TKO Group Holdings, Inc.
Analysis
Most of TKO's money now comes from long-term media contracts that rise every year, and management is spending to grow the audience those contracts get repriced against — even at a $30 million loss on the White House card. Did that spending show up as weaker profit per share?
- Media rights turned TKO into a contracted business.
More than 70% of UFC and WWE revenue is now locked into media deals whose fees rise every year, replacing selling each fight one at a time. The show costs the same to stage either way, so nearly all of each increase drops to profit. How does the margin stack up against other live-events companies?
- TKO is buying attention on purpose, including at a loss.
Management went into the White House card knowing it would lose money, and it did, about $30 million, calling it a marketing investment rather than a business. The exposure brought 25 new partners, many on multiyear deals.
- Profit is growing faster than the cash behind it.
Cash conversion was 54% of profit last quarter, under the 60%-plus the company targets, because Paramount pays for the UFC rights more heavily in later years and the World Cup cash at On Location belongs to partners. How does cash conversion compare with its own recent years?
- The locked-in media deals keep escalating to the end of the decade. Staging a show costs about the same either way, so each yearly increase drops nearly straight to profit.
- Partnership and city-incentive targets stay on schedule. Both are money that arrives without selling another ticket, so hitting them lifts profit faster than adding events.
- UFC's new free-to-air reach turns into higher prices. Sponsors and ticket buyers must pay more for that bigger audience, or the spending never comes back.
- The reach-buying phase costs more than the calls suggest. International shows sell less sponsorship and one-off nights run at a loss, so more events is not more profit.
- Cash keeps arriving behind the profit it belongs to. Buybacks are funded with new borrowing, so debt grows while the cash to pay for them arrives years later.
- The audience may not be worth more than it was. WrestleMania ticket sales fell year on year and fans are pushing back on prices, while fighter pay keeps rising.
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No product-segment revenue breakdown reported for this stock.