Q4 2019 Earnings Call
Hello, and welcome to the webcast entitled W. W E fourth quarter earnings.
Just a few announcements before we begin.
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Please press star too I will now turn the call over to Michael Weitz Senior Vice President of financial planning and Investor Relations. Please go ahead Michael.
Good morning, everyone welcome.
Fourth quarter full year 2019 earnings conference call.
Thanks.
Today's discussion art.
Our chairman and CEO as well, it's Frank Riddick interim Chief Financial Officer.
Our remarks will be followed by Q1 Sasha.
Our 2019 earnings in 2020 business.
Outlook released earlier this morning.
Most of them.
At least our earnings presentation other supporting materials on our website <unk> dot www dot com forward slash investors.
Today's discussion will include forward looking statements.
These statements reflect our current views are based on various assumptions and are subject to risks and uncertainties.
His flows as easy filings.
Actual results may differ materially an undue reliance should not be placed on it.
Definitely the matters, we won't be discussing namely <unk> non-GAAP financial measures reconciliation of non-GAAP information is set forth in our earnings release and presentation, which I mentioned.
And our available on our website.
Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later today.
Fine it's Mike.
[music].
Good morning, everyone.
Joining us today.
HM.
Like the dark.
Distribution agreements with growing smartphone.
Performance.
Oh man.
Yes.
The middle East distribution agreement.
Going overseas.
Customer engagement.
Watching your sorry.
Right.
Platforms born your audience revenues rose.
Metrics, including television ratings.
Yes.
Sure.
On the core background <unk>.
Mark.
Well I remain convinced.
2%.
No.
Recently I know.
Rangers.
She does not reflect from change.
Energy.
Sure for she regime.
Before.
Everybody over time.
What are your much much much.
You fans.
Oh platforms.
Surgery.
Oh sure Rangers reimbursement different.
Sure.
So a focus.
Two years.
It's important part score management teams worked very goes to show.
Nick <unk> workers.
Okay.
If you change.
I should be.
Due to challenges Executive committee to our company.
More than scared.
Right.
I wanted to know sourcing of long term.
Oh, you choppy waters and why did you write watch sports content.
I'm showing strong.
We are providing.
Perspective.
2020, you should note.
We are pursuing initiatives or could substantially faster performance.
Through the distribution comps at least.
As well.
Valuation execution of strategic alternative.
Consumer service.
Okay.
[noise] critique.
Exactly.
[noise] recorded changing the culture.
Collaborative one solution.
No.
There should move to Reimagine are competing Tom Jones.
You like.
Actually my executive team.
My recruiting.
Global talent.
We express we remain extremely optimistic about future.
Most of the country.
I feel more confident than ever.
Oh.
Yes.
So much turnover no.
Right.
She ago and longstanding number.
Thank you Vince.
Several key topics, which we'd like to review today.
These include discussion of our financial performance the progress of key strategic initiatives our business outlook.
2019, we.
Generated record revenue of 960 million.
Nothing significant growth in the stores on new content agreements in the United States, which became effective in the fourth quarter.
Our adjusted OIBDA was 180 million is the growth in rights fees and lower incentive compensation were offset by weaker performance across other product.
And the impact of accelerated investments to support our core content creation.
Given both the changes in the media industry increase disruption from new direct to consumer services and heightened competition for viewers as well as the challenges to our brand engagement, we believed in increasing our ability to create compelling content, representing a prudent course of.
Action.
This was not a decision that was made easily but ultimately the right thing to do.
As we transition smack down to Friday nights on Fox broadcasting or engagement metrics, including TV ratings and live event attended has showed marked improvement.
Domestic TV ratings for smack down which declined 15% in first quarter 2000 <unk>.
<unk>.
Prove to a 20% increase in the fourth quarter with a 25% increase in December.
Generally domestic TV ratings for raw, which declined 14% in the first quarter 2019, So a 5% increase in December.
Quarter wrong outperformed the aggregate ratings performance, but the top.
25 cable networks Smackdown was there number one rate is Friday night broadcast program among the comedy 18th 49 demo and outperformed the aggregate ratings the top four broadcast networks.
Also indicative of stripping engagement average attendance at our live events in North America, which declined 12% in the first quarter.
Improved two an increase of 15% for the fourth quarter.
Early indications in January show continued positive trends.
During the fourth quarter strong revenue growth from our new U.S. distribution agreements was partially offset by the timing of original series absent other large scale down as well as lower subscription to W. W.
The network.
Importantly, the ongoing investment to support the creation of more content was balanced by a reduction in accrued management compensation associated with our full year performance.
Through your business performance in the quarter, let's turn to page five of our presentation.
Which shows the revenue operating income and.
Adjusted OIBDA contribution by segment as compared to the prior year.
Looking at our media segment, adjusted EBITDA increased 62% or 44.5 million driven by the escalation of domestic rights fees for our raw and Smackdown programs.
Revenue growth was partially offset by the absence of mismatch.
On an original series license to Facebook last year.
Reduction in network subscription and increased content related expenses.
Let me to be networks average paid subscribers decreased 10% to approximately 1.43 million for the fourth quarter, driven primarily by the impact of lower subscriber additions earlier in the year.
We have projected that the networks average paid subscribers will increase on a sequential basis to approximately 1.47 million for the first quarter of 20 Twond.
[noise] given the evolution of new streaming services in the increasing value of life content. We believe there may be alternate strategic options for the WWD network, which will enable us.
To further monetize our most valuable premium content.
Thus, we're currently evaluating alternatives strategic options.
During the quarter, we made important progress on other strategic initiatives that extended the reach of WD brands.
Specifically, we completed a free to air distribution agreement with Viacom CBS is channel.
Five in the UK and extended our agreement with Supersport in Africa, which will create a dedicated WD channel.
We also premiere the second season of MS images on U.S.J. network and announced the fifth season in total Bell with total dollars.
To err on the beginning on April nine.
Turning to our.
Five event business as shown on page seven of a presentation adjusted OIBDA from all live events declined 3.8 million, primarily due to the absence of Super show down a large scale is after we held in Australia in the fourth quarter 2018.
Although we had 14 if you were in North American events in the quarter. This change had limited impact on adjusted away but.
Despite the absence of Super Showdown, we continued success successfully stage large scale of that's for fans. We held our second such events in Saudi Arabia. Shortly thereafter announced an expansion of our partnership to hold a second we have not country every year through 2027.
Domestically, we stayed survivor series, which anchored and extended weekend.
Nearly 40000 fans over the four day period to the Allstate Arena in Chicago.
And our consumer product segment, adjusted OIBDA increased slightly from the prior year quarter as a reduction video game royalties was offset by lower operating expenses.
During the quarter, we continue to drive growth from the distribution of mobile.
Increasing installs to nearly 125 million across our game portfolio led by WWD champions.
Page nine of a presentation shows selected elements of our capital structure as of December 31st 2019, WWD held approximately 250 million in cash and short term investments.
Additionally, we estimate that fact, wcbs, approximately 200 million and debt capacity under our revolving credit facility.
2019, we generated approximately 53 million in free cash flow as compared to 154 million in the prior year.
The decline was due to unfavorable changes in working capital related to our fourth quarter of them.
In Saudi Arabia, and the payment of prior years accrued management incentive compensation.
Additionally, the change of free cash, but also reflected a 37 dollarsmillion $37 million, increasing capital expenditures the majority of which was related to the execution of our workspace plan.
Notably we returned more than 120 million a.
Capital to shareholders in 2019, consisting of approximately 83 million share repurchases and 37 million and dividends paid. This included included nearly 75 million stock repurchased in the fourth quarter, representing approximately 15% of the authorization under our $500 million repurchase program.
Looking ahead over the next few years, we believe that W.W. He is well positioned to take advantage of significant growth opportunities.
These include the rising value of like sports content growth of media and entertainment in international markets and the evolution of other businesses, specifically Wi Fi network.
2020, the escalation rights fees.
Hi, its contractual revenue growth of approximately 185 million.
We expect this gross growth will be partially offset by an increase in operating expenses from multiple sources.
Our cost to develop new sources of revenues for full year impact from 2019 content related investments the reset of performance based management incentive compensation.
And the annualized the staff costs.
You should note that while we anticipate incremental investment over the long term to support our growth initiatives, we're working to moderate that investment in 2020.
We're also pursuing several strategic initiatives to increase the mark that could increase the monetization of our content in 2020 in subsequent years.
Equally distribution of content in the middle East in India, and the evaluation strategic alternatives for a direct to consumer service WPP network.
At this time the outcome of these initiatives is subject to considerable uncertainty.
Excluding the potential impact of these initiatives, we anticipate 2020 adjusted OIBDA of 250 to 300.
Hundred million.
Management believes it has the potential to exceed this range, but were unable to provide additional guidance at this time.
Previously discussed step up and capital expenditures in conjunction with our workspace strategy.
For 2020, we estimate total capital expenditures of 180 to 220 million, which.
Crudes includes approximately 130 to 160 million to build out a new headquarters facility.
21 has to make total capital expenditures of 120 to 140 million, including approximately 80 to 100 million to complete construction.
We expect total capital expenditures to return to approximately 5% of revenue.
By 2022, which is in line with historic range of approximately 47% of revenue is predominantly related to maintaining existing infrastructure.
[noise] for the first quarter 322020, we estimate adjusted OIBDA of 60, 65 million, which represents approximately five times be.
Adjusted OIBDA results achieved in the prior year quarter.
We estimate reflects substantial revenue growth from our new content distribution agreements in the you asked which became effective in the fourth quarter and the February staging of a large scale down in Riyadh, Saudi Arabia.
We also anticipate the first quarter growth will be partially offset by an increase in operating expenses associated.
With developing new sources of revenue.
Electing full year impact in 2019 investments.
The former includes higher cost to accommodate the production of Smackdown broadcast live on Friday nights for rather than one day fallen law, that's producing additional hours NXT on Wednesday nights.
[noise].
The fundamental elements of our growth strategy remain unchanged as mentioned earlier, we believe we're well positioned to take advantage of the rising value of live sports content as well as strong media and entertainment growth in international markets. Additionally, we have confidence that we can grow or sponsorship business and leverage increasing digitization to expanded engager audience.
But the escalation of content content rights fees, we've seen an increasing share of revenue coming from contractual arrangements and we expect that trend to continue further transforming our business model.
We're in the process of evaluates evaluating several strategic initiatives that could materially impact our growth trajectory.
And we are targeting a date by the end of.
First quarter to communicate our long term strategy.
Committed to providing a comprehensive perspective on our roadmap for creating shareholder value and we look forward to meaning we view our investors and analyst.
That concludes this portion of recall and I'll now turn back from Michael Thank you Brian.
The call we're ready for questions.
Please open the lines.
Thank you Sir.
We will take our first question from Ben Swinburn with Morgan Stanley.
Thank you good morning.
Thanks for all the color two questions for you first I just want to confirm your guidance for 2020 assumes.
Hearing.
You're right zero revenues associated with your rights.
TV rights or media rights in India, and the Middle East I just wanted to see if that's correct and if it is.
I understand why you'd have to guide that way, but but that seems highly unlikely since presumably there is a path to some distribution deal.
So just wanted to see if you could add some color.
Color there so we can better understand the guidance and then I've a follow up.
Well on on meaning you're correct on India. It would be the increment from the new deal because we have an existing deal in India. That's in place.
And what we're what were we have taken out because of the uncertainty not about whether we feel pretty confident that but that these new agreements.
We put in place and as I said, we havent existing agreement in India already the uncertainties around the timing of that and the ultimate value that we receive.
I see and you are still on the air in India as of right now right in this first quarter correct.
Yes, okay.
Got it okay, great and then secondly on the strategic.
For the network, what do you guys trying to achieve there I mean is this a business. You think you can sell or are you looking to maybe turn this into a license stream.
Your broader media business sort of de risk it with a partner like any of skin plus or something like that everybody that anymore color you could add I realize it's it's sort of an ongoing review, but just would love to hear anything else you could share.
[music].
We have a lot of options.
Can you on as we are now with the management of free to your.
No one asked speed tier.
That is an option. We also have an entre and everything right now.
No more better time to exercise we're selling.
Right no to all the mixers and quite frankly.
Really clamoring for our content.
So that could be a significant increase obviously in terms of revenue.
Got it thank you very much.
Our next question comes from David Karnovsky with JP Morgan.
Got it thanks for taking the question I guess, just a follow up on that holds.
We think about what's on the network now what anything kind of be off limits.
Some of the more premiere.
It's a profitable or low level.
My going right when you say that.
Interest from third or linear parties for that content.
Does that overall for network.
I think there's nothing you know obviously the devils in the details in any of these arrangements, but you know at this point of Theres nothing that would looks like it would be.
I think it would stop us from from doing a different type of transaction with the network. If we chose to.
Okay.
It's a question because we've got mad but to Todd.
Last week from that there is but can you just say here definitively whether that's been plans to invest to partner with or.
No towards next without important feature.
No the excess Allison separate.
Completely.
About 400.
Please golf courses this company.
It's completely separate.
Got it okay. Thank you.
Your next question comes from our Martin from Needham.
Hey, I guess I have a sort of.
Philosophical question like what are the things we did with next as we pulled that proprietary content on the network and put it on you I'd say for cash flow today, which de risk said, but I'd also took away programming on your U.S. subs. So in answer to Ben's question. Just now you said that there is people clamoring for.
And that that might be more valuable ways to monetize network. How do you think about the fact that you can take more cash, but it's coming from the linear TV ecosystem, which is dying in this country compared to OTI tea, which is structurally growing but doesn't give you the near term cash.
So that maybe you could get into different alternatives.
Well Mark as you know there's so many.
Majors going into.
Gigi that's what I was referring to.
Our network, obviously Europe is our most premium content.
We have likely.
Subscribers, who got more.
So that's another way for us to capitalize.
I Wonder network and again as I said, there is very strong interest and all the major as relates to go to three.
And you've talked about adding add them in the past like sponsorship <unk> advertising was something we talked about early when you're doing a teacher.
If you read thought adding a second revenue stream video T T service.
That's possible even leave I'd open, but again right now.
We continue onto the network pretty much as is different ethnic I consider that if in fact, we're looking to enhance revenue.
That would be.
Our partners.
I see that makes sense.
Okay, Great and then I think one of the questions. We get much frequently is what's taking so long for the Mina and India. Because we've got those are gonna be done like early and 19 and is there do.
Do we have a well we'd be done.
By the end well because some of those deals at the end of the first quarter when you're gonna give us. This comprehensive overview of W. W. E. Do you think.
Laura.
Really good to answer the first for your question, let's take so long in India. There's been some regulatory changes that have complicated to negotiations and.
So so that that is really the primary reason for the delay there the Mena rights.
The intricacies dealing with the Saudi Arabian government and their own out ways of going about of doing business.
I think we don't want to predictive specific date, but as I said before our the uncertainty is around the.
I mean in your mouse knockout these deals will eventually be dawn.
Thank you.
Let me just add.
In making reference to due to you and the interest automaker players.
We'd be announcing that deal if we go that way.
Last quarter so for long.
Sure.
Okay. Thank you My next question from Curry Baker with Guggenheim Securities.
Thanks, guys.
On the buyback it looks like you guys were in the market more active than in the fourth quarter I'd have to soon if he is off the stock was attractive.
Then you'd have to think it's significantly undervalued hill, you're well you'd be more aggressive I'm in the market at these levels under your current authorization and I guess following all on that will you consider using or leveraging the balance sheet to take take advantage of near term dislocation.
Well answering the first.
The last part of your question I think their capital structure strategy isn't going to change a lot I don't I think we believe having a flexible tax of capital structure that allows us to have the resources to pursue growth opportunities is probably more important even in the short term and we do have a lot of liquidity right now.
I don't think that we would.
Never jumping to the significant way to buy stock on the existing program.
Shifting program has about $450 million so remaining.
Authorization and we're going to continue.
To run that program that way, we have trying to buy at significant discounts to what we feel as intrinsic value.
You know constrained only by a regulatory and other other.
Relations that we have to disclosure and regulations, we have to follow in the buyback. So clearly right now with the stock trading where it is it's you know more attractive than the ones.
Okay. Thanks, that's helpful and then maybe just one more on.
That's in the influx and buckets of investments you're looking at this year and over the next couple of years you I think in the past managements I'm focused on three main areas here, we're building out your data and technology capabilities localization, which I think include the performance centers internationally as well as continuing to.
Hey that.
More et cetera.
Any more color on on how you're thinking about each of these as well as if there's maybe other investment opportunities that are also that you're considering.
The only other area that we've had good look back would be around.
As to the network and of course that that is.
Someone depending on where we end up on the strategic alternatives.
So the other areas continue to be the primary focus for investment because that's where the growth opportunities our international.
You know increasing back on the brand value engagement with customers of setting.
Not for continue rights and renewals and new products or new services or the content that we can put in the market.
Is there any way you can put kind of an aggregate framework around the level of investment spending you're expecting for 2020 like a range or anything.
Well I think what we said is that.
Looking to you know we're gonna have the effective the follow on from the 219 investments in the full year, but we're taking a hard look in 2020 at all the investments.
And see it to see to try to find the right balance between investing in the business for future growth and shareholder value and maintaining.
Financial performance at an acceptable level so.
I think we did say that 2021 would see more investments in 2020, and we are taking a hard look right now at all investments, but the areas at one option.
Okay. Thanks, guys.
Our next question comes from Brandon Ross with White said partners.
Hi, guys. Good morning, Thanks for taking the questions I think first.
Since content is obviously the lifeblood of this company and the quality of your content is very strongly correlated with the success of your various business units.
What have.
Are you done specifically.
Over the last several quarters to improve.
The content.
Engagement.
And then related how much it through Hey man and Richard.
On raw and Smackdown.
And do you believe you need to spend.
And much more on talent to help stimulate engagement trends.
A couple of things.
Mm.
We we think that what we've done thus far in terms of.
Television ratings in terms of.
Higher production value.
There is three lines.
Okay.
Our top talent at the same time, bringing on new Joan is Paramount.
You see again Moody's ratings.
Your current ladies notwithstanding what's been happening first quarter.
Two years growth there.
Sort of like.
At one time got a lot of.
Talent that was injured.
We don't have that like now and again, it's ready it just takes a while to be able to point.
Everyone in this type players like storylines like county.
And when you refer to mania recently.
Exactly what we want and going forward as well.
Got it and then maybe.
Actually I have two more once a clarification so for India. It did you actually euro out India and the guidance or are you.
[laughter] attributing the the pre the right so prior deal.
In the guidance.
I wasn't sure about that.
We left the current deal in the guidance it would be the increment that we were expecting that we took out.
Okay, and then just philosophically I wonder the key aspects to that WWD network.
And that it allows you to have a direct to consumer.
Jason Chip and access to real first party data.
What's keeping those three important in any strategic alternative and.
We still matter to you or do you think that was.
Misplaced priority in the past.
Well I mean is misplaced.
It was one of our goals.
Still continues to be when the plane, but some of the majors it depends on.
Whether or not we can negotiate holding onto phases I manager, sometimes youve invoice, what all that to themselves. So it isn't that really negotiation as to what we keep if we could keep.
[music].
Right, but it's not a must have for you.
But what.
Yeah.
Okay Mr. nothing nothing is a must have no real would deal with what's available.
Again, it's going to fluctuate somewhat with what's the.
They want out of those.
Okay got it thank you.
Your next question comes from Eric Katz from Wolfe Research.
Thanks, Good morning.
One question on B 2020 guides, the 250 to 300 its.
It's a pretty big range, when excluding I guess, the increments from India and also the middle East deal, what's driving that 50 million dollar range is that mostly on the network strategy.
No I would say that the reason for the ranges is.
The.
D. around.
What level of cost structure, we can actually achieved through.
Cost reductions and other things and where are the rest of the business is going to perform.
Including the network in the interim in terms of the number of subscribers that we get so we wanted to make sure that we provided guidance that was.
You know realistic.
What we thought we could achieve.
There's no reason was that you know just some color that goes I think these numbers are.
Considerably.
Sherman.
Yeah for anyone.
These deals takes place it soon.
It's going to be a big deal it's going to transform.
I understood and it sounds like I guess just to be clear and some of the other comments and questions. We've got so far it sounds like there could be anything from a dual revenue stream, where you still monetize the network just in a different way or there's even a scenario where the networks completely shut down.
But I guess, we're all trying to figure out is it sounds like whatever you decide and the timing sounds like potentially before this events at the end of quarter. The economics will be better than your current structure. I mean does that generally a fair assessment and is that from both revenue and expense perspective.
Okay.
I think.
Did we.
Successfully achieved what we're trying to do.
The majors in terms of their desire for.
Gigi.
Again section.
Just a minute ago, it's transformers.
I'm just not most okay.
You know.
Would be available.
Okay. I guess, maybe will be helpful is do you have a number on the profitability for the network currently is it.
The 40 50 million range.
We don't provide that information.
Okay. I guess my last question would be based on your comments for 2020.
Essence moderating should we then assume be investments in Q4, not a run rate for the entirety of 2020.
I think we were talking about the level of increment in 2020, obviously.
As we said we have investments in 2019 that aren't going to continue into 2020, because they were made during 2000 2019.
Well I thought I'd say that the run rate existing run rate isn't going to go down in the first quarter Thats, what you're asking.
Okay. Thank you.
Our next question comes from Eric Handler with MKM partners.
Good morning, and thanks for the question Wonder if you just give a little bit of color on the TV deals you talk about 185 million incremental there and 2020, but.
If you take out the U.S. step up which I believe as you know.
North of $200 million.
Maybe you can reconcile does that mean UK, China Latin America World down and then is NXT and that number in the free to air money.
[noise] basically all that excludes.
Component around our assumptions around.
Nina annual rent around India, So everything else is.
Included in that there's a small portion.
That we've excluded.
Into our forecast around contracts that renewed that I haven't been contracted yet.
But the vast majority is related to the other deals.
And to be but didn't.
Sorry did you K, China Latin America grow.
Eric we wouldn't get into specifics around burns and specific.
Terms and.
Back to specific deal.
Okay.
Fair enough and then.
The second question, what that that'd be WD network late in 19, you did.
Do a beta of a free tier is that continuing now can you give us maybe some color on how it performed in terms of baby down incremental downloads.
Was it the tier was launched in December I think it's too early to say exactly what the results are of that had been we're going to continue to analyze and when we have something when we feel like we have good data around what effect is having real world.
Out there and again you saw.
Right. Okay. Thank you.
Very much.
Our next question comes from Sandy cars.
Cannonball research.
Thank you good morning, I wanted to ask a quick clarifying question on the guidance and specifically about the initiatives you mentioned and the middle East and India.
So first of all [noise].
The decisions being made to go we've had with those with those initiatives and if not what's the timeline and then do I understand correctly from your prepared remarks that.
If they want to go ahead that wouldn't be an upside to the EBITDA for Twentytwenty then descent.
Correctly or would that require more of a spending period, which would be on negative for the EBITDA for the year.
Yes, we still for June pursuing those new agreements and you know from our perspective as quickly as we can get them done now that's what we're aiming for and I think as I explained earlier that.
The India rights are already we already have existing India rights and they are in the guidance because we've already on the Ari.
Do it will be paid under that arrangement it would be the increment on India, but yes. There is for Mena would be an addition to their guidance.
All right. Thank you very much.
Our next question is from Jason Bazinet with Citi.
Oh, thanks, So there's a lot of investors were speaking with it.
Interested in your stock, but they're very nervous about what I'll call Extractors. She wants something some sort of curve ball.
Right.
I know, there's a bit on Orthodox but can you just take a second and just maybe address some of the things that are out there in the marketplace just to put them to bad. So I'll give you two and feel free to add others. One is integrated media that fell.
That's what we here and then the second one.
Is there anything in there in that.
Fox and Comcast.
Agreement, that's not a fixed payment in other words, some sort of flexible payment that turns on the trajectory of the viewership.
It's going investors are the count on those dollars whatever they are or is there an embedded surprise potentially.
No the contractor or what they are that's not to say that.
We couldn't do more programming, you know with them and or others.
Good.
And what was your question on Mexico.
Well, there's just there's concern but in some way your personal investment of access al will somehow got swirled up and to the.
Sort of investment case, that'd be good to either public.
Equity.
None of that basically it's all you know again as we have like 400 employees.
He is one by itself.
Yeah.
So no investment whatsoever.
Yes, So I think you know just to.
There's no plans to put the exit fell back into it as a part of the WB investments, you're asking is completely independent entity.
Okay. Thank you.
Yes.
And Steven Cahall from Wells Fargo has our next question.
Thank.
I was wondering if you could provide a little bit more color on somebody operating expenses that are driving the 2020 guide you mentioned developing new sources of revenue. So I was wondering if you could give us a little more color on what those might be and you also mentioned resetting the performance based management incentive comp why does that.
Increase costs in 2020, as well, maybe especially given that the stocks down quite a bit over the last 12 months I got a quick follow up thank you.
So the cost areas, either increasing has 2020 or around.
Production and again, we talked about the fact that we now.
Smackdown Vance four days later, you're going to full year effective that.
I have a higher higher costs right into some of the initiatives and I think we did say.
Third quarter, we talk about the increase in talent expansion that will rollover.
There are.
Okay.
Incineration is around new production.
Developing new new content and there are some costs.
For that as well.
What was your books your second question.
The second part of that were good Yosemite resetting receiving any property it's quite straightforward.
Because of the relative performance in 2019.
Payouts under the management incentive plan.
Lower than.
Targeted and when we build the plans for that for 2020, we of course, we put it in.
Yeah, right, where we would achieve that target so.
And that accounts for the here from a best for the short term the cash bonus plan.
The stock component is not as adjusted OIBDA. So.
Clearly stock compensation might be lower stock stays lower but it's not an adjusted or would be anyway. So it doesn't explain any of the difference.
Okay, and then Vince you just mentioned that India or meet a contracts could be transformative I was wondering if you could tell us what you meant by that could those be more than just TV rights deals anymore color. There. Thank you.
Yeah.
I believe Vince was referring to a net potential Trent network.
And would be transformed.
Okay. Thanks.
And John Bolton from Evercore has our next question.
Thanks, Vince I was hoping you could give us some updated thoughts.
No other it's about a year into that promotion launching.
And you've been competing with them on Wednesday nights for about four months basically.
They are trying to do fill and finish with more edgy content. How do you feel about that strategy what does it done for the category how has a view in general changed your content and your business.
Oh.
You do not change or content.
No because it's all about character storylines and resolutions.
So it really hasn't changed our point of view in terms of what we present, we don't need it.
Yeah.
Content.
Okay.
There really.
He is BG.
So as far as 60, which.
Okay.
The next year.
Competing on Wednesday mine.
Doing extremely well.
And were onto the next to continue on lose their jobs.
Got it thank you.
We have a question from burning certain end up with Rosenblatt Securities.
Great. Good morning, Thanks for taking the question I was wondering based on the increased investment what the return thresholds or be or or how that started out in over what timeframe is all about being in a better positioned for that.
Next right.
All in the U.S. or could we see those returns prior.
You of course, we look at the return on investment for all the incremental investments, but they're largely tied to building the brand and building the content quality and engagement with fans to get the pay off in the next.
Content renewals.
So that's that's the objective Theres pizza.
Always a healthy tension around how much do you invest for for the future pay off from what the landscape is going to look like at that time and but those those are the judgments that are made.
Got it and then just.
A follow up on Talen costs, I believe that talent.
What you pay the Ww Superstars is based on percentage of revenue has that rate that you pay them gone up or is the impact just because of revenue increasing as well.
It's mostly revenue increasing we've always done.
Brazil use.
Gentlemen.
Generally speaking.
Revenue more money bitumen.
Conversely, when should we tell Crosspaths point, though.
And so the problem with them.
Got it and thank you and lastly, Vince just wondering if you're yeah within.
Management turnover changing any where you're spending your time I'm on a database databases short term and you expect to change over the next few years.
At the moment of a few more with works to record works.
Going forward.
Yes.
James in terms of allocating.
During my time.
Right.
Pretty broad shoulders, and I can handle.
A lot.
Thank you.
And we have a question from Alan Gould with loop capital.
[noise]. Thank you.
Lets me a little bit of a divergence between some of the domestic trends on the international trends, especially with respect to live events on the domestic ratings have been programming domestic Roberts and was up.
The international average upon them close on a trailing domestic aperek dependence and plans are for some changes.
Just a functional.
The locations you can go on but it looks like or is it something going on internationally.
No I think it's the difference in international is really Nixon venue and what country what venue.
A number of events, which is a little more variable in the international because of the logistics associated with it but thats the.
Primary there's nothing fundamentally different.
Between the U.S. and international at this point.
Thank you.
And we have a question from John Healy with Northcoast research.
I think you. It's one that's good question about the at the corporate leadership.
Its structure going forward rightfully. So the company has always had a very unique structure.
I was hoping you could give us a little bit of thought on terms of what ideally you would like the C suite. The kind of look like you know over the next couple of years and Additionally.
Oh I get my.
Take to maybe you'll get to where do you want to be what the <unk> with the transitional leadership.
Well I think that's for sure.
In terms of change your re imagining a co through the way we do business it is going to be far more inclusive.
And quite frankly with Ben.
Our strong management team currently is what was going forward.
You mean, attracting world class.
Visuals to our company wouldn't want to work for WB come on.
Yes.
It's exciting.
We are on the.
5% on investments in terms of what do you have an executive is not only 50 50 can we.
You get what you pay for and it will take US long either you know do.
Minimal.
Thank you.
Your next question comes from social with consumer edge research.
Great. Thanks for taking my question could you see more specific about any explicit disagreements around strategy that you may have had the prior exec team members to give us a sense.
How you're thinking about the business going forward.
More granularity.
Like it was execution related but just wanted to be clear there.
I want it was execution than they did not lot of it is.
Focus as well.
And as well as reallocation of resources again looking at the way, we do business, it's it's going to be different.
And.
And more successful.
Great. Thanks, and then.
Another one on capital allocation. So aside from I could tell you do have the venture portfolio. How do we think about that when it comes to capital allocation and what would be the potential for non accidental related acquisitions over the next few years. Thanks.
Yes, well I think we'll continue to make.
Small equity investments meeting.
Taking taking a small equity stake in technologies in businesses that.
Where are there other enhancements to.
Learning that can be put into the WD organization I don't think that those are going to be.
Cereal and and.
Because of the size of the stuck in just the size of those investments so.
But I do think it's a valid.
Strategy has has created some opportunities for the business. So I think we will continue that.
At a modest loan.
When you just Richard Nixon, probably doing it you know there's a totally separate entity.
Great. Thanks again.
And we have a question from Brandon Ross with White said partners.
Hi, I'm, sorry, just a couple of.
Clarifying questions.
Where were any W.W. read that work profits.
Excluded from the guidance or do you assume that couldn't network continues as it is for the purpose of the guide.
We didnt assumed that any of the strategic options that were looking at with respect to the network would be achieved in impact the guidance.
Right, but.
Right.
He said ongoing business in the networking and are.
Operating what would be if you're assuming it's a contributor.
Correct.
But not got new dependent.
In the sense of any new strategic deal or any.
No major change in the way, we're doing business in the.
Network, who were partnering with that would not include like we have an ongoing business.
You know and that business will continue until we make a change in house operator.
Okay and then he told our plan to rebuild our plans when we give our guidance it's included.
Okay got it and then could you explain a.
A little more specifically, who is going to fill Georgia michelle's roles, which is within the company.
Or are you, bringing in additional senior executives I think that's what you said or the business unit leaders gonna take on additional responsibilities.
Where are you going to fill those roles.
We're in search now where an exceptional.
I want to come in at the same time.
Huge phase in the occurring.
Our current role in terms of management team.
Okay.
Got it thank you.
And ladies and gentlemen, as a final reminder, that as far and then one if you would like to ask a question at this time.
Yes.
Thank you everyone. We appreciate you listening to the call today.
If you have any questions. Please do not hesitate to reach out to us. Thank you.
Once again, ladies and gentleman that concludes today's conference I. Appreciate your participation today you may now disconnect.
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