TKO

TKO is a premium sports/entertainment company monetizing UFC, WWE and IMG through media rights, live events, partnerships and consumer-products licensing — a durable, contracted, recurring-revenue model with real pricing power. FY2025 showed a dramatic bottom-line inflection: operating income of $835M (+2598.3%), net income of $195M (+1977.0%) and operating cash flow of $1.29B (+119.4%). Much of this is the first cleaner year after the WWE merger (Sept 2023) and the ~$3.25B Endeavor Asset Acquisition, as transaction/integration drags rolled off the depressed FY2024 base. GAAP net income understates the cash economics — OCF is ~7x net income, reflecting $485M of acquisition-related D&A amortization. The 17.6% operating margin and strong cash conversion mark this as a genuinely high-quality franchise.

The cautions are equally concrete. Revenue actually fell 3.1% to $4.74B — the first decline after a purely M&A-driven ramp (revenue went from $1.03B in FY2021 to $4.88B in FY2024 by folding in WWE and the Endeavor assets, not organic growth), so the dip needs to be read as either event/media-rights cadence or a softening trend. Reported returns are thin: net margin 4.1% and ROE 5.2%, as $835M of operating income is compressed down to $195M by interest and the Up-C/non-controlling-interest structure. The balance sheet carries the cost of aggressive capital return — long-term debt up 36.1% to $3.72B, total liabilities up 25.7%, equity down 8.6%, and the accumulated deficit deepening to -$797M, as $867M of buybacks (+425.4%) plus $185M of dividends (~$1.05B returned) were funded partly with debt. Net debt of roughly $2.9B against $1.29B OCF is manageable but rising.