Context/Background Info
- The UFC and WWE recently merged to form TKO Group Holdings Inc ($TKO) – with TKO being the parent company of the two.
- TKO itself is majority-owned by Endeavour Group, who orchestrated the merger after buying out the UFC in 2016, and the WWE in April 2023 from Vince McMahon.
- In post-market trading on 7th November, TKO released their first quarterly earnings report for the Q3 of 2023, which runs from July 1st – September 30th.
- Due to the company being newly formed and both the WWE and UFC having been privately owned previously, it's quite time-consuming to go through the different necessary financial documents in order to understand and evaluate the financials of $TKO.
- So, to improve comprehensibility, I have tried to put some of the financial data together into tables, and summarised other important information into bullet points.
- If you want to research for yourself or double check my numbers (please do), the data/info here I obtained from the Q3 Earnings Release, the Q3 10-Q Filing, and this TKO Historical Financial Info Document.
Recent Highlights & Developments
- UFC held 13 successful events with strong viewership and attendance, setting all-time revenue records at the respective venues.
- WWE secured a five-year domestic media rights agreement with NBCUniversal for SmackDown starting in October 2024.
- WrestleMania 40, scheduled for April 2024 in Philadelphia, set a record by selling over 90,000 tickets in a single day, surpassing the gate record from WrestleMania 39.
- UFC signed a significant multi-year sponsorship deal with AB InBev, making them the exclusive “Official Global Beer Partner of UFC” effective from January 1, 2024.
- UFC expanded its presence in the Middle East North Africa (MENA) region through a partnership extension with the Department of Culture and Tourism – Abu Dhabi. This includes hosting numbered events through 2028 as well as up to 3 Fight Nights to the region annually, including the first event in Saudi Arabia in March 2024.
- Since the merger on September 12th, management has been focused on the integration of WWE and UFC and strategy execution, which includes finding cost 'synergies' and exploring international markets.
Financial Statements
TKO Revenue from Q1'22 – Q3'23
| Q1 2022 (millions) | Q2 2022 (millions) | Q3 2022 (millions) | Q4 2022 (millions) | Q1 2023 (millions) | Q2 2023 (millions) | Q3 2023 (millions) | TTM | |
|---|---|---|---|---|---|---|---|---|
| UFC | $259.6 | $268.1 | $340.7 | $271.7 | $306.7 | $305.2 | $397.5 | 1.28 B |
| WWE | $333.4 | $328.2 | $304.6 | $325.3 | $297.6 | $410.3 | $287.3 | 1.32 B |
| Merged | $593.0 | $596.3 | $645.3 | $597.0 | $604.3 | $715.5 | $684.8 | 2.6 B |
TKO Earnings (Adj. EBITDA) from Q1'22 – Q3'23
| Q1 2022 (millions) | Q2 2022 (millions) | Q3 2022 (millions) | Q4 2022 (millions) | Q1 2023 (millions) | Q2 2023 (millions) | Q3 2023 (millions) | TTM (Trailing Twelve Months) | |
|---|---|---|---|---|---|---|---|---|
| UFC | $161.7 | $160.3 | $204.5 | $154.1 | $186.3 | $188.2 | $238.3 | $766.9 |
| WWE | $142.9 | $121.0 | $122.5 | $126.1 | $117.0 | $173.1 | $102.0 | $518.2 |
| Corporate | ($43.1) | ($42.1) | ($45.3) | ($49.3) | ($46.5) | ($47.0) | ($42.1) | ($184.9) |
| Combined | $261.5 | $239.2 | $281.7 | $231.1 | $256.8 | $314.3 | $298.2 | $1.10 B |
Key Figures from Revenue/EBITDA Statements:
- Revenue for the last 12 months was $2.6 Billion compared to $2.43 Billion in FY'22
- 6% Revenue increase from Q3'22 to Q3'23
- $1.1B EBITDA in last 12 months compared to $1.01B in FY'22
- Q3'23 EBITDA 6% higher than in Q3'22
Merger/Integration Costs
- For the three and nine months ending on September 30, 2023, the company incurred $67.5 million and $82.5 million in merger and acquisition related costs.
- During the same periods, the company also had $31.6 million in restructuring, severance, and impairment costs, including $16.5 million in equity-based compensation expenses.
Balance Sheet Highlights
- Cash on hand: Cash and equivalents amount to $188.6 million.
- Current Ratio: Current assets total $501.0 million, while current liabilities amount to $399.5 million. Therefore, the current ratio is about 1.26.
- Debt/Equity Ratio: Long-term debt is $2.72 Billion, and total stockholders' equity is $8.96 Billion. So debt/equity ratio is approximately 0.30.
- Assets/Liabilities Ratio: Total assets amount to $12.74Billion, and total liabilities are $3.65 Billion. Therefore, the assets/liabilities ratio is 3.38.
Other Financial Highlights
*The following figures do not include any results for WWE from before September 12th
- Free Cash Flow of $247.7 Million in the 9 months preceding 30th September
- Cash flows generated in Q3 by operating activities were $67.0 million, a decrease of $71.3 million from $138.3 million, primarily due to lower net income.
- Free Cash Flow in Q3 was $63.6 million, a decrease of $72.5 million from $136.1 million, primarily due to the decrease in cash flows generated by operating activities.
Hope some of you find this helpful. Please let me know if I have gotten anything wrong here.
Also, what are your thoughts/opinions on $TKO as a long-term investment?
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