TKO Stock | TKO Group Holdings Inc Q1 2026 Earnings Call

Hello everyone. Thank you for joining us and welcome to TKO's first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Seth Zaslo, head of investor relations.

Good afternoon and welcome to TKO's first quarter 2026 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 Schwimr, 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 first quarter 2026 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. 2026 is off to a formidable start, especially considering the macro environment. The key growth drivers we outlined in February, media rights, live events and experiences, global partnerships, and financial incentive packages, all delivered as planned in the first quarter in line with our guidance. We are introducing our live events and experiences to new markets around the world while capitalizing on all the revenue generators inside our machine. And our newer properties, most notably Zufa Boxing, are on accelerated growth tracks. TKO sits squarely at the center of a growing sports and entertainment ecosystem. As AI transforms how content is created and consumed, the value of our IP and properties increases. Our content is live, it's communal, it's scarce, and no algorithm can replicate it. Reflecting our conviction in TKO and its long-term value, we've announced an incremental $1 billion share repurchase authorization, complementing the existing program, which we expect will be largely complete in the near term. We firmly believe TKO is built for what's ahead. Mark will take you through the quarter in greater detail.

Good afternoon. As Ari and Mark highlighted, 2026 is off to a strong start. We delivered positive operating and financial performance across our businesses and as such are reaffirming our full-year outlook. Before I get into more detail on our financial results, I want to comment on our events calendar as well as trends we're seeing in consumer demand. As we know these are topics on investors' minds. We're closely monitoring the developments in the Middle East and the potential implications on our business. We're in close contact with our partners in and around the region and we're actively tracking government advisories and security assessments for the avoidance of doubt. And as previously announced, we're planning for and moving forward with the events that we have scheduled in the region on the same dates we anticipated when we set our plan for the start of the year. We have two events scheduled for the last Saturday in June: a WWE PLE Night of Champions in Riyadh and a UFC Fight Night in Baku, Azerbaijan. The balance of our planned activity includes an event in Abu Dhabi in late July and several events in the fourth quarter. With respect to consumer behavior, as Mark discussed, we continue to see healthy demand for premium live events across our portfolio as TKO is firmly situated in the center of this ecosystem. Our business benefits from a high percentage of contracted revenue, including media rights, global partnerships, FIPs, and consumer products licensing anchored by multi-year high margin fixed fee agreements with annual escalators that provide attractive visibility, predictability, and cash flow generation. This provides us with a unique, durable platform to drive modernization. Moving to our consolidated results for the first quarter, we generated revenue of 1.597 billion. Adjusted EBITDA was 550 million. Our adjusted EBITDA margin was 34%. Revenue increased 26%, adjusted EBITDA increased 32% and adjusted EBITDA margin increased approximately 150 basis points as compared to the prior year. UFC generated revenue of 401 million in the quarter, an increase of 12% or 41 million. Adjusted EBITDA was 255 million, an increase of 12% or 27 million. UFC's adjusted EBITDA margin was 63% on par with the prior year period. UFC had nine total events in the first quarter of '26 compared to 11 total events in the first quarter of 2025. Event mix shifted slightly with both the first quarter of this year and last having three numbered events. However, as we previewed on our last call, Q1 '26 included only six fight nights compared to eight in the prior year period. Q1 2025 also benefited from a fight night in Saudi Arabia that carried a meaningful financial incentive package. Later this year, we anticipate hosting a similar event that will also carry a significant FIP. Media rights, production and content revenue increased 23% to 275 million. The increase was driven by a step up in media rights fees related to the Paramount deal that began in January, partially offset by lower media rights revenue recognition as there were two fewer fight nights in the quarter. Partnerships and marketing revenue increased 4% to 67 million. Despite two fewer events, we still managed to deliver an increase driven by the addition of new partners and renewals of existing partners at higher rates. We continue to make significant progress adding new categories and growing existing ones including the recently announced deals with Bet365 as well as Free Nicotine and Supershore which span multiple TKO properties. As expected, live events and hospitality revenue decreased 17% to 49 million. The decrease was due to lower revenue from financial incentive packages driven by the aforementioned Saudi Arabia event partially offset by an increase in ticket sales. As Mark highlighted in Q1, we continue to see strong demand for our events, including sellouts for all three numbered events and several arena records. Adjusted EBITDA reflected the increase in revenue, partially offset by an increase in expenses. Direct operating expenses primarily reflected an increase in athlete production and other event related costs driven by UFC 324, our first event under the Paramount Rights Deal. SG&A increased primarily due to higher personnel and travel costs compared to the prior period. While normally we don't focus on the timing of revenue and expense recognition, both were important to note this quarter because adjusted EBITDA margins were on par with the prior year despite the step up from the Paramount rights deal. There are three items worth mentioning. First, we held two fewer fight nights which carry sizable revenue allocations from our various media rights and partnership agreements. These are high flow-through revenue streams that will lead to incremental margin when those events occur in future quarters. Second, prior year margins benefited from the FIP related to the fight night in Riyadh, which we anticipate to be held later this year. And finally, we incurred higher than normal costs related to UFC 324 to ensure a strong start to our Paramount relationship. For the full year, we expect UFC margins will meaningfully outpace 2025 exactly as our guidance suggests. Our WWE segment generated revenue of 476 million in the quarter, an increase of 22% or 84 million. Adjusted EBITDA was 256 million, an increase of 32% or 62 million. Adjusted EBITDA margin was 54% up from 50% in the prior year period. Live events and hospitality revenue increased 62% to 123 million. Results reflected an increase in revenue from financial incentive packages related to the favorable impact of Royal Rumble in Saudi Arabia in Q1. Media rights, production and content revenue increased 12% to 282 million, primarily reflecting higher media rights fees related to the agreements with ESPN and Netflix. Partnerships and marketing revenue increased 2% to 26 million driven by new partnerships and renewals across multiple categories. This growth came even with additional international events, including a 12-day European tour in January, as well as Royal Rumble, which catered to and served to grow our global fan base. Though it occurred in April, WrestleMania 42 was emblematic of the momentum we're seeing in this area. The event featured a record 32 total partners, including Snickers, 2K, Riyadh Season, Ram Trucks, DoorDash, and Minimade, among many others. Adjusted EBITDA reflected the increase in revenue partially offset by an increase in expenses. Direct operating expenses increased primarily due to higher talent and production costs most notably related to holding Royal Rumble in Saudi which of course carries a higher cost structure versus other PLEs. SG&A increased primarily due to higher travel costs driven by an increase in the number of international events in the quarter. Adjusted EBITDA margin improved by four percentage points. The increase would have been even higher except for several timing related items. We made a strategic decision to increase the number of NXT non-televised events. The goal of this strategy is based on a desire to get younger talent more experience in front of live audiences. We believe this will accelerate their development and readiness to join our main roster. The aforementioned European tour also resulted in an increase in international events compared to the prior year. While our international shows tend to have lower margin profiles due to increased travel and logistical costs, we believe they serve to increase fan engagement and overall monetization. As with UFC, for the full year, we expect WWE margins will meaningfully increase compared to 2025. Shifting now to our IMG segment, we generated revenue of 655 million, an increase of 38% or 179 million. Adjusted EBITDA was 97 million, an increase of 32% or 24 million. Adjusted EBITDA margin was 15% on par with the prior year period. As we previewed on our last call, the increase in revenue primarily related to the favorable impact of the Milan Cortina Winter Olympics at On Location, which was on plan and in line with our guidance. Revenue at the IMG business increased slightly over the prior year period as new production agreements and boxing commissions were offset by the absence of the Arabian Gulf Cup which is a biannual event. Adjusted EBITDA primarily reflected the increase in revenue partially offset by an increase in expenses. Expenses reflected costs related to the Milan Cortina Olympics as well as continued meaningful planned pre-spend for LA28, namely to support increased sales efforts which Mark highlighted are off to a strong start. Corporate and other generated revenue of 74 million an increase of 36%. Adjusted EBITDA was negative 58 million an improvement of 19 million compared to the prior year period. The increase in revenue was primarily driven by higher media rights and partnerships revenue at PBR as well as higher management fees for services related to our boxing initiatives. Adjusted EBITDA primarily reflected the increase in revenue and a 22 million decrease in costs related to the absence of allocations of Endeavor corporate expenses under its ownership of IMG, On Location, and PBR. As we discussed on prior calls, from the close of the acquisition on February 28th, 2025 forward, there are no Endeavor corporate expense allocations included in our financial results. These improvements were offset by costs incurred to replicate the services previously provided by Endeavor as well as an increase in personnel and other operational expenses. Now moving on to our capital structure. In the first three months of the year, we generated 675 million of free cash flow. Our free cash flow conversion of adjusted EBITDA was 123%. Free cash flow included the favorable impact of 582 million of net collections related to On Location for the FIFA World Cup. Free cash flow also included the unfavorable working capital impact of UFC's new media rights deal with Paramount. As with prior years, first quarter cash flow was also impacted by annual bonus payments as well as negative working capital related to the seasonality of our businesses. As Ari conveyed, maintaining a robust and sustained capital return program remains a top priority for us. In the first quarter alone, we returned approximately 1 billion of capital to equity holders through our dividend and share purchases. On March 31st, we made our quarterly cash dividend payment from TKO Opco of approximately 150 million or 78 cents per share. We intend to continue to fund quarterly cash dividends with cash flow from operations or cash on hand. Regarding share purchases, as we disclosed in our earnings release, our board of directors has approved up to an additional 1 billion of share purchases in addition to our previous authorization of two billion. Given the strength of our balance sheet and what we believe to be a dislocation in our stock price relative to its intrinsic value, we are positioned to continue deploying capital toward what we view as a highly value accretive opportunity. In the quarter, we repurchased 38 million of shares under a 10b5-1 trading plan that we entered into in September 2025, which expired on February 26th. In March, we entered into an ASR agreement to repurchase 800 million of our Class A common stock. We received an initial delivery of approximately 3.1 million shares and expect to complete the ASR in short order. We also entered into a 10b5-1 trading plan for the repurchase of up to 200 million of Class A common stock. Repurchases contemplated under this 10b5-1 plan are to commence immediately once the ASR agreement is completed. Share purchases under the ASR and 10b5-1 plan are being funded with proceeds from the 900 million term loan add-on that we closed on March 10th, as well as from cash on hand. We ended the quarter with 4.671 billion in debt and 789 million in cash and cash equivalents in addition to 937 million of restricted cash. As of Q1 2026, net leverage was 2.3 times based on net debt of 3.882 billion and LTM adjusted EBITDA of 1.718 billion. 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. As noted in our press release, based on our performance through the first three months of the year and our anticipated performance for the remainder of the year, we are reaffirming our expectations for full year 2026. We continue to target revenue of 5.675 billion to 5.775 billion and adjusted EBITDA of 2.24 billion to 2.29 billion. As articulated on our Q4 earnings call, this outlook reflects anticipated 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. This performance is expected to be driven by robust growth across media rights, live events, including FIPs, and partnership revenue. Consistent with our prior calls, while we're not providing quarterly guidance, we want to highlight a few notable items as we look to the second quarter. At UFC, media rights revenue will continue to reflect the step up from the Paramount rights deal. The mix of live events in the quarter will also impact results. We expect to stage 11 events in Q2, UFC Freedom 250 at the White House in June, as well as two numbered events and eight fight nights. This compares to 11 events in Q2 '25, which included four numbered events and seven fight nights. As Mark discussed, UFC Freedom 250 is a once-in-a-lifetime event that will highlight the brand on the biggest stage possible. That comes with a unique financial profile where our expenses will meaningfully exceed the limited partnership inventory we have sold and we expect to lose approximately 30 million on this event. With respect to live events revenue, the fight night

Scheduled to take place in Baku, Azerbaijan, carries a meaningful financial incentive package, part of a multi-year renewal at a higher per event fee than we realized in the same market in Q2 of last year. At WWE, given the timing and mix of our event calendar, including WrestleMania, as well as a premium live event in Saudi Arabia, we expect the second quarter to be by far the highest revenue and adjusted EBITDA quarter of the year in terms of absolute dollars. Meteorites will continue to benefit from the step up of our agreement with ESPN. With respect to live events revenue, the Saudi PLE carries a meaningful FIP, but as a reminder, we held a similar event in the second quarter of 2025. At the IMG segment, we expect results will be driven by on location with the World Cup starting on June 11th as well as notable events in the quarter like the Final Four and NFL draft. It's also a big quarter for our IMG business with many of the largest soccer leagues in the final months of their season, the start of Wimbledon, and the first full quarter of the MLS season. While the World Cup is anticipated to have a positive impact on adjusted EBITDA, our sales efforts, as mentioned for LA28, will have ongoing costs that are expected to partially offset such impact. In terms of free cash flow, while we have not given formal guidance, we continued to target a free cash flow conversion rate in excess of 60%, normalizing for two notable items: the impact of net payments related to the World Cup and UFC's rights deal with Paramount. We generated strong first quarter results that reflect continued momentum across our businesses. As we look ahead, we remain focused on operational execution as well as maintaining our robust capital return program. Anchored by our premium content, live, experiential, and insulated from AI disruption, we remain extremely well positioned within the sports and entertainment ecosystem to deliver incremental value for shareholders. With that, I'll turn it back to Seth.

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

We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Brandon Ross with Lightshed Partners. Please go ahead.

Hi everyone, and thanks for taking the questions. You guys have unlocked a ton of monetization at both UFC and WWE over the last several years, but as you noted in your prepared, there's been some vocal fan criticism calling out things like sponsorship and ticket pricing as being excessive. How do you think about balancing fan-facing monetization and the fan experience going forward? And do you think those vocal critics are reflective of the larger overall fan base?

All right. While we're on the topic of fan...

Your next question is from Sean Diffley with Morgan Stanley. Please go ahead.

Great. Thanks, guys. Mark, I think you mentioned financial incentive packages, pipeline growing, and you guys referenced Azerbaijan as a good example. I was curious if you could elaborate on some color and texture on what new deals are looking like and conversations are looking like, and is there any impact from the Middle East there on a go-forward basis? And then curious as you know, Paramount and WBD potentially combine, what that could mean for UFC and Zuffa in terms of, you know, HBO Plus, Paramount Plus, and a combat sports super app. Thanks.

Yeah, look, I would say FIPs is a major growth strategy for us and, you know, momentum continues. We have not seen a slowdown. We've recently announced a couple of deals, most notably in Philadelphia where we announced UFC 330 will be at Xfinity Mobile Arena in August. That's with an FIP, so domestic demand for high premium intellectual property. We talked about Baku and Baku is unique because we're going back there after sort of a heft deal in that market last year with a multi-year deal at a higher rate than we received in 2025. We've announced our debut event in Belgrade, Serbia, which will be a fight night in early August as well. So really no corner of the globe untouched and, you know, we're fairly bullish that this strategy continues to take hold.

Thank you. Operator, if you can, let's go back to Brandon Ross. I think you got cut off.

Yes, Brandon Ross from Lightshed Partners. Please go ahead.

Thank you. Not sure what happened there. The question I was going to ask is there's also been a lot of noise about weaker UFC cards lately. In your view, what's going on and what are you guys doing to improve?

Thanks for taking me again.

Your next question is from Steven Lazic with Goldman Sachs. Please go ahead.

Hey guys, thanks for taking the questions. Mark, you called out the strong engagement momentum you're seeing with your new distribution deals at ESPN and Paramount. I was curious if you could expand on that a little bit and maybe update us on perhaps to what extent you're seeing increases in engagement translate to other parts of the business like live events or sponsorship revenue, how some of those conversations progress, and, you know, to what extent those benefits you think could flow through the P&L this year and, you know, what we've seen so far play out and what's still to come.

Great. Thanks for that. And then maybe just on the partnership and marketing front, maybe for Andrew, I think growth decelerated in the first quarter quite a bit. I was just curious if you could talk a little bit more about the puts and takes of the first quarter revenue growth dynamic and then how we should expect growth in this line item to progress as we look into the balance of the year across both the UFC and WWE.

Yeah. So on UFC partnership and marketing revenue for the quarter increased 4% and that's largely attributable to timing if not exclusively attributable to timing. We're bullish. Partnerships and marketing is core to our thesis and we really see no slowdown at UFC or WWE for that matter. We had two fewer events in the quarter, two fewer fight nights, and we do allocate and recognize revenue on a per event basis. So nothing to read through on that side. As we look at WWE, partnerships and marketing revenue was impacted by geography. We did have 12 events internationally which historically have been a bit harder to monetize than our domestic events. We did have an event in Riyadh which has some restrictions that caused a bit of slowdown versus the prior year quarter but candidly there's nothing to read through or read into given the fact that we're well on our way to massive year-over-year growth in partnerships.

Great. Thank you both.

Your next question comes from Peter Supino with Wolf Research. Please go ahead.

Hi, good afternoon. Wanted to ask about the segmentation of demand. If you guys could share any color on how you see consumers at various price points acting across WWE and UFC and how that informs your strategy going forward in terms of trying to maximize your revenue at a given night. And then you also talked about the success of UFC on Paramount Plus. Obviously that bigger stage is great for the brand and I wondered how you expect that to show up across the business over the next few years. Thank you.

Thanks, Mark.

Your next question is from Ryan Gravit with UBS. Please go ahead.

Hey guys, thank you. Two questions for me, I guess. First on the PBR, I guess coming off the new rights deals you signed last year and the expansion of the team series plan for next year, how should we think about the opportunity for growth at that property and the level of EBITDA contribution that it could drive for the company? And then Andrew, I think it was about a year or two ago when you first talked about your comfort in operating the business at up to three times leverage. I'm just wondering if your thoughts around leverage have changed at all now that you have all the media rights deals locked in through the end of the decade. Thanks.

Yeah. So I'll hit the PBR and actually I'll take the entire question Ryan. As I reported, our corporate and other segment where PBR sits generated revenue of 74 million in the quarter which is up 36% over the prior year period. A couple of factors that drove that very impressive growth. Boxing obviously is in there as well, but PBR and PBR media rights and just traction in that business is something that we're very, very excited about driving year-over-year increases. We anticipate there to be continued growth at PBR which will be reflected in that segment. And it is high margin growth analogous to what you see in both the WWE and UFC segments. Look, we have an extraordinary financial position. Our balance sheet is strong. We're highly free cash flow generative. We are looking to continue to commit to deploy and return capital to shareholders. As you saw today in our press release and our prepared remarks, our board has authorized another billion dollars of share repurchase for us to be opportunistic to the extent we continue to believe there to be a dislocation from geopolitical uncertainty in our stock price. We are just about complete with our ASR which will then shift to a 200 million 10b5-1 plan. When that's all said and done, we now have a billion dollars in our toolkit to put to work as authorized by our board. So how we finance that is TBD. I'm comfortable with our leverage level. I'm comfortable at a higher leverage level because we will naturally delever over time by virtue of the robust growth characteristics of this company. So, you know, you can just pull it forward. The 2.3 times that we are today at the midpoint of our guidance range, assuming no incremental debt, will be well below two times. And that obviously is an extraordinarily comfortable place to be. And that's not to say we wouldn't look to add more given the natural delever characteristics.

Got it. Thanks, Andrew.

Operator, why don't we take one last question, please?

Your last question will be from Brett Navon from Bank of America. Please go ahead.

Good afternoon. Thanks for squeezing me in. So just one for me on, there's been several instances of high-profile, one-off fighting events that are just really validating the fan interest in combat sports. But I guess the flip side is this demand could also make the demand for some of your fighters even stronger. So are you finding that it's becoming more competitive to retain top fighters and, you know, anything you could share on how fighter comp is tracking this year relative to prior years? Thanks.

Thank you so much. This concludes today's call. Thank you for attending and you may now disconnect.