TKO Group Holdings Inc (TKO) 2023 Q3 法說會逐字稿

Hello, everyone. Thank you for attending today's TKO third-quarter 2023 earnings call. My name is Sierra, and I will be your moderator today. (Operator Instructions)

I would now like to pass the conference over to our host, Seth Zaslow, Head of Investor Relations with TKO. Please proceed.

Good afternoon, and welcome to TKO's third-quarter 2023 earnings call. A short while ago, we issued a press release, which you can view on our Investor Relations website. A recording of this call will also be available via our website for at least 30 days. Joining me on today's call are Ari Emmanuel, TKO's Chief Executive Officer; Mark Shapiro, our President and COO; and Andrew Schleimer, our CFO. After prepared remarks from Ari and Andrew, we'll open the call for questions.

The purpose of this call is to provide you with information regarding our third-quarter 2023 performance. I do want to remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties, and assumptions. Please see our filings with the Securities and Exchange Commission for further details. If these risks or uncertainties were to materialize or any assumptions prove incorrect, our results may differ materially from those expressed or implied on this call.

Forward-looking statements speak only as of the date they are made and we undertake no obligation to update them in light of new information or future events, except as legally required. Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics can be found in our press release issued today, as well as the information posted on our IR website.

With that, I'll now turn the call over to Ari.

Thanks, Seth, and good afternoon, everyone. Welcome to TKO's first earnings call. Since launching TKO on September 12, our teams at WWE, UFC, and Endeavor have been focused on integration and executing our strategy. This includes identifying cost synergies at the high end of the range we guided, bringing events to new international markets, including Saudi Arabia and Australia; delivering media rights increases for WWE SmackDown and NXT; and closing the largest global partnership deal ever for UFC with AB InBev.

Before Andrew provides a financial update, I'd like to reiterate why we're so bullish about TKO, and highlight the progress we're making to accelerate growth, and unlock long-term value for shareholders. TKO brings together two leading pure-play sports and entertainment companies that are uniquely positioned to capitalize on the ongoing demand for premium content and live events. While UFC and WWE's iconic brands remain distinct, we know we can capitalize on their similarities.

As just a few examples, both UFC and WWE are in season year-round with live events and premium content that reach more than a combined one billion fans globally. Our content is an antidote for churn. Both UFC and WWE have large, young, and diverse fanbases who are deeply engaged across linear, digital, and social channels, video games, and sports betting. Both properties are tailor made for all levers of the sport's ecosystem.

In addition to our high-margin US domestic media distribution deals, UFC and WWE have enormous upside for growth internationally, especially when powered by the scale and leverage of the media group at IMG inside Endeavor.

As we've articulated since April, the strategic and financial rationale of this transaction is underpinned by the vast array of potential revenue synergies we expect, as we bring these two businesses together and activate the Endeavor flywheel. We anticipate this will result in accelerated revenue growth, increased margins, and an enhanced profitability profile for TKO.

Now, turning to some highlights. At UFC, we had six sellouts in the quarter, including record-breaking events in Sydney, Singapore, and Paris that all underscore the growth potential we see internationally and the reach and popularity of the brand. Notably, UFC is making significant progress in global expansion, particularly in the Middle East.

In October, we announced the extension of UFC's long-standing partnership with the Department of Culture and Tourism Abu Dhabi to continue hosting one numbered event there each year and up to three Fight Nights in the region. Additionally, we will expand our presence in the region when UFC debuts a first-ever Fight Night in Saudi Arabia next March as part of Riyadh season.

This deal builds on WWE's long-standing partnership with the Kingdom and reflects Saudi Arabia's commitment to bringing more premium-mixed martial arts events to the country. It is also a clear indication that Saudi Arabia has every intention of growing its relationship with the UFC, despite assumptions made about their recent investment in the professional fighter's league.

Both UFC and WWE have built a strong presence in the Middle East. And we remain focused on growing our businesses and fan bases there over time. Importantly, these new deals include significant site fees, which represent a high-margin growth opportunity for both UFC and WWE. So far in 2023, we are on track to secure close to mid eight figures in site fees anchored by our recent agreement with DCT Abu Dhabi. And we anticipate meaningful growth over time as we sign new deals and expand our live events footprint.

We are also leveraging the full Endeavor flywheel to bring new global partnership opportunities to TKO. AB InBev just announced a significant multi-year deal with UFC to become its official global beer partner beginning in 2024. The deal, UFC's biggest ever in aggregate including cash and marketing assets, will bring Bud Light into the Octagon in the US and integrate AB InBev brands globally across live events, broadcast, and social media. The marketing commitment we've secured from AB InBev for our international events will be a significant driver for D2C subscriptions, ticket sales, and viewership levels, particularly in Mexico, Brazil, and across South America.

Pivoting to WWE. On the events side, WWE set multiple records in the third quarter and unveiled two new international premium live events for 2024. WWE will return to Australia in February as part of a tourism Western Australia partnership that includes its largest ever site fee. WWE will also stage its first-ever premium live event in Germany next August.

We are also making solid progress on the media rights front. Today, we are pleased to announce a new five-year agreement for WWE NXT with the CW Network. This deal marks the first time in NXT's 13-year history it will air on broadcast television.

We secured a 70% AAV increase for this property, which highlights WWE's next generation of superstars. More importantly, the process and demand were brisk, which should serve as an encouraging sign to our investor base vis-à-vis our Raw discussions, which are quite active at the moment with multiple linear and streaming partners. Given we produce all WWE content in-house, we have until October of next year to find the right partner. And we remain measured, strategic, and patient in our approach to maximizing value.

The NXT deal comes on the heels of a new five-year partnership with NBCUniversal, which we announced in September, that will bring WWE Smackdown back to USA Network next October. That agreement, which represents a 40% AAV increase over the existing SmackDown deal, includes four annual primetime specials that will air on NBC, marking the first time WWE will air on the network in prime time.

Just two months after bringing UFC and WWE under one roof, the playbook is working as designed. We've made great progress, but the work is truly just getting started. With that, I'll hand off to Andrew.

Thanks, Ari. And good afternoon, everyone. Before I discuss our results, I want to share a couple of updates on our integration and how we will report our financials.

As Ari highlighted, we are very excited about bringing the UFC and WWE businesses under one roof. These businesses are highly complementary, well positioned for success, and are both delivering strong financial results. Combining these two iconic brands and leveraging the capabilities of Endeavor will only make them stronger. Recently, we've been hard at work integrating the businesses and beginning to realize the revenue and cost synergies that we've been discussing with investors since we announced the deal back in April.

Further to Ari's remarks, on the revenue side, we realized a number of early meaningful wins in media rights, with renewals for SmackDown and NXT and in sponsorship with AB InBev. Our extension with DCT in Abu Dhabi and first-ever live event deal for UFC with the Kingdom of Saudi Arabia demonstrate the ever-increasing global demand for our product.

With that, I want to further emphasize the importance of these site fee deals to our business, which as previously articulated, is an area of major strategic focus and one of the levers that we'll continue to pull to drive growth. In addition to the two Middle East examples, we will also realize the single highest site fee in WWE's history with WWE Elimination Chamber in Perth, Australia, in February 2024, a deal done in collaboration with UFC and Endeavor's government relations teams.

I would also like to provide some additional detail on the cost side. We're performing a detailed review to identify cost savings opportunities across all of TKO. We're focused on areas such as IT, marketing, finance, human resources, and legal. In addition, we're looking at overlapping personnel in revenue-generating areas such as sponsorship, media rights, and consumer products.

We're also reviewing ways we can be more efficient in other areas of the business, including live events, production, and operations. We've already identified and commenced actioning upon run-rate savings that when fully realized will allow us to achieve the upper end of the previously communicated range of $50 million to $100 million in annualized savings. We anticipate realizing approximately 75% of these synergies in 2024.

These are early days. And as our team has done successfully in past integration, including with UFC, we expect to identify and deliver additional efficiencies over time.

Pivoting to how we are reporting our results for TKO. In connection with the transaction, we performed a review of our business to determine the optimal reporting structure of the new public company. We considered various factors, such as how the business will be managed, how financial results will be evaluated, and how key operating decisions will be made.

Based on this review, we've decided to report two business segments: UFC and WWE; as well as a corporate group, which captures unallocated general administrative and other corporate expenses. As I'm sure many of you saw, we issued historical financial information last week to provide you with detail around this new reporting structure, specifically a recast in the prior periods in the manner we'll report them going forward.

Turning to our financial results. Because of the timing of the transaction, our consolidated results this quarter will include a full quarter of activity for UFC and 19 days of activity for WWE. For the quarter ended September 30, TKO generated $449 million in consolidated revenue, an increase of 32%.

Net income for the quarter was $22 million. Adjusted EBITDA on a consolidated basis was $240 million, an increase of 26%. Our adjusted EBITDA margin was 53%.

To assist with comparability, we've also presented information that includes WWE activity and a portion of WWE related to the corporate group for the full quarter in both periods. On this basis, combined revenue was $685 million. And combined adjusted EBITDA for UFC, WWE, and their respective portions of corporate totaled $298 million. Our combined adjusted EBITDA margin was 43%.

Including WWE activity for the prior year period, combined revenue was $645 million and combined adjusted EBITDA was $282 million. Our combined adjusted EBITDA margin was 44%. Based on these amounts, combined revenue and adjusted EBITDA both increased 6% year over year.

Now, I'll walk you through each of our segments. Our UFC segment generated revenue of $398 million in the quarter, an increase of 17% or $57 million. Adjusted EBITDA for the quarter was $238 million, an increase of 17% or $34 million. UFC's adjusted EBITDA margin was 60% in both periods. The results reflect continued strong performance across each category of the business.

Media rights and content increased $31 million to $267 million. The increase was driven by two additional Fight Night events compared to the prior period, contractual and annual step-ups in media rights agreements and certain international renewals which kicked in earlier this year. As previously disclosed, we are seeing the positive impact of increases in international deal of AAVs in our numbers.

Live events revenue increased $13 million to $52 million. The increase was driven by one incremental event with a live audience compared to the same period last year, and continued strong demand for tickets and VIP experiences at our events. Results in the quarter also benefited from higher site fees due to our multi-year partnerships to bring live events in the Salt Lake City, Utah; and Sydney, Australia.

Sponsorship revenue increased $12 million to $64 million. The increase was driven by contractual and annual step-ups in existing agreements and new partnerships secured year to date. Expenses increased $23 million to $159 million. The increase was primarily due to a $16 million increase in athlete costs due to the timing of matchups and additional production costs from incremental events within the quarter.

Venue, marketing, and other operational costs also increased due to two additional Fight Nights and two additional international events versus the prior year period.

Now turning to WWE. As I mentioned, reported results for WWE only include 19 days in the third quarter from September 12 through September 30. For this period, WWE revenue was $52 million and adjusted EBITDA was $22 million.

Including WWE activity for the full 90 days in the third quarter, combined revenue was $287 million, combined adjusted EBITDA was $102 million, and combined adjusted EBITDA margin was 36%. This compares to WWE revenue of $305 million, adjusted EBITDA of $123 million, and a margin of 40% in the prior period.

The following commentary on the WWE segment includes activity for the full quarter in both '22 and '23. As anticipated, timing impact the comparability of results in the quarter causing declines in media rights and content revenue, as well as consumer products licensing revenue, partially offset by an increase in live events rep.

Media rights and content declined $9 million to $211 million. The decrease was primarily due to the timing of third-party original programming and the airing of one less episode of SmackDown in the current year period. These items more than offset contractual escalation of rights fees from the distribution of WWE's weekly flagship shows and premium live events.

Live events revenue increased 14% to $39 million, despite 10 fewer non-televised events, reflecting continued strong demand. Consumer products licensing revenue declined $13 million to $23 million. The decrease primarily reflected the absence of revenue recognized in the prior year period related to certain licensing agreements with minimum guarantees.

As previously disclosed, the accounting related to the transition of our venue merchandise business to Fanatics also impacted revenue in the period. Expenses were essentially flat as an increase in content creation costs was substantially offset by lower expenses related to third-party original programming and the transition of the venue merchandise business.

Turning to corporate. Corporate reflects operations not allocated to the UFC or WWE segments and primarily consists of general and administrative expenses. Corporate also includes the management fees paid by TKO to Endeavor under its services agreement.

On a consolidated basis, corporate expense was $21 million for the third quarter. Including [WWE] activity for the full 90-day period, combined corporate expense was $42 million for the third quarter of 2023 compared to $45 million in the prior year, a decrease of $3 million. The decrease was primarily the result of cost savings from actions being implemented subsequent to the closing of the transactions in September.

Moving on to our capital structure. We define free cash flow as net cash provided by operating activities less capital expenditures. In the third quarter, TKO generated $64 million in free cash flow as compared to $136 million in the prior year period. The decrease was primarily due to $68 million in payments associated with the TKO transaction.

In September, pursuant to the transaction agreement, we returned $321 million of capital to Class A shareholders in the form of a special one-time cash dividend of $3.86 per share. We ended the quarter with approximately $2.8 billion in debt, and $189 million in cash and cash equivalents.

Given the strong financial profile of TKO and the high free cash flow generative nature of the business, we expect there to be a wide spectrum of alternatives for the deployment of capital, including organic investment at positive ROI, as well as the return of capital to shareholders in the form of dividends and/or share repurchases. We are in the process of formulating more specific plan around the appropriate long-term range of net leverage for the combined business as well as uses of capital. As we previously discussed, TKO is structured as an Up-C. As is common with Up-C structures, TKO OpCo will be making periodic distributions of cash to its owners, Endeavor and TKO PubCo, to cover tax obligations on a quarterly basis.

Now, related to our outlook. We plan to provide full-year guidance targets for consolidated TKO, as we believe our company's results are best evaluated on a full-year basis, given quarterly fluctuations related to the timing of events and content deliveries among other things. We are laser focused on integration finding further synergy opportunities as well as budgeting the respective businesses for 2024.

We intend to issue our 2024 full-year outlook when we report our fourth-quarter results in February. We are excited about the ongoing performance of both UFC and WWE, which remain firmly on track to deliver record revenue and adjusted EBITDA for full-year '23, and are both in line with our expectations when we consummated the transaction.

In conclusion, while it's been less than two months since we closed this deal, we've been hard at work integrating the businesses and identifying opportunities to accelerate the growth profile of the combined company. Based on what we've seen so far, our conviction has only increased and we're extremely excited about the future for TKO.

With that, I'll turn it back to Seth.

Thanks, Andrew. Operator, we're ready to open the call for questions.

(Operator Instructions) Ben Swinburne, Morgan Stanley.

Thanks. Good afternoon, guys. I want to come back to why you put these two companies together, and some of the comments you made about free cash flow conversion and the unique properties of this company, which is contracted revenues and high free cash flow generation. So with all that, one thing you guys obviously need to think about and are thinking about is the right leverage level for this new company.

So could you spend a minute just talking about what you think makes sense for TKO? And even if you don't want to put a number on it, can you talk about the relative attractiveness of dividends, buybacks, and M&A as you look at running this company over the next couple of years? Thanks a lot.

Thanks, Ben. As we mentioned in our prepared remarks, it's too early to discuss specific plans with regard to TKO's capital allocation philosophy right now. TKO is a strong financial profile growing revenues, healthy margins, strong free cash flow generation, manageable net debt position, which will present us with various opportunities on the allocation of our capital into the future. And as you can hear from Andrew and myself, we're really focused on TKO's integration within our -- maybe Andrew can follow up with some of the other questions you had.

Yeah. Look, I think we can talk about the industrial logic and strategic rationale for the transaction. Obviously, that is down. And we did put some statistics out there, Ben, when we first announced the deal. But look, further to Ari's remarks and in line with my prepared remarks, we expect to provide an update on our plans with more specificity on our next earnings call in February tethered to our full-year outlook first time in giving guidance for full year 2024.

That being said, that does not preclude us from being opportunistic between now and then, particularly given the relatively undervalued nature of our stock right now. And obviously, as Ari articulated, as I articulated, as Mark articulated, when we meet with folks sell-side and buy-side, this is a meaningfully high cash flow generative business. And we remain committed to evaluating all those alternatives that are available to us, share repurchases, repayment of debt, and are laser focused on the return of capital to shareholders, all through the lens of maximizing shareholder value.

Ben, it's Mark. I would just say, as you can imagine -- I mean that's why it's the first question here. This is the most popular question the three of us are asked frankly on a daily basis. We have to remind folks sometimes we're in the quiet period.

But as Andrew and Ari have articulated, I mean, we are uniquely and keenly aware of the strong free cash flow conversion we're going to have with these two properties. I mean, UFC's up there near 60% these days. Obviously, that won't be worth it forever. It will be around 50% where we've been historically. And WWE is going to quickly get into the 40% to 50% once we get done with our cost synergies and some of the revenue synergies that we will talk about.

Obviously, our Budweiser deal on the UFC side was big and high and a lot of conversion there. And we're going to have similar deals on the WWE side. So we're just early innings here. We don't have a plan to articulate today and lay out. But as Andrew said, you can expect we're focused on it. We're in conversations with the Board. And we'll be back to you in February with a specific plan. In the meantime, we will be opportunistic along the way.

Thanks, guys. I appreciate the comments.

Thank you.

Brandon Ross, LightShed Partners.

Hi, good afternoon. Thanks for taking the questions. So you've got a really nice increase on the NXT deal, but there's still a lot of investor concern about the state of sports rights licensing. What gives you guys confidence that the rights environment is going to improve in the coming year?

And then how does this impact your strategy around Raw? And then anything, of course, that you could tell us on the latest -- on the broad negotiations that you highlighted in the prepared is welcome.

So let me just first start with a ratings update, which I think the first thing that you have to think about when you do this. Viewership and ratings for WWE content is very strong and there's a lot of momentum. SmackDown, up 19% in the key demo compared to broadcast, down 11%. Raw, up 2% compared to cable, down 11%. NXT, up 39% compared to cable, down 11%.

TKO and WWE content airs. There's no churn in the content we have. It's one of the big issues for all the S5 and the cable companies and et cetera. We're year-round content of UFC and WWE. And we are scheduling flexibility regarding day and time, and urgency and consistency of our content is appealing and it's an attractive viewership. And as I said, there's no real churn in the content.

On SmackDown renewal, we're very pleased with the agreement. We delivered healthy 40% increase. WWE will produce four primetime specials per year that will air on NBC, first time WWE will air on a network primetime. It's a strong deal.

We feel good about the continuing relationship with NBC, who is also owner of the WWE Network. Current deal probably expires, I think, it's March 26. And as fast as you may or may not remember, 40% of the market was not live. Now, it will be all live.

On the NXT renewal, very pleased with that agreement, strong deal, 70% healthy increase. CW will become a new home. It's the first time actually we'll air on a broadcast network. CW is a major network, reaches 100% of the US households.

And as you may or may not know, NXT plays an important role in developing talent for WWE. Nearly 90% of the participants in last year's WrestleMania were developed under the NXT banner.

And as it relates to Raw renewal, we're having really productive conversations with multiple parties regarding Raw. We expect a robust process with Raw. We're very comfortable with Raw's position.

We're going to be patient, measured, calculated in our approach, no specific timeline regarding some announcement; exactly what we did with the UFC. So we feel really good about the situation that we're in. And so that's correct.

Yeah. So on the second part of your question, Brandon, on just the overall state of sports rights. I really love when you bring this up, as if there's an issue going on out there. Let's just underscore what's been happening over the last few months.

Last time I checked, the Xfinity series when for a monster number on CW. Good for them, good programming, they're adding to their portfolio of sports rights properties like the ACC, LIV, et cetera. And now, of course, they've got the late, great NXT.

The NBA is having a robust process. They have an exclusive negotiating period until April with their current partners. But everybody is lined up to get a piece of the NBA. So Adam's in a good position there.

Netflix is about to launch the Netflix Cup. So anybody who had questions about, is Netflix going live in sports rights, et cetera, they're just dipping their toe in the water. And you can expect that's going to open up down the road. And as you know, there was an extra NFL playoff game, if you will, that Peacock took off the table for a massive number.

So the state of sports rights and the dollars being spent on sports rights remained in a very strong, robust position. And to Ari's point, we're in the middle of this. It is strong and robust for us too.

Raw is a very healthy property, not only your ratings up, it's got a lot of equity to it. It's got longevity. It's got brand affinity. It's got super fandom.

And we're going to take our time with this. We have until next October. We can flip the switch, just to remind you, because we do all the production. So we can literally move from one network to a new partner overnight.

And the last thing I would say, just on Ari's point, which Ari often talks about, the antidote to churn any points to these two properties, I think objectively, frankly because we are year-round and we are premium. But keep in mind that we have a lot of urgency to our sports properties. When there is a PLE going on at WWE or WrestleMania, it's just a trigger to get folks to sign up for subs. And the same can be said for UFC.

When we have a number of events every month, it's a trigger when folks want to see those prelims on ESPN Plus to sign up for ESPN Plus. That's driving subscriber count for all those partners. And as they move to go direct to consumer, like ESPN is going to do in the next two years, they reported it themselves, they're going to want year-round premium and urgency.

And we're standing in a good position. And we're going to be patient to maximize our rights fee and our marketing partner for the next deal.

Got it. Thanks. And then maybe just --

It cut him off.

Brandon, are you there?

Apologies. It appears Mr. Brandon's line did drop from the call for some reason. So we will move to next question.

Curry Baker, Guggenheim.

Thanks for the question. Could you update us on how the integration is going so far? And maybe more specifically on the revenue synergy front? Could you drill down on the largest areas of opportunity that you see, maybe help us frame an aggregate where you think the revenue synergies could ultimately go? And any initial thoughts on timing? Seems like you're off to a nice start with the UFC Saudi announcement.

Here's what I would say. Integration is going well. It's early days, but we're really pleased with how the teams are coming together and the opportunities that we're identifying to enhance the growth profile and the profitability of both companies, both on the cost side and on the revenue side.

And Curry, let me hit the cost side first and then we'll pivot to the revenue side. As we discussed, and to reiterate in both Ari and my prepared remarks, we expect to achieve the upper end of the previously announced range of $50 million to $100 million in cost synergies. And we got started over the summer.

We got deeper into this after we closed in September, really, no stone left unturned here. And we feel good guidance at the upper end of that range. We're looking at all areas.

And that's prior to really combining this business and seeing efficiencies from the operation of the business going forward. So we're going to quickly pivot on the cost side to see if we can get some more.

With that being said, of that range, we expect to realize roughly 70% of those -- 75%, excuse me, of those synergies in 2024. Those will be reflected in our full-year guide when we're back in front of you in February. And the balance, 25% balance of those will impact 2025.

On the revenue side, look, we think as we've stated time and time again, there are many attractive revenue synergies in the connection with this transaction, many of which you've gotten a taste of some deals that we've announced to date whether it be Anheuser-Busch on the sponsorship side, DCT extension, as well as the Saudi deal on the live event and site fee side. We discussed NXT, SmackDown and how we're well positioned for Raw. And then a lot of this doesn't happen candidly without us leveraging and having tentacles into the Endeavor flywheel, which we're spending a lot of time with our parent company and partners to extract as much value as we probably can.

Yeah. Curry, I'll just say that, obviously, our AB deals is a best-in-class deal. And we're right out of the gate with that. And we expect to mimic that in several categories on both sides of the fence with WWE and TKO -- or excuse me -- and UFC. We've already -- between Lawrence Epstein who runs the day to day of the UFC and Nick Khan who runs the day to day of the WWE, they've already integrated our partnerships team.

So we're already out on the street, in some cases, selling both properties together. And where we have unsold category on one end but not the other, of course, selling those individually to the two brands where it makes sense. I think from a live event perspective as well Andrew touched on, but beyond the site fees, we're setting the table. So you see Nick build and appoint a date for Perth, which is a place that Lawrence and Dana White and the UFC have been going for such a long time.

So we come in and we laid the foundation. We laid local sponsorship opportunities; we fast civilized it with WME and the Endeavor network. And then WWE comes right behind in the pipeline with their own events. We already have the blueprint working. And you can expect to see that in other cities.

You have the UFC, obviously, now doing it in Saudi, which will be a great story. But also in China, we will be later on in Shanghai for UFC. And we're already looking at what's going to be our next China date, which we haven't been to in a long time on the WWE.

Beyond that, we've got dynamic ticket pricing happening across the board, which is a capability we have at our location at Endeavor. And now, WWE is tapping into that the way the UFC has. And of course, rounded out hospitality, on-location sell hospitality, and experiential ticketing for both properties. And frankly, we're seeing record numbers out of the gate, especially for WrestleMania 40.

So for revenue synergies, no surprise to anybody. We're pretty bullish. I mean, that ultimately was the recipe for the merging of these two properties.

And the only other thing I would add to that, all the things that Mark just stated are very high-margin businesses, which will increase the numbers as it relates to the WWE and UFC for our free cash flow conversion.

Great. Thanks for the answers, guys.

Ryan Gravett, UBS.

Great, great. Thank you. You touched on this a bit in your prepared remarks. But just curious, are you seeing the competitive landscape evolving in the MMA space over the next few years following the minority investment that the PFL received? And I guess, just more broadly, how you're thinking about balancing margin expansion and reinvestments at the UFC from here? Thanks.

Well, I would just say the following. Competition is not new for the UFC or the WWE. MMA is probably the fastest-growing sport. And we're encouraged by the increased interest, and rising tide lifts all boats, in my opinion.

So we don't see it as a zero-sum game. It's not only competition. We don't have any -- not only do we have competition with other MMA or wrestling organization, football, college football, there's a lot of competition out there. We have a strong -- at the UFC, we have a strong and stable fighters over 600 in total. I think UFC is where fighters want to come and want to be.

And as I discussed in my prepared remarks, we feel good about the future of our relationship with Saudi. As one example, we recently announced and we bring UFC Fight Night to Riyadh in March 2024, a clear indication that Saudi has very high intentions to grow into a relationship with UFC. So that's our feeling about it.

Yeah. Look, the investments SRJ and PFL, we look it to our advantage. We have no issue with Bellator, PFL, name your league. To Ari's point, competition is good. Not only do we have over 600 fighters, we have the premier fighters. I mean, ultimately, you're trying to get to the UFC, which is akin to the SFL trying to ultimately get their players into the NFL.

I mean, that's what we are. Those are pipeline and feeder properties. In fact, we're supportive of them being on ESPN. PFL has been on ESPN. We were totally supportive of that deal. And the Saudi experience should prove out well for us and I think proves something to every investor on this call. Because when it first came out, it was a lot of, what's going on? They're coming after us, they're going to take fighters out, they're going to increase fighter pay, UFC is in trouble.

And then quickly on the heels of that, we announced our deal. So good for them. Saudi Arabia is being very aggressive in bringing events to the Kingdom. There are discussions on the WTA finals for tennis. They're looking obviously at Motorsports. There are rumors about their potential investment in F1.

All kinds of stuff that are out there right now. All we know is they want more MMA, which is great for us. And the more they have, the more it's really just going to serve as an appetizer to what will be the meal, which is UFC.

Operator, let's take one last question, please.

David Karnovsky, JPMorgan.

Hey, thank you for the question. Curious to know how you think about incremental sponsorship opportunities at WWE. Are there inventory or assets that you think have been underutilized, like the ring for instance? And then since coming public, you discussed the idea of [super deals] or super weekends, UFC plus WWE. I'm interested how many of these events do you think are realistic given the calendar? And then how do they factor into your overall strategy for growing site fees? Thanks.

Here's what I would say to you. Vince has been very open to -- before he was [clean] in the ring and around. He is now very open into increasing the inventory that we can work with, like we increased the inventory at the UFC; very happy about that. And we think there's huge opportunities around the stadium. So that's a good sign.

And we are starting in some territories, looking at a Friday night, a Saturday night, and a Monday night for both WWE, UFC, and WWE again. That will give us an indication of our ability to put that on. Once we can prove that model, I think we can take it globally and really move it domestically pretty easily.

And we're never going to -- just going forward, just an alert for everybody, we're never going to come out specifically and talk about open categories, who are negotiating with, who is open. Frankly, we've got so many competitors out there now, not just in our space, but overall, as Ari mentioned in this, just the sports marketplace.

So it's robust. We're being aggressive. We've got a best-in-class team. And we'll talk about each of the deals as they ultimately come to fruition. But we're not going to give anybody our playbook at this time.

But I'll just reemphasize, there's a ton of inventory now that Vince and team are opening up at the WWE for us.

Helpful. Thanks.

Thanks, David.

Thank you, everyone, for joining us on today's call. Operator, you can now conclude the call.

So we'll now conclude today's conference call. Thank you all for your participation. You may now disconnect your line.