be funding NBA inflation and several other contract renewals in context of their broader corporate commitment to reduce programming costs? And the second question is on competition. I wondered if you've seen any behavior changes at the PFL since they took in outside capital. Thank you.

I'll take the second part first. I mean, just do yourself a favor. Look at the ratings that just happened. We're happy with competition. Not only are the PFL and Bellator competition, but football's competition, basketball's competition, video games are competition. There's a lot of competition. And there's a lot of competition in the MMA space. That being said, we perform significantly better than them as it relates to the ratings that took place recently. As it relates to the NBA and whether they're going to be at ESPN, Comcast, Warner Brothers, Amazon, et cetera, and their budgets, we know how much the UFC drives ESPN/ESPN Plus. We're happy with our relationship. I think they're happy with us. And we feel very positive about that relationship and what's going to come. So that's all I'll say right now.

Operator, let's take one last question. Next question.

Our last question will be from Ryan Gravett with UBS. Your line is now open.

Great. Thank you. Just going back to the Netflix deal, are there cost savings that you can realize by having just largely one partner for the majority of your programming internationally, like sun-setting a WWE Network in any way to quantify that? And then just curious on the initial reception from your sponsors on the cross-selling opportunity here in any way to frame when that could drive higher WWE sponsorship revenues. Thanks.

Yeah. Ryan, this is Andrew. I'll take the first part. Mark will take the second one. Yeah. I think you hit the nail on the head. On one of the opportunities vis-a-vis our deal with Netflix, as you know, the lion's share of day one of our content internationally inclusive of the WWE Network will be licensed to Netflix. And to the extent that there is longer tail of WWE Network operating in the market, that will then shift to Netflix at the time at which those deals are up. So sun-setting that network is certainly a part of our plan and will yield cost savings when we transfer over to the licensed model, as I said in my prepared remarks.

And then just on the partnership side of the business, which is obviously, and maybe even arguably are among the top three revenue synergies we see for TKO going forward. Let's remember when we -- meaning Endeavor, bought UFC, they were doing roughly $35 million in partnership revenue. I mean, not a lot of inventory identified, not a clear strategy, not a robust global staff selling it and not any local folks, which by the way, WWE is very good at. They sell locally really well. It's national, they need work. And now here we are, end of February in 2024, and we've got a clear line of sight to well over $200 million in partnership revenue for the year. So it's been a great growth story for us. And just as a reminder, similar to Netflix, not only are the dollars good and the margins good and the recurring revenue good, but these are great marketing partners. You're not going to find better marketing partners for our brand than Monster Energy and Anheuser-Busch, et cetera. So we're really confident that we can really materialize the same kind of results on the WWE side, especially since we have merged a best-in-class global partnership theme that is now on the street selling both properties. End of Q&A:

Great. Well, thank you everyone for joining us on today's call and for your interest in TKO. Operator, you can conclude the call now.

That concludes today's call. Thank you all for your participation. You may now disconnect your line.