Item 7. 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 audited consolidated financial statements and related notes included elsewhere in this Annual Report.
On February 28, 2025, TKO OpCo, a Delaware limited liability company, and TKO, a Delaware corporation (together with TKO OpCo, the “TKO Parties”), completed the Endeavor Asset Acquisition, acquiring the IMG business, including certain businesses operating under the IMG brand, On Location, and 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 historical financial data discussed below reflects our historical results of operations and financial position inclusive of the historical results of operations and financial position of the Acquired Businesses which were acquired in a common control acquisition on February 28, 2025; refer to our Form 8-Ks filed on February 28, 2025 and May 8, 2025 for further details. The historical financial data included in the discussion below reflects our historical results of operations and financial position and relates to periods prior to the closing of the TKO Transactions.
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” and in other sections of this Annual Report.
The following is a discussion and analysis of, and a comparison between, our results of operations for the years ended December 31, 2025 and 2024. A discussion and analysis of, and a comparison between, our results of operations for the years ended December 31, 2024 and 2023 is set forth in Exhibit 99.1, titled, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed with our Current Report on Form 8-K for the year ended December 31, 2024, filed with the SEC on May 8, 2025.
Overview
TKO is a premium sports and entertainment company which operates leading combat sports and sports entertainment companies. 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.
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"). The TKO Transactions unite two complementary sports and sports entertainment properties in a single company. For additional information regarding the terms of the TKO Transactions, see Note 4, Acquisition of WWE , to our audited consolidated financial statements included in this Annual Report.
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). The EGH Parties 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 for the periods prior to the completion of the Endeavor Asset Acquisition, 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 U.S. generally accepted accounting principles ("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.
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With respect to the historical combined balance sheets of the Company, they include 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 EGH 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 accompanying combined statements of cash 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 historical combined financial statements of the Company, they include all revenues and costs directly attributable to the Acquired Businesses and reflect allocations of certain 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 consolidated historical financial data of TKO and the Acquired Businesses for all periods presented.
Segments
As of December 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. Refer to Note 19, Segment Information , within the audited consolidated financial statements included elsewhere within this Annual Report.
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 products 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 products licensing agreements of WWE-branded products.
IMG
The IMG segment reflects the operations of the following businesses:
The IMG business is a leading global sports marketing company, specializing in media rights management and sales, multi-channel content production and distribution, brand partnerships, strategic consulting, digital services, and event management.
On Location is a premium experiential hospitality business, offering ticketing, curated guest experiences, live event production and travel management services.
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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.
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 and boxing. PBR owns the Professional Bull Riders brand, which organizes bull riding competitions, promotes the sport and its athletes through live events and broadcasts. Boxing includes the joint venture with Sela Company for the Zuffa Boxing brand as well as promotional services TKO provides for boxing events.
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 products licensing agreements of PBR-branded products. Revenue also consists of management and promotional fees for services primarily related to boxing.
General and administrative expenses relate largely to corporate activities, including information technology, facilities, legal, human resources, finance and 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 Endeavor Group Holdings, Inc. 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 that are not themselves subject to U.S. federal income taxes as well as some foreign subsidiaries and U.S. regarded corporations subject to
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entity level taxes. Income taxes related to the Acquired Businesses reflected in the consolidated tax provision are attributable to U.S. regarded entities and foreign entities subject to tax in their respective jurisdictions.
RESULTS OF OPERATIONS
(dollars in millions, except where noted)
The following is a discussion of our consolidated results of operations for the years ended December 31, 2025 and 2024. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP.
Year Ended December 31,
(in millions)
Revenue
Operating expenses:
Direct operating costs
Selling, general and administrative expenses
Depreciation and amortization
Total operating expenses
Operating income
Other expenses:
Interest expense, net
Other expense, net
Income (loss) before income taxes and equity losses of affiliates
Provision for income taxes
Income (loss) before equity losses of affiliates
Equity income of affiliates, net of tax
Net income (loss)
Less: Net income (loss) attributable to non-controlling interests
Net income attributable to TKO Group Holdings, Inc.
Revenue
Revenue decreased by $149.0 million, or 3%, to $4,735.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
UFC revenue increased by $96.0 million, or 7%. This increase was primarily due to $62.9 million of higher partnerships revenue from new sponsors and increases in fees from renewals. Additionally, UFC generated $28.3 million of increased media rights, production and content revenue from higher media rights fees resulting from increases in contractual revenues, partially offset by a year-over-year shift in event mix featuring one fewer numbered event despite the same total event count. This increase was also driven by $12.5 million of greater live event revenue driven by higher site fee revenue associated with certain international events, including Fight Night events held in Baku, Azerbaijan and Doha, Qatar, partially offset by lower ticket sales revenue driven by holding one less numbered event as well as the impact of UFC 306 in the prior year, which was a marquee event at Sphere in Las Vegas. These revenue stream increases were partially offset by a decrease of $7.7 million in consumer products licensing revenue from lower royalties on UFC-branded products compared to the prior year.
WWE revenue increased by $311.3 million, or 22%. This increase was primarily due to $135.1 million of higher media rights, production and content revenue associated with media rights fees for Raw , SmackDown and NXT , which was attributable to the new global content distribution agreement with Netflix that became effective in January 2025 and the expansion of WWE’s SmackDown programming, as well as rights fees associated with WWE’s premium live events, including the new content distribution agreement with ESPN that became effective in September 2025. This increase was also driven by $76.6 million of higher partnerships revenue from new sponsors and increases in fees from renewals, as well as $74.3 million of increased live event revenue, which was the result of higher ticket sales revenue, driven by WrestleMania 41 in Las Vegas and the first ever two-night SummerSlam in New Jersey. Additionally, WWE generated $25.3 million of increased consumer products licensing revenue related to the sale of WWE-branded products, including video games, merchandise and toys sales, compared to the prior year.
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IMG segment revenue decreased by $602.9 million, or 31%. This decrease was primarily attributable to a $555.1 million decline in On Location revenue as the prior year included hospitality related revenues generated from the 2024 Paris Olympics. The decline in On Location revenue was also 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 $47.8 million 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, as well as the biennial timing of the Arabian Gulf Cup. This reduction was partially offset by higher revenue associated with new production agreements, most notably Saudi Pro League, as well as media rights commissions related to the Canelo vs. Crawford boxing event.
Corporate and Other revenue increased by $28.8 million, or 17%, driven by $29.0 million of higher management and promotional fees for services primarily related to boxing. PBR revenue remained relatively flat as higher partnerships and live event revenue was mostly offset by a decline in media rights revenue.
Direct Operating Costs
Direct operating costs decreased by $720.7 million, or 27%, to $1,903.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
UFC direct operating costs increased by $3.0 million, or 1%. This increase was primarily due to $17.1 million of higher variable costs of revenue, including commissions and other event-related costs. These increases were partially offset by $15.8 million of lower production and athlete costs driven by holding one less numbered event as well as the impact of UFC 306 in the prior year, which was a marquee event at Sphere in Las Vegas.
WWE direct operating costs increased by $48.6 million, or 11%. This increase was primarily driven by $57.5 million of higher talent and production costs associated with WWE's weekly television programming and premium live events, from holding more premium live events, including WrestleMania 41 in Las Vegas, the first ever two-night SummerSlam in New Jersey and Wrestlepalooza in Indianapolis to kick-off our distribution agreement with ESPN, as well as more televised events, including Saturday Night's Main Event , compared to the prior year. These increases were partially offset by $9.7 million of lower other direct operating costs, including lower commissions and credit card fees associated with the transition of media content to new partners.
IMG segment direct operating costs decreased by $764.2 million, or 46%. This decrease was primarily driven by a $683.5 million decline from On Location, largely related to the impact of the 2024 Paris Olympics being included in prior year results, coupled with 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. Additionally, lower costs of $80.7 million from the IMG business was primarily due to lower media rights fees associated with no longer having rights to the FA Cup as well as the biennial timing of the Arabian Gulf Cup.
Corporate and Other direct operating costs decreased by $10.3 million, or 7%. This decrease was primarily driven by service fees paid to EGH in the prior year for various operational functions that support revenue generating activities pursuant to the Services Agreement. The Services Agreement was terminated during the first quarter of 2025. Additionally, lower costs of $4.6 million from PBR were primarily driven by lower rider and marketing costs compared to the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $259.5 million, or 15%, to $1,512.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
UFC selling, general and administrative expenses increased by $55.5 million, or 29%. This increase was primarily driven by $51.6 million of higher personnel and travel costs compared to the prior year.
WWE selling, general and administrative expenses decreased by $12.6 million, or 4%. The prior year included an impairment charge of $27.9 million as a result of reducing the carrying value of WWE assets held for sale to their fair value less cost to sell, as described in Note 5, Supplementary Data , to our audited consolidated financial statements included in this Annual Report, partially offset by $20.6 million of higher travel and personnel costs compared to the prior year.
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IMG segment selling, general, and administrative expenses decreased by $32.7 million, or 8%. This decrease was primarily driven by the impact of the 2024 Paris Olympics included in the prior year results as well as the impact of cost reduction initiatives in connection with the Endeavor Asset Acquisition.
Corporate and Other selling, general and administrative expenses decreased by $285.5 million, or 33%. This decrease was primarily driven by lower legal and professional costs of $365.2 million, of which $375.0 million was due to charges recorded in the prior year associated with the legal settlement of the UFC antitrust lawsuit, as well as the impact of $92.5 million of lower corporate allocated costs from EGH to the Acquired Businesses. The decrease in service fees paid to EGH under the Services Agreement were mostly offset by fees paid under the Transition Services Agreement. These declines were partially offset by $141.7 million of higher cost of personnel and other operating expenses, as well as $30.5 million of professional fees associated with strategic transactions, primarily the Endeavor Asset Acquisition, compared to the prior year.
Depreciation and Amortization
Depreciation and amortization increased by $27.1 million, or 6%. This increase was primarily driven by an $80.1 million acceleration of expenses for WWE customer relationship assets following the modification of a related media revenue arrangement, partially offset by a decline of $50.4 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 by $33.1 million, or 14%. This decrease was primarily driven by the Credit Facilities refinancing transactions in November 2024 and September 2025 that resulted in term loans with a lower spread interest rate and the decline in SOFR over the period, partially offset by incremental interest expense from a $1.0 billion increase in the principal balance of our term loan resulting from the September 2025 refinancing transaction.
Other (expense) income, net
Other expense, net for the years ended December 31, 2025 and 2024 includes net losses on foreign exchange transactions. Other expense, net for the year ended December 31, 2025 also includes a net loss of $9.6 million from the sale of certain equity method investments, partially offset by a gain of $1.3 million on the sale of PBR's former headquarters building.
Provision for Income Taxes
For the year ended December 31, 2025, TKO recorded a provision for income taxes of $73.8 million compared to a provision of $37.3 million for the year ended December 31, 2024. This change was primarily related to increased pretax income for the year ended December 31, 2025.
Equity earnings of affiliates, net of tax
Equity earnings of affiliates, net of tax for the years ended December 31, 2025 and 2024 reflects income of $13.4 million and $1.8 million, respectively, related to equity method investments.
Net Income (Loss) Attributable to Non-Controlling Interests
Net income (loss) attributable to non-controlling interests was income of $350.8 million and a loss of $255.1 million for the years ended December 31, 2025 and 2024, respectively. The change was primarily due to the change in the amount of reported net income for the year ended December 31, 2025 as compared to the reported net loss for the year ended December 31, 2024 as well as the impact of the Endeavor Asset Acquisition. See Note 11, Non-Controlling Interests , to our audited consolidated financial statements included in this Annual Report 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 December 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
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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 years ended December 31, 2025 and 2024:
Year Ended December 31,
Revenue:
UFC
WWE
IMG
Total revenue from reportable segments
Corporate and Other
Eliminations
Total revenue
Year Ended December 31,
Adjusted EBITDA:
UFC
WWE
IMG
Total Adjusted EBITDA from reportable segments
Corporate and Other
Total Adjusted EBITDA
UFC
The following table sets forth our UFC segment results for the years ended December 31, 2025 and 2024:
Year Ended December 31,
Revenue
Media rights, production and content
Live events and hospitality
Partnerships and marketing
Consumer products licensing and other
Total Revenue
Direct operating costs
Selling, general and administrative expenses
Adjusted EBITDA
Adjusted EBITDA margin
UFC Operating Metrics
Number of events
Numbered events
Fight Nights
Total events
Location of events
United States
International
Total events
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WWE
The following table sets forth our WWE segment results for the years ended December 31, 2025 and 2024:
Year Ended December 31,
Revenue
Media rights, production and content
Live events and hospitality
Partnerships and marketing
Consumer products licensing and other
Total Revenue
Direct operating costs
Selling, general and administrative expenses
Adjusted EBITDA
Adjusted EBITDA margin
WWE Operating Metrics
Number of events
Premium live events
Televised events
Non-televised events
Total events
Location of events
United States
International
Total events
IMG
The following table sets forth our IMG segment results for the years ended December 31, 2025 and 2024:
Year Ended December 31,
Revenue
Media rights, production and content
Live events and hospitality
Partnerships and marketing
Consumer products licensing and other
Total Revenue
Direct operating costs
Selling, general and administrative expenses
Adjusted EBITDA
Adjusted EBITDA margin
IMG Business Operating Metrics:
Number of clients with events (1)
Rights
Studios
Event management
Total
(1) Represents unique clients generating revenue in the period.
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Year Ended December 31,
On Location Operating Metrics (1)
Number of Events
Packages Sold
Number of Events
Packages Sold
NFL
Collegiate Sports
Combat Sports
Other Sports
(1) On Location metrics do not include non-recurring events (e.g., Olympics).
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 products licensing agreements of PBR-branded products. Revenue also consists of management and promotional fees for services primarily related to boxing. 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 and 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 years ended December 31, 2025 and 2024:
Year Ended December 31,
Revenue
Adjusted EBITDA
The following table sets forth our operating metrics for PBR for the years ended December 31, 2025 and 2024:
Year Ended December 31,
PBR Operating Metrics:
Number of events:
Unleash The Beast ("UTB")
Teams
Velocity
Other
Total events
Location of events:
United States
International
Total events
Adjusted EBITDA increased by $30.0 million, or 9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was primarily driven by the impact of $92.5 million of lower corporate allocated costs from Endeavor Group Holdings, Inc. to the Acquired Businesses and $29.0 million of incremental revenue from higher management and promotional fees for services primarily related to boxing. These increases were partially offset by $91.5 million of higher cost of personnel and other operating expenses compared to the prior year.
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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.
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.
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Adjusted EBITDA and Adjusted EBITDA Margin
Year Ended December 31,
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net income (loss)
Provision for income taxes
Interest expense, net
Depreciation and amortization
Equity-based compensation expense (1)
Merger, acquisition and earn-out costs (2)
Certain legal costs (3)
Restructuring, severance and impairment (4)
Debt transaction costs (5)
Foreign exchange losses and (gains) (6)
Other adjustments (7)
Total Adjusted EBITDA
Net income (loss) margin
Adjusted EBITDA margin
(1) Equity-based compensation represents non-cash compensation expense for awards issued under Endeavor’s 2021 Plan subsequent to its April 28, 2021 IPO, for the WWE Replacement Awards (as defined below) and for awards issued under the 2023 Incentive Award Plan. For the years ended December 31, 2025 and 2024, equity-based compensation expense includes $4.0 million and $17.7 million, respectively, related to services provided by an independent contractor in the WWE segment. For the year ended December 31, 2024, equity-based compensation expense related to the accelerated vesting of the WWE Replacement Awards was $3.3 million, associated with the workforce reduction of certain employees in the WWE segment and Corporate and Other.
(2) Includes (i) certain costs of professional advisors related to other strategic transactions, primarily the Endeavor Asset Acquisition, incurred during the years ended December 31, 2025 and 2024, and (ii) certain costs related to integration initiatives resulting from the Endeavor Asset Acquisition. Also includes fair value adjustments for contingent consideration liabilities associated with past acquisitions.
(3) Includes costs related to certain litigation matters including antitrust lawsuits for UFC and WWE matters where Mr. McMahon has agreed to make future payments to certain counterparties personally. For the year ended December 31, 2024, these costs include the legal settlement of the UFC antitrust lawsuit of $375.0 million, as described in Note 21, Commitments and Contingencies , to our audited consolidated financial statements in this Annual Report.
(4) Includes costs resulting from the Company’s cost reduction program during the years ended December 31, 2025 and 2024, as described in Note 17, Restructuring Charges , to our audited consolidated financial statements in this Annual Report. For the year December 31, 2025, the Company recognized impairment charges of $3.6 million within the IMG segment primarily related to the write-off of certain assets that are no longer in use. For the year ended December 31, 2024, the Company recorded impairment charges of $27.9 million as a result of reducing the carrying value of WWE assets held for sale to their fair value less cost to sell. Refer to Note 5, Supplementary Data , to our audited consolidated financial statements in this Annual Report, for further information.
(5) For the year ended December 31, 2025, the Company recognized $8.7 million of third-party transactions costs associated with the Company's debt refinancing transactions as described in Note 8, Debt .
(6) Includes gains and losses related to foreign exchange transactions.
(7) For the year ended December 31, 2025, other adjustments were comprised of a net loss of $9.6 million from the sale of certain equity method investments, partially offset by a gain of $1.3 million on the sale of PBR's former headquarters building. For the year ended December 31, 2024, other adjustments were comprised primarily of gains of approximately $3.2 million related to the change in the fair value of embedded foreign currency derivatives, partially offset by losses of $0.3 million related to the change in the fair value of forward exchange contracts and $1.1 million on the disposal of assets.
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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 December 31, 2025 and 2024, the Company had $3.7 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 (now known as "TKO Guarantor, LLC" or "TKO Guarantor"), UFC Holdings, LLC (now known as "TKO Worldwide Holdings, LLC" or "TKO Worldwide Holdings"), as borrower, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent, which was entered into in connection with the acquisition of Zuffa by Endeavor in 2016. TKO OpCo and TKO 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 September 15, 2025 (the “Credit Agreement Closing Date”), TKO Worldwide Holdings entered into the Sixth Refinancing Amendment (the “Credit Agreement Amendment”) to the First Lien Credit Agreement. The Credit Agreement Amendment, among other things: (i) refinanced and replaced the outstanding first lien term loans (the "Existing Term Loans") with a new class of first lien secured term loans, (ii) provided for an additional $1.0 billion incremental first lien secured term loan as a fungible increase to the Existing Term Loans of $2.8 billion (the "New Term Loans"), (iii) extended the maturity of the existing $205.0 million revolving credit facility from November 21, 2029 to September 15, 2030 (the "Revolving Credit Facility" and together with the New Term Loans, the "Credit Facilities"), and (iv) made certain other changes to the First Lien Credit Agreement. The Credit Facilities are secured by liens on substantially all of the assets of TKO Guarantor and TKO Worldwide Holdings and certain subsidiaries thereof.
The New Term Loans accrue interest, at the option of the borrower, at either (a) Term SOFR plus 2.00% (with a SOFR floor of 0.00%) or (b) the Alternate Base Rate (“ABR”) plus 1.00% (with an ABR floor of 1.00%). The New Term Loans' interest rate totaled 5.87% as of December 31, 2025. The New Term Loans have the same amortization schedule as the Existing Term Loans and collectively amortizes in equal quarterly installments and matures on November 21, 2031.
The Company incurred $9.0 million in transaction costs related to the Credit Agreement Amendment. Of this amount, $8.7 million related to modification arrangements which are included within selling, general and administrative expenses on the Company’s consolidated statements of operations, while the remaining $0.3 million associated with new lenders entering the syndication were capitalized as a component of long-term debt on the Company's consolidated balance sheets.
Borrowings under the Revolving Credit Facility now accrue interest at either (a) Term SOFR plus 1.75% to 2.00% (depending on the First Lien Leverage Ratio) with a SOFR floor of 0.00% or (b) ABR plus 0.75% to 1.00% (with an ABR floor of 1.00%).
As of December 31, 2025 and December 31, 2024, there was no outstanding balance under the Revolving Credit Facility.
The First Lien Credit Agreement contains a financial covenant that requires the Company to maintain, commencing with the fiscal quarter ended June 30, 2025, a First Lien Leverage Ratio of Consolidated First Lien Debt to Consolidated EBITDA of 8.25-to-1. The Company is only required to comply with the foregoing financial covenant if the sum of outstanding borrowings under the Revolving Credit Facility is (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 Revolving Credit Facility. This covenant did not apply as of December 31, 2025, as the Company had no borrowings outstanding under the Revolving Credit Facility.
TKO Worldwide Holdings had outstanding letters of credit of $1.1 million as of December 31, 2025 and none as of December 31, 2024.
Restrictions on Dividends
The First Lien 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 First Lien Credit Agreement) is less than 5.0x.
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Other Secured Loans
As of December 31, 2025 and 2024, the Company had $63.1 million and $30.3 million, respectively, of other secured loans outstanding, which were entered to finance the purchase of certain assets. These loans are secured by the underlying assets of the Company and bear interest at rates ranging from SOFR plus 1.70% to SOFR plus 2.25%. Principal amortization is payable in monthly installments with any remaining balance payable on the final maturity dates of November 1, 2028 and January 1, 2031.
One of the Company’s other secured loans contains a financial covenant that requires the Company to maintain a Debt Service Coverage Ratio of consolidated debt to Adjusted EBITDA as defined in the applicable loan agreements of no less than 1.15-to-1 as measured on an annual basis. As of December 31, 2025 and 2024, the Company was in compliance with its financial debt covenant under this secured loan.
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 approximately $75.0 million expected quarterly distributions to be made by TKO OpCo. TKO OpCo made distributions of $75.2 million on each of March 31, 2025 and June 30, 2025 under the cash dividend program.
In September 2025, the Company's board of directors authorized an increase to the quarterly cash dividend from $0.38 per share to $0.76 per share starting with third quarter 2025 dividend payment. Under the upsized quarterly cash dividend program, TKO's Class A common stockholders will receive their pro rata share of approximately $150.0 million to be made by TKO OpCo. TKO OpCo made distributions of $150.7 million and $151.3 million on September 30, 2025 and December 30, 2025, respectively, under the cash dividend program.
In September 2025, the Company repurchased approximately $26.1 million of its outstanding Class A common stock under a privately negotiated transaction. Additionally, the Company entered into an accelerated share repurchase agreement ("ASR Agreement") to repurchase $800.0 million of its outstanding Class A common stock, which was completed in November 2025. The Company also entered into a 10b5-1 trading plan for the repurchase of up to $174.0 million of its outstanding Class A common stock (the "10b5-1 Plan"), which commenced immediately following the completion of the ASR Agreement. The Company repurchased $40.7 million of its outstanding Class A common stock under the 10b5-1 Plan during the fourth quarter of 2025. These share repurchase transactions are being completed under the Company's previously announced $2.0 billion share repurchase authorization. The Company will determine at its 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, through accelerated share repurchase agreements, 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 the next two years and may be modified, suspended, or discontinued at any time.
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
Year Ended December 31,
(in millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Operating activities increased from $586.1 million of cash provided in the year ended December 31, 2024 to $1,285.7 million of cash provided in the year ended December 31, 2025. Cash provided in the year ended December 31, 2025 was primarily due to net income for the period of $546.2 million, which included certain non-cash items, including depreciation and amortization of $485.0 million and equity-based compensation of $117.6 million, as well as an increase in restricted cash of $296.6 million related to On Location for the FIFA World Cup 26. This increase was partially offset by a decline in accounts payable and accrued liabilities primarily driven by the $250.0 million payments under the settlement agreement in the UFC antitrust lawsuits. Cash provided in the year ended
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December 31, 2024 was primarily due to net loss for the period of $245.8 million, which included certain non-cash items, including depreciation and amortization of $457.9 million and equity-based compensation of $103.5 million, as well as decreases in deferred costs of $367.0 million due to the 2024 Paris Olympics, Super Bowl and other events occurring during the period, and an increase in accounts payable and accrued liabilities of $308.4 million driven by the settlement agreement in the UFC antitrust lawsuit and the timing of bonus payments. This increase was partially offset by an increase in other non-current assets of $255.5 million due to FIFA costs and deferred media rights costs, as well as a decrease in deferred revenue of $258.1 million due to the 2024 Paris Olympics, Super Bowl and other events occurring during the period.
Investing activities increased from $117.2 million of cash used in the year ended December 31, 2024 to $146.9 million of cash used in the year ended December 31, 2025. Cash used in the year ended December 31, 2025 primarily reflects payments for property, buildings and equipment of $127.0 million, investments in affiliates of $30.7 million and acquisitions of $8.7 million, partially offset by infrastructure improvement incentives received of $11.7 million and proceeds from the sale of assets of $5.8 million. Cash used in the year ended December 31, 2024 primarily reflects payments of $118.8 million for property, buildings and equipment and investments in affiliates of $35.1 million. These payments were partially offset by proceeds of $28.4 million primarily related to the sale of WWE's owned properties in Stamford, Connecticut, as well as infrastructure improvement incentives received of $11.0 million.
Financing activities increased from $155.0 million of cash used in the year ended December 31, 2024 to $635.7 million of cash used in the year ended December 31, 2025. Cash used in the year ended December 31, 2025 primarily reflects payments for share repurchases of $866.8 million, distributions to EGH and its subsidiaries of $455.6 million, dividends paid to holders of TKO Class A common stock of $185.2 million, net transfers to EGH of $122.5 million and net payments on debt of $70.4 million. These payments were partially offset by net proceeds of $1.0 billion received from the upsizing of the Company's existing first lien term loan in September 2025 and contributions of $26.5 million from EGH in connection with the Endeavor Asset Acquisition. Cash used in the year ended December 31, 2024 primarily reflects share repurchases of $165.0 million, partially offset by net transfers from EGH of $12.3 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 strategic 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 share repurchases as authorized by the Board and (8) 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.
Material Cash Requirements Related to Contractual Obligations, Commitments and Contingencies
Our material cash requirements from known contractual and other obligations primarily relate to our debt, leases and service contracts, and they include the following:
Debt
As of December 31, 2025, we had outstanding term loans with an aggregate principal amount of $3.7 billion, of which $37.4 million is due for repayment within the twelve-month period ending December 31, 2026. The term loans are due in November 2031, with quarterly principal repayments and the balance due at maturity. Future variable rate interest payments, calculated based on the interest rate as of December 31, 2025 and the loans' scheduled maturity, totaled approximately $1.3 billion, including approximately $226.7 million due on or prior to December 31, 2026. See Note 8, Debt , in our audited consolidated financial statements included elsewhere in this Annual Report for further detail.
Leases
Our operating and finance leases, primarily for office facilities, equipment and vehicles, feature varying lease terms and may include provisions for rent escalations or lease concessions. As of December 31, 2025, our total undiscounted fixed lease payment
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obligations related to our operating and finance leases amounted to $622.7 million, with $60.6 million due within the twelve month period ending December 31, 2026. The total lease payment obligation incorporates $335.0 million in finance lease payments related to options to extend the lease on WWE’s global headquarters, which are reasonably certain of being exercised. See Note 20, Leases , to our audited consolidated financial statements included elsewhere in this Annual Report for further detail.
Service contracts and commitments
We have certain financial commitments primarily consisting of long-term commercial partnerships with professional sports leagues and federations, alongside various other service contracts with vendors related to events and media rights. As of December 31, 2025, our total payment obligations under these commitments were approximately $1,806.4 million, with $434.4 million due within the twelve month period ending December 31, 2026.
Critical Accounting Estimates
The preparation of our consolidated financial statements requires us to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates.
We believe the following estimates related to certain of our critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. See Note 2, Summary of Significant Accounting Policies , to our audited consolidated financial statements included in this Annual Report for a summary of our significant accounting policies.
Revenue Recognition
We have revenue recognition policies for our various operating segments that are appropriate to the circumstances of each business.
In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when control of the promised goods or services is transferred to the Company’s customers either at a point in time or over time, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. ASC 606 requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates, and changes in those estimates.
Arrangements with Multiple Performance Obligations
We have various types of contracts with multiple performance obligations, including multi-year partnerships and media rights agreements. The transaction price in these types of contracts is allocated on a relative standalone selling price basis. We typically determine the standalone selling price of individual performance obligations based on management estimates, unless standalone selling prices are observable through past transactions. Estimates used to determine a performance obligation’s standalone selling price impact the amount and timing of revenue recognized, but not the total amount of revenue to be recognized under the arrangement.
Principal versus Agent
We enter into many arrangements that require management to determine whether we are acting as a principal or an agent. This determination involves judgment and requires evaluation as to whether the Company controls the goods or services before they are transferred to the customer. As part of this analysis, the Company considers whether we are primarily responsible for fulfillment of the promise to provide the specified service, have inventory risk and have discretion in establishing prices. For events, this determination is primarily based on whether we own and control the event. For bundled experience packages, including those sold by third parties, the determination is primarily based on whether we have control over the elements of the package including inventory risk and setting pricing with customers. For media rights distribution, this determination is primarily based on whether we have control over the media rights including inventory risk and setting pricing with customers. If our determinations were to change, the amounts of our revenue and operating expenses may be different.
Timing of Recognition
Media Rights, Production and Content
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Broadcast and streaming rights fees received from distributors of our live event and television programming, both domestic and internationally, are recorded when the live event or program has been delivered and is available for distribution. Commission revenue from our IMG business' distribution and sales arrangements for media and broadcast rights on behalf of clients is recognized when the underlying content becomes available for view or telecast and has been accepted by the customer. Certain of our media rights are typically sold in multi-year arrangements and are generally comprised of multiple performance obligations that involve the allocation of transaction price based on the relative standalone selling price of each performance obligation. TKO uses its estimate of standalone selling price to allocate transaction price. Any advance payments received from distributors are deferred upon collection and recognized into revenue as content is delivered.
We recognize revenue from PPV programming from live sporting events when the event is aired. PPV programming is distributed through cable, satellite and digital providers. UFC and WWE receive a fixed license fee for its domestic residential PPV programming under a long-term contract. For UFC and WWE’s international and commercial PPV, the amount of revenue recognized is based upon management’s initial estimate of variable consideration related to the number of buys achieved. This initial estimate is based on preliminary buy information received from certain PPV distributors and is subject to adjustment as new information regarding the number of buys is received, which is generally up to 120 days subsequent to the live event. If our estimates of buys achieved were to change, the timing and amount of its revenue may be different.
UFC owns and operates its own over-the-top (“OTT”) platform UFC FIGHT PASS that engages customers through a subscription based model. Subscriptions are offered to customers for one-month, six-month and 12-month access to UFC FIGHT PASS. WWE distributes content in certain international markets through its platform WWE Network, which collects licensing fees from distribution partners and collects monthly subscription fees. Subscription revenue for UFC FIGHT PASS and WWE Network is recognized ratably over each paid monthly membership period and revenue is deferred for subscriptions paid in advance until earned. PBR owns and operates its own OTT platform, PBR Ride Pass, that engages customers through a monthly subscription-based model. Access to PBR Ride Pass is provided to subscribers and revenue is recognized ratably over each paid monthly membership period. Revenue for PBR Ride Pass is deferred for subscriptions paid in advance until earned. The Company recognizes revenue for PBR Ride Pass gross of third-party distributor fees as the Company is the principal in the arrangement.
Revenue from our IMG business' production services of live entertainment and sporting events is recognized at the time of the event on a per event basis. Revenue from production services of editorial video content is recognized when the content is delivered to and accepted by the customer and the license period begins. Customers for the Company’s production services include broadcast networks, sports federations and independent content producers.
Live Event and Hospitality
Live event revenue is generally recognized at the time that an event occurs. Advance ticket sales, participation entry fees, site fees, hospitality and VIP package sales and bundled experience packages are recorded as deferred revenue pending the event dates.
We earn revenue from events that we control in addition to providing event related services to events controlled by third parties. For controlled events (owned or licensed), revenue is generally recognized for each performance obligation over the course of the event, multiple events, or contract term in accordance with the pattern of delivery for the particular revenue source.
For event management related services to events in our On Location business, revenue is generally recognized over the course of the event, multiple events, or contract term in accordance with the pattern of delivery for the service. If such revenues were recognized based on another basis, or if we made different determinations about which method to apply to a given arrangement, the timing of our revenue and operating expenses may be different. For bundled experience packages, the Company recognizes revenue at the event dates when all of the package components have been delivered to the customer. The Company defers the revenue and cost of revenue on experience packages until the date of the event.
Partnerships and Marketing
Customer contracts for advertising and partnerships rights are generally comprised of multiple performance obligations that involve the allocation of the arrangement consideration to the underlying deliverables based upon their standalone selling price. We use an adjusted market assessment approach as our estimate of standalone selling price to allocate arrangement consideration as the performance obligations under customer contracts are infrequently sold on a standalone basis either by UFC, WWE or other third parties.
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After allocating revenue to each performance obligation, we recognize partnership revenue when the promotional service is delivered. If our estimates of standalone selling prices were to change, the timing and amount of our revenue may be different.
Consumer Products Licensing and Other
Consumer products licensing revenue relates to royalties earned from sales of licensed merchandise and digital products. The nature of the licensing arrangements is typically symbolic intellectual property, inclusive of logos, trade names, and trademarks related to merchandise sales. Many licensing agreements include minimum guarantees, which set forth the minimum royalty to be paid during a given contract year. We will recognize the minimum guarantee revenue ratably over its related royalties’ contract period until such point that it is more likely than not that the total revenue during the royalty period will exceed the minimum royalty. If during the royalty period, management determines that total revenue will exceed the minimum royalty, the revenue recognized during each reporting period will reflect royalties earned on the underlying product sales. For licensing agreements without minimum guarantees, we recognize revenue related to the sales or usage of the underlying symbolic intellectual property over time as the sales or usage occurs. The amount of revenue recognized is based on either statements received or management’s best estimate of sales or usage in a period, if statements are received on a lag. If our estimates and judgments were to change, the timing and amount of revenue recognized may be different.
Goodwill
Goodwill is tested annually as of October 1 for impairment and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of goodwill may not be recoverable. We perform our goodwill impairment test at the reporting unit level, which is one level below the operating segment level. We have three operating and reportable segments, consistent with the way management makes decisions and allocates resources to the business, and we have five reporting units across these three segments.
We have the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. A qualitative assessment includes, but is not limited to, consideration of the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, and industry and market conditions. If we can support the conclusion that it is “not more likely than not” that the fair value of a reporting unit is less than its carrying amount under the qualitative assessment, we would not need to perform the quantitative impairment test for that reporting unit.
If we cannot support such a conclusion or we do not elect to perform the qualitative assessment then we must perform the quantitative impairment test. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. We apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We believe our estimates of fair value are consistent with how a marketplace participant would value our reporting units.
The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses along with discount rates. Our long-term cash flow projections are estimates and inherently subject to uncertainty, particularly during periods of adverse economic conditions. Significant estimates and assumptions specific to each reporting unit include revenue growth, profit margins, terminal value growth rates, discount rates and other assumptions deemed reasonable by management. Where a market approach is utilized, we use judgment in identifying the relevant comparable-company market multiples. These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that unit. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ.
If the carrying amount of a reporting unit exceeds its fair value, such excess is recognized as an impairment. For the year ended December 31, 2025, we performed a qualitative impairment test which resulted in no 2025 impairment charges.
In periods where we perform a quantitative impairment test, we utilize various estimates and assumptions that we believe are reasonable, but are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, significant customer losses, changes in spending levels of our existing customers or a different economic outlook than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future.
Intangible Assets
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For finite-lived intangible assets that are amortized, we evaluate assets for recoverability when there is an indication of potential impairment or when the useful lives are no longer appropriate. If the estimated undiscounted future cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, an impairment would be measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets. We define an asset group by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. If identified, the impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying value of each asset is above its fair value. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of the asset groups, estimates of future cash flows and the discount rate used to determine fair values. If we had established different asset groups or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record charges.
Identifiable indefinite-lived intangible assets are tested annually for impairment as of October 1 and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of an indefinite-lived intangible may not be recoverable. We have the option to perform a qualitative assessment to determine if an impairment is "more likely than not" to have occurred. In the qualitative assessment, we must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset has a carrying amount that "more likely than not" exceeds its fair value. We must then conduct a quantitative analysis if we (1) determine that such an impairment is "more likely than not" to exist, or (2) forgo the qualitative assessment entirely. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
For the year ended December 31, 2025, the Company performed a qualitative assessment and did not record any non-cash impairment charges to intangible assets.
Equity-Based Compensation
We grant equity awards to certain executives, directors, employees and service providers, which may be in the form of various equity-based awards such as restricted stock, restricted stock units and stock options.
We record compensation costs related to our equity awards issued to executives and other employees based on the grant date fair value of the award. Compensation cost for time-based awards is recognized ratably over the applicable vesting period and compensation cost for awards with a performance condition is reassessed each period and recognized based upon the probability that the performance conditions will be achieved. The awards with a performance condition are expensed when the achievement of performance conditions is probable. Compensation cost for performance-based awards with a market condition is recognized regardless of the number of units that vest based on the market condition and is recognized on straight-line basis over the estimated service period, with each tranche separately measured. Compensation expense is not reversed even if the market condition is not satisfied.
WWE Replacement Awards
Pursuant to the Transaction Agreement, the Company converted each WWE equity award of restricted stock units (“RSUs”) and performance stock units (“PSUs”) held by WWE directors, officers and employees into TKO RSUs and PSUs of equal value and vesting conditions (with such performance vesting conditions equitably adjusted), respectively (the “WWE Replacement Awards”). The value of the WWE Replacement Awards was determined using the closing price of WWE Class A common stock, par value $0.01 per share (“WWE Class A common stock”), on the day immediately preceding the closing of the TKO Transactions. The portion of the WWE Replacement Awards issued in connection with the TKO Transactions that was associated with services rendered prior to the date of the TKO Transactions was included in the total consideration transferred.
With regards to the remaining unvested portion of the WWE Replacement Awards, equity-based compensation costs of RSUs are recognized over the total remaining service period on a straight-line basis with forfeitures recognized as they occur. RSUs have a service requirement and generally vest in equal annual installments over a three-year period. Unvested RSUs accrue dividend equivalents at the same rate as are paid on shares of Class A common stock. The dividend equivalents are subject to the same vesting schedule as the underlying RSUs.
PSUs, which are subject to certain performance conditions and have a service requirement, generally vest in equal installments over a three-year period. Until such time as the performance conditions are met, stock compensation costs associated with these PSUs are re-measured each reporting period based upon the fair market value of the Company’s common stock and the estimated performance
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attainment on the reporting date. The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance conditions. Compensation costs for PSUs are recognized using a graded-vesting attribution method over the vesting period based upon the probability that the performance conditions will be achieved, with forfeitures recognized as they occur. Unvested PSUs accrue dividend equivalents once the performance conditions are met at the same rate as are paid on shares of Class A common stock. The dividend equivalents are subject to the same vesting schedule as the underlying PSUs.
EGH Replacement Awards
In connection with the Endeavor Asset Acquisition, each unvested EGH restricted stock unit held by an employee of the Acquired Businesses or independent contractor (i) outstanding as of the date of the Endeavor Asset Acquisition Agreement or (ii) granted thereafter in accordance with the Endeavor Asset Acquisition Agreement was assumed by TKO and substituted for 22% of a TKO restricted stock unit, subject to similar terms and conditions, pursuant to the terms of the Endeavor Asset Acquisition Agreement. EGH generally retained and remains liable for (i) all EGH performance stock units, (ii) all options to purchase EGH class A common stock, and (iii) all EGH restricted stock units held by Former Service Providers (as defined in the Endeavor Asset Acquisition Agreement) and phantom and cash-settled equity-based awards.
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, other than entity-level income taxes in certain U.S. state and local jurisdictions. TKO OpCo’s foreign subsidiaries are subject to entity-level taxes, and TKO OpCo’s U.S. subsidiaries are subject to foreign withholding taxes on sales in certain foreign jurisdictions which are included as a component of foreign current taxes. For the periods prior to the Endeavor Asset Acquisition, the Acquired Businesses primarily consisted of U.S. flow through entities that are not themselves subject to U.S. federal income taxes 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 consolidated tax provision are attributable to U.S. regarded entities and foreign entities subject to tax in their respective jurisdictions.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Significant factors considered by us in estimating the probability of the realization of deferred tax assets include expectations of future earnings and taxable income, as well as application of tax laws in the jurisdictions in which we operate. A valuation allowance is provided when we determine that it is “more likely than not” that a portion of a deferred tax asset will not be realized. Our deferred tax positions may change if our estimates regarding future realization of deferred tax assets were to change.
A minimum probability threshold for a tax position must be met before a financial statement benefit is recognized. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The tax benefits ultimately realized by us may differ from those recognized in our financial statements based on a number of factors, including our decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and our success in supporting its filing positions with taxing authorities. As a result of the Endeavor Asset Acquisition, a significant amount of unrecognized tax benefits conveyed to TKO are indemnified by Endeavor.
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included in the related tax liability line in the consolidated balance sheet.
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Consolidation
We typically consolidate entities in which we own more than 50% of the voting common stock and control operations, as well as variable interest entities (“VIE”) for which we are deemed the primary beneficiary.
Evaluating whether an entity in which we have a variable interest is a VIE and whether we are the primary beneficiary requires management to make significant judgments involving evaluating the fair value and capitalization of the investee along with the most significant activities of the entity and the party that has power over those activities.
Business Combinations
We account for our business combinations under the acquisition method of accounting. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any non-controlling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and non-controlling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives, among other items. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.
Non-Controlling Interests
Non-controlling interests in consolidated subsidiaries represent the component of common equity in consolidated subsidiaries held by third parties. Noncontrolling interests with redemption features, such as put options, that are redeemable outside of our control are considered redeemable non-controlling interests and are classified as temporary equity on the consolidated balance sheet. Redeemable non-controlling interests are recorded at the greater of carrying value, which is adjusted for the non-controlling interests’ share of net income or loss, or estimated redemption value at each reporting period. Estimating the fair value or other redemption value requires management to make significant estimates and assumptions specific to each non-controlling interest including revenue growth, profit margins, terminal value growth rates, discount rates under the income approach and other assumptions such as market multiples for comparable companies. These estimates and assumptions may vary between each redeemable non-controlling interest depending on the facts and circumstances specific to that consolidated subsidiary.
Recent Accounting Pronouncements
See Note 3, Recent Accounting Pronouncements, to our audited consolidated financial statements included in this Annual 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.
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Ite m 7A. Quantitative and Qualitative Disclosures about Market Risk
TKO is exposed to market risks in the ordinary course of its business. Market risk represents the risk of loss that may impact TKO’s financial position due to adverse changes in financial market prices and rates.
Interest Rate Risk
Our exposure to changes in interest rates relates primarily to the floating interest component on our long-term debt. The Credit Facilities bear interest at floating rates and we regularly monitor and manage interest rate risks. Holding debt levels constant as of December 31, 2025, a 1% increase in the effective interest rates would have increased our annual interest expense by approximately $37 million.
Foreign Currency Risk
We have operations in several countries outside of the United States, and certain of our operations are conducted in foreign currencies, principally the British Pound. The value of these currencies fluctuates relative to the U.S. dollar. These changes could adversely affect the U.S. dollar equivalent of TKO’s non-U.S. dollar revenue and operating costs and expenses and reduce international demand for its content and services, all of which could negatively affect TKO’s business, financial condition and results of operations in a given period or in specific territories.
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar appreciated by 10% against the foreign currencies used by TKO’s operations in the year ended December 31, 2025, revenues would have decreased by approximately $68.8 million and operating income would have decreased by approximately $2.9 million.
We regularly review our foreign exchange exposures that may have a material impact on our business and from time to time use foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of potential adverse fluctuations in foreign currency exchange rates arising from these exposures. TKO does not enter into foreign exchange contracts or other derivatives for speculative purposes.
Credit Risk
TKO maintains its cash and cash equivalents with various major banks and other high quality financial institutions, and its deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions and the failure of any of the financial institutions where we maintain our cash and cash equivalents or any inability to access or delays in our ability to access our funds could adversely affect our business and financial position.
