Executive Summary / Key Takeaways

• TKO Group Holdings, formed by the merger of UFC and WWE, is executing a pure-play sports strategy focused on unifying iconic combat and entertainment brands to drive revenue synergies, cost efficiencies, and global expansion.
• The recent acquisition of IMG, On Location, and PBR significantly expands TKO's capabilities in sports rights, live experiences, and hospitality, positioning it for accelerated growth and cross-selling opportunities across its portfolio.
• Strong Q1 2025 financial results, with significant revenue and Adjusted EBITDA growth in core UFC and WWE segments, underscore the momentum in live events, partnerships, and media rights, leading to a raised full-year 2025 guidance.
• Key strategic initiatives, including the transformative Netflix deal for WWE, securing lucrative site fees for major events globally, and exploring new verticals like boxing and Lucha Libre, are expected to fuel future growth and enhance monetization.
• Supported by a robust balance sheet and strong cash flow generation, TKO has initiated a substantial capital return program ($2 billion share repurchase and quarterly dividend), balancing shareholder returns with strategic investments and maintaining financial flexibility amidst market uncertainty and ongoing legal matters.

Unifying Forces: Forging a Sports Entertainment Powerhouse

TKO Group Holdings, born from the strategic combination of the Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE) in September 2023, represents a deliberate move to consolidate two of the most potent forces in combat sports and sports entertainment under a single roof. This union, overseen by TKO Operating Company (TKO OpCo), the accounting predecessor, was designed from inception to unlock significant value by leveraging the complementary strengths of these global brands. The core thesis is simple yet powerful: by integrating operations, cross-promoting assets, and centralizing key functions like live events and global partnerships, TKO can drive greater efficiency, expand reach, and enhance monetization opportunities well beyond what either entity could achieve alone.

The strategic vision solidified further with the February 2025 acquisition of IMG, On Location, and Professional Bull Riders (PBR) from Endeavor (EDR) affiliates. This move was not merely an expansion but a reinforcement of TKO's commitment to a pure-play sports strategy. These acquired assets, now integrated into the TKO structure (with IMG as a new reportable segment and PBR in Corporate and Other), are expected to act as accelerants, bolstering TKO's position in sports rights distribution, premium hospitality, and adding another growing sports league to the portfolio. The rationale is clear: On Location's expertise in premium experiences can be directly applied to enhance UFC and WWE events, while IMG's global reach and rights distribution capabilities can amplify the international presence and media value of all TKO properties.

TKO operates across four principal activities: Media rights, production and content; Live events and hospitality; Partnerships and marketing; and Consumer products licensing and other. This diversified model allows the company to monetize its intellectual property across multiple channels, creating a resilient revenue base less dependent on any single stream.

While TKO does not highlight a single, distinct "technology" in the same vein as a manufacturing process, its operational strength is underpinned by sophisticated capabilities in content production, digital distribution, and data analytics. The company leverages technology for high-quality live event production, including exploring advanced arena technologies as seen with the high-investment UFC 306 event at the Sphere. Its digital platforms, like UFC FIGHT PASS, utilize technology for content delivery, with management noting efforts to optimize latency and user engagement. Data analytics inform strategic decisions, from ticket pricing and event routing to identifying audience demographics and tailoring marketing efforts. The recent partnership with Meta (META) aims to leverage AI and immersive technologies for enhanced fan engagement, signaling an investment in next-generation fan experiences. While not a manufacturing moat, TKO's technological application focuses on optimizing fan interaction, content delivery efficiency, and operational execution in the live and digital realms.

In the competitive landscape, TKO operates within the broader sports and entertainment industry, facing off against major players like The Walt Disney Company (DIS) via ESPN, Warner Bros. Discovery (WBD) via TNT Sports, Comcast (CMCSA) via NBCUniversal, and Liberty Media (FWONK) via Formula 1. These competitors vie for media rights, advertising dollars, and consumer attention. TKO differentiates itself through its ownership and control of its premium, year-round content, which offers a unique value proposition in a fragmented media environment. While larger entities like Disney and Comcast possess greater scale and broader distribution infrastructure, TKO's focused niche in combat sports and sports entertainment allows for deep fan engagement and targeted monetization. TKO's operational agility, particularly in event scheduling and production turnaround, can be faster than some competitors. However, it faces vulnerabilities in overall scale and potentially lags in the technological sophistication of broader media platforms in areas like content delivery speed compared to leaders like Disney. The acquisition of IMG and On Location aims to close some of these gaps by adding established expertise and scale in global rights distribution and premium experiences.

Performance Reflecting Strategic Momentum

TKO's financial performance in the first quarter of 2025 provided a strong validation of its integrated strategy and the inherent demand for its core assets. The company reported total revenue of $1.27 billion, a 4% increase year-over-year, and Adjusted EBITDA of $417.4 million, a significant 23% increase, resulting in an Adjusted EBITDA margin of 33%, up from 28% in the prior year period. These results exceeded internal expectations and underscored the positive momentum across the business.

Breaking down the segments reveals the core drivers:

• UFC: Revenue grew by a robust 15% to $359.7 million, with Adjusted EBITDA increasing 17% to $227.4 million, maintaining a strong 63% margin. This growth was fueled by a 66% surge in live events and hospitality revenue ($58.6 million), driven by higher ticket sales and site fees from international events (including Fight Night London and UFC 312 Sydney), and a 32% increase in partnerships revenue ($64.3 million) from new deals and renewals (like the record Monster Energy agreement). Media rights also saw a 4% increase ($224.1 million) due to contractual escalations.
• WWE: Delivered an impressive 24% revenue growth to $391.5 million, with Adjusted EBITDA climbing 38% to $193.9 million, expanding the margin to 50%. This performance was significantly boosted by a 14% increase in media rights ($251.6 million), driven by the expanded SmackDown format and the commencement of the transformative Netflix global distribution agreement. Live events revenue also grew 52% ($76.3 million), primarily from higher ticket sales (including records set at Royal Rumble and Elimination Chamber), and partnerships revenue jumped 86% ($25.6 million) from new sponsors and renewals.
• IMG: The newly formed segment, reflecting the acquired businesses, reported revenue of $476.3 million and Adjusted EBITDA of $73.5 million (15% margin). Year-over-year comparisons showed a 13% revenue decrease and a 10% Adjusted EBITDA decrease, primarily due to lower hospitality sales at On Location (less favorable Super Bowl/Bowl Game locations compared to 2024) and the absence of FA Cup media rights in the IMG Business segment.
• Corporate and Other: Revenue increased 4% to $54.4 million, mainly from PBR event attendance. Adjusted EBITDA was -$77.4 million, relatively flat year-over-year, impacted by lower Endeavor corporate allocations offset by higher personnel and transition service costs.

Operating expenses saw notable shifts. Direct operating costs decreased overall, but increased for UFC and WWE due to higher event-related expenses associated with a greater number of international shows. IMG's direct costs decreased due to the change in business mix post-acquisition (e.g., no FA Cup rights). Selling, general and administrative expenses saw a substantial 46% decrease, primarily due to the absence of the $335 million legal settlement charge recorded in Q1 2024 related to the UFC antitrust lawsuit. Depreciation and amortization decreased due to certain WWE intangible assets becoming fully amortized. Interest expense declined due to the November 2024 credit facility refinancing at a lower rate.

The significant increase in net cash provided by operating activities in Q1 2025 ($162.8 million vs. $44.9 million in Q1 2024) was driven by net income and non-cash adjustments, notably a $100 million increase in restricted cash related to On Location's FIFA World Cup 2026 prepayments, partially offset by a decrease in accounts payable and accrued liabilities (including the second UFC antitrust settlement payment). Investing activities used $31.0 million, primarily for capital expenditures and investments in affiliates. Financing activities used $185.7 million, reflecting net transfers to Endeavor, distributions to members, the inaugural dividend payment, and debt repayments, partially offset by contributions from Endeavor related to the asset acquisition.

TKO ended Q1 2025 with $470.9 million in cash and cash equivalents and $2.76 billion in total debt. The refinanced credit facilities provide significant capacity for future borrowings, anticipated to support the authorized share repurchase program. The company remains in compliance with its debt covenants.

Strategic Pillars and Future Outlook

TKO's forward strategy is built on several key pillars designed to capitalize on its integrated structure and market position:

1. Integration and Synergy Realization: The company is actively integrating the acquired IMG, On Location, and PBR businesses, aiming to identify and action upon further cost savings and revenue synergies. Management has already exceeded the initial $100 million annualized net savings target from the UFC/WWE merger and expects more efficiencies as integration continues. The "TKO Takeover" concept, bringing multiple properties to a single city, exemplifies the operational synergies being pursued.
2. Maximizing Media Rights Value: Securing lucrative domestic media rights deals for UFC and WWE's premium live events remains a top priority. The Netflix deal for WWE Raw and international content, which commenced in January 2025, is expected to be a significant driver of global reach and future monetization. Management is confident in the demand for its premium content in the current market environment, citing recent large sports rights deals as evidence.
3. Expanding Live Events and Site Fees: Building on the strong momentum in live events, TKO is focused on increasing ticket yield, expanding its international event calendar for both UFC and WWE, and securing more site fees and incentive packages from host cities and tourism authorities. The strategy involves enhancing the overall event experience to increase duration and economic impact, making TKO events highly attractive for potential partners.
4. Growing Partnerships and Sponsorships: The unified global partnerships team is focused on cross-selling opportunities across the TKO portfolio and securing major deals with new and existing sponsors. The Monster Energy and Meta partnerships highlight the potential for significant revenue growth in this area.
5. Strategic Expansion: TKO is selectively exploring opportunities in adjacent verticals, as demonstrated by the recent acquisition of Mexican Lucha Libre promotion AAA and the joint venture to establish a global boxing promotion. These moves are designed to access new talent pools, expand into key demographics (like the Latino market), and leverage TKO's operational expertise in new combat sports ventures without significant capital risk (in the case of the boxing JV).
6. Capital Return Program: The authorized $2 billion share repurchase program and quarterly cash dividend program underscore the company's commitment to returning value to shareholders, supported by strong cash flow generation and a healthy balance sheet. While timing is subject to market conditions, the program is expected to be a key component of capital allocation.

Based on the strong start to the year and anticipated performance, TKO has raised its full-year 2025 guidance. Excluding the impact of the acquired businesses, core TKO revenue is now targeted between $3.005 billion and $3.075 billion, and Adjusted EBITDA between $1.39 billion and $1.43 billion. Including the acquired businesses, the full-year 2025 guidance targets revenue of $4.49 billion to $4.56 billion and Adjusted EBITDA of $1.49 billion to $1.53 billion. Management noted that the expected contribution from the acquired businesses is slightly lower than initial estimates due to nonrecurring corporate allocations in early 2025, the timing of cost savings realization (more weighted towards 2026), and the loss of PBR's domestic media rights deal (excluding revenue from a new deal in the outlook).

The outlook for free cash flow conversion remains strong, targeted in excess of 60% of Adjusted EBITDA for the full year, excluding approximately $300 million in nonrecurring payments related to the UFC antitrust settlement and M&A professional fees. FIFA World Cup 2026 prepayments are expected to provide a substantial cash inflow in 2025, which will be separately identified.

Risks and Considerations

Despite the positive momentum and strategic opportunities, TKO faces several pertinent risks. Legal proceedings, particularly the ongoing aspects of the UFC antitrust litigation and matters related to the former WWE CEO, could result in further costs or reputational damage. While the $375 million settlement for the Le case is finalized, the Johnson case remains. The IMG segment also faces legal challenges related to historical business practices.

Macroeconomic uncertainty and potential tightening in marketing and premium spending could impact revenue streams, although management notes resilience historically and has not seen a slowdown to date. Fluctuations in foreign currency exchange rates can affect international revenue and costs. Credit risk related to cash holdings at financial institutions is also a consideration.

The integration of the newly acquired businesses, while underway, presents execution risk. Realizing the full potential of cost and revenue synergies depends on successful integration efforts. The timing and terms of key media rights renewals, particularly for UFC and WWE PLEs, are critical for future growth and are subject to market dynamics.

Conclusion

TKO Group Holdings has rapidly established itself as a formidable force in the global sports and entertainment landscape. The strategic combination of UFC and WWE, now augmented by the acquisition of IMG, On Location, and PBR, has created a diversified, pure-play sports entity with significant scale and cross-monetization potential. Strong financial performance in Q1 2025, driven by core business momentum in live events, partnerships, and media rights, underscores the effectiveness of the integration efforts and strategic initiatives implemented since the merger.

The company's focus on expanding its global footprint, securing high-value media rights deals, enhancing live event economics through site fees and premium experiences, and strategically entering new verticals like boxing and Lucha Libre positions it for continued growth. Supported by a robust balance sheet and a commitment to returning capital to shareholders, TKO presents a compelling investment thesis centered on leveraging iconic brands and integrated capabilities to drive long-term value. While macroeconomic uncertainty and ongoing legal matters present potential headwinds, the company's operational execution, strategic clarity, and the inherent demand for its premium content provide a solid foundation for navigating the competitive landscape and delivering on its growth objectives.