TKO Group Holdings, Inc. (TKO) Earnings Call Transcript & Summary

All right. Good morning, everybody. Welcome to Day 3 of Morgan Stanley's Technology, Media and Telecom Conference. We are starting bright and early, sort of the breakfast club, I'm Ben Swinburne, Morgan Stanley's media and entertainment analyst. And we are really excited to welcome, technically for the first time to the conference, TKO Holdings, President and COO, Mark Shapiro. Mark, it's great to have you here.

Ben, always good to be with you.

Thanks for coming. It's actually the first time we've had a chance to chat at length about this new company you guys created, and I'd love maybe to start there. Give us the thesis around putting the UFC and WWE together and why you guys are so excited about this new company?

I mean, look, I would tell you that, first off, we're clearly very confident in the industrial logic of the transaction. We think these are highly complementary properties, the UFC and WWE. Obviously, we've done this before, I mean Endeavor, and when we bought the UFC. So this is like running the playbook 2.0. From a financial profile standpoint, I mean these are both properties coming off record years. I mean, both WWE '23, record revenue, record EBITDA. UFC, record revenue, record EBITDA. And every year, by the way, is a record for UFC. And then free cash flow conversion is an amazing story for us. I mean we're -- we've guided to an excess of 50% with a couple of one-timers that we have that we won't have next year, you're talking about a 60% plus situation here. I mean that's -- in terms of investing in growth, investing in companies that produce cash, which is obviously, a priority for all investors on both fronts, you're getting it in spades here. And then I'd go further to say that the experience economy is alive and well. Biden is taking a hit here on inflation, but having said that, jobs are good, wages are good, consumers are spending money and where they're spending money with their new Fridays off, they're spending money on events, experiences. So that bodes well for us from an attendance standpoint, from a pricing standpoint, from a site fee standpoint, add to that the Endeavor Flywheel, which has a lot to do with why UFC has gone from what $170 million of EBITDA when we bought it, to 3x that now kind of going forward. Our integration is going extremely well. We're going to be at the high end of what we've guided. And as I mentioned before, we've been here before. We've done this before. We know the playbook, and we are in the sports leagues business. So if you want to be in the sports ecosystem, if you want to be with a company that controls all the different spokes of sports and ways to revenue -- generate revenue, ways to monetize revenue, ways to have access, frankly, to the teams and leagues that kind of everybody wants to be with these days, TKO is a place for you.

Yes. That's a great overview. One of the big announcements, probably the biggest announcement that you guys have made year-to-date was your kind of landmark Netflix deal with WWE, Spencer Neumann was here yesterday. We chatted a bit about that. Why did this deal make sense for WWE, especially when you think about how long, I mean, this could be a 20-year deal, and I'm sure in success, it will be. Why did that make sense? What's so interesting about going with Netflix?

Well, first my good friend Spence who I worked with at Disney, I'll have to give him some s*** because he barely talked about us when he was up here, but they'd like to downplay all their big hits. But they've -- look, Ted Sarandos, Bella, Spence all have been big supporters of this. Look, I ought to tell you, there's no way to slice it. This is just looking at it objectively. This is a landmark deal. This is an industry-changing deal. This is a transformative deal. It's Netflix, right? We're not going to get into live sports. And even though WWE is quasi live sports, we're not going to get into it. And everybody was waiting for when the code would be cracked. And we cracked the code, and it's $5.2 billion over 10 years. And it's highly visible revenue. It's high-margin revenue. It's locked in. It's recurring. We derisked the whole merger with that alone, and Netflix itself is -- got unbelievable reach and scale globally. It's a global deal. And they are a marketing powerhouse, people forget that. Just the idea. Andrew Schleimer, my CFO; and Nick Khan, who runs WWE, we were just kind of chomping at the bit, the idea of turning to Netflix and -- because they have the best marketing ever. It's just on their channel. They don't have to do much outside marketing. Whatever they put, it starts rolling the second you come there. It's getting all kinds of attention and drawing viewership. And the fact that RAW will be there on a weekly basis as the first image you see when you go to Netflix, I mean their marketing plan is insanely robust. And we're really, really excited about it. And I would just tell you, lastly, when you look at TKO, you're talking about our properties being on Disney with UFC, being on Comcast with WWE and of course, now being on Netflix. That's a good neighborhood.

Yes. That's fair. Do you think that the products will change over time? Do you expect Netflix to sort of innovate with what WWE fans see from RAW, which has frankly been more or less not the same, but the same product for a long time on cable.

That's a great question. The answer is, they plan to be very innovative. What those plans are? We're still kind of in the laboratory, exploratory stage, but I have to give a lot of credit to Rick Cordella and Mark Lazarus and NBC. When they did that NFL Wild Card game, they paid a boat load for $110 million. But arguably, if you look at the numbers, worth it for them. And they -- folks had their doubts. Can they pull it off, just technologically? Would the stream be clean? Would there be any bumps or hiccups. And instead they added -- not only was it clean and a great viewing experience, they added a whole bunch of accoutrements. And that really got the attention of Netflix. We don't want to just put the property on. We do want to be clean, and they've had some troubles in the past to being clean. But we want to be innovative. We want to add bells and whistles. We want to add all kinds of new technology. When I ran ESPN before this, we spent a lot of time K-Zone, which is the strike zone, right? We're coming up with that. The first intent line, the Hawk-Eye vision, which is Tennis, where the ball is in or out, like those were all developed at ESPN. And Netflix is very, very, I would say, incentivized to bring that same kind of technological innovation and disruption to WWE, and we welcome it.

WWE has been around, frankly, for decades. Let's talk a little bit about the UFC. Because MMA and the UFC are, to some extent, newer sports. I mean do you still look at the UFC and say this and even the broader MMA world is undermonetized relative to the popularity?

Completely. As I said, we've had a record year, year in and year out with UFC. This has just been incredible. And I give the folks at Endeavor and IMG a lot of credit for enhancing and supporting the efforts of Dana White and Lawrence Epstein and Craig Borsari and what they're building at the UFC. It's been an incredible story. But let's just take a step back, if you will, right? In 2016, we weren't even legal in New York. UFC couldn't even put on a match there. And now we're sitting here as the premier MMA organization, just celebrated our 30th anniversary, 700 million fans, 170 countries, [ 900 million households ], 600 fighters. We have the best talent. We have a lot of competition now, a lot, and they're constantly chipping at us and trying to steal our fighters. But we have 600 of the best quality fighters, and we have spent money to incubate more fighters by having a PI, a performance institute, in Mexico City that we built and paid for, by having a performance institute in Vegas that we built and paid for, by having a performance institute in Shanghai which we built and paid for, by potentially having one in the Middle East, and we're looking to do that because you never know where these fighters are coming from, and we want the best talent. On top of that, we're constantly live. We are year-round, so with the antidote to churn -- and I would tell you this, I've spent a lot of time in sports in my career, I'm getting old now. And we always -- once in a while, you hear -- you used to hear it more often than you do now. But it used to be the 4 majors, the 4 majors. And frankly, what are you talking about? Like UFC is now not only mainstream, it's 1 of the 4 majors. The ratings on ESPN and ESPN2, apples-to-apples against the NHL, even including the playoffs, we dwarf them. So you put a fight night, not a pay-per-view guys, not a preliminary bout in front of the pay-per-view, a regular weekly fight night on ESPN does double-digit rating beats across the NHL, against the NHL. And the demos are anywhere from 20% to 40% up. So not the smack Gary Bettman or anything. I love the NHL. I'm a huge Chicago Blackhawks fan, but they're just not in our league. It's just not the case. And keep in mind, when I rattle off those ratings, that doesn't include what we're doing on ESPN+, which they're not publishing. So we're that much bigger. So we're in a great place and to give you a long answer to your short question. Yes, it's under-monetized because you have all those facts. There's more money to be made in all the different places we're making it, but guess what, it's a growth story. We're going to make that money. We're already making that money. We've gone 3x on our sponsorship sales, and we're going to go further in time.

Let me ask you, Mark, about the ESPN relationship. So you guys signed this deal or at least it began, I think in 2019, which is, in many ways, kind of a world to go. It's a unique deal, right? You have cable, you have broadcast, you have pay-per-view, you don't see a lot of pay-per-view deals anymore. Has this -- what has this done over the course of this contract, which is on the -- coming to the end over the next couple of years for the UFC product?

Well, ESPN and Disney are the greatest partners you could ever have. I mean -- if we can replicate that at Netflix, we're going to be golden. They get the sport, they are fans of the sport. It was Bob Iger that frankly saw the vision. It was his decision to go bite off all the UFC, including the pay-per-views, but Jimmy Pitaro and Burke Magnus and Roz Durant, who now runs programming, are huge fans of the UFC and they support it in every way. So social, sports center coverage, short-form content, long-form content. And they work with us on the scheduling, about trying to get us the best windows. They want more UFC, not less. And by the way, they have a pretty crowded sheet of programming. Their schedule -- the calendar is nip and tuck. What I would tell you is we love the marketing strength. I mean we got out of the gate. Keep in mind, ESPN+ was in like 4 million subs. And Dana White was really concerned. Wait a second, we're going to go on ESPN+, and no ones there. And by the way, our advertisers or sponsors weren't too happy about it. We can't get any numbers. We don't know who is watching us, we're not going to pay you these numbers for a small platform. And we took a shot into ESPN's credit, they used the might of the entire Disney platform to market and promote the UFC in a way no other company could have done it. So to say we're loyal to them would be an understatement. I'm anxious to see where this all goes. ESPN flagship, what happened with ESPN+. Obviously, the cable bundle is completely imploding. ABC kind of have a little resurgence right now. So we're going to work with them behind the scenes to figure out what the next chapter of our partnership looks like.

That was actually going to be my next question, which is I think the window opens, I believe, January or so, '25 for your ESPN and UFC deal. So how are you approaching that? Are there things you're looking at for the rest of 2024, Mark, that will inform sort of how you think about maybe addressing some of these product ideas or expanding the calendar and all those kind of things?

Well, I'll tell you, yes, on the '24 part. What we do now is -- I mean, literally, the President of ESPN, Jimmy Pitaro, will fly into Vegas every quarter and meet with Dana White or at least 3 times a year. What are we doing right? What are we doing wrong? Where can we be more supportive? Where are we missing the boat and also what's important to them in terms of matchups and quality and cities that we might go to, et cetera. We really work with them on diagramming and letter boxing, if you will, checker boarding the schedule. So we want to see them just continue to keep us kind of front and center, right? They have the NFL, right? They have college football now, and that's expanding, not losing site that we are one of those majors in keeping us front and center. We'll be watching that. It is our preference to say Disney because of this history, but we've had kind of impromptu 3 different platforms inquire about that window you're talking about and when we might be able to sit down with them to discuss moving to another platform, which by the way, we will do if we can't get the right deal. But the window opens in January. There's no reason we can't start talking about it earlier. We're curious to see what happens with the NBA. You'll be talking to Adam Silver later. That will have an impact on us. Are they getting more content? Are they getting less content? And when they launch this ESPN flagship, what price points? How are they going to push it? What's going to be on ESPN Plus? What's the long-term vision for ESPN, ESPN2 and ABC. There's a lot of questions that need to be answered if you're a premier property partner, which is what we are.

I was going to ask you what the answers were to all those questions because those are the questions. I mean what do you think of the streaming sports JV and the ESPN flagship opportunity? Because you talk to a lot of investors, and I know you will today. There's a lot of concern that, frankly, if you like sports, you have the bundle and if you don't, you don't and that's kind of the world we're in. So there really isn't that much of an opportunity. What do you think?

Yes. Look, here's what I would say. It's not a criticism. But I think like this WBD ESPN combination with Fox is a big nothing. That's what it is. It's a big nothing. It's just another bundle out there, right? Like who's going to go pay $40, $50, $60, depending on what you believe, to get half the NFL package? That doesn't solve it. So now I'm at home and by the way, I'm still a DIRECTV user, I got cable, I have all the apps, like I'm as inefficient as you can be, because I just want to make sure when I want to see Caitlin Clark and Iowa women's basketball team playing, I actually have it. And I never know where it's going to be. So you're not going to get one-stop shopping. You're going to be missing a lot of stuff that's on NBC and CBS. So why would I get it? I must get it in addition, but it's an expensive in addition. So the idea that like, oh, this is coming out and [indiscernible] is going crazy and going crazy about what? It's another bundle. Yes, it's got a lot more there on one package, but it's not the end all be all. And frankly, for Disney, it's just moving money. If I'm going to get that, I'm probably not going to go get ESPN flagship when that comes out. Or if I'm going to get ESPN flagship, I don't necessarily need to get that big bundle from Lachlan. So there's a lot being made out of it and then on top of it 5 million, 6 million homes in 5 years, which Lachlan told you the other day, I mean, really, what are we talking about.

Right, right, right. No, I hear you. You mentioned this before. I mean, ESPN Plus and the UFC have sort of had this really nice growth trajectory over the last several years. Do you have a view of what happens to ESPN+ as we think about it today, when ESPN flagship launches? I mean those products sort of come together? And how does that impact your UFC deal?

Yes. Look, it's interesting. You read Nelson Peltz's white paper. A very interesting read, by the way, long read, but interesting read and obviously his position is, you can't do flagships. You can't do direct-to-consumer. It will kill ESPN+. Look, ESPN direct-to-consumer is the smartest thing ever. They absolutely should do it. They're going to get critical mass. And by the way, they're going to need premier properties to do that, period. If you're going to get ESPN direct-to-consumer, you've got to believe, I am getting the best-of-the-best stuff that I necessarily can't get elsewhere, which, by the way, that's where we come into play. ESPN+ grew from 4 million to whatever, 26 million, because the anchor tenant is the UFC, make no bones about it. And we're one of the only sports that is flexible enough to play in all these places and actually give you proprietary content you can't get elsewhere, that you could potentially just get on ESPN flagship. So I think they keep it all. There's definitely a place for ESPN+. They've got a lot of subs there. They've got a lot of programming. They've got a lot of secondary and tertiary sports. They've got a lot of library program. There's -- you need that platform, frankly, and you're off to the races already. So keep that puppy going and then get ESPN flagship going with just premier live stuff, maybe more First Take with Stephen A. Smith, full disclosure we represent, maybe more Pardon the Interruption with Mike Wilbon and Tony Kornheiser. Like give them the stuff they really, really want and they're willing to pay extra for. And Disney is not stupid. They'll make it work. And by the way, they have the best portfolio of content, nobody even close.

Right. How does Dana feel about maybe expanding the calendar to more than 42 fights, more than 13 pay-per-views? Or are there other ways to give ESPN or your other potential partners more value?

Yes. Dana is -- Dana is the greatest. I mean he really is the greatest marketer. He's the greatest promoter. He's always on. His life is the UFC. Obviously, he's got -- he's building some other businesses now. But he is knee-deep in matchmaking in the Sphere, like it wasn't even a discussion. Like, we're going to the Sphere. [indiscernible] going to be in the first [indiscernible]. Angola was like, well, we don't know that we could fit you in, and we don't know that like our venue is set up to hold a sport. We're doing it. We're going to make it work. Okay, great. And then [indiscernible] all this excitement and when we have a fight there, I don't care who's fighting. It's going to be a spectacle. And so when we talk to Dana about maybe adding -- remember, last year, we had 13, and this year, we had 12. In a new deal, the answer is yes. We have the capability to do more pay-per-view. We have the capability to do more fight nights and we're going to explore all of that. Frankly, the Dana White's Contender Series, which is on ESPN, that's actually picking up some great traction in the way The Ultimate Fighter used to be on Spike. So I think that's something we can toggle with as well. But we're going to look to probably expand our content portfolio, live content portfolio, in order to maximize dollars in the marketplace.

Mark, let's shift a little bit. I want to ask about sponsorships. You're up to $200 million of sponsorship revenue at the UFC. Is there a way for you to frame for us how -- what the opportunity is from here? How much more inventory you can create or verticals that you're not monetizing today?

Yes. Several categories we're not monetizing yet, QSR being one of them, had plenty of conversations. For one reason or another, we're not finding the right marketing partner, the right brand or the right dollars, right? It's a combination. We don't just want dollars. We need marketing partners. We need folks that are going to activate our brand across America to start with. And so there's definitely more we can get from UFC. But the fact that we bought UFC, they were doing, what, $30 million, $40 million of sponsorship and we're now at $200 million, pinch me on that. We've got an amazing team led by Grant Norris-Jones and Lucas Covalis. And they are now fronting a best-in-class unified team with WWE that we just started in January. So we're just out of the gate. In fact, we haven't even made a pitch yet on a combined sale. But think about it, and I'm not criticizing Vince McMahon. The WWE didn't activate and didn't do a lot of branding inside the arena. In fact, the canvas was blank? Ours is arguably too muddy, but their's is dead empty. And so we're going to go to town on sponsorship. And I think that -- well, I'd like to help you model it. What does that turn out to be. It's still early going here, but I think that the same $30 million to $200 million we did for UFC, we can do on the WWE side in roughly the same amount of time or maybe better because we have a best-in-class organization going. But -- we're closing deals every week on the UFC, which is exciting, and we have a lot of work to do on WWE right now.

Yes. And I want -- we're going to get to WWE next, just one more topic on the UFC. And these are -- sort of tying 2 things together that you've been asked about for all the years you guys have been public at Endeavor as well, you have incredibly enviable margins at the UFC, which of course, the market looks at and say that they're overearning, right? That's the things you get for having 50% EBITDA margin. So can you talk a little bit about competition for fighters, which you did mention before. And it would be great if you can also address the class action suits that are around the business and one of the trials set to start in April?

So let's start just on the margins front. That's only going to grow because sponsorship is going to go north, site fees are significant. We have -- the majority of our fights aren't getting site fees. We just started getting into this business, if you will, and that's high margin and high visible. That's going to drive the margin. Our ticket pricing, dynamic ticket pricing, we're setting records everywhere you go. Every week, we're putting on a press release, a new record, which might follow to that to [indiscernible], who manages that for us is, you're not charging enough? Tell me a day when we're actually at 97% capacity. So we're going to get more there. And that margin is just going to keep going, plus new media deals and our international media deals, which 1/3 are rolling off every single year. So that margin, just on the UFC, is going to keep driving. Now if you think of the combined TKO, and I'm sorry, I'm taking this maybe in another direction, but we're in excess of 50%. Keep in mind our year, this year, we have one less UFC fight, pay-per-view, and we have a fourth quarter with no rights fee for the WWE. If you put those 2 together, that's $100 million that just goes back in. So our cash flow is going to get -- our revenue top line is going to get significantly higher, right? That growth would be better. And on the cash flow side of things, we had a couple of advertising deals for '24 that hit in December, and we had a onetime for the WWE headquarters, some CapEx, that will be gone. So that's another roughly $100 million. So we're going to be -- when this thing starts rolling in '25, we're going to be in excess of 60% for the combined TKO. So this is a continued growth story. In terms of the stable of fighters, look, it's -- competition is great. We welcome it. It's strong, and they're coming at us from all ends. We're seeing it everywhere. They want our fighters. They want what the UFC brand stands for. Hell, they'd buy Dana White if they could. But we're going to be competitive. We're still paying our fighters more than anybody else, and we're giving them touches to more of the revenue streams. So they're getting a piece of the consumer products. They're getting a piece of the sponsorship. If you're winning on the UFC, you're going to be making more and more money and you're making great money as it is. And then as far as the antitrust goes, look, I would just tell you that we believe in the merits of the case, strongly. Our trial is in April. We have every intention of going through with that. We feel very confident about where we stand. But on a parallel track, as you see in kind of any case of this nature, we are in mediation with the other side, and we'll see what happens.

So I don't want to put words in your mouth, Mark, but it sounds like what you're saying is, with the revenue growth you have ahead of you, even with all the competition for your talent, you can pay fighters, retain the best fighters and grow margins at the same time irrespective of these [indiscernible]?

Absolutely. And you know what -- we don't want to lose fighters. By the way, there's no one fighter that makes or breaks the UFC. It's just a fact. It's not a slam. We have an incredible stable. We respect them, and we spend a lot of money on these performance centers where our fighters can come to these cities and train and eat for free, right? I mean we have hundreds of fighters coming in every week, getting physical therapy in Las Vegas or nothing. That's just part of getting them back into the Octagon. That's part of the deal. We have to support them. So we will continue to spend. We will continue to be the leader in spending on wages and incentives for our fighters. And yes, we believe that when it comes to the competition, we have to continue to be innovative, where else you're going to fall back. We take nothing for granted, nothing for granted.

Okay. Let's shift to WWE. I mean the biggest focus on the business, I think, is still in '25, but the PLE, the premium live events, opportunity. So that is on Peacock in the U.S. today. Now that you own the asset, you've sort of seen the data, are you excited about the opportunity to reprice that business? How do you think it fits into sort of the sports landscape that's pretty dynamic?

Look, that's underpriced. And everybody likes to talk about the Disney UFC deal being underpriced. But that's neither here nor there. The PLEs not underpriced because a bad deal was cut. A great deal was cut. And then the market catches up. That's just what happens. And new deals get cut. But these are essentially pay-per-views that are once a month. Obviously, now you just get them on the WWE network that are massively performing for NBC, massively performing. I think higher than their expectations, certainly way higher than what Steve Burke envisioned when he greenlit this. So there is insatiable demand for the PLEs when that window becomes available in '26. But we are loyal to NBC and Peacock. We do think they've been a great partner. They know how to market the WWE. It's become appointment viewing for their platforms and their viewers. We like the neighborhood around us, meaning the Premier League, Supercross, et cetera. And we'll look to renew with them. But I would tell you that this will be one hotly contested property.

Just knowing Netflix and watching how they operate, they like global rights. That's not a comment per se just on WWE, but in general, why wouldn't we expect them to look hard at it, because they have these -- they have this content outside the United States, starting next year.

Well, I'll tell you this, when we met with Netflix, when we met with Apple, when we met with other streaming platforms, the conversation always started with one of the PLEs up.

When you met on RAW?

When we met on RAW, always started with that. And like we're not here to talk about the PLEs, but we are in the sense that it's part of the narrative, right? I mean, if you watch RAW and SmackDown, the things lead in and out of, they weave in and out of these PLEs. So it's an important part of the narrative, concept and continuum to your point. So why wouldn't Netflix be there? Look, let's just get out of the gate with RAW Strong, right? We have time. Let's see how that partnership goes. Let's see that, that marketing really delivers. Let's see that the viewership shows up. Let's see that we're monetizing it from a sponsorship consumer products, site fees standpoint. And then we'll talk about where it goes, if it doesn't go back to NBC Peacock. We're patient. And I think that has bode well for us. We had a lot of pressure when we announced the SmackDown deal. And you and I had conversations about that. The market was freaking out RAW, NXT, why didn't they announce it? They don't have anybody. There's no demand. They're not going to get the 1/4 increase. I'm not saying that to be, hey, we did it. Look at us now, there was pressure, right? But we said from the beginning, we're going to be patient, and it's going to work in our favor. And it overdelivered on our expectations. Never that I think Netflix was coming in, just to be clear. Not my wildest dreams that I think Netflix was coming in. And when we first started talking to Netflix, it was frankly about NXT. It wasn't even about RAW and then that just turned into a bigger conversation. And then the RAW conversation became a global conversation. So I think they certainly have the wherewithal to do more. I think they have an appetite to do more. But let's walk before we run.

Okay. That makes sense. That's quite the upsell from NXT to global, almost everything.

I give the credit to Andrew Schleimer and Nick Khan, who are in the room, been kind of back and forth because Netflix, everybody thinks they just spend a lot of money, they are terrific negotiators. And they are smart and they are bright and they don't leave a kernel on the table.

That could be a little side, like a series, like a Drive to Survive where they watching the negotiations.

No, I wouldn't even go to it. Call me in the breaks. Okay. This is going to be bloody.

Okay. Let me ask you about -- you already sort of talked about sponsorship at WWE. What about live events. That's -- coming out of the pandemic, live events sort of went down and they came back up. At WWE, how are you, Nick and the team, thinking about the right live event schedule for WWE? And what's the opportunity to do more with UFC?

Well, as you know, we just, a couple of weeks ago, did a combo in Anaheim.

How did that go?

Terrific. Just -- I'm focused on the cost structure, too. So like, okay, if we go to the same city on the same weekend, how can we cut costs, production, trucks, bandwidth. In the old days, satellite time, labor, take machines, bundling ticket pricing on the revenue side. Obviously, local municipality monies to get us to come, rent, like where can we squeeze and make this equation a big winner on the top line and on the cost structure. And it was a great test, if you will. We signed a long-term deal, and we're going to look to further that as we proceed. Plus, you got to love the fact we had WWE fighters coming to the UFC fight making noise and UFC -- or WWE Superstars going to the UFC fights and making noise. And we had UFC fighters going to the WWE events and making noise. I mean it was unplanned synergy, really was spontaneous, and it was a great story for us, and we're going to look to replicate that. But those will be select. And for the most part, especially in '24 and a little bit of '25, we've already calendared this out. And we already have commitments to certain arenas, et cetera, that we just can't break out of. So that's a long-term play for us, but it will help us on both sides. But we're -- I would say we're keenly focused on it.

That's helpful. You mentioned site fees a few times. Is that an opportunity at WWE and the UFC? And as you think about site fees, often that sort of international events, the time zones aren't great for the U.S. broadcast? Is that something you have to balance?

Absolutely. But there's -- as long as there's demand for your product, folks will work the local governments to come up with dollars to get you there, to get their hotel rooms booked, to get people in their restaurants, to get the foot traffic in their cities. And there is great demand for that. As evidence, why we're getting paid a nice sum to go to Saudi Arabia with UFC, on the heels of the WWE of course, having their deal. We have an amazing partnership with Abu Dhabian DCT that's expanding every day, not just in Abu Dhabi, but now partnering with them to look for more countries to bring the UFC in tandem. So the site fees are there. This actually isn't a tough business, and we'll be aggressive to make sure we kind of get our share, if you will.

Okay. In the time we have left, I want to talk a bit about your balance sheet, capital allocation. You talked about free cash flow conversion. So on your earnings call, Mark, you and the team talked about the fact that you believe the business can support up to 3x leverage. You're obviously below that today. I think in the near term, you will delever. So if you can talk a little bit about what went into the decision to sort of set that kind of leverage comfort range, but also why deleveraging in near term makes sense?

Look, I think we're going to deleverage just naturally by our performance and the cash we're going to generate, especially from a net debt perspective. But I think, look, the topic which is top of mind is really what are you going to do with all that cash? Why haven't you announced the capital return program? Are there reasons that we don't know about that you're -- look, let's go generate the cash first, right? I mean we closed this deal in September. We're infants when it comes to this merger. So I think what we said on the call is, what I'm going to stick to today, which is we're going to be prudent with our cash. We're going to generate our cash. We're going to be extremely careful and deliberate and strategic about the way we ultimately spend that cash. We are absolutely focused in the long term on a capital return program that is robust and sustainable and consistent. And that should be music to the ears of our long-term investors, whether that's a dividend, whether that's a share buyback program, whether that's just in the form of continuing to kind of bring our leverage down. As you recall, Vince McMahon believed in no debt and had no debt on WWE. We're not there. We're going to carry leverage, obviously, but we guided to the fact that we'd like to remain under that 3x, if you will. But it's going to -- it's a good place to be. In terms of M&A, very high bar, a very high bar for us right now for us to look at something or think about going anywhere. We're more focused on what we can do organically and internally with investments to that has significant ROI tied to it.

Got it. Mark, are you able to comment as to whether TKO participated in the Vince McMahon recently announced share sale?

Yes, we did not participate in the recent sale on Vince McMahon's load that he dropped off. And this is now his second time. He has gone from 28 million shares to 15 million shares. He now roughly has 8.5%. We're not in conversations with Vince. We don't -- I said this on the call. We don't talk to him. We don't have -- we don't know his motives, his plans, his time lines. What, if any, he doesn't consult with us. He doesn't work for the company. He doesn't work at the company. He doesn't come into the offices of the company. And he's not coming back to the company. And that's where we sit.

That's pretty clear. We've been talking to investors quite a bit about your corporate structure. It's pretty unique with, I think, a double UP-C, which is fun to say but very hard to explain. Is this the right long-term structure for the company in your view? Would you like to see -- is there a natural way to evolve this over the longer term to something more, I don't know, standard for lack of better term?

No. No. I mean, yes, we're comfortable with where we are. Obviously, a lot of time thought, energy, strategy and mapping went into this plan. Look, we're focused on doing what we said from the get-go. We've run this playbook before with UFC. We're going to run it with WWE. And oh, yes, we're going to have the benefit of having the UFC while we do it. Which we didn't have in other sports league at the time when we made the UFC such a success. So different audiences. By the way, both have strong female basis, frankly, 40%. I mean, it's pretty significant. WWE tends to have more kids at their events. And we're going to make sure that we maximize the monetization opportunities because we are under monetized. So it's -- we're focused on those site fees. We're focused on selling more sponsorship and partnerships. We're focusing on the consumer products. We're focused on dynamic ticket pricing, which we just started at WWE. They weren't even doing at the time. We're focused on these media renewals, UFC coming up before you know it, PLE is right behind it, and we intend to make some noise with that.

Well, that's great. Thank you, Mark. Anything you want to highlight for WrestleMania, which is, I think, cometh -- the road to WrestleMania is approaching, like less than a month out.

Yes. These -- look, these -- I'm actually pleasantly surprised at how much noise -- Elimination Chamber and Royal Rumble, I mean these PLEs make a lot of noise. Our event coming up in April is going to be heavily attended. You're going to see a little WME influence there. Because we've got a lot of celebs coming. We got a lot of partners that are coming. A lot of folks that are invested in 1 or 2 of the different sports properties, where our ticket sales are off the charts and went fast. We're in a stadium. I mean, enough said right there. And our sponsorship sales for just that event, I'd frankly not like to do that in the future. We want to bundle and package, but those are going extremely well on that front. And the event we're launching with Michael Rubin with Fanatics beforehand sort of a -- I think they're calling it WWE World, which is a fan experience, hot cakes, the tickets, and more spending opportunities as you go. I mean, it's really turned into sort of a festival. And I think that's a blueprint for what we can do going forward, not just on the WWE side but on the UFC side. We festivalized UFC a little bit, music. Obviously, we have the weigh-ins. We do a lot to make it a weekend, but I think partnering with Ruben on the Fanatics side with collectibles in merch and celebrity appearances, meet and greets and music, and that could turn into a hell of a road show.

Absolutely. Mark, anything you want to wrap up with as we finish our conversation and leave this room and audience, TKO's outlook.

I appreciate -- I'd like to see you be a little more bullish in your reports. Now that you've seen this, but...

Right. So I asked one question too many.

No, no. I would just tell you, look, you're talking about a company that doesn't spend much in CapEx, right -- it doesn't have much debt and dropping. The free cash flow is enviable from any other company, and we're in a space that matters. Whether you're watching on old screens or new screens, sports is where it's at. Music strong, too, by the way. But sports is where it's at. You can't get away from it. It's live. I mean what that Caitlin Clark coming back to that women's basketball game is like -- the second highest-viewed basketball game in college basketball -- of the year, men or women. The highest women's viewership in 25 years, Travis Scott is flying out to the Iowa City, to be there. We rep him, full disclosure. Like this is incredible. Like sports is just hot and getting hotter and we sit at the epicenter with one of the majors in the UFC and WWE, which gets the double down as a sports and an entertainment property. So we're not arrogant about it. We're not overconfident. We are prudent, we are flexible, we are patient and we are all about overdelivering. And I thank you for your time today.

Thanks, everybody. Thanks, Mark.