Q3 2021 World Wrestling Entertainment Inc Earnings Call
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Yeah.
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Hello, everyone and welcome to the webcast entitled W. W. E third quarter earnings 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 assistance the option to enlarge slides is located.
The right on your slides with the four arrows pointing in different directions. You may ask a question at any time by typing a question into the question box located on the web interface and clicking send if you are 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 too.
I will now turn the call over to Michael Whites S V P financial planning and Investor Relations. Please go ahead.
Thank you and.
Good to have that's her.
Our shareholders.
W. W.
Cool.
Welcome everyone reading today's discussion.
Man.
Chairman.
New car.
President and Chief revenue Officer.
Mcmahon Wwe's Jeep Grand Officer.
Alien Wwe's Chief Financial Officer.
Remarks will be followed by Q&A Saturday.
We issued our third quarter earnings release earlier this afternoon and have posted the release our earnings presentation and other supporting materials on our website.
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Our eyes to many many more ways that we can.
Take advantage of our IP and the evolution of sports and entertainment.
And so that's.
That's basically it with that ill turn it over the next year.
Thank you very much Vince and thank you everyone for calling in and it's nice to speak with you all again.
This quarter I'd like to first offer perspective on our media segment hitting.
Hitting on both near term opportunities as well as our long term position in a marketplace that continues to put a premium on live rights.
After an update on media I will run through a number of deals we closed over the past quarter that have created new revenue streams for WWE and increase the value of existing ones.
Looking first at near term media rights opportunities, we have two key negotiations in our sites that will drive value for our company.
The first is our media rights for raw on Hulu, which expire in the back half of 2022.
The second is the licensing of our direct to consumer service WWE network in international markets, which we have discussed previously.
Our competitive landscape has already formed around both initiatives.
In terms of the raw Ria rights, we know from the data that there is a substantial and recurring audience, who watched the program via delayed viewing week to week on Hulu.
When we close the Hulu deal in 2018, the media landscape was quite different as we all know.
<unk> was an active owner of Hulu and Peacock was just a nascent dream.
We now all know that in 2021 World NBC was a passive hulu owner and barring exigent circumstances NBC you stake will be bought out by Disney at Hulu is 'twenty 'twenty four valuation.
Let's keep in mind, what we all know in addition to Disney's initial Hulu ownership percentage Disney picked up Fox has ownership stake in Hulu with Disney's acquisition of a large majority of Fox two plus years ago.
We also recently saw executive shifts from Hulu to Peacock and we believe that in addition to all other platforms looking for event programming that resonates that the battle for raws Ria rights will be intense and funds.
Regarding WWE network, we continue to execute on our strategy to optimize our value across international markets. We have a model that buyers are responding to.
As so many U S based companies look to go international overnight.
Sets up a competitive global landscape and none of us have seen over the course of our careers.
We continue to believe that was on our great results.
Outside of those media deals tied to a live rights.
We are continuing to expand our original programming slate.
This quarter NBC, you announced Miz <unk> Mrs would be returning for a third season.
Earlier in October we debuted escaped the Undertaker on Netflix and innovative interactive show featuring WWE superstars.
Six months ago, we merged our content units in one place.
<unk> media with.
We recently completed a children's animation scripted project with a streamer and will soon announce a slew of scripted and unscripted programming that demonstrates the weight of our content pipeline.
This is an area that we'll continue to be a priority for us we recognize these production not only generate meaningful economic returns for our company, but they also expand wwe's brand and help us establish relationships with myriad media companies, while making sure that our programming remains young and diverse.
All of this is directly related to our next U S rights negotiations.
We are as bullish now on those rights as we were when we went into the prior negotiations, which saw an increase in the U S from $130 million, a year AAV to $470 million a year AAV for raw and Smackdown.
We have previously discussed numerous deals that demonstrate the continued rise in the value of live.
For the NFL Sunday ticket package heads.
Ted Serrano's was publicly expressed that Netflix or rather by then run sports properties, we seem to be referring to formula one coming off of the success of their drive to survive program.
Speaking of Netflix we've seen early cuts of our upcoming Vince Mcmahon Multipart, Netflix documentary, which is executive produced by WWE and Bill Simmons, who did the acclaimed Andre the giant documentary with US Vince cuts are out of this world Amazing.
Wait until you see it.
As it relates to Bill Simmons, who somehow referred to as the godfather of podcasts Orthopod father.
This past quarter, we closed the deal with Spotify and the ringer for Spotify to become the exclusive audio network of WWE.
The partnership Jumpstarts us in this all important space, while allowing us to leverage the resources and reach a Spotify and it's 165 million subscribers.
That partnership was announced this past August at Summerslam, when the Ringer hosted live shows for our fans in Las Vegas.
We're confident that with Spotify has expertise along our lives alongside our library of intellectual property and our talent that we will deliver an audio product that excites existing fans, while also introducing WWE contents the millions of Spotify listeners.
I would also like to discuss some new business with you.
As we focus on extracting more value from our IP wheel further establishing new businesses that expands wwe's brand and drives revenue is a key for all of us.
We've had an active quarter, creating new revenue streams and increasing the value of existing lines of business.
One area. We've spent the last year examining as our strategic approach to pay per views. We've looked into all parts of that business that are making adjustments that we believe will enhance our results by making each pay per view a special event not only in its content, but in all things surrounding each event.
As promised last quarter, we recently announced or pay per view calendar for 2022.
Gates cities venues for the first time in our history for hosting at least for pay per view nights in stadiums in the United States.
Relating to our pay per view events for the first time, we're holding an event on the night of New year's day from State Farm State Farm Arena in Atlanta.
As we discussed previously this upcoming new year's Eve as of Friday.
Both college football playoff games are on that Friday.
Usually the NFL will go to a Saturday and Sunday schedule once a college football regular season is over that.
That is no longer happening on Saturdays late in the season with the NFL as new 18 week regular season.
And over 350000 people are expected in Atlanta for that new year's weekend with.
With the removal of NFL competition in a city packed with visitors we thought it might be smart to have an event there the next night.
Again Saturday January one.
We expect to benefit from all of those weekend guests looking for entertainment the night after new year's Eve.
You may recall, seeing Atlanta Hawks, NBA, all star tray young interfere in one of our matches at Madison Square Garden in September all part of our Atlanta strategy look for more integration like that across our product.
Another area, where we've strategically pivoted in an effort to further grow our business is with a new trading card partner anemia as.
As all of you know the trading card market is booming right now with a handful of companies competing for a select number of deals with the top sports properties. We received multiple bids from those companies the meeting with their expertise doggedness and domestic and international knowledge proves out to be the best partner for us in this space.
The deal is considered as a considerable financial step up from our previous trading card deal.
We also recently announced a new multiyear agreement with Fox to launch an NFC marketplace for licenses digital WWE tokens and collectibles Fox is obviously, our existing partner in the U S for Smackdown, and coming out of the pandemic, we've been able to spend considerable in person time with Fox as senior executive team.
Let's think of additional ways to work together.
As Lachlan Murdoch Fox as executive Chairman and CEO said on their earnings call yesterday relating to Fox and WWE together in the NFC space. This type of deal will drive new business and the creative and entrepreneurial spirit and all of it.
This new collaboration will create authentic and ftes that showcases wwe's catalog of digital assets, including iconic moments legendary superstars and premier events, such as Russell Mania in summer Slam.
With our wholly owned intellectual property, we have a competitive advantage and our ability to leverage the immense popularity of <unk> Ts as well as the activity surrounding trading cards in other collectibles.
It's been a busy quarter with a sustained focus on strengthening our existing businesses and establishing new revenue streams. At this time I'd like to turn the call over to my colleague Stephanie Mcmahon recently named the number two most influential marketing executive in the world by Forbes.
I will cover a number of items, including our significant growth in sponsorship over the past year.
Thanks very much.
Thank you Nick.
Unfortunately, everyone I have to start with some bad news.
WWE superstar the NIM was eliminated from dancing with the stars don't reach.
You did make it to the top 10 in his weekly appearance was seen by nearly 6 million viewers on ABC raising awareness for both Ms and WWE.
As Nick mentioned, we are changing from an arena based touring model to a stadium base touring model, allowing us to better align all lines of business around our key tentpole events for.
And Becky Lynch and the Beast Incarnate Brock Lesnar rocks return broke seen as Instagram record at $4.5 million.
Sales is sponsorship revenues for Summerslam, we're up 18% year over year and 25% over 2019, featuring our first ever official water with Blue Triton's pure life and our first ever official beer with constellations Victoria Beer brands, We also had enough.
Ray of sponsors across bedding gaming wireless energy and credit card categories with Draftkings, two K cricket wireless cellular C four and credit one.
Justin Wwe's overall business is nearly 80% contractual we have shifted our sales and sponsorships strategy from transactional to contractual pivoting to multiyears seven figure deal.
In 2021, the number of these deals has increased 60%. Additionally, our clients spend has increased 44% year over year with over 50% returning partners.
A few examples.
An international sales are just getting up to bat as we focus on creating more localized content.
Additionally, engagement metrics continue to be strong for WWE with a slight increase in television ratings for both raw and Smackdown. Despite tough competition from the return of life sports.
Digital consumption increased to a quarterly record of 410 million hours and video views increased 38% to $12.8 billion as compared to a prior year period that had benefited from COVID-19 related viewing trends.
And with our renewed emphasis on producing more content for emerging platforms and younger audiences are video views on Snapchat, and tictoc are up 22% and 29% respectively year over year.
Speaking of tick tock, while it is a tight race.
We are the number one sports brand on Tech talk over the NBA with 14.5 million followers.
Lower cost of producing televised content from our training facility in the prior year quarter.
Media segment revenues increased slightly as the contractual escalation of WWE. He's core content rights fees from the distribution of raw and Smackdown were partially offset by decreased and network revenues.
The latter was driven by the timing of license fees associated with the delivery of WWE network content Peacock.
As compared to the recognition of subscription revenue in the prior year quarter.
In mid July we transitioned our television and pay per view production from the Giggling Center in Tampa Bay to the arenas and stadiums that are part of our touring model.
We'll call that in the third quarter of 2020, you are producing a bare bones production out of our performance center in Orlando for much of the quarter until we established our WWE Thunder dome experience in late August of 2020.
These changes in venue, where the primary determinant of the year over year increase in production expenses.
Now, let's turn to WWE eased live event business on slide five of the presentation.
Representing approximately 40% of the authorization under our $500 million.
The repurchase program.
As of September 32021, WWE held approximately $449 million in cash and short term investments.
That totaled $221 million, including $200 million associated with WWE <unk> convertible notes.
The company has no amounts outstanding under its revolving line of credit and estimates related debt capacity of approximately $200 million.
And finally, a word on WWE east business outlook.
In January WWE issued adjusted OIBDA guidance of $270 million to $305 million.
For the full year 2021.
During this third quarter key performance metrics demonstrated positive trends and we continue to realize a heightened demand for live events and better than expected TV production efficiencies.
Our outperformance to date and revised expectations for the full year, we are raising our guidance.
Adjusted OIBDA is now expected to be within a range of $305 million to $315 million with the staging of one large scale international events.
The revised full year guidance implies fourth quarter, adjusted OIBDA of $75 million to $85 million as.
As compared to $51 2 million in the fourth quarter of 2020.
The projected year over year growth reflects the impact of staging one large scale international events.
Okay.
In the third quarter, WWE generated better than expected revenue and adjusted OIBDA results.
The robust demand for our events and increased consumption of programming across platform highlights the strength of our brands and reinforces our belief that continued innovation can enhance the value of our content and our products.
That concludes our remarks and I'll now turn it back to Michael Thank you Christina.
Christy Please open the lines for questions.
Thank you if you'd like to ask a question at this time. Please press star followed by the number one on your telephone keypad first we'll go to Eric handler with <unk> partners. Your line is open.
Good afternoon, and thank you very much for the question two questions for you first.
Yes, since you mentioned.
The data rights for raw and DTC.
NASA Lites exhibited network do you have a timeframe on when you'd like to have those deals done by now.
Hello, Paul.
Thanks, Eric.
Couple of things on the day two rights deal was up latter half of 2022, so certainly it's going to be done by then.
Perhaps sooner and on the international rights.
The lack of ability to travel, which is obviously freed up over the last couple of months.
Slowed down what would have been a quicker process, but that process is now set up so we're confident we're going to come back to you with us in short order.
Great. Thank you and then.
Second question, Hey, It's also for unit historically with WWE productions.
The profitability was rather negligible.
A lot of its programming.
Is that changing now are you looking at some type of cost plus model, what's what's sort of the economic model behind all of these television programming events.
I remember on the last call you had asked about scripted and unscripted content as well. So thank you for that question.
Total flip of the model from a few years ago. So instead of self financing films and sequels to films, it's about licensing our intellectual property and content in the scripted and unscripted space. So obviously no risk there's no investment by us.
Paid project paid to us and as you know in the TV and streaming space great success means great profit mediocre success still means profit.
Online world and to sort of think that N F T. As they're gonna <unk> isn't that are gonna be actually a bigger deal like leaving the alive you guys really working alive world physical world, but how do you feel about the met averse and within that context, how big do you think <unk> could be that's a part of the <unk> the new medicine.
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We think it's robust now we think it's gonna continue to Rybolt that'd be home, perhaps even more robust and we think it's here to stay.
Okay. Thanks.
Thanks, Laura.
In the space and we think all of those results will come to fruition in the right way and then NXT will continue to build the way it's already building.
Great. Thanks, so much Nick.
Thank you.
And next we'll go to Benjamin Swinburne from Morgan Stanley. Your line is open.
Hi, guys. It's maryann on for Ben just two questions on my end first can you talk about your international.
Content rights expectations, especially as it relates to your larger territories like India and the UK.
In the context of your.
Like revamped international distribution strategy for your streaming product and is there any possibility that you will maybe anchor deal in the Mena region as well.
Sure. Thank you for the question. This is Nick I'll keep in mind, our existing India deal with Sony is an all encompassing deal that includes the premium rates. So that's a deal that's already in place.
JBT, our existing partner raw Smackdown NXT.
We couldn't be in the hundreds of millions of dollars.
Okay.
Okay.
Yes, sorry.
In terms of the strategy, it's really the the four key buckets that I laid out earlier in my remarks, the content, our talent digital social and international.
Okay.
Yes.
Helpful for framing and then maybe a quick one for Christina.
On the guide for the fourth quarter you obviously.
Look at where you are fourth quarter last year $51 million of EBITDA, you've got a number of positives the Saudi event live events and then also cost cost escalators on the contracts can you maybe help us think about incremental expenses in.
In the fourth quarter.
Incremental from the third quarter you mean.
Yes, yes exactly.
I think if we can talk a little bit about third quarter versus fourth quarter. Corey I think what you see is at.
The driver will continue to be live events.
From a topline perspective.
And when we compare the third quarter versus.
The fourth quarter remember that we'll have fewer pay per views in the fourth quarter in part because of the great decision that we need to move our December pay per view to January for day one.
<unk> in Atlanta, and so when we look at the first quarter, we will have more <unk>.
The fourth quarter, but again our guidance.
Our adjusted OIBDA guidance realm.
Relative to year over year indicates strong growth coming in the fourth quarter.
Okay. Thanks, Scott.
Yes.
You bet.
And again, if you have a question. Please press star one at this time next we will go to David Joyce from Barclays. Your line is open.
Thank you a couple of questions first on licensing.
There was some pull forward.
Moving onto Peacock earlier this year, but it seems like it is later this quarter or is there going to be.
More volatility in the licensing comparability going forward or is there more of a smooth kind of visibility path there.
Then secondly, I wanted to ask about the.
A shift to more of a stadium model.
Well that due to overall event volume given that you've got.
The weeklies for.
Raw Smackdown.
T.
Is there going to be any.
Are the larger scale of events going to replace some of those effectively or is there or is there something incremental here. Thanks.
Goodbye you David we'll go in reverse order there last time, you had asked about M&A consolidation. So I take it you're satisfied with that at this moment in time, which is great.
In terms of our stadium events no. It is not going to have any impact on the frequency of tonnage of raw Smackdown. Our NXT. Those remained 52 weeks a year barring exigent circumstances three times a week. These pay per views are separate above and beyond that we just have seen the appetite for more fans in right cities.
At the right time on the right night. So the model is based on that thus far it's proven out with summer Slam. We believe it's going to continue to prove out in 2022.
And David just to clarify Youre licensing question Youre, referring to the licensing of the network to Peacock.
Well there was some licensing.
Movements in your results this quarter.
There were some comparative there was some comparator ability.
No changes there I was just wondering if there is.
Should we expect some volatility in that in that line going forward.
If youre, referring to the licensing of the network to kickoff.
I mentioned before we allocate the cash.
We receive in any given quarter from Peacock is the same.
We allocate that revenue based on the contribution of the pay per view events in any given quarter.
So a wrestlemania quarter is the greatest allocation followed by summer Slam and so on and so on and so that's how we think about licensing of Peacock the peacock.
Allocation, if youre talking about licensing generally what I would say as a number of the things that Nick mentioned in his remarks over the course of the next year, we will have a positive impact on on licensing of our products and our brands.
You mentioned.
For example.
And the.
The partnership we have with Fox.
And in my remarks I referenced.
Our.
Okay extension with Mattel our toy licensing partner. So there are a number of positive impact on licensing that from a year over year perspective, we'll have.
Positive contribution going forward.
Does that answer your question David.
Yes.
That's fine thank you.
Great. Thank you.
I believe that's our land with net.
With no further questions in the queue I'll turn it back to Michael Weiss for closing remarks.
Thank you everyone. We appreciate you listening to the call today, if you have any questions as always please do not hesitate to contact me, Michael White Wells 335 to 86 million.
And that does conclude our call for today. Thank you for your participation you may now disconnect.
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