Q1 2021 World Wrestling Entertainment Inc Earnings Call
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Please standby.
Hello, and welcome to the webcast entitled WWE first quarter earnings today's call is being recorded we have just a few announcements before we begin first please use the question Mark icon in the upper right hand corner of your web console for technical <expletive>istance.
The option to of March slides is located to the right on your slides with the for arrows pointing in different directions.
The listening through the phone line you may ask a question verbally by pressing Star then one on your Touchtone phone if you wish to be removed from the queue. Please press star two I will now turn the call over to Michael White as the VP financial planning and Investor Relations. Please go ahead Michael.
Thank you Lauren and good afternoon, everyone. Welcome to Wwe's first quarter of 2021 earnings Conference call, leading today's discussion are Vince Mcmahon WWE chairman and CEO.
The car WWE, President and Chief revenue Officer.
Stephanie Mcmahon WWE, Chief brand Officer, and Christine Zealand WWE, Chief Financial Officer, the remarks will be followed by a Q&A session. We issued our first quarter earnings release. This afternoon and posted the release of our earnings presentation and other supporting materials on our website.
Today's discussion will include forward looking statements. These statements reflect our current views are based on various <expletive>umptions and are subject to risks and uncertainties disclosed in our SEC filings.
The results may differ materially and undue reliance should not be placed on them.
Additionally, the matters, we will be discussing today may include non-GAAP financial measures reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website.
Note that all comparisons are versus the year ago year ago quarter.
Otherwise described.
Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later this evening.
The decline, it's my privilege to turn the call over to Vince.
Thanks.
Joining us everybody.
The real world for Ryder.
James.
Sure.
Coming out of Covid.
At first the run of survival mode.
We found the right.
Once we resolve of secure presents all of those as an opportunity to.
I think the way, we do business and open what I call the WWE treasure chest.
The only way.
As of the best management team.
And the WWE history.
We have that James.
James it's innovative.
David drives revenue and has reorganized the company for more nutritious way to take advantage of the new revenue streams.
Platforms.
The consumer products.
The content creation.
Opportunities to expand our media rights for <unk>.
On the global basis.
I'm always excited about our business I don't think of everyone is excited as I am now.
Okay.
Thank you Vince this is Nick com.
First of all thank you everyone. So much for calling in it's going to be nice to speak with all of you again.
Since our last earnings call there have been significant developments in the media industry.
We'd like to discuss them and how the economics of these deals signals for us a marketplace. The continues to put premium.
On live content.
Additionally, we'd like to outline a number of new revenue streams, we've identified in the recent corner.
The quarter excuse me.
I will end by providing an update on our expanding original programming slate as well as giving you an update on our return the live events and touring.
Recent developments in media had been highlighted by the completion of new content distribution deals.
As we discussed last earnings call Amazon grabbed the Thursday night NFL package.
Oh, we have no inside knowledge of this we wouldnt be shocked if Amazon was negotiating now as we speak to get that package on its air exclusively early.
In terms of lease both of the NFL and NHL realized substantial increases in the rights fees for their license programs demonstrating the continuing value of live content the.
NFL saw of media rights increase of 79%.
Even as linear ratings went down a little bit in recent seasons.
The NHL has already doubled its media rights AAV, having sold just over half of its package.
In the case of the NHL linear ratings are down about 25%.
In this context, the NHL received tremendous credit for already doubling its AAV from 200 million for 400 million with another package still available for sale in the marketplace.
Our bet is that part of the package goes to a new sooner.
These deals are indicative of where the media rights marketplaces, and where it continues to head.
One of the big takeaways for US if you look at these packages is of the overwhelming majority of the media networks are paying for license both of the linear rights as well as streaming rights of the days of splitting those rights appeared to be over for the moment.
Looking at the NFL, which often sets the standard of media rights negotiations each media partner outside of Amazon pay the multiple of what they were previously paying for the rights to show the games are linear or digital or both.
It's clear to us the abuse companies view live rights as meaningful subscription and retention programming for their OTT services. We are confident that of robust marketplace with interest the buyers across broadcast cable and OTT positions of our rights portfolio for long term growth.
We had an early case study in WWE delivering audiences for our partners streaming services, a little over two weeks ago, when our premier event Wrestlemania.
Was distributor for the first time exclusively on Peacock in the United States.
We were thrilled with the result and.
And our partners of Peacock, we're even happier.
Stephanie will provide a more thorough update on these achievements from Russell mania momentarily, but we couldnt be more pleased with the first event the promotion from our partners of Fox and NBC, you leading into it and the number of conversations we have engaged in subsequent to the Peacock partnership announcements.
And coming off of the subscriber and viewership success of Russell Mania that was delivered the Peacock. We're excited about possibly replicating the licensing of WWE network to potential streaming partners in key international territories. It's the.
The story, we're sharing with the international community as we introduce WWE network to potential partners across the globe.
We look at the success that we're having with our Tencent deal in China.
We've seen of 30 ex increase in views across all platforms in China since striking this deal with 30% of that coming from the viewership on Tencent.
We look at the success, we continue to have in India, and the United Kingdom were excited to replicate that and to grow it further.
Of course content rights are not our only revenue focus we're always looking at new streams of revenue on April 10th our first day of Russell Mania, We dropped our first NFC featuring iconic moments from the undertakers legendary WWE career.
Many of the sold out in seconds.
Thrilled with our first foray into the space.
Considering our vast library of wholly owned intellectual property.
Look for more in Ftes from us in the near future.
In this quarter. We also made of key deal in the gambling space.
Stephanie is going to provide background on that deal later as well.
As we continue to expand WWE brand beyond the ring, we remain focused on developing the slate of original programming from our WWE Studios.
We sold the multi episode anime series to crunchy role, which as all of you know is now owned by Sony Young.
Young rock, which we've talked about previously chronicles the real life journey of Dwayne Johnson from childhood to WWE legend and beyond.
The Bureau, and NBC and its doing significant business on NBC and with three years on USA and Peacock.
And last Sunday for the stone Cold, Steve Austin documentary was the highest rated biography of 16 years on a N a.
Our other showing of any of that night WWE. Most wanted treasures retains 79% of that lead in audience.
There are seven more biographies, featuring our superstars each Sunday for the next seven weeks again all of these projects from sitcom the unscripted documentary to anime or produce the co produced by us via our studio.
Last.
As I mentioned earlier stay tune for our announcements showcasing our full time return for live event Tori.
I'll provide further perspective on our progress allow me to turn this call over to my colleague Stephanie Mcmahon.
Thanks, Nick.
This year's Wrestlemania live historic for many reasons, attracting more than 50000 fans representing full capacity for the Q&A David.
I would be remiss, if I didn't mention how amazing itself to have the <unk>.
Opportunity to stand onstage look out of the faces in the audience and hear their chairs from the Superstars next to me to the people in the crowd the even maybe my father Vince Mcmahon.
Wasn't of dry eye as we all celebrated something much bigger than ourselves.
The power of the World.
Last year's Wrestlemania with no fans and our performance center net backs of Raymond James Stadium was the full circle moment, providing a sense of hope for the future and where our signature then now forever became now forever.
Yes.
It is because of this powerful fan base, what we call. The WWE universe, and we were able to achieve record breaking performances across all of our platform, including reaching new audiences for our domestic streaming partner Nbc's Peacock.
In the world when the 52 days, we successfully launched our partnership with Peacock with Cross functional task force is responsible for <expletive>imilating metadata transporting and formatting, our most viewed content and creating marketing direct to consumer campaigns and one of the most comprehensive publicity plans we have ever had for.
For Wrestlemania.
One executive of Peacock described our process as the best in Cl<expletive> example, for how partnerships should work.
The result was the most viewed live event in peacocks young history.
The launch was supported by two integrated media campaigns executed across the Comcast NBC Peacock and WWE portfolio.
Wrestlemania media coverage increased 25% with over 500 of individual news story, representing one 2 billion media impressions.
[noise] creatively everything kicked off the Friday before with the Wrestlemania addition of Smackdown on Fox, where James So when the Athena the Andre the giant battle right.
Sasha banks and beyond for Belair became the first African American female superstars to main event Wrestlemania pop star of BB racks of saying the national anthem, and the hip hop Star Huawei wrapped siggi down to the range.
Grammy Award, winning artist Bad Bunny and Youtube Influencer Logan poll found themselves getting in on the action inside the range of bad.
Bad Bunnies performance received praise from ESPN counting it as one of if not the most impressive showing by of celebrity in the range.
And apparently a lot of people enjoyed seeing Youtube influencer of Logan Paul gets done as he trended number two on Twitter and generated nearly 100 million impressions on social media alone.
WWE also secured of record 14, new and returning the Blue Chip partners for Wrestlemania, including sneakers as the presenting partner for the sixth consecutive year and presenting partner of the main event.
John's cricket wireless P&g's of Spice credit, one bank and drafting.
Draft Kings is now an official gaming partner of WWE, focusing on their signature free to play pools, which included placing some fun bets on main event matches in both night of Wrestlemania.
Video views during Wrestlemania week across digital and social platforms, including Youtube Facebook and Instagram hit 1.1 billion and 32 million hours of content were consumed representing a 14% and 9% increase respectively.
WWE related content from 115 million of engagements and Wrestlemania was also the world's most social programs both nights of the weekend delivering 71 Twitter train.
As Nick mentioned for the first time, we launched a series of NSP, featuring the Undertaker and record breaking Wrestlemania weekend E Commerce sales and record merchandise per catheter sales in the stadium.
We also held more than 10 community activations throughout the week, including collaborating with the Mayor's office to customize our of vaccination messaging for the local market recognizing local community champions teaming with Fox sports to donate equipment to the Special Olympics, Florida, and working with various organizations, including seating.
Tampa Bay to combat food and nutrition and security.
On USA network. The following night Ross delivered its best performance in the 18 to 49 demo in over a year and NXT. The debut on its new night on Tuesday was up 29% in the 18 to 49 time of year over year.
As we move towards our next streaming special Wrestlemania backlash on Sunday May 16th we are excited to build on our recent success, where all of our.
The audience, there peacocks enhanced reach align with iconic franchises such as the Olympics and the Super Bowl and continued to leverage Peacock sales and promotional team.
Additionally, key brand metrics in the first quarter are as follows.
TV viewership continued to remain stable maintaining of trends that began when we transitioned out of the performance center and invested in WWE Thunder down at the end of either from.
From that time to the end of this quarter Rod ratings have held steady and Smackdown ratings increased 9%.
Notably all of all raw appearances featuring bad Bunny showed an increase of 31% in the Hispanic persons 18 to 30 for demo and bad Bunnies total social impressions during the time of his storyline equal.
Equaled nearly $700 million.
Digital consumption increased 7% of 367 million hours.
The WEX flagship Youtube Channel Cross 75 million subscribers and is now the fourth most viewed Youtube channel in the world.
WWE sales and sponsorship revenue increased 19%, excluding the loss of of large scale international event.
As I mentioned on our last call brands are looking for unique ways to reach their consumers WWE is perfectly positioned to do just that with the ability to create customized content experiences and utilized the WWE superstars that resonate with target audiences for example, the creation of our.
Digital content series Grit and glory for Gm's, Chevy Silverado brand and the creation of of news Superstar The night Panther and the first ever campaign integration across multiple platforms to market the new scent from old space.
And our view WWE is well positioned to continue to elevate our brand grow our business and engage new and existing consumers across all media platforms.
And now I'll turn the call over to our CFO Kristina sailing.
Thank you, Stephanie and Hello to WWE shareholder.
As Vince Nick and Stephanie highlighted transitioning WWE networks, the peacock, while launching Russell media with the live audience of 50000 fans in attendance is a major accomplishment I was odd by the flexibility speed and sheer brute force of well demonstrated by the WWE team.
The innovative and entrepreneurial spirit on display was as strong as I've seen in my 25 plus years prior in the tech industry.
Today, I'll discuss WWE financial performance, which underscores that spirit.
As a reminder, all comparisons are versus the year ago quarter, unless I say otherwise.
In the first quarter of WWE continued to manage a challenging environment.
Total WWE revenue was 263 $5 million of decline of 9% due to the cancellation of live events, including a large scale international events and the <expletive>ociated loss of merchandise sales all due to COVID-19.
Despite this decline adjusted OIBDA grew 9%.
From $83 $9 million, reflecting the upfront recognition related to the WWE ease of licensing agreement.
And the decline in operating expenses that resulted from the absence of live events.
To review the first quarter performance in more detail, let's turn to slide three of the presentation, which shows revenue operating income and adjusted EBITDA contribution by segment.
Looking at the WWE E media segment.
The adjusted OIBDA was $107 million.
Growing 4% of.
The increased revenue and profit from WWE, the licensing agreement with key thought.
As well as increased revenue from the escalation of domestic core content rights.
More than offset the absence of of large scale international event.
During the quarter, we continued to produce raw and Smackdown, and our state of the art environment WWE Saturday at Tropicana, Phil and thanks for your Petersburg, Florida.
While our operating results continued to be impacted by the year over year increase in production costs <expletive>ociated with bringing nearly 1000 lives from virtual fans into ourselves surrounded by pyrotechnics laser displays and drones cameras.
Did achieve some efficiencies quarter over quarter.
The April transition of WWE Thunder, Donna taking lean center in Tampa Bay, We expect this investment will continue through at least the second quarter as it elevates the level of excitement and brings our fan back into the shop.
Despite the challenging environment WWE continues to produce a significant amount of time that nearly 650 hours in the quarter.
<unk> TV streaming and social platforms and as Nick described we continue to develop our slate of original programming from our WWE Studios.
Now, let's turn to WWE ease of live events.
On slide five of the presentation.
Live events adjusted EBITDA was a loss of $4 $3 million.
Due to a 97% decline in live events revenue. These.
These declines are due to the loss of ticket revenue, resulting from the cancellation of events.
As we said we are delighted to of entertain taking the fan and an audience of over 50000 of Wrestlemania of few weeks ago.
We look forward to the highly anticipated return of regular ticketed events.
However, predicting the pace of that return is challenging.
As of this we do not anticipate savings such events until at least the second half of 2021.
Looking at WWE <unk> consumer products segment on slide six of the presentation of adjusted OIBDA was $6 7 million growing 76%, primarily due the higher royalty and profit from the sale of licensed video games, including strong sales from our mobile game portfolio.
No.
WWE <unk> also continued to introduce new products leveraging of superstar talent brands and strong distribution partners as examples of WWE <unk> continuing commitment to product innovation WWE released three new championship title belts and a suite of branded products at the memory Stone Cold, Steve Austin 25 years.
For WWE.
Also in the quarter of WWE continued to be the number one action figure sold at Walmart for continues to deliver exclusive products.
Now, let's turn to WWE, he's overall cash generation as shown on slide seven of the presentation.
In the first quarter, WWE generated approximately $54 million and free cash flow.
It was down slightly.
Improved operating performance and lower capital expenditures were offset by the timing of collections <expletive>ociated with network revenue.
Notably during the first quarter.
We returned approximately $84 million of capital for shareholders, including $75 million and share repurchases.
The $9 million and dividends paid.
Good day more than $158 million of stock has been reported representing approximately 32% of the authorization under our 500 million moving.
Purchase program.
As of March 31, 2021.
He held approximately $461 million in cash and short term investments, which reflected the repayment of the remaining $100 million borrowed under the WWE views of volatile credit facility.
Accordingly every day, we estimate that the capacity under the revolving line of credit of $200 million.
And finally, a word on WWE E business outlook.
Last quarter WWE E issued guidance for 2021, adjusted OIBDA of $270 million to $305 million.
This range of guidance reflects estimated revenue growth driven by the impact of the Peacock transaction.
The gradual ramp up of ticket of live events and large scale international events.
And the escalation of core content rights fees.
Offset by increased personnel and TV production expenses.
The company is not changing full year guidance at this time the guidance range is subject to risks over the remainder of the year, particularly related to the impact of ongoing COVID-19 restrictions on the Companys ability from states live events, including large scale international all of that.
Turning to WWE <unk> capital expenditures as we mentioned last quarter, we anticipate increased spending on the company's new headquarters as we restart this project in the second half of 2021.
For 2021 we've estimated total capital expenditures of $65 million to $85 million to begin construction as well as the enhanced WWE is technology infrastructure.
In the process of reevaluating of the headquarter project and we'll provide further guidance on future capital expenditures Linda.
That work is completed.
For the second quarter of 2021, we.
We estimate adjusted OIBDA will decline as incremental profit from kickoff and the escalation of content rights fees.
For more than offset by increased production personnel and other operating costs.
As a reminder of the year over year rise in television production costs reflects the impact of our investment in WWE Thunder zone.
Relative to the lower cost of producing content from our training facility as we did exclusively in the second quarter of last year.
As the timing and rate of returning ticketed audiences. The WWE ease of live events for me is subject to uncertainty.
Not reinstate anymore specific quarterly guidance at this time.
In the first quarter of WWE generated solid financial results as we executed on key strategic objectives.
President Nick from Stephanie mentioned, we believe we can continue to innovate.
<unk>, our fan engagement driving the value of our content developing new products and markets as well as cultivating new partnerships and I look forward to sharing our progress on these initiatives with the law.
That concludes our remarks, and I will turn it now back to Michael Thank you Christina.
Lauren Please open the lines for questions.
Thank you and as a reminder, that the star one to ask a question and start to remove yourself from the queue. Our first question comes from Curry Baker with Guggenheim Securities.
Hey, good afternoon, everyone and thanks for the questions. My first one is on the sponsorship front for Nick I think sponsorships scenario, where wwe's historically under monetize relative to other live sports first can you maybe talk about the inventory thats tied into the Peacock deal on the sponsorship side and the strategic upside you see.
The <unk>.
Partnering with NBC use team there and then secondly, more of a higher level look at sponsorship can you maybe size the opportunity you see over the next couple of years and take us through.
Your strategy to more fully monetize that inventory.
Absolutely. Thanks for the question I'm going to tag in Stephanie to help answer that question and I'll supplement it if any.
The thing needs to be supplemented if that's okay by you.
Great.
Great. Thank you for the question, we absolutely see that the same thing that you see and there is tremendous potential and upside in terms of sponsorship, particularly as it relates to mirroring what has been so successful with the sports leagues added onto our ability to create custom content all of our superstars, who are influencers in and of themselves.
And the fact that WWE owns all of our intellectual property. So there's an ease of engaging in doing business with us that doesn't exist in other leagues or entertainment media.
The second part of that Corey This is net.
As it relates to the relationship with Peacock, we're going to be selling it with them.
So we're getting all of those ducks in a row, obviously launching the product on Peacock was the priority now that both sides of our happy with that launch the focus is on further monetizing it. So we're deep in those conversations now.
Okay. Thanks, that's helpful. And then maybe just one final one on the <unk>.
On the ratings front shifting focus of all but yes.
There's obviously pressure on the linear ratings for both raw and Smackdown.
Can you maybe talk to us about the lift you expect in the back half as you return to a more normal product with fans. We obviously saw a bit of of lift when you move to the Thunder the format format last year.
Is there any way to think about that and then I guess secondarily.
Is there anything that you guys are doing new on the storyline fraud or from a talent perspective that you also think Mike.
Re energize.
The fan base and TV ratings as we move through the rest of the year. Thanks.
Well, we have of for question limit per person.
For season yet.
All of things how we looked at ratings is how we think all of the buyers look at ratings is the culmination of everything linear digital streaming numbers et cetera.
Our numbers are robust.
No different than when we referenced the NHL NFL earlier or on the last fall that we all have together there was a challenge in linear content for everybody.
Walls are going away from it and think about how you watch your own content yourself, how often are you watching on your phone how often are you what you get on some sort of Apple TV like device it's easy.
So we are there when we launched the WWE network in 2014 candidly, we saw that when we did the Peacock deal a few months ago are finalized the we saw it then as well.
As it relates to live events that always matters for us.
The fans of our fourth wall. If you will we know immediately from them, what's working and what's not working the Thunder dome was a phenomenal creation by the creative team here, but to get live fans back and to get our performers in front of them, we earn for that as much as our performers do and we think it's going to have the.
Direct impact on all parts of our business and an overwhelmingly positive way.
Okay. Thanks for the question.
Thank you for the 2014 question for sure.
Our next question comes from Brandon Ross with light shed partners.
I think I'd need to amp up the number of questions I was going to ask the compete with Curry.
So, let's see first I wanted to get more color on the traction on Peacock, which you know for.
From the sounds of it appears to be expanding your reach I think you said record viewership of Wrestlemania any way you can size that for us compared to last year on the network.
Absolutely Brandon, we know yours come in with 20% to 30 questions. So.
Well, we love it and we thank you for that sort.
A couple of things our partners of Peacock of asked us not to do that what we can tell you.
Is that as you guys know in the content business when you wake up on Monday morning. After the two nights as we did to phone calls and emails from Peacock at NBC Universal It usually means the thrill when you don't hear from them as one of the problem. So Fortunately for us.
A great number of us here heard from them Sunday Night Monday morning, how thrilled they were with the content and how the content delivered for them. So we're excited about everything that could happen and yes, expanding the fan base with one of the key reasons why we did that deal.
Awesome and.
The Nx T. Just wanted to ask about the move of nights strategically how did you weigh the pluses and minuses of that move.
I guess it appears that.
<unk> W is reaching record viewership probably because of the.
For the move was that in the consideration set do you think about them do you care.
Honestly, we everything is competition for everything so movies are competition people sitting in deciding just the text all night.
As our competition all we're focused on is the tracking attracting eyeballs for our content.
So part of the reason for the move to Tuesday night. The last time, we were all here, we were specifically asked about well what about the NHL and the impact of Wednesday's with the NHL on your content NXT on Wednesday nights in particular, it's our belief that NBC and the NHL are not going to continue to be a business together that was.
Our belief months ago, so that has absolutely nothing to do with our decision making process. If you look at the efficiencies of Sunday night pay per views Monday night, Raw and Tuesday night NXT. It made sense for us for myriad reasons to do consecutive nights, Obviously Sunday night is of 15 to 20 time event.
Premium event excuse me premium event type of thing, but those efficiencies for US is what really drove it we're pleased with the increase in NXT ratings and not focused on anyone other than ourselves.
Great and then I guess, you gave a little bit of your opinion on where the NHL rights might wind up talk about Amazon getting Thursday night earlier can you just broadly give us some color on what youre seeing out there in terms of other sooner.
<unk> and the digital universe, Besides Amazon appetite for sports content or are there a bunch of players is there of real interest outside of Amazon.
We think Apple Tvs readying for something.
They've come close on a number of live events. They haven't decided to go all in yet so we're looking for them to see what their moves are going to be.
It's not just the digital companies and I know your company yesterday. There was an article about a conference you guys were at where you said hey, not you specifically, but one of your partners Hey look at the FDA.
Jack the companies coming in.
Those of the Behemoths, we agree with you to Disney's credit the Comcast credit for the credit of others. They saw it may be a moment in time late but they saw so we think they are going to be significant competitors for different premium content rights for everybody and what we know is <unk>.
<unk> matters and that's what we do.
Great. Thank you so much.
Thank you.
We will take our next question from Laura Martin with Needham <unk> Company.
Can you guys hear me okay.
Yes.
Okay great.
Maybe sticking to that one of building on that maybe.
Maybe I have this wrong, but my understanding of the way Youre right. Theyre. Currently structure is you can actually sell anything to anybody, including Apple or Amazon for three or four years do I have that wrong is there something you guys could actually monetize over the next three year Investor tour flow.
There is so much and we appreciate you asking the question number one as part of the reason why our focus is so international based right now in terms of the existing content in the United States. Yes that is licensed through October of 2025 on raw and Smackdown in terms of new content.
It is not in terms of licensing that existing content of the WWE network internationally.
That is what we are deeply involved in right now so a lot of upside in that obviously, it's a good time in our opinion to be a seller of these rights and we think the proof will be in the pudding on that in the not too distant future.
Okay very helpful. Thank you Allen Kristina, maybe one for you.
You're showing on slide.
The two maybe but the EBITDA grew about 9%.
Looks like because we didn't have the Saudi event and we estimate you showed a lot of revenue there.
We estimate of Scott like 50%, 60% margin really is the underlying operating power of these <expletive>ets closer to 23% growth, which marriage here.
Operating income because we add back of another $12 million for the last Saudi event, which shouldn't really be what I would call of detrimental the operating cash flow power of these <expletive>ets is that fair.
I think what's really understand in terms of what's driving our adjusted EBITDA growth of 9%.
Is to understand the.
The accounting recognition.
For the delivery of call of content and subscribers in our Peacock day, all that very high incremental margin revenue.
And as we've discussed before that was one time in the quarter.
The live event for us.
As we discussed was down revenue was down 97% and we booked an adjusted OIBDA loss of $4 3 million. So it's not just the loss of a large international events, but it's the absence of all of live events in the quarter that was the downdraft on adjusted EBITDA.
Perfect. That's super helpful. Thank you Christina.
That's it.
Thanks.
Okay.
Our next question comes from comes from Eric Katz with Wolfe Research.
Hey, good afternoon, everyone. Thank you.
I actually would like to piggyback, a little bit of Florida question, maybe focusing more on expenses in the media segment.
I heard some of your comments around the moving pieces for Opex I was hoping you can maybe unpack that a bit more for Q1 and that's of Q2 because of media costs were down about $15 million year over year, and I guess, it's tough to reconcile the loss of the international event that Inc.
Peacock I think furloughed workers back I know, you're investing of Thunder dome.
I understand you're not quantifying, but is there anything you could maybe share qualitatively to think through the margins of flow through because I think the expectation is that on the speed. The full year guide maybe should have gone up.
Thanks, Eric Yes, absolutely will walk you I'll walk you through that.
Yeah again to understand.
I'll take the last question first why did we raise our guidance it's really because.
The quarter performance was driven by the accounting for the Peacock transaction. The one time accounting for the delivery of subscribers and the delivery of content. Indeed, there was very little licensing fee revenue related to peacock in the quarter because we deliver.
For all of this all of these <expletive>ets on March 18th for the licensing fee revenue in the quarter was really represented the last two weeks or so of March when we move into the second quarter. We will see the first full quarter of Peacock licensing fee revenue and we won't see the one time.
The valuation of our subscription and <unk> of our subscribers and content delivery.
So that's the Peacock portion of net of network and media.
To understand the Opex, you're absolutely right what we've highlighted is.
In our guidance is that increases in television production and personnel.
An important thing to consider when forecasting 2021, adjusted EBITDA now year over year in the first quarter production expenses as we discussed television production on a per episode basis.
<unk> discussed last quarter, we're up.
The considerably 30% year over year.
What we're really excited about in the second quarter is while they're up.
Oh, sorry in the first quarter of while they're up.
The year over year.
Quarter over quarter were able to obtain certain efficiencies really around our virtual fan technology, but also of generally around.
Operating expenses of not just a testament to us constantly learning constantly innovating and as we move into the second quarter of this year, we think again quarter over quarter per episode of television production costs will be down versus first quarter.
And this is the big but Eric when you think of second quarter of 2021 versus second quarter of 2020 remember for the entirety of last year in the second quarter, we were in our training facility.
And the per episode cost of our training facility and remember that was the.
The height of Covid.
Her episode of course.
Training facility were remarkably lower than even the steady state pre COVID-19 levels, but really the second quarter is our toughest comparison from a production and TV production expense perspective does that help you draw the story throughout these two quarters Eric.
Yes, it definitely helps.
Okay, and maybe just a follow up on the touring plans.
I guess one thing we're trying to think through is as you guys begins the tour I guess, maybe in the second half hopefully in the second half would you continue to hold the residency while you sort of phase in touring is it sort of.
Going right into a 100% I guess, maybe the decision making process on once you actually start touring is at full bore or of season.
We haven't yet decided.
What are touring plans will be for the summer, but we are very hopeful that we return detouring.
In the second half of this year and our hope is that we go to fall Tory.
Not that we.
Now that we have we retained from semi permanent residency in one location and do have outside of our guidance. Just so you know Eric <expletive>umes that we go for sorry.
In the second half of this year, which is what we disclosed when we talked about our guidance back in February so.
Going.
Of semi permanent residency in half touring wouldn't be the most ideal situation from a financial perspective, but also really just from a fan engagement perspective, we're really looking for it takes getting out on the road again.
Okay, great. Thank you.
The next question comes from David Karnofsky with J P. Morgan.
Alright, thank you.
I just wanted to follow up on your commentary.
One of the Brandon's question with the increased demand coming from streaming for live content.
See this as sort of a rising tide lifts all boats situation.
Some sports like the NFL or even yourself with Peacock Disproportionally benefit from this dynamic and if that is the case what factors do you think determines success or not here.
Thanks, David I think there's a couple of things the.
The newer content I don't want to say the lower tiered content. The newer content, that's not as known as we believe our content to be or certainly the NFL. The b theres only so much money to go around so somebody's going to the left holding the bag. So if you look at.
College football for example.
The FCC is in great shape.
The big tenant for the next big rights package up.
There's going to be some challenges there even though it's a major conference because they didn't perform for part of the season that always makes it tricky. If you look at all of the conferences outside of that I would look for some sort of consolidation SKU was for conference was the happened and you look at the other folks out there.
Some businesses are unfortunately going to go away. So the folks who have delivered eyeballs in the past are going to benefit from it the folks who are trying to prove that they can deliver eyeballs, it's going to be challenging.
Great.
For color and then maybe just separate topic.
Commerce has had for a really strong quarter of since the pandemic started just wondering how much you attribute that to a mix shift for venue merchandise zero versus kind of actions you've taken the drive higher online sales just wanted to get a sense for how sustainable some of that strength in the BW and shop us.
Thanks, Dave.
I'll take that question I think that.
Made a lot.
The effort to really take advantage of the trends and bring customers to.
WWE shop.
Permanently.
The first thing that comes to mind is title belts and the number of.
Lots of three had about just in this quarter, a similar number last quarter.
I'll also comes to mind is the launch of <unk> and creating.
Creating product and merchandise for our fans who are who are so enthusiastic about historical WWE superstars.
So we haven't just been sitting on our seals and letting this wave come to us we've been doing a lot.
Do you get folks the comments.
I think I could add to that if that's okay. David the.
The brick and mortar business as we all know has probably changed forever or at least for the foreseeable future. The E. Commerce business is going to continue to grow one part of the brick and mortar business that we are bullish about is the live event business, where we do sell a lot of our merchandise, which we have not had an over.
A year. So if you look at e-commerce, if that stays robust we believe that it will and the return for live events, where people can buy our products.
We're quite bullish on it.
Okay, great. Thank you.
Thank you.
Our next question comes from Ben Swinburne with Morgan Stanley.
Thanks.
Congratulations on Wrestlemania and executing on that I'm sure that was a tremendous experience to be at so congrats.
I wanted to ask I promise I'll limit myself to two questions.
Just wanted to ask Kristina on Peacock, if if at this point the or in the first quarter.
Did we see all of the revenue recognition <expletive>ociated with the delivery of the I guess, what we would call one time <expletive>ets.
Is that done or is there more in Q2.
And then I think it was Nick who mentioned Ftes in the prepared remarks.
This is very early days, but could you just talk about what you think the opportunity is there.
A meaningful that might be and what would you guys are doing to try to maximize that right now I know it's early.
The short answer to your first question Ben is that yes, it's largely done well recognize some one time content around the delivery of marquee.
Premier shows like for example, Wrestlemania in the second quarter or summer Slam.
In in the third quarter, but those won't be anything like the size of what we recognized in the first quarter.
And then I can jump in on the second part of that first two youre precursors statement on Wrestlemania we remain undefeated against the weather for our outdoor stadiums minus the 10 minute delay of night, one Saturday of this year, but.
But we were happy to do the advent of Tampa and to deliver for our partners down there.
In terms of the Enfp's look if you look at what.
Vince setup with WWE years ago for one all of the intellectual property to own the overwhelming majority of the character of rights.
That business is going to be something that we are in long term. So we're excited to get our first one up.
For Russell Media, I think our silver tier of their 100 limited Undertaker cards. Those 100 cars that we sold about 35 seconds.
So we want to make sure that we're there for our fans is the ease of the baseball cards of the digital World as you know so we're there we're going to continue to be there and we have a plan in place that we're really excited about.
Thank you.
Our next question comes from the Sealy carries the off with Cannonball research.
Thank you good afternoon before the pandemic you talked about your plans to invest overseas and the local content production and training centers developing local talent et cetera. So can I ask you to talk about whether your plans changed given the terms on the which you renewed the international rights contracts the impact of course.
Is it and.
What's going on with you.
The strategy is developing other domestic Wayne in terms of licensing versus the double the double in that work and then.
If you could.
Talk a little bit about how we will see that flowing through the P&L Your international strategy of thank you.
George So the first part of that facility.
No our plans have not changed the has simply been delayed by Covid.
Even during Covid, what we did with our partners and we discussed this at the last earnings call.
We did a show for our partners Sony in India featuring of incoming Indian talent against some of our current superstars.
That product, which we call the superstar spectacular.
The Liberty five ex rating from <unk>.
Share through our normal high ratings in the again based on talent that candidly, we don't believe the Indian fans of her up and that the American fans have not heard of yet. So we were thrilled to be able to pull that off we did that one in Florida as you know very very difficult with international travel right now very.
Difficult to go through international builds right now in terms of the performance centers. It's all still part of the plan, but like many things just the <unk>.
Cause by Covid, and hopefully rollout of it soon certainly seems like it's heading that way.
And the answer the modeling question I think we're really fortunate in that.
Where international without even trying and I of course, I need that sarcastically theres. So much effort going on around but it doesn't require a significant amount of capex or opex to take advantage of the global reach of WWE brands.
And indeed that the.
The demand for our global brand like WWE is so strong.
Lots of partners.
Nick referenced our partner in India, we of partnership in the U K and so we look around the world for those partners to help us.
Deepen our relationship in specific regions and countries.
And also help us co invest smartly.
In the local content of local talent and local opportunity.
Thank you very much.
Yeah.
Our next question comes from David Beckel with Ehrenburg capital markets.
Hey, Thanks, so much for the question just wanted to touch back on the Peacock and the and the sponsorship arrangement.
Acknowledging there is probably some parts of the deal you can't really talk too much about but I'm curious if you can just fill us in on some of the broad strokes does the partnership.
Does that pertain, mostly to new deals that have not yet been struck and to what extent across your properties would the partnership apply and then out of.
A follow up.
Certainly I'll I'll take that David This is Stephanie so in terms of sponsorship working with Peacock basically anything that youll see that will air on Peacock in terms of the sponsorship we are working with them.
There is a lot.
Lot of White space. If you will as is recognized I think in the first question around Wrestlemania around all of our major properties and when Youre dealing with teams who have regularly so the likes of the Olympics and the Super Bowl Youre working with really topnotch teams, who will provide us opportunities that we have.
Not had in the past.
Great. Thanks for that color I appreciate it and just more of a high level wanted to actually I sort of piggybacking on the last question.
No question, we get from investing a lot of sort of longer term thinking how you. How you approach the investment process. Obviously there are lots of areas you can invest in and you also have a great degree of certainty on the topline.
Two thirds of more of your revenue sort of contracting going forward. So I'm just curious how youre thinking about the level of investment do you think about it as a percentage of revenue incremental revenue over the coming years or is it less structured net.
Well I think what you can appreciate about our business model David is.
Yeah.
Net normal for the normal environment, we are of high incremental margin business.
Throws off nice cash flow and as we you know as we've discussed all of these wonderful.
The basins just in the quarter, whether it was NFC <expletive>ist the deal with the asking.
The Peacock integration, none of it required a significant amount of opex or capex on our part so we're very clear when we think about new opportunities, it's not about us having to go out and Phil that so it can happen, it's about us going out of harvesting what's the.
There are optimizing with already there it's not to say that there arent opportunities to invest we highlighted for example that will this this coming year in 2021, we will spend about somewhere between 60 to 85 million in capex largely on.
The way SKU, which we've been delayed.
The delayed now more than a year it'll be two years of laid by the timing of it.
<unk>.
Im going technology infrastructure improvement that you would expect every couple of years at any innovative company.
So where.
We're really fortunate.
In our business model, which enables us to match.
Maximize the opportunity for the OSM WWE universe.
Thanks Christina for.
Sure.
Analysts on the line for Warren our operator.
We're at the limit of this meeting we have time for one more question. If we missed anybody we're happy to follow up with you offline.
We will take our next question from Steven Cahall with Wells Fargo.
Thank you just a couple of maybe first Christina on the guidance just wondering did the Peacock delivery you had in the first quarter outperform your full year expectations for Peacock OIBDA or was this just the timing of how it fell in sort of March versus April and sort of the same question on NXT historically.
I commented about a lot of the AAV is of the long term big rights deals in the U S. So just curious how the AAV of any.
Next he performed or was contracted based on what you had sort of baked in to the year for guidance.
And then second question just you made a comment about non fungible tokens any of it.
Yeah, how much exploration you've done into this it's certainly a unique <expletive>et as you say for a public media company of WWE and any stock with crypto get the heck of evaluation of these days. Thanks.
Thanks, Steve I'll take the first part and I'll, let I'll, let Nick take the second part and hopefully he will take the coin in day.
Glen Bingo.
What I would say thank you so much for the question about timing and I will just underscore.
Youre absolutely right. There is no change with regard to.
The impact of Peacock in our guidance on a full year basis for real.
Really pulling forward a little bit of what we thought would hit in the second quarter of hitting in first quarter and that is exactly why we are not increasing guidance overall for the year.
So thank you for that question with regard to NXT, Yes NXP.
Was expected.
Asleep because of the contract was up and it is within our guidance range that we provided so there is no there.
We're really pleased with with with that result, but theres nothing to update with regard to guidance on that Brian.
And Stephen on the NFC part of that.
I feel like at the start of the pandemic, we were in lieu of fights.
Like I think most others were and now I would put our level of knowledge.
As high as I would hope.
Our knowledge of the media space is perceived.
No it is.
And it doesn't mean, there's not a lot of room to continue to learn just like with everything else that we do but we're confident from where we sit on what we can deliver and what our audience is looking for.
Thank you Matt.
Thank you everyone for participating in the call today. We appreciate you listening if you have any questions. Please don't hesitate to contact me Michael way for Michael Guido. Thank you.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
[music].
Okay.
Okay.