01—Abstract
Summary
Summary of the 10-K filed February 27, 2024. Cited figures are marked; the original filing is the authoritative source.
TKO Group Holdings, Inc. was formed on September 12, 2023 through the combination of UFC and WWE, with TKO Operating Company, LLC (f/k/a Zuffa Parent, LLC) treated as the accounting acquirer in a reverse acquisition of WWE.
For the year ended December 31, 2023, revenue was $1,675.0 milliona, up $534.9 million, or 47%, from $1,140.1 million in 2022. Adjusted EBITDA was $809.1 million, up $180.4 million, or 29%. Net income was $175.7 million, while the net loss attributable to TKO Group Holdings, Inc. was $(35.2) million.
Post-combination WWE contributed $382.8 millionb of revenue and $163.0 million of Adjusted EBITDA from September 12 through December 31, 2023. The company carries $2.7 billion of first lien term loans maturing in April 2026, with about $205 million of revolver capacity, and interest expense rose $99.4 million, or 71%, to $239.0 million on higher variable rates. Endeavor Group Holdings controls about 52.1% of voting power, so TKO qualifies as a controlled company.
Key risks disclosed include a pending antitrust class action by former UFC fighters with a trial date of April 15, 2024, legal and regulatory inquiries tied to the WWE special committee investigation of Vincent K. McMahon, and the renewal or replacement of major media rights agreements, including the Netflix agreement for Raw beginning January 2025.
The company reported $1,675.0 millionc of revenue, $809.1 million of Adjusted EBITDA, and $468.4 million of operating cash flow for 2023. Investors should weigh the strong growth and media-rights visibility against the leverage, the rising interest burden, and the concentrated Endeavor control.
02—Key points
Key Highlights
- Revenue rose $534.9 million, or 47%, to $1,675.0 million in 2023, driven by the WWE acquisition contributing $382.8 million from September 12 to December 31, 2023, and UFC revenue growing $152.1 million, or 13%.
- Adjusted EBITDA increased $180.4 million, or 29%, to $809.1 million, with an Adjusted EBITDA margin of 48%.
- Net income was $175.7 million, but net loss attributable to TKO Group Holdings, Inc. was $(35.2) million, reflecting non-controlling interests in TKO OpCo.
- Interest expense, net increased $99.4 million, or 71%, to $239.0 million, and a hypothetical 100 basis point rate increase would add about $27 million in annual interest expense.
- Total debt principal was $2.76 billion at year-end, mainly the $2.7 billion First Lien Term Loan due April 2026, which the company expects to refinance.
- Endeavor subsidiaries own about 52.1% of voting power, making TKO a controlled company under NYSE rules.
- Netflix will become the exclusive global home to Raw beginning January 2025, and the company disclosed pending renewals of UFC and WWE Network domestic rights in December 2025 and March 2026.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 27, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $3.22B$1.14B | +182.8% |
| SG&A Expenses | $1.03B$210.14M | +388.6% |
| Operating Expenses | $2.85B$595.76M | +378.2% |
| Operating Income | $375.78M$544.39M | −31.0% |
| Interest Expense | $229.60M$139.57M | +64.5% |
| Net Income | $175.72M$0 | — |
| EPS (Basic) | $-0.43— | — |
| EPS (Diluted) | $-0.43— | — |
| Shares Outstanding (Basic) | 82.81M— | — |
| Shares Outstanding (Diluted) | 82.81M— | — |
05—Questions
Frequently Asked Questions
What drove the increase in TKO's revenue in 2023?
Revenue rose $534.9 million, or 47%, to $1,675.0 million. UFC revenue increased $152.1 million, or 13%, on higher media rights fees, more live event revenue, and sponsorship growth. WWE contributed $382.8 million of revenue for the post-acquisition period from September 12 through December 31, 2023.
How much debt does TKO carry and when does it mature?
As of December 31, 2023, the company had $2.7 billion outstanding under the First Lien Term Loan, which matures in April 2026. It also has a $205.0 million revolving credit facility, with about $205 million available, that matures in October 2024. The company expects to refinance the term loans before maturity.
Who controls TKO and what does that mean for public shareholders?
Subsidiaries of Endeavor own about 52.1% of the voting power and economic interests in TKO OpCo. As a controlled company, TKO is exempt from certain NYSE governance requirements, and Endeavor can significantly influence board elections and major transactions, which may limit minority shareholders' influence.
What are the main legal risks disclosed?
Zuffa faces class action antitrust lawsuits from former UFC fighters alleging monopsony conduct, with a damages class certified for December 2010 to June 2017 and a trial set for April 15, 2024. A separate lawsuit covers July 2017 to present and names Endeavor and TKO OpCo. WWE is also subject to regulatory inquiries and stockholder suits connected to the investigation of Vincent K. McMahon.
What were TKO's cash flows and capital uses in 2023?
Net cash provided by operating activities was $468.4 million. Investing activities provided $12.3 million, including $381.2 million of cash acquired from WWE, offset by a $321.0 million payment of deferred consideration to former WWE shareholders. Financing used $424.5 million, including $296.6 million of net distributions to Endeavor and subsidiaries and $100.0 million of share repurchases.
06—Continue