TKO reported its second-quarter earnings on Thursday with the company posting a record-setting quarter for revenue with a unified message that UFC & WWE are firing on all cylinders.
The company disclosed its revenues from April 1 through June 30 at $851.2 million between the combined entities and net income of $150.7 million leading to an increased projection for its revenue target this year.
Previous guidance pegged this year’s revenue marker at $2.670 billion but they are bullish and increasing that target to $2.745 billion and increasing its target for Adjusted EBITDA to $1.240 billion.
WWE’s quarter was highlighted by the two-night WrestleMania 40 event, labeled as the “most streamed entertainment event” in Peacock’s history, which excludes sports like the NFL and Olympics.
WWE grossed $456.8 million in the quarter, which for perspective, is an amount WWE had never grossed in an entire year until 2007. The revenue translates to $251.3 million in Adjusted EBITDA and is aided by growth in the sponsorship, and media rights sectors of its business and a quarter with both WrestleMania and the King & Queen of the Ring event in Saudi Arabia.
The UFC grossed revenues of $394.4 in the quarter including sizable increases in its media rights division with $69.1 million (an increase from $32.4 million in Q2 of 2023), and sponsorship growth from $46.2 million to $61.7 million this year. The quarter benefited from an additional numbered event in the quarter with UFC 300, 301, 302, and 303, plus the company’s first event staged in Saudi Arabia.
On the call, the company disclosed it received a $20 million site fee for the debut card in Saudi Arabia and expanded its deal with the region while also receiving a “meaningful site fee” in connection to the UFC 302 event at the Prudential Center in Newark, New Jersey.
UFC is still a comfortable distance ahead of WWE in the sponsorship department with Mark Shapiro noting that WWE has been under-monetized in that area. One only has to watch a WWE premium live event to see how aggressive they are in this area with an explosion in sponsors throughout the events and represented on the canvas, LED boards, and segment sponsorship.
In its filing, TKO issued the following statement regarding the state of the antitrust cases against UFC and the rejection by Judge Richard Boulware of the settlement involving the plaintiffs and TKO:
As previously disclosed, on March 20, 2024, the Company announced that it had reached an agreement to settle all claims asserted in both the Le and Johnson UFC antitrust lawsuits for an aggregate amount of $335 million. The terms of the settlement were subject to court approval. On July 30, 2024, the court issued a ruling denying the motion for preliminary approval of the settlement agreement and scheduled a new tentative trial date for the Le case for October 28, 2024. The Company is evaluating all of its options, including, without limitation, an appeal, and has also initiated discussions with plaintiffs’ counsel, who have expressed a willingness to engage in separate settlement discussions for the Le and Johnson cases. A motion to dismiss the complaint in Johnson remains pending and no trial date has been set.
During the Q&A portion of the call, there were multiple mentions of the UFC 306 event at The Sphere in September, which they noted has exceeded its original estimate for production cost but is being assisted by the largest single-event sponsorship in its history with Riyadh Season. The argument from Dana White’s side is that the cost will pay off due to the brand awareness and expansion of its fanbase from the September 14 event and targeting the Latin American fanbase. They are optimistic it could break the UFC’s gate record, which is held by the UFC 205 event from Madison Square Garden in November 2016 at $17.7 million.
Mark Shapiro continued to push increasing site fees as an area for growth and noted WWE’s recent deal with the Indiana Sports Corp. beginning next year with the Royal Rumble and working with Minnesota (MN) Sports & Events to bring SummerSlam to the city in two years. He confirmed Minnesota was the frontrunner for next year’s WrestleMania until Las Vegas “came in and trumped them.”
The most insightful response regarded the pricing of UFC pay-per-view events by Disney/ESPN with Shapiro believing they were “very aggressive” in the pricing of the events. He said they may have gone “higher and quicker” than the UFC would have preferred and said ESPN was receptive to this suggestion when they had a meeting in Las Vegas with Jimmy Pitaro. The meeting led to a promotion where fans could receive a discount if they purchased the show by a certain date, however, one of the drawbacks is that any fans who took the UFC up on this offer in June may have bought UFC 303 while Conor McGregor and Michael Chandler was being promoted as the main event and it’s always a gamble if you’re buying a show several weeks before it takes place.
Shapiro also noted that piracy has been “jacked up” due to the pricing of UFC events but also said that the company is sustaining its buys, which seems like contradictory statements if the percentage of pirating is escalating from would-be customers.
The last point from Shapiro was Ari Emanuel’s push toward “festivizing” its events and increasing their presence in a host city from one night to multiples and thus, being incentivizing cities to bid on the events and receive more live shows. WWE has moved in this direction with the addition of stage shows hosted by Sami Zayn and The Undertaker is probably a factor in keeping SmackDown on Friday nights when the program moves to the USA Network.
TKO has also found many efficiencies in its production department and has lowered expenses through the work of Lee Fitting with WWE and Craig Borsari on the UFC side, who head up those divisions.
In the filing, TKO outlined recent stock transactions involving Vince McMahon, and its agreement with Dwayne Johnson, who joined its board of directors in January.
Vince McMahon (again) and Dwayne Johnson each get their own headings in the 10-Q.
An update on how much Vince is paying personally, presumably toward NDAs.
Provides some insight on how much Johnson is making on royalties.https://t.co/NRP2aA4XCu pic.twitter.com/fXl5qXE2U5
— Brandon Thurston (@BrandonThurston) August 8, 2024
We will have a lengthy discussion on the second-quarter results on a Thursday edition of Pollock & Thurston at 3 p.m. ET.
