TKO Q2 financial notes: WWE revenue, ticket prices, UFC piracy & PPV cost issues

The parent company of WWE & UFC had such a successful second quarter that they increased their targeted revenue for the year.

On Thursday, TKO released their Q2 financial statements followed by an investors call that featured comments from the usual company leadership with some nods to what might be coming pricing-wise down the line for consumers.

The new revenue target for the year is $2.745 billion, up from the originally forecasted $2.67 billion.

Overall company revenue increased to $851.2 million thanks to big quarters from WWE ($456.8 million) and UFC ($394.4 million), up from $629.7 million in Q1.

The quarterly revenue increase of $46.5 million by WWE was driven by increases in live event revenue, media rights and content revenue. Ticket sales revenue helped the live events portion while the addition of one PLE in the quarter helped in all areas. They noted third-party original programming revenue was down due to “timing of delivery” and their consumer products revenue was flat due to an increase in video game license revenue being offset by their transition of live event merch sales to Fanatics.

The UFC revenue increase of $89.2 million was driven by increases in media rights & content ($38.9 million), live events ($36.7 million) and sponsorship ($15.5 million). They noted they held one more “numbered event” and that their media rights fees contractually escalated in addition to “higher site fee revenues.”

The UFC class action lawsuit was mentioned in their release and on the call, not straying too far from their original statements when the presiding judge would not accept the initial settlement. They believe the judge erred in making his ruling and while they are prepared to go to court on both cases, they are evaluating all their options including new settlement talks.

Call notes:

• Asked about further optimizing ticket prices for WWE, TKO president Mark Shapiro said they haven’t seen any pushback and that site fees are a huge growth sector for them, sponsorship is great, and rights fees are great for both WWE and UFC.
• He made a point to say “don’t underestimate the Netflix play” in growing WWE worldwide in that it’s all about discovery and new viewers due to WWE being featured on the home screen when viewers log on. He said that is “a whole new audience for us” and expects it to help drive both site fees and sponsorship increases.
• While initially forecasting $100 million in cost savings when the merger happened, TKO chief financial officer Andrew Schleimer said they now expect to exceed that, citing efficiencies gained thus far by cutting “superfluous” production costs and making some shows “smaller.” That comment is believed to be related to using smaller sets for some PLEs which allows for more tickets to be sold and less setup/breakdown costs.
• In an interesting comment, Shapiro said their UFC piracy numbers are “jacked up” due to ESPN becoming a bit too aggressive with their PPV pricing. He said he and Dana White talked to ESPN’s Jimmy Pitaro about that and that ESPN was receptive, and some changes with discounting for early buys has appeared. He also said they are sustaining their buys.
• Shapiro said TKO head Ari Emanuel has a big focus on “festivalizing” their events and making them more multi-day cultural events, something municipalities and cities are saying they want more of. He mentioned wanting to pit cities against each other to bring them in, citing the Las Vegas vs. Minnesota fight for WrestleMania 41 that saw the former up their offer to secure it.
• Schleimer said the UFC received a $20 million site fee for the company’s debut in Saudi Arabia in June and that there was a “meaningful fee” attached to UFC 302 from Newark, New Jersey.
• Asked about consumer trends for both brands, they aren’t seeing any slowdown, crediting the creativity and matchmaking by Dana White and Paul Levesque. Shapiro said demos are strong, age group is strong, and the Hispanic market has picked up which they are trying to grow.
• He said they are watching their ticket pricing but probably aren’t being as aggressive with WWE as they should be and mentions using some dynamic pricing with some venues.

Other notes:

• Vince McMahon was in TKO’s 10-Q filing as well with two separate stock purchases agreements by TKO, one on April 4th that purchased 1,642,970 shares from McMahon for $146.2 million and another on April 7th for 1,853,724 shares at $165 million.
• In the first half of the year, Dwayne Johnson earned $6.7 million and $15.7 million worth of restricted stock units (RSUs) in two transactions as part of his $30 million agreement with TKO. He also earned a combined $700,000 in royalties and incurred $3.1 million in “certain travel expenses associated with delivering services” in the first six months of which $400,000 was paid back to him.