TKO Group Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. TKO combined UFC and WWE on September 12, 2023. Results include UFC for the full year but WWE only from September 12 through year-end; therefore, reported year-over-year comparisons are not like-for-like. The filing does not provide standalone fourth-quarter results.
Business context and key financial metrics
TKO operates UFC and WWE and monetizes their content and intellectual property through media rights and content, live events, sponsorships, and consumer products licensing. The company reports UFC and WWE as separate segments, with unallocated costs in Corporate.
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1,675.0 million | $1,140.1 million |
| Operating income | $446.7 million | $544.4 million |
| Net income | $175.7 million | $389.0 million |
| Net loss attributable to TKO Group Holdings, Inc. | $35.2 million | — |
| Adjusted EBITDA (non-GAAP) | $809.1 million | $628.7 million |
| Adjusted EBITDA margin (non-GAAP) | 48% | 55% |
| Cash provided by operating activities | $468.4 million | $501.7 million |
UFC generated $1,292.2 million of FY2023 revenue and $755.7 million of Adjusted EBITDA (58% margin), compared with $1,140.1 million and $680.6 million (60% margin) in FY2022. WWE contributed $382.8 million of revenue and $163.0 million of Adjusted EBITDA (43% margin) during its post-acquisition period. These segment figures are not full-year WWE results.
At December 31, 2023, cash and cash equivalents were $235.8 million, current assets were $492.4 million and current liabilities were $472.1 million. Long-term debt carrying value was $2,713.9 million, plus $22.4 million current debt; principal outstanding was $2,760.6 million. The company had no revolver borrowings at year-end and reported $205 million of revolving capacity.
Material changes versus the prior comparable period
- Reported revenue rose $534.9 million, or 47%, mainly because WWE was consolidated after the September combination, alongside UFC growth. UFC revenue increased 13%, with higher media rights fees, more live events with audiences, higher site fees and sponsorship growth.
- Operating income declined $97.7 million despite higher revenue. Expenses included acquisition-related amortization, transaction costs, restructuring, legal costs and higher corporate/public-company costs.
- Net interest expense increased $99.4 million, or 71%, to $239.0 million, primarily reflecting higher rates on variable-rate debt, partly offset by lower debt balances.
- Operating cash flow decreased $33.3 million. Investing cash flow was positive $12.3 million, including $381.2 million of cash acquired with WWE, offset in part by the $321.0 million special dividend to former WWE shareholders and capital expenditures.
- Financing cash used was $424.5 million, including $296.6 million of distributions to Endeavor and subsidiaries and $100.0 million of share repurchases. The company borrowed and repaid $100.0 million under the revolver during the year.
Outlook, commentary, risks and unusual items
- Outlook: The filing provides no numerical earnings or revenue guidance. Management expects cash on hand, operating cash flow and available credit to fund operations and commitments for at least the next 12 months. It expects to refinance term debt before its April 2026 maturity, but acknowledges refinancing terms and availability are uncertain.
- Media rights: Management identifies future media-rights renewals as a growth opportunity. WWE announced long-term Netflix arrangements beginning in 2025, including U.S. Raw distribution and, as rights become available, WWE content distribution outside the U.S. UFC’s U.S. media rights agreement and WWE Network’s U.S. agreement were identified as upcoming renewal/negotiation matters, with expirations in December 2025 and March 2026, respectively.
- Leverage and rates: The first-lien term loan carries a variable rate, reported at 8.40% at year-end, and matures in 2026. A 100-basis-point rate increase would raise annual interest expense by approximately $27 million, holding debt constant. Debt is secured by liens on substantially all assets of specified borrowers and subsidiaries.
- Legal and governance matters: UFC faces antitrust class actions alleging suppression of fighter compensation; the certified damages class trial in the Le case was scheduled for April 15, 2024, and a separate case is in discovery. WWE settled the MLW antitrust matter for $20 million. The filing also describes continuing inquiries and litigation related to allegations concerning former WWE/TKO executive Vince McMahon, including a January 2024 lawsuit; outcomes and potential financial effects are uncertain.
- Unusual costs and accounting: FY2023 included $83.8 million of merger and acquisition costs, $34.2 million of certain legal costs, $21.5 million of restructuring/severance/impairment adjustments used in the Adjusted EBITDA reconciliation, and a $20.0 million WWE antitrust settlement. The company recorded $41.4 million of restructuring charges, including $19.9 million of equity compensation expense. Adjusted EBITDA is non-GAAP and excludes significant costs, including interest, taxes, amortization, transaction costs and certain legal and restructuring items.
- Combination and controls: The acquisition accounting and purchase-price allocation remain preliminary. Management said disclosure controls were effective at year-end, but the company was in a transition period as a newly public company and did not provide management’s annual assessment or auditor attestation of internal control over financial reporting. WWE had previously identified material weaknesses, with remediation ongoing.
- Other risks: Key risks include reliance on distributors and streaming partners, competition and changing viewing habits, event cancellations or injuries, cybersecurity and privacy, talent retention, integration and realization of synergies, and Endeavor’s controlling ownership and related-party service arrangements.
Important facts for investors to verify
- Review the WWE acquisition accounting, preliminary purchase-price allocation, acquired intangible values and future amortization, and compare post-acquisition performance with full-year pro forma results.
- Track UFC and WWE media-rights renewals, the transition to Netflix and other announced distribution arrangements, and the effect of rights timing on revenue.
- Assess debt refinancing progress, variable-rate exposure, covenant restrictions, cash availability and the ability of operating subsidiaries to distribute cash to the holding company.
- Monitor developments, potential exposure and costs from the UFC antitrust cases and the WWE-related investigations and litigation.
- Evaluate whether integration savings and growth opportunities materialize against elevated corporate costs, and distinguish GAAP results and cash flow from non-GAAP Adjusted EBITDA.
- Consider Endeavor’s approximately 52.1% voting control, its service-provider role, and the implications for minority shareholders and governance.