Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information set forth in our unaudited consolidated financial statements and related notes included in this Quarterly Report and with our audited financial statements and related notes included in our 2024 Annual Report. This discussion contains forward-looking statements based upon management’s current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various known and unknown factors, including those set forth under Part I, Item 1A. “Risk Factors” of our 2024 Annual Report or in other sections of the 2024 Annual Report and this Quarterly Report.

On February 28, 2025, TKO Operating Company, LLC, a Delaware limited liability company (“TKO OpCo”), and TKO Group Holdings, Inc., a Delaware corporation (together with TKO OpCo, the “TKO Parties”), completed the acquisition of the IMG business, including certain businesses operating under the IMG brand (collectively referred to as “IMG Business”), On Location, and the Professional Bull Riders (“PBR”) (collectively, the "Acquired Businesses"), pursuant to a transaction agreement, dated as of October 23, 2024 (as amended, the “Endeavor Asset Acquisition Agreement”), by and among the TKO Parties, Endeavor OpCo, IMG Worldwide, LLC, a Delaware limited liability company (“IMG Worldwide” and, together with Endeavor OpCo, the “EGH Parties”), and Trans World International, LLC, a Delaware limited liability company and subsidiary of EGH (“TWI”) (the “Endeavor Asset Acquisition”).

The Endeavor Asset Acquisition was treated as a merger between entities under common control, due to EGH’s control of both TKO and the Acquired Businesses. As a result of the common control acquisition, the net assets of the Acquired Businesses were combined with those of TKO at their historical carrying amounts, and the financial statements have been retrospectively recast on a combined basis for all historical periods prior to February 28, 2025 because they were under common control for all periods presented.

The following is a discussion and analysis of, and a comparison between, our results of operations for the three months ended March 31, 2025 and 2024.

Overview

TKO is a premium sports and entertainment company which operates leading combat sports and sports entertainment brands. The Company monetizes its brands through four principal activities: (i) Media rights, production and content, (ii) Live events and hospitality, (iii) Partnerships and marketing, and (iv) Consumer products licensing and other.

TKO was formed through the combination of Zuffa Parent, LLC (n/k/a TKO Operating Company, LLC) which owns and operates the Ultimate Fighting Championship (“UFC”), a preeminent combat sports brand, and World Wrestling Entertainment, Inc. (n/k/a/ World Wrestling Entertainment, LLC) (“WWE”), a renowned sports entertainment business. The TKO Transactions united two complementary sports and sports entertainment properties in a single company.

Endeavor Asset Acquisition

In connection with the Endeavor Asset Acquisition Agreement, the TKO Parties acquired the Acquired Businesses for total consideration of approximately $3.25 billion plus a $50 million purchase price adjustment (based on the volume-weighted average sales price of TKO Class A common stock for the twenty five trading days ending on October 23, 2024). Endeavor Group Holdings, Inc. received approximately 26.54 million common units of TKO OpCo and subscribed for an equivalent number of corresponding shares of TKO's Class B common stock.

With respect to the historical financial data of the Acquired Businesses, the historical financial data has been derived from the combined financial statements and accounting records of Endeavor Group Holdings, Inc. and were prepared on a standalone basis in accordance with GAAP and may not be indicative of what they would have been had the Acquired Businesses been independent standalone companies, nor are they necessarily indicative of the Acquired Businesses’ future financial data.

With respect to the combined balance sheets of the Company, the combined balance sheet includes Endeavor Group Holdings, Inc.’s consolidated assets and liabilities that are specifically identifiable or otherwise attributable to the Acquired Businesses, including subsidiaries and/or joint ventures relating to the Acquired Businesses in which Endeavor Group Holdings, Inc. had a controlling financial interest. The assets, liabilities, revenue and expenses of the Acquired Businesses have been reflected in these combined financial statements on a historical cost basis, as included in the consolidated financial statements of Endeavor Group Holdings, Inc., using the historical accounting policies applied by Endeavor Group Holdings, Inc. Cash and cash equivalents held by Endeavor Group Holdings, Inc. at the corporate level were not attributable to the Acquired Businesses for any of the periods presented due to Endeavor Group Holdings Inc.’s centralized approach to cash management and the financing of its operations. Only cash amounts held by entities for which the Acquired Businesses have legal title are reflected in the combined balance sheets. Transfers of cash, both to and from Endeavor Group Holdings, Inc.’s centralized cash management system, are reflected as a component of net parent investment in the combined balance sheets and as financing activities in the combined statements of cash

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flows for the recast periods prior to the TKO formation on September 12, 2023. Endeavor Group Holdings, Inc.’s debt on a consolidated basis was not attributed to the Acquired Businesses for any of the periods presented because Endeavor Group Holdings, Inc.’s borrowings are not the legal obligation of the Acquired Businesses.

With respect to the combined financial statements of the Company, the combined financial statements include all revenues and costs directly attributable to the Acquired Businesses and reflect allocations of certain of Endeavor Group Holdings, Inc.'s corporate, infrastructure and shared services expenses, including centralized research, legal, human resources, payroll, finance and accounting, employee benefits, real estate, insurance, information technology, telecommunications, treasury, and other expenses. Where possible, these charges were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount and gross profit, or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by the Acquired Businesses during the periods presented. The allocations may not, however, reflect the expense the Acquired Businesses would have incurred as standalone companies for the periods presented. These costs also may not be indicative of the expenses that the Acquired Businesses will incur in the future or would have incurred if the Acquired Businesses had obtained these services from a third party.

Accordingly, as discussed above, the historical financial data presented within this discussion and analysis of our financial condition and results of operations includes the combined historical financial data of TKO and the Acquired Businesses for all periods presented.

Segments

As of March 31, 2025, we operated our business under three reportable segments, UFC, WWE and IMG. In addition, we also report results for the “Corporate and Other” group, which incurs revenue and expenses that are not allocated to the business segments. As a result of the close of the Endeavor Asset Acquisition, the Company determined that IMG, as described below, is a third reportable segment. Refer to Note 17, Segment Information, within the unaudited consolidated financial statements included within this Quarterly Report on Form 10-Q.

UFC

The UFC segment reflects the business operations of UFC. Revenue from our UFC segment principally consists of media rights fees associated with the distribution of its programming content; ticket sales and site fees associated with the business’s global live events; partnerships and marketing; and consumer product licensing agreements of UFC-branded products.

WWE

The WWE segment reflects the business operations of WWE. Revenue from our WWE segment principally consists of media rights fees associated with the distribution of its programming content; ticket sales and site fees associated with the business’s global live events; partnerships and marketing; and consumer product licensing agreements of WWE-branded products.

IMG

The IMG segment reflects the operations of the following businesses:

The IMG business is an independent global distributor of sports programming selling media rights on behalf of rights holders and is a producer of sports programming, responsible for content on behalf of sports federations, associations and events. The IMG business also has a partnership with Euroleague Basketball to manage the commercial business of the league and includes several other properties such as Mailman, a digital sports agency and consultancy, Formula Drift, a professional automobile drifting series, Golf Events, an owner, operator and manager of golf events, and International Figure Skating, which represents figure skating competitions and championships.

On Location is a premium experiential hospitality business, offering ticketing, curated guest experiences, live event production and travel management across sports and entertainment and includes events such as the 2024, 2026 and 2028 Summer and Winter Olympic and Paralympic Games, FIFA World Cup 2026, Super Bowl, and the NCAA Final Four.

Revenue from our IMG segment principally consists of media rights sales, commissions, production services and studio fees; ticket and premium experience sales; and partnerships and marketing.

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Corporate and Other

Corporate and Other reflects operations not allocated to the UFC, WWE or IMG segments and primarily consists of general and administrative expenses as well as operations of PBR. PBR owns the Professional Bull Riding brand, which organizes bull riding competitions, promotes the sport and its athletes through live events and broadcasts.

Revenue from our Corporate and Other group principally consists of media rights fees associated with the distribution of PBR's programming content; ticket sales and site fees associated with live events; partnerships and marketing; and consumer product licensing agreements of PBR-branded products. Revenue also consists of management fees for services provided to certain equity method investments.

General and administrative expenses relate largely to corporate activities, including information technology, facilities, legal, human resources, finance, accounting, treasury, investor relations, corporate communications, community relations and compensation to TKO’s management and board of directors, which support all reportable segments. Corporate and Other expenses also include service fees paid by the Company to Endeavor Group Holdings, Inc. under the Services Agreement, inclusive of fees paid for revenue producing services related to the segments. On the closing date of the Endeavor Asset Acquisition, the Services Agreement between EGH and TKO OpCo was terminated and the Transition Services Agreement was entered into between the EGH Parties, TWI and the TKO Parties.

Components of Our Operating Results

Revenue

TKO primarily generates revenue via domestic and international media rights fees, production services and studio fees, ticket sales at live events, hospitality sales and site fees, partnerships and marketing, and consumer products licensing.

Direct Operating Costs

TKO’s direct operating costs primarily include costs associated with our athletes and talent, marketing, venue costs related to live events, expenses associated with the production of events and experiences, event ticket sales and fees for media rights. These costs include required payments related to media sales agency contracts when minimum sales guarantees are not met, materials and related costs associated with consumer product merchandise sales, commissions and direct costs with distributors, as well as certain service fees paid to Endeavor Group Holdings, Inc. under the Services Agreement and Transition Services Agreement.

Selling, General and Administrative

TKO’s selling, general and administrative expenses primarily include personnel costs as well as rent, travel, professional service costs, overhead required to support operations, and certain service fees paid to Endeavor Group Holdings, Inc. under the Services Agreement and Transition Services Agreement. 

Provision for Income Taxes

TKO Group Holdings, Inc. was incorporated as a Delaware corporation in March 2023. As the sole managing member of TKO OpCo, TKO Group Holdings, Inc. ultimately controls the business affairs of TKO OpCo. TKO Group Holdings, Inc. is subject to corporate income taxes on its share of taxable income of TKO OpCo. TKO OpCo is treated as a partnership for U.S. federal income tax purposes and is therefore generally not subject to U.S. corporate income tax. TKO OpCo’s foreign subsidiaries are subject to entity-level taxes. TKO OpCo’s U.S. subsidiaries are subject to withholding taxes on sales in certain foreign jurisdictions which are included as a component of foreign current taxes. TKO OpCo is subject to entity-level income taxes in certain U.S. state and local jurisdictions. For the periods prior to the Endeavor Asset Acquisition, the Acquired Businesses primarily consisted of U.S. flow through entities not subject to tax as well as some foreign subsidiaries and U.S. regarded corporations subject to entity level taxes. Income taxes related to the Acquired Businesses reflected in the combined tax provision are attributable to U.S. regarded entities and foreign entities subject to tax in their respective jurisdictions.

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RESULTS OF OPERATIONS

(dollars in millions, except where noted)

The following is a discussion of our consolidated results of operations for the three months ended March 31, 2025 and 2024. This information is derived from our accompanying consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

		Three Months Ended
		March 31,
		2025				2024
Revenue		$	1,268.8			$	1,222.4
Operating expenses:
Direct operating costs			567.6				605.6
Selling, general and administrative expenses			363.3				668.3
Depreciation and amortization			100.5				122.1
Total operating expenses			1,031.4				1,396.0
Operating income (loss)			237.4				(173.6	)
Other expenses:
Interest expense, net			(44.8	)			(61.2	)
Other expense, net			(8.4	)			(8.2	)
Income (loss) before income taxes and equity earnings of affiliates			184.2				(243.0	)
Provision for (benefit from) income taxes			21.2				(5.7	)
Income (loss) before equity earnings of affiliates			163.0				(237.3	)
Equity earnings of affiliates, net of tax			(2.5	)			(2.8	)
Net income (loss)			165.5				(234.5	)
Less: Net income (loss) attributable to non-controlling interests			107.1				(130.6	)
Net income (loss) attributable to TKO Group Holdings, Inc.		$	58.4			$	(103.9	)

Revenue

Revenue increased by $46.4 million, or 4%, to $1,268.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

UFC revenue increased by $46.7 million, or 15%. This increase was primarily due to $23.3 million of greater live event revenue driven by higher ticket sales revenue, including the Fight Night event in London, England, and site fees primarily from UFC 312 in Sydney, Australia and the Fight Night event in Riyadh, Saudi Arabia, as well as $15.7 million of greater partnerships revenue from new sponsors and increases in fees from renewals, compared to the prior year. The current year also includes $9.6 million of increased media rights, production and content revenue from higher domestic and international rights fees resulting from increases in contractual revenues. These increases were partially offset by a decrease of $1.9 million in consumer products licensing revenue from lower royalties on UFC-branded products.

WWE revenue increased by $74.8 million, or 24%. This increase was primarily driven by $30.5 million of higher media rights, production and content revenue associated with domestic and international rights fees for WWE’s flagship programs, Raw, SmackDown and NXT, which was attributable to the format expansion of WWE’s SmackDown programming as well as the new global content distribution agreement with Netflix that became effective in January 2025. The increase was also due to $26.1 million of increased live event revenue, of which $31.8 million was primarily the result of higher ticket sales revenue, partially offset by a decline in site fees due to the timing of certain international premium live events compared to the prior year. Additionally, WWE generated $11.8 million of higher partnerships revenue from new sponsors and increases in fees from renewals, coupled with $6.4 million of increased consumer products licensing related to the sale of WWE-branded products, including video games and collectibles, compared to the prior year.

IMG revenue decreased by $73.4 million, or 13%. This decrease was driven by lower revenues of $58.4 million, or 17%, from On Location, due to lower hospitality sales primarily driven by less favorable locations related to the Super Bowl and collegiate Bowl Games compared to the prior year. Additionally, lower revenues of $15.0 million, or 7%, from the IMG Business were driven by a reduction in media rights revenue primarily from no longer having rights to the FA Cup, as these rights did not transfer to the Company pursuant to the Endeavor Asset Acquisition Agreement.

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Corporate and Other revenue increased by $2.2 million, or 4%, primarily driven by higher ticket sales due to the impact of higher attendance at four additional PBR events compared to the prior year.

Direct Operating Costs

Direct operating costs decreased by $38.0 million or 6% to $567.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

UFC direct operating costs increased by $7.4 million, or 9%. This increase was primarily due to $3.1 million of higher production, marketing and athlete costs as well as $2.6 million of greater event-related costs primarily associated with holding two additional international events compared to the prior year.

WWE direct operating costs increased by $7.6 million, or 7%. This increase was primarily driven by $7.4 million of higher talent-related costs associated with WWE's weekly television programming and premium live events.

IMG direct operating costs decreased by $51.6 million, or 14%. This decrease was driven by lower costs of $36.8 million, or 25%, from the IMG Business, primarily due to lower media rights fees associated with no longer having rights to the FA Cup. Additionally, lower costs of $14.8 million, or 6%, from On Location was driven by decreased event-related costs primarily from fewer hospitality sales associated with less favorable locations related to the Super Bowl and collegiate Bowl Games compared to the prior year.

Corporate and Other direct operating costs increased by $2.2 million, or 6%, driven by greater production- and event-related costs primarily associated with four additional PBR events compared to the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $305.0 million, or 46%, to $363.3 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

UFC selling, general and administrative expenses increased by $12.2 million, or 32%. This increase was primarily driven by $7.6 million of higher personnel costs, as well as $4.6 million of higher travel expenses due to holding two additional international events compared to the prior year.

WWE selling, general and administrative expenses decreased by $4.9 million, or 6%. The prior year included $4.9 million of charges associated with restructuring activities related to the TKO Transactions. The current year included $3.5 million of increased travel expenses due to 12 more international live events as compared to the prior year, which were offset by the continuation of planned cost reduction initiatives implemented following the formation of TKO.

IMG selling, general, and administrative expenses decreased by $13.3 million, or 14%. This decrease was primarily driven by a reduction in third-party and personnel costs from On Location due to the completion of the 2024 Olympics.

Corporate and Other selling, general and administrative expenses decreased by $298.7 million, or 66%. This decrease was primarily driven by lower legal costs of $338.7 million, of which $335.0 million was due to charges recorded in the prior year associated with the preliminary legal settlement of the UFC antitrust lawsuit. This decline was partially offset by $39.3 million of higher professional fees associated with strategic transactions, primarily the Endeavor Asset Acquisition, compared to the prior year.

Depreciation and Amortization

Depreciation and amortization decreased $21.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily due to a decline of $18.2 million of expenses associated with certain WWE intangible assets that became fully amortized during the third quarter of 2024.

Interest Expense, Net

Interest expense, net decreased $16.4 million, or 27%, to $44.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily driven by the refinancing of the Credit Facilities in November 2024 that resulted in New Term Loans with a lower interest rate.

Provision for (Benefit from) Income Taxes

For the three months ended March 31, 2025, TKO recorded a provision for income taxes of $21.2 million compared to a tax benefit of $5.7 million for the three months ended March 31, 2024. This change was primarily related to the preliminary legal

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settlement for the UFC antitrust lawsuit of $335.0 million that resulted in a $39.6 million discrete tax benefit that was recognized in the prior year.

Net Income (Loss) Attributable to Non-Controlling Interests

Net income (loss) attributable to non-controlling interests was income of $107.1 million and loss of $130.6 million for the three months ended March 31, 2025 and 2024, respectively. The change was primarily due to the change in the amount of reported net income for the three months ended March 31, 2025 as compared to the reported net loss for the three months ended March 31, 2024, as well as the impact of the Endeavor Asset Acquisition. See Note 12, Non-Controlling Interests, to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on the effect of the Endeavor Asset Acquisition to this line item.

Segment Results of Operations

As described above, the following discussion and analysis of our financial condition and results of operations presents three reportable segments as of March 31, 2025: UFC, WWE and IMG, which were determined to be our reportable segments following the close of the Endeavor Asset Acquisition. Our chief operating decision maker evaluates the performance of our segments based on segment Revenue and segment Adjusted EBITDA. Management believes segment Adjusted EBITDA is indicative of operational performance and ongoing profitability, and Adjusted EBITDA is used to evaluate the operating performance of our segments and for planning and forecasting purposes, including the allocation of resources and capital. Segment operating results reflect earnings before corporate expenses. These segment results of operations should be read in conjunction with our discussion of the Company’s consolidated results of operations included above.

The following tables set forth Revenue and Adjusted EBITDA for each of our segments for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
Revenue:
UFC		$	359.7			$	313.0
WWE			391.5				316.7
IMG			476.3				549.7
Total revenue from reportable segments			1,227.5				1,179.4
Corporate and Other			54.4				52.2
Eliminations			(13.1	)			(9.2	)
Total Revenue		$	1,268.8			$	1,222.4

		Three Months Ended
		March 31,
		2025				2024
Adjusted EBITDA:
UFC		$	227.4			$	195.1
WWE			193.9				140.2
IMG			73.5				81.3
Total Adjusted EBITDA from reportable segments			494.8				416.6
Corporate and Other			(77.4	)			(77.7	)
Total Adjusted EBITDA		$	417.4			$	338.9

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UFC

The following table sets forth our UFC segment results for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
Revenue:
Media rights, production and content		$	224.1			$	214.5
Live events and hospitality			58.6				35.3
Partnerships and marketing			64.3				48.6
Consumer products licensing and other			12.7				14.6
Total Revenue		$	359.7			$	313.0
Direct operating costs		$	89.7			$	82.3
Selling, general and administrative expenses		$	42.6			$	35.6
Adjusted EBITDA		$	227.4			$	195.1
Adjusted EBITDA margin			63	%			62	%
UFC Operating Metrics:
Number of events
Numbered events			3				3
Fight Nights			8				8
Total events			11				11
Location of events
United States			7				9
International			4				2
Total events			11				11

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WWE

The following table sets forth our WWE segment results for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
Revenue:
Media rights, production and content		$	251.6			$	221.1
Live events and hospitality			76.3				50.2
Partnerships and marketing			25.6				13.8
Consumer products licensing and other			38.0				31.6
Total Revenue		$	391.5			$	316.7
Direct operating costs		$	122.1			$	100.4
Selling, general and administrative expenses		$	75.5			$	76.1
Adjusted EBITDA		$	193.9			$	140.2
Adjusted EBITDA margin			50	%			44	%
WWE Operating Metrics:
Number of events
Premium live events			3				3
Televised events			40				38
Non-televised events			18				34
Total events			61				75
Location of events
United States			47				73
International			14				2
Total events			61				75

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IMG

The following table sets forth our IMG segment results for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
Revenue:
Media rights, production and content		$	161.3			$	177.5
Live events and hospitality			288.5				353.1
Partnerships and marketing			22.3				13.0
Consumer products licensing and other			4.2				6.1
Total Revenue		$	476.3			$	549.7
Direct operating costs		$	325.0			$	378.6
Selling, general and administrative expenses		$	77.8			$	89.8
Adjusted EBITDA		$	73.5			$	81.3
Adjusted EBITDA margin			15	%			15	%
		Three Months Ended
		March 31,
IMG Business Operating Metrics:		2025				2024
Number of clients with events (1)
Rights			74				85
Studios			88				83
Event management			22				21
Total			184				189
(1) Represents unique clients generating revenue in the period; quarterly counts may include repeats.

		Three Months Ended								Three Months Ended
On Location Operating Metrics		March 31, 2025								March 31, 2024
		Number of Events				Packages Sold				Number of Events				Packages Sold
NFL			26				32,325				23				35,740
Collegiate Sports			23				72,001				22				77,857
Combat Sports			15				4,639				16				4,781
Other Sports			8				10,024				8				10,148

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Corporate and Other

Corporate and Other revenue primarily relates to media rights fees associated with the distribution of PBR's programming content; ticket sales and site fees associated with live events; partnerships and marketing; and consumer product licensing agreements of PBR-branded products. Revenue also consists of management fees for services provided to certain equity method investments. Corporate and Other expenses relate to direct operating costs and general and administrative expenses attributable to PBR as well as general and administrative expenses largely related to corporate activities, including information technology, facilities, legal, human resources, finance, accounting, treasury, investor relations, corporate communications, community relations and compensation to TKO’s management and board of directors, which support each of the reportable segments. Corporate and Other expenses also include service fees paid by the Company to Endeavor related to corporate activities as well as revenue generating activities under the Services Agreement, prior to its termination on February 28, 2025. As discussed above, on the closing date of the Endeavor Asset Acquisition, the Services Agreement between TKO OpCo and Endeavor was terminated and a Transition Services Agreement has been entered into between the EGH Parties, TWI and the TKO Parties.

The following table sets forth results for Corporate and Other for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
Revenue		$	54.4			$	52.2
Adjusted EBITDA		$	(77.4	)		$	(77.7	)

Adjusted EBITDA for the three months ended March 31, 2025 increased slightly compared to the three months ended March 31, 2024. This increase was primarily driven by the impact of $9.0 million of lower corporate allocated costs from Endeavor Group Holdings, Inc. to the Acquired Businesses and $2.5 million of lower services fees paid to Endeavor Group Holdings, Inc. under the Services Agreement due to the timing of the Endeavor Asset Acquisition, partially offset by higher cost of personnel of $6.2 million and additional costs of $3.9 million under the Transition Services Agreement.

The following table sets forth our operating metrics for PBR for the three months ended March 31, 2025 and 2024:

		Three Months Ended
		March 31,
		2025				2024
PBR Operating Metrics:
Number of events:
UTB			13				13
Teams			—				—
Velocity			27				25
Other			7				5
Total events			47				43
Location of events:
United States			45				41
International			2				2
Total events			47				43

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income, excluding income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger and acquisition costs, certain legal costs, restructuring, severance and impairment charges, and certain other items when applicable. Adjusted EBITDA margin is a non-GAAP financial measure defined as Adjusted EBITDA divided by Revenue.

TKO management believes that Adjusted EBITDA and Adjusted EBITDA margin are useful to investors as these measures eliminate the significant level of non-cash depreciation and amortization expense that results from its capital investments and intangible assets, and improve comparability by eliminating the significant level of interest expense associated with TKO’s debt facilities, as well as income taxes which may not be comparable with other companies based on TKO’s tax and corporate structure.

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Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases to evaluate TKO’s consolidated operating performance.

Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of TKO’s results as reported under GAAP. Some of these limitations are:

they do not reflect every cash expenditure, future requirements for capital expenditures, or contractual commitments;

Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on TKO’s debt;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted EBITDA and Adjusted EBITDA margin do not reflect any cash requirement for such replacements or improvements; and

they are not adjusted for all non-cash income or expense items that are reflected in TKO’s statements of cash flows.

TKO management compensates for these limitations by using Adjusted EBITDA and Adjusted EBITDA margin along with other comparative tools, together with GAAP measurements, to assist in the evaluation of TKO’s operating performance.

Adjusted EBITDA and Adjusted EBITDA margin should not be considered substitutes for the reported results prepared in accordance with GAAP and should not be considered in isolation or as alternatives to net income as indicators of TKO’s financial performance, as measures of discretionary cash available to it to invest in the growth of its business or as measures of cash that will be available to TKO to meet its obligations. Although TKO uses Adjusted EBITDA and Adjusted EBITDA margin as financial measures to assess the performance of its business, such use is limited because it does not include certain material costs necessary to operate TKO’s business. TKO’s presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed as indications that its future results will be unaffected by unusual or nonrecurring items. These non-GAAP financial measures, as determined and presented by TKO, may not be comparable to related or similarly titled measures reported by other companies. Set forth below are reconciliations of TKO’s most directly comparable financial measures calculated in accordance with GAAP to these non-GAAP financial measures on a consolidated basis.

Adjusted EBITDA and Adjusted EBITDA Margin

		Three Months Ended
		March 31,
		2025				2024
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net income (loss)		$	165.5			$	(234.5	)
Provision for (benefit from) income taxes			21.2				(5.7	)
Interest expense, net			44.8				61.2
Depreciation and amortization			100.5				122.1
Equity-based compensation expense (1)			30.3				32.2
Merger and acquisition costs (2)			39.8				0.5
Certain legal costs (3)			6.5				345.2
Restructuring, severance and impairment (4)			1.5				9.5
Other adjustments (5)			7.3				8.4
Total Adjusted EBITDA		$	417.4			$	338.9
Net income (loss) margin			13	%			(19	)%
Adjusted EBITDA margin			33	%			28	%

(1)

Equity-based compensation represents non-cash compensation expense for various awards issued under the TKO 2023 Incentive Award Plan, awards assumed in connection with the acquisition of WWE in September 2023, and awards issued under Endeavor Group Holdings, Inc.’s 2021 Plan. For the three months ended March 31, 2025 and March 31, 2024, equity-based compensation includes $1.0 million and $9.0 million, respectively, of expense associated with certain services provided by an independent contractor in the WWE segment. For the three months ended March 31, 2024, equity-based compensation includes $2.4 million of expense associated with accelerated vesting of the Replacement Awards related to the workforce reduction of certain employees in the WWE segment and Corporate and Other.

(2)

Includes certain costs of professional advisors related to strategic transactions, primarily the Endeavor Asset Acquisition.

(3)

Includes costs related to certain litigation matters including antitrust lawsuits for UFC and WWE and matters where Mr. McMahon has agreed to make future payments to certain counterparties personally. For the three months ended March 31, 2024, these costs include the preliminary legal settlement of the UFC antitrust lawsuit for $335.0 million, as described in Note 16, Commitments and Contingencies, to our unaudited consolidated financial statements in this Quarterly Report.

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(4)

Includes costs resulting from the Company’s cost reduction program as described in Note 15, Restructuring Charges, to our unaudited consolidated financial statements in this Quarterly Report.

(5)

Primarily relates to losses of $6.5 million on the sale of certain equity method investments and losses of foreign exchange transactions, partially offset by a gain of $1.3 million on the sale of PBR's former headquarters during the three months ended March 31, 2025. Primarily relates to losses on foreign exchange transactions during the three months ended March 31, 2024.

Liquidity and Capital Resources

Sources and Uses of Cash

Cash flows from operations are used to fund TKO’s day-to-day operations, revenue-generating activities, and routine capital expenditures, as well as service its long-term debt, and are expected to be used to fund our capital return programs.

Credit Facilities

As of March 31, 2025 and December 31, 2024, the Company had $2.7 billion and $2.8 billion, respectively, outstanding under a credit agreement dated August 18, 2016 (as amended and/or restated, the “First Lien Credit Agreement”), by and among Zuffa Guarantor, LLC ("Zuffa Guarantor"), UFC Holdings, LLC ("UFC Holdings"), as borrower, the lenders party hereto and Goldman Sachs Bank USA, as Administrative Agent, which was entered into in connection with the acquisition of Zuffa by EGH in 2016. TKO Operating Company, LLC and TKO Group Holdings, Inc. are holding companies with limited business operations, cash flows, assets and liabilities other than the equity interests in the borrower entities Zuffa Guarantor and UFC Holdings. On November 21, 2024 (the “Closing Date”), UFC Holdings entered into the Fifth Refinancing Amendment (the “Credit Agreement Amendment”) to the First Lien Credit Agreement (as previously amended and/or restated, the “Existing Credit Agreement” and, as further amended by the Credit Agreement Amendment, the “Credit Agreement”).

The Credit Agreement Amendment amended the Existing Credit Agreement to, among other things, (i) refinance and replace the outstanding first lien secured term loans (the “Existing Term Loans”) with a new class of first lien secured term loans in an aggregate principal amount of $2,750.0 million (the “New Term Loans”), which now mature on November 21, 2031, (ii) refinance the existing secured revolving credit facility (the “Existing Revolving Credit Facility”) in an aggregate principal amount of $205.0 million, which now matures on November 21, 2029 (the “New Revolving Credit Facility,” and, together with the New Term Loans, the “Credit Facilities”), and (iii) make certain other changes to the Existing Credit Agreement including as summarized below. The Credit Facilities are secured by liens on substantially all of the assets of Zuffa Guarantor and UFC Holdings and certain subsidiaries thereof.

The New Term Loans accrue interest at an annual interest rate equal to Term Secured Overnight Financing Rate ("SOFR") plus 2.25%, with a SOFR floor of 0.00%, which totaled 6.58% as of March 31, 2025. The Existing Term Loans accrued interest at an annual interest rate equal to SOFR plus a credit spread adjustment plus 2.75%. The New Term Loans include 1% principal amortization payable in equal quarterly installments, with any remaining balance payable on the final maturity date of November 21, 2031.

The loans made pursuant to the New Revolving Credit Facility accrue interest at a variable interest rate equal to Term SOFR plus 2.00%-2.25%, depending on the First Lien Leverage Ratio (as defined in the Credit Agreement), with a SOFR floor of 0.00%.

On the Closing Date, UFC Holdings borrowed $2,750.0 million of New Term Loans under the Credit Agreement to (i) repay the entire amount outstanding under the Existing Term Loans and (ii) pay fees and expenses incurred in connection with entering into the Credit Agreement Amendment.

As of March 31, 2025 and December 31, 2024, there was no outstanding balance under the New Revolving Credit Facility.

The New Revolving Credit Facility contains a financial covenant that requires the Company to maintain, commencing with the fiscal quarter ending June 30, 2025, a First Lien Leverage Ratio of Consolidated First Lien Debt to Consolidated EBITDA of 8.25-to-1. Prior to the Closing Date, Zuffa Guarantor was required to maintain a First Lien Leverage Ratio of no more than 6.5-to-1. Pursuant to the terms of the Credit Agreement Amendment, following the Closing Date, the Company is only required to comply with the foregoing financial covenant if the sum of outstanding borrowings under the New Revolving Credit Facility (excluding any letters of credit, whether drawn or undrawn) is greater than the greater of (i) $85.0 million and (ii) forty percent of the borrowing capacity of the New Revolving Credit Facility. Prior to the Closing Date, this applicable testing condition was thirty-five percent of the borrowing capacity of the Existing Revolving Credit Facility. This covenant did not apply as of March 31, 2025 and December 31, 2024 as UFC Holdings had no borrowings outstanding under either of the revolving credit facilities.

UFC Holdings had $11.1 million of outstanding letters of credit as of March 31, 2025 and none as of December 31, 2024.

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Restrictions on Dividends

The Credit Agreement contains restrictions on TKO’s ability to make distributions and other payments from the respective credit groups. These restrictions on dividends include exceptions for, among other things, (1) amounts necessary to make tax payments, (2) a limited annual amount for employee equity repurchases, (3) distributions required to fund certain parent entities, (4) other specific allowable situations and (5) a general restricted payment basket, which generally provides for no restrictions as long as the Total Leverage Ratio (as defined in the Credit Agreement) is less than 5.0x.

Other Debt

In October 2018, UFC entered into a $28.0 million Loan Agreement and a $12.0 million Loan Agreement in order to finance the purchase of a building and its adjacent land (the “Secured Commercial Loans”). The Secured Commercial Loans have identical terms except the $28.0 million Loan Agreement is secured by a deed of trust for UFC’s headquarters building and underlying land in Las Vegas and the $12.0 million Loan Agreement is secured by a deed of trust for the acquired building and its adjacent land, also located in Las Vegas. The Secured Commercial Loans bore interest at a rate of LIBOR + 1.62% (with a LIBOR floor of 0.88%). In May 2023, the parties amended the terms of the Secured Commercial Loans to replace the adjusted LIBOR reference rate with SOFR, and bear interest at a rate of SOFR plus 1.70%. Principal amortization of 4% is payable in monthly installments with any remaining balance payable on the final maturity date of November 1, 2028.

The applicable loan agreements each contain a financial covenant that requires UFC to maintain a Debt Service Coverage Ratio as defined in the applicable loan agreements of no more than 1.15-to-1 as measured on an annual basis (the “Secured Commercial Loan Covenant”). As of March 31, 2025 and December 31, 2024, UFC was in compliance with the Secured Commercial Loan Covenant.

Capital Return Programs

In October 2024, the Company announced that its board of directors has authorized a share repurchase program of up to $2.0 billion of its Class A common stock and the approval of a quarterly cash dividend program pursuant to which holders of TKO’s Class A common stock will receive their pro rata share of $75.0 million expected quarterly distributions to be made by TKO OpCo. We will determine at our discretion the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise, and we are not obligated to acquire any particular amount under the share repurchase program. The share repurchase program has no expiration, is expected to be completed within approximately three to four years and may be modified, suspended, or discontinued at any time.

Our inaugural quarterly cash dividend, totaling $75.2 million, was paid on March 31, 2025. Future declarations of quarterly dividends are subject to our determination and discretion based on our consideration of various factors, such as our results of operations, financial condition, market conditions, earnings, cash flow requirements, restrictions in its debt agreements and legal requirements and other factors that we deem relevant.

Cash Flows Overview

		Three Months Ended
		March 31,
		2025				2024
Net cash provided by operating activities		$	162.8			$	44.9
Net cash used in investing activities		$	(31.0	)		$	(55.1	)
Net cash used in financing activities		$	(185.7	)		$	(13.3	)

Operating activities increased from $44.9 million of cash provided in the three months ended March 31, 2024 to $162.8 million of cash provided in the three months ended March 31, 2025. Cash provided in the three months ended March 31, 2025 was primarily due to net income for the period of $165.5 million, which included certain non-cash items, including depreciation and amortization of $100.5 million and equity-based compensation of $30.3 million, as well as an increase in restricted cash of $100.3 million related to On Location for the FIFA World Cup 2026. This increase was partially offset by a decline in accounts payable and accrued liabilities of $199.6 million primarily driven by the $125.0 million payment under the settlement agreement in the UFC antitrust lawsuits and the timing of bonus payments.

Investing activities increased from $55.1 million of cash used in the three months ended March 31, 2024 to $31.0 million of cash used in the three months ended March 31, 2025. Cash used in the three months ended March 31, 2025 primarily reflects payments for property, buildings and equipment of $27.3 million and investments in affiliates of $11.0 million, partially offset by proceeds from the sale of assets of $7.3 million. Cash used in the three months ended March 31, 2024 primarily reflects payments for property, buildings and equipment of $37.4 million and investments in affiliates of $16.5 million.

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Financing activities decreased from $13.3 million of cash used in the three months ended March 31, 2024 to $185.7 million of cash used in the three months ended March 31, 2025. Cash used in the three months ended March 31, 2025 primarily reflects net transfers to Endeavor Group Holdings, Inc. of $122.5 million, distributions to EGH and its subsidiaries of $44.3 million, dividends paid to holders of TKO Class A common stock of $31.1 million and net payments on debt of $11.0 million. These decreases were partially offset by contributions of $23.3 million from Endeavor Group Holdings, Inc. in connection with the Endeavor Asset Acquisition. Cash used in the three months ended March 31, 2024 primarily reflects net payments on debt of $10.0 million.

Future Sources and Uses of Liquidity

TKO’s sources of liquidity are (1) cash on hand, (2) cash flows from operations and (3) available borrowings under the Credit Facilities (which borrowings would be subject to certain restrictive covenants contained therein). Based on our current expectations, we believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments, including long-term debt service, for at least the next 12 months.

TKO expects that its primary liquidity needs will be cash to (1) provide capital to facilitate organic growth of its business, (2) pay operating expenses, including cash compensation to its employees, athletes and talent, (3) fund capital expenditures and investments, (4) pay interest and principal when due on the Credit Facilities, (5) pay income taxes, (6) reduce its outstanding indebtedness under the Credit Facilities, (7) fund the legal settlements described in Note 16, Commitments and Contingencies, to our unaudited consolidated financial statements included in this Quarterly Report, (8) fund share repurchases as authorized by the Board and (9) make distributions to members and, in accordance with the Company’s cash management policy, to TKO stockholders, including the planned quarterly dividend when declared by the Board.

Recent Accounting Pronouncements

See Note 3, Recent Accounting Pronouncements, to our unaudited consolidated financial statements included in this Quarterly Report for further information on certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations.

Critical Accounting Estimates

For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in our 2024 Annual Report. During the three months ended March 31, 2025, there were no significant changes in our critical accounting policies and estimates or the application or the results of the application of those policies to our unaudited consolidated financial statements from those previously disclosed in the 2024 Annual Report.