Q4 2022 World Wrestling Entertainment Inc Earnings Call

Yes.

[music].

Yes.

[music].

Please standby.

Hello, and welcome to Wwe's fourth quarter, and full year 2022 conference call.

All lines are on mute.

The prepared remarks, there will be a question and answer session. You may ask a question by pressing Star then one when your Touchtone phone.

If you would like to be removed from the queue. Please press star two.

I will now turn the call over to Seth Zaslow, SVP and head of Investor Relations.

Please go ahead Sir.

Thank you and good afternoon, everyone.

Welcome to Wwe's fourth quarter, and full year 2022 earnings conference call.

Joining us on todays call are Nick Con Wwe's, Chief Executive Officer.

All of <unk>, our chief content Officer, and Frank Riddick, our President and Chief Financial Officer.

Following their prepared remarks, we'll open the call for questions.

We issued our earnings release about an hour ago and have posted the release and other supporting materials to our website.

Today's discussion will include forward looking statements.

These statements reflect our current views are based on various assumptions and are therefore subject to risks and uncertainties.

Please refer to our SEC filings for a discussion of the risks and uncertainties.

Results may differ materially and undue reliance should not be placed on these statements.

Additionally, we will be discussing certain non-GAAP financial measures on today's call.

Conciliations of non-GAAP to GAAP information are provided in our earnings release and other supporting materials.

Lastly, today's conference call is being recorded and a replay will be available on our website.

With that I'd now like to turn the call over to Nick.

Thank you Seth and good afternoon, everyone and thank you all for joining us.

To start 2022 was another record setting year at WWE.

In 2021, WWE surpassed $1 billion in revenue for the first time in company history and 2022, we grew that number to $1 3 billion.

Up 18% from the prior year.

We also generated record profitability with adjusted OIBDA of $385 million.

Over delivering on our initial projections.

And we're seeing our product reach more people on more screens, both domestically and internationally.

We believe we are well positioned as we go forward.

I, along with Paul and Frank will touch on financial and operational highlights from the year and past quarter in more detail.

Before we do that I do want to take a moment to address a few other topics.

As all of you know there've been a few changes in Ww's management structure during the past year.

Vince Mcmahon, our founder and long time, CEO stepped away from the business for a period of time, but recently returned as executive chairman.

Vince is driving our strategic alternatives process.

WWE has engaged the rain group as its financial advisor with an end goal of maximizing value for our shareholders.

Allow me to start with a brief update on this process, which is underway, but still in the early stages.

As we have said before there is more interest than ever and owning content and intellectual property.

So with the exploration of our domestic media rights in 2024, and the upcoming negotiations for those rights, we have a unique opportunity to explore a wide range of value maximizing alternatives.

Both with parties that recognize the value of content and IP like ours and with parties that value owning the content they host on their own platforms.

It's still early in the strategic alternatives review, we intend to consider a broad range of options via a thorough process.

Assess there can be no assurance that the review being undertaken will result in any transaction and we do not intend to make future announcements regarding the review until such a time that is appropriate.

One additional note on management.

Stephanie Mcmahon, who has been both a great business partner and friend stepped away last month.

<unk> has had a measurable impact on our company.

Thank her for returning when she did and for her continued support of WWE and our fans.

I'm honored and privileged by the opportunity to sit in the seat that I'm sitting in working alongside our Chief content Officer, Paul <unk>, and President and CFO Frank Riddick.

Our team is engineered record performance over the past year, and we're confident we will execute on the Companys key initiatives in the year ahead.

Turning to the past quarter in fiscal 2022. It was another record revenue year marked by our first full year of touring for live events since the pandemic.

<unk> Global gate revenues of $110 million on 231 events. This broke our record for the highest average revenue per event.

Additionally, WWE set in market.

Gate Records for raw and Smackdown events.

More than 20 cities and we continue that run of success as we head into 2023.

Last week's Royal Rumble set a new record in terms of paid tickets and gross revenue for the event.

And a gain of over $7 $7 million at the Alamodome in San Antonio has.

This surpassed our previous Royal Rumble gate record by almost $2 million.

In early January we announced that we broke our companies all time gate record for any Wrestlemania with this coming April two night Russell, meaning a 39% at <unk> Stadium in Los Angeles, and Thats before the announcement of a single match.

We fully expect April's Russell menu to be sold out across both nights and further drive what are already new gate revenue records for our company.

Along with increased live event demand.

We're seeing similar growth in TV viewership.

<unk> 2022, 2023 season of Smackdown on Fox is off to a strong start averaging $2 3 million viewers up 6% from a year ago.

<unk> is up 2% to $1 6 million average viewers. This comes as all of TV is down 18%.

Our final smack down of 2020 to produce an audience of $2 6 million the highest in 24 months as for raw its 30th anniversary show less than two weeks ago to our biggest ratings in nearly three years.

Smack down from this past Friday had an audience of $2 5 million.

Paul will speak about this strong performance shortly.

Additionally, watch times for raw and Smackdown, we're at all time highs in the fourth quarter.

Raw and Smackdown are both seeing record average viewer engagement.

One other specific ratings data point that we want to highlight.

We're seeing big gains in young viewers.

It was up 17% in the 18 to 34 demo year over year.

This is as TV viewing for 18 to 34 is down 28% across all of television.

What youre seeing with raw is one of the strongest growth stories in all of television for young demo for the young demo.

Ratings growth increase watch time, drawing younger audiences. These numbers underscore how ww is bucking the trends of natural and traditional viewership.

In streaming our partnership with Peacock continues to yield viewership increases for all of our premium live events.

Last week's Royal Rumble saw 52% viewership increase over 2022, making this royal Rumble, both the highest grossing and most viewed royal Rumble in company history.

In Q4 during football season, all three of our premium live events saw double digit increases.

Following a year over year comparisons.

2022 extreme rules viewership was up 36%.

22 Crown Jewel viewership was up 70%.

2022 Survivor series viewership was up 46%.

And we're looking at aggregate premium live event viewership for 2022 versus 2021, it was up 43%.

Two years into our partnership with Peacock, we could not be more pleased our premium live events are driving subs keeping users coming back to the service month after month and serving as Tentpole events.

Internationally, our product also continues to perform and register viewership increases when.

When measuring premium live events on international viewership were up 17% year over year.

One of the standout premium live events from 2022 was clash at the castle and part of Wales. This past September the.

Events set records for viewership ticket sales and merchandise sales for WWE international events.

It was Ww's first major stadium show in the UK in 30 years and was the highest grossing UK event in company history.

Notably 75% of those who attended the event traveled from outside of wells, creating maximum economic impact for Wales every hotel room in and around Cardiff was sold out.

More than $12 million was spent in bars and restaurants alone.

The success of the <unk> event and the money have generated for the community has already led to positive conversations with potential host markets that see the economic and marketing value WWE can deliver.

Following the success, we're headed back to the U K. This July 4th weekend for money in the bank at the <unk> Arena on Saturday July one or.

Our first premium live event in London in over two decades.

The Cardiff in London events, dovetail with our upcoming rights renewal in the U K for raw and Smackdown.

Please also keep in mind that WWE network remains a standalone agnostic service in the U K.

Our success in the region puts us in a strong position as we begin those conversations.

Staying with international later this month, we had to Montreal for elimination Chamber, our first premium live event in Montreal in 14 years.

We're already tracking towards more than 12000 people in attendance, which will make it another sold out event. These.

These international events drive increased gauge sales and build enthusiasm for our product in the market and further demonstrate that WWE is truly a global brand.

For both the upcoming Montreal in London shows, we're offering premium experienced packages through on location.

This is the first time, we've offered premium experiences for international shows since partnering with endeavour and on location a year ago.

We are seeing big sales in this category and expect to make on location packages available at most international premium live events moving forward.

<unk> side, we continue to offer on location packages that are premium live events and are seeing real growth there as well.

In our consumer products business. The partnerships we've struck over the past few years continued to deliver and our localized merchandise approach once again yielded year over year growth extra.

Extreme rules in October of 2022 generated the most in venue merchandise revenue in the events history.

Resulting in a 62% increase over extreme rules 2021, which held the previous record.

<unk> series in November of 2022 also generated the most in venue merchandise revenue and bad events history with a 73% increase over survivor series 2021, which held the previous record.

Last week's Royal Rumble also generated the most in venue merchandise revenue in the events history with.

A 135% increase over Royal Rumble 2021, resulting in the highest domestic in venue merchandise sales ever for WWE event outside of the Russell Manias.

We are also seeing growth for WWE shop Dot com since partnering with fanatics last July .

November and December holiday season sales were up almost 25% year over year in our trading card business also continues to deliver healthy results.

Partner Panini executed seven product drops throughout the year, leading to record annual revenue for WWE as trading card business.

One area I also wanted to hit on as we head into the new year is a sponsorship category driving growth. In this segment is key and we expect to see increases for this fiscal year.

Under new leadership in sales and sponsorship we've taken a different sales approach that focuses on expanding our core partnerships with a heightened focus on categories with strong consumer overlap.

This new strategy is already yielding results for.

For 2023 average client spend is already up 98% from.

From the same time last year.

Team is finding new ways to organically integrate brands into our product.

At Royal Rumble last week, we partnered with Pepsi to stage, our first ever mountain Dew pitch black match and for the first time, our countdown clock was branded by Applebee's.

These reached seven figure deals, which helped us nearly triple our sales from last year's Royal Rumble.

Look for more of these custom integrations in 2023, along with continued sales growth compared to the prior year.

Before I turn the call over to Paul I want to reiterate how pleased we are with the performance of the business and the performance of our amazing colleagues, we're off to a strong start in 2023, and we expect to deliver another year of record revenue and adjusted OIBDA.

With that I'll now turn the call over to Paul.

Thank you Nick.

As Nick hit on we're seeing record numbers for our shows and that is a result of an amazing talent roster and a creative writing team.

As prolific as any in the world strong content as the bedrock of this company and drives our business.

We're coming off a record Royal Rumble that featured the young up and coming powerhouse Ripley, who won the women's World Rumble.

Also featured a return of one of the most popular and entertaining figures and sports media, Pat Mcafee brush off Reinvigorating College gameday.

We saw the in ring return of social media Phenom turned WWE superstar Logan, Paul and of course, the return of the American Nightmare Coty Rhodes, who went on to win the men's Royal Rumble batch and earned himself a championship match at Wrestlemania.

The event also featured our first ever sponsored batch highlighting mountain dew pitch black.

And concluded with an incredible WWE championship match between Kevin Owens, and Roman reigns, whereas superstar Sami Zayn severed his ties with the bloodline, which ESPN said quote was one of the most dramatic moments we've ever witnessed in the history of sports Entertainment.

It was a historic night that set us up for a number of compelling story lines as we kick off the road to Wrestlemania.

Leading into the Royal Rumble was our raw 30, <unk> anniversary show on USA that captured more than $2 3 million viewers and one the demo across all of television including broadcast shows for the night Bye.

By way of comparison, the only other content on cable that traditionally beach out broadcast in the demo is the NFL games and Thats it.

The night showcase the breadth of our talent roster.

<unk> global legends, such as Hoak, Hogan and Ric Flair, the Undertaker along with our current generation of talent like Roman reigns at <unk> later.

As we see record ratings for our flagship shows on linear and with our premium live events on Peacock WWE continues to build our industry, leading social channels.

<unk> audiences and establishing new revenue streams.

In Q4, Wwe's Youtube channel surpassed 92 million subscribers and remains the most subscribed to sports channel on the platform.

We are one of only 10 channels on Youtube to ever surpassed the 90 million subscriber Mark.

Across all social platforms WWE, social also racked up the most video views of any sports League in 2022, surpassing 16 billion views as we finish out the year.

Our Royal Rumble Saturday alone WWE generated over 200 million video views across all WWE accounts.

Tictoc, we've established ourselves as the leading sports league as well in Q4, we surpassed 20 million followers on our flagship Dr. Gao, making WWE. This first sports league to reach that milestone.

The success is leading to new revenue opportunities. We recently closed a content licensing deal that will see wwe's output on the platform increase as well as lead to the launch of several superstar accounts.

Additionally, we will be launching three international pick doghouse. Following the success of our WWE as Daniel handle that is already at $1 8 million followers in its first year.

As we continued to prioritize wwe's global expansion local language social accounts like these in key territories speak directly to our fans in the region and keep the product in front of them outside the traditional broadcast windows.

In November Wwe's weekly digital show the bump surpassed its 200th episode the.

The shows quarter was highlighted with alive sponsored show for fans from TD Garden in Boston before Survivor series.

Look for us to launch more digital original programming in 2023 as it has proven to be an effective platform to pilot new shows and test creative all while creating new programming for our sales team to sell against.

Last but not least in November at our Crown Jewel premium live events, social media Star and a member of the WWE talent roster Logan Paul lead from the top rope under Roman reigns, all while recording the move on a cell phone that clip alone racked up over 40 million views.

In less than 24 hours across Logan and WWE, social platforms, becoming wwe's, most viewed social highlight of 2022.

Almost all did himself this past Saturday at the Royal Rumble with a clip of he and ricochet colliding from the top row, which garnered $26 5 million views across all platforms.

Of course this success on social would not be possible without wwe's roster of superstars, we continue to invest in a robust recruitment and development system to produce the next generation of talent.

The foundation of this strategy is our next in line program that launched in December of 'twenty one.

As we hit the one year Mark of WWE Nio and with the last and with last week's announcement of the programs third class our stable of nearly 50 athletes now represents 13 sports with 40, plus all American honors 12, NCWA Championships and an impressive 13.

5 million combined followers across all social media platforms.

Members of the first class of successfully transitioned to full time training of the performance center with their PV debuts on the horizon soon.

<unk> building blocks designed to attract young talent and solidify relationships with stakeholders across sports have recently been launched WWE campus Rush successfully premiered in Q4 with visits to power five schools, including Ohio State Clemson old Miss.

And with our spring schedule is set to be revealed in the coming weeks.

Initiatives with the industry leader in sports performance training Xo's and with the nation's leading sports focused prep School IMG Academy will only bolster our domestic talent development efforts.

Keep in mind that WWE superstars like Bianca Belair Roman reigns Biggie, John seen and of course, Dwayne the rock Johnson, where all major college athletes that transition at WWE.

We want to make that possible transition as easy as we can for all college athletes.

Internationally, we've unveiled a new annual campaign.

Along side, our sub Saharan broadcast partners at multi choice and Supersport.

The search for Africa is next WWE superstar.

First integration of the continent wide talent search will culminate with a multi day tryout in Lagos, Nigeria later this year.

The competition to land at WWE contract is a compelling story in and of itself.

We will have exciting news to share soon on our plans to bring the stories of our aspiring superstars to our fans.

On original programming production is underway on our new Hulu documentary series, featuring Superstars Montes Ford and Bianca Belair the series will be rolling out on Hulu later this year.

Last week also saw the debut of our first WWE Studios, a local language original <unk> careless.

Hey, guys you have that right.

The scripted half hour comedy about an aspiring young lucci door premiered globally on Netflix with incredible success.

And just two days of release it was the third most in demand show in Mexico.

It is not just on Netflix.

But of all new series premiering on any Mexican platform that week.

In addition, it quickly rose to number two on Netflix top 10 shows watched in Mexico and has remained on that covenant list ever since its premiere outs.

Outside of Mexico. The show is in the top 10 in six other countries. According to data from analytics.

Before I conclude I want to reiterate.

Just how excited I am at how much fun I am having in my role as Chief content Officer.

I also want to add that having Vince around has been great.

I'll tell you this.

It has allowed me and it will allow me to speak for our entire creative team.

We are standing on the shoulders of Giants, so having him back and involved EBIT at just the board level comes with his incredible insight and he is a tremendous asset to the company.

This is the best time of the year.

We kicked off the road to Wrestlemania.

<unk> moment for WWE and I look forward to continuing to build the business alongside this leadership team for the long term with that I'll now turn the call over to Frank.

Thank you Paul.

To review, our financial performance for the quarter and the year and then discuss our outlook and key initiatives for 2023.

As Nick highlighted 2022 was a record year for WWE, both in terms of revenue and adjusted OIBDA.

All of the external challenges to the economy WWE has delivered record results in each of the past three years. We think this is a testament to the strength of our IP and brand as well as the stability and attractiveness of our financial model.

Our content remains highly engaging and therefore desirable to third party programmers interested in attracting and retaining viewers.

In 2022, we generated revenue of nearly $1 3 billion and adjusted OIBDA of $385 million, which was at the very high end of our revised guidance range and exceeded the range. We originally provided at the beginning of the year.

Revenue grew 18% and adjusted OIBDA grew 19% as compared to the prior year.

This performance reflected a return to a full year of ticketed live events and strong results in each of our three reporting segments media live events and consumer products.

Turning to slide three of our presentation in the fourth quarter, we generated revenue of $325 million and adjusted OIBDA of $90 million, which was at the high end of our guidance.

On page four of our presentation, we detail our performance by business performance in the quarter, which shows revenue operating income and adjusted OIBDA contribution by segment as compared to the prior year quarter.

Looking at our media segment on page five adjusted OIBDA increased 3% on 9% revenue growth.

Network revenue increased due to the timing of our premium live events, which resulted in an additional event in the fourth quarter of 2022 compared to the prior year period.

Other revenue included the staging of a large scale international event in both the current and prior year periods.

The increase in other revenue was primarily due to the delivery of third party original programming to any in connection with our ongoing partnership.

Core content rights fees increased due to the contractual escalation of domestic right fees from the distribution of our flagship shows raw and Smackdown.

Growth in this line item was partially offset by the timing of the calendar as we aired one less episode of smack down in the current year quarter.

International core content rights fees increased primarily as a result of the Mena deal that we entered into early in the year.

Advertising and sponsorship revenue declined due to continued pressure on third party digital platforms as well as lower sponsorship deals in the quarter.

The growth in revenue was partially offset by higher operating expenses.

The increase in expenses was primarily related to an increase in third party original programming and higher content related costs.

Television production costs for our weekly in ring content raw and Smackdown was relatively flat year over year on a per episode basis.

Now, let's turn to our live events business as shown on page six of our presentation.

Revenue from our live events was $24 million and adjusted OIBDA was $1 million.

During the fourth quarter, we continued to experience strong demand for our live events.

61, total events 54 in North America, and seven international events.

Average tenants in North America was approximately 5500 up nicely year over year at 6%.

Moving to our consumer products segment on page seven adjusted OIBDA was $9 million on revenue of $22 million.

Results in this segment reflected a number of moving pieces.

Licensing revenue declined year over year as growth in revenue from collectibles was more than offset by a decrease in video game revenue and the revision to our estimates for certainly in licensing agreements with minimum guarantees that we highlighted in the third quarter call. The.

The decrease in video gaming revenue was primarily related to the timing of the release of our franchise game WWE <unk> 22.

As a reminder, we didnt release of version of the game in 2021, and instead move the released in March of 2022, as a result, and notwithstanding the success of WWE <unk> 22 for the full year the booking of the minimum guarantee in Q4 2021 exceeded Q4 2022 video game results.

The latest installment of the game WWE <unk> 'twenty three is set for release next month and we're very excited about the early feedback for this version with initial preorders in social media interaction well above last year's launch.

E Commerce revenue declined in connection with the transition of our digital platform to fanatics, which occurred in the third quarter of this year.

Reflecting the terms of our deal with fanatics, we record the revenue on a net as opposed to gross basis still.

Still early days, but we remain quite pleased and excited about the fanatics relationship and the economics to WWE, which continue to gain momentum.

Along these lines adjusted OIBDA for our E Commerce business was up year over year in the quarter.

The new merchandise revenue increased two any increased due to an increase in total events and per cap spending which was up 8% year over year.

For the full year CPG revenue is up 33% and adjusted OIBDA is up 59%.

Strategic alternatives review process as announced on January six 2023, Vince Mcmahon, our executive Chairman and majority shareholder in cooperation with Ww's management team and board of Directors announced the intent to undertake a review of strategic alternatives with the goal being to maximize value for all WWE shareholder.

In connection with the strategic strategic alternatives review process. The company has retained outside financial legal and strategic communication advisors to support WWE <unk> management team and board.

There can be no assurance is given the regard regarding the outcome or timing of this alternatives review process.

We don't intend to make further announcements until such time it as appropriate.

As we previously disclosed a special committee consisting of the independent members of the board of Directors was formed to conduct an investigation into alleged misconduct by Mr. Mcmahon had another executive who is no longer with the company and.

In November 2022, the company disclosed that the Special Committee investigation was completed and the special Committee was disbanded.

Our fourth quarter results include a $2 $3 million expense associated with the cost the company has incurred related to the investigation.

Going forward, we expect to incur additional costs related to the investigation as we previously discussed Mr. Mcmahon has agreed to pay the reasonable cost of the investigation not covered by insurance.

Our results in the quarter also included $7 4 million of expenses, reflecting payments that Mr. Mcmahon has agreed to make related to additional claims that have recently been settled these payments were or will be paid by Mr. Mcmahon personal.

Now, let's turn to <unk> capital structure is shown on slide eight of the presentation.

In 2022, we generated $126 million and free cash flow as compared to $144 million in the prior year period.

The decrease was due to higher capital expenditures related to the company's new headquarter facility.

During the year, we incurred $200 million of capital expenditures, approximately $170 million of which related to our new headquarters.

Excluding the new headquarters Capex free cash flow would have been $296 million or a conversion rate of 77% of adjusted OIBDA.

During the year, we returned $76 million of capital to shareholders, including $40 million in share repurchases and $36 million in dividend payments.

We did not repurchase any shares in the fourth quarter due to regulatory and legal requirements.

To date, we've repurchased five 3 million shares at an average price of $54 nine per share totaling $289 million.

$211 million available under our $500 million repurchase authorization.

Going forward, we do not expect to repurchase shares during the pendency of the ongoing review of strategic alternatives.

As of December 31, 2022, WWE held approximately $475 million to $479 million in cash and short term investments.

That totaled $235 million, including $214 million associated with the carrying value of our convertible notes, we have no amounts outstanding under our $200 million revolving line of credit.

Our current and projected liquidity remains strong and we continue to evaluate our capital structure and financing strategy for opportunities to lower our cost of capital and increase shareholder value.

Turning to our outlook for 2023 as shown on slide nine we're targeting an adjusted OIBDA range of $395 million to $410 million, which would be which would be another all time record for the company and represents growth of 3% to 7% from 2020 twos adjusted OIBDA of $385 million.

Targeting record revenue in 2023 and relatively flat operating expenses.

In terms of revenue, we're projecting growth in media rights fees for the Companys flagship weekly programming and premium live events, we're making positive strides in our advertising and sponsorship business and are targeting healthy growth in this area.

These increases are expected to be partially offset by the timing of our third party original programming deliveries and the full year accounting impact of the transition of our digital retail platform to fanatics.

We remain very excited about the partnership with fanatics and projected relationship will be accretive to adjusted OIBDA in 2023 and beyond.

On the expense side, we expect to continue to invest in the creative side of our business.

Given the importance of the U S media renewals for raw and Smackdown. We believe this assessment best positions the business for the long term.

We expect to partially offset the increase in creative costs with savings in other areas of the business such as <unk>.

And related network costs.

Made good progress in managing overhead and other cost increases in 2022 and expect to continue to find incremental efficiencies in 2023.

Some of the revenue drivers I mentioned will also yield lower expenses in 2023, and particularly in particular, the reporting of the fanatics ecommerce partnership and lower third party original program.

As in any year there are several key initiatives that will impact our ability to achieve our targets for 2023. These include the renewal of our domestic licensing agreement for NXT, which is expect expected to expire and is expected to expire in September the renewal of content licensing agreements in various international markets.

Most notably Mena in March our ability to enter into new third party original programming agreements our ability to grow sponsorship and advertising revenue in line with our projections and the performance of the latest installment of our flagship video game franchise, WWE, <unk> 23, which will be competing in comping with.

The very successful 2022 please.

Sure.

We're also continuing to keep a close eye on macroeconomic conditions, including the potential impact on consumer behavior and any related impact on our financial performance.

Moving to slide 10 for 2023, we expect capital total capital expenditures of $150 million to $170 million, including spending of approximately $105 million to $120 million related to our new headquarters facility with the remainder primarily related to the maintenance and enhancement of our existing production and enterprise technology infrastructure.

Page 11 of our presentation provides an update on total capital expenditures for the new HQ facility. Despite the challenges related to supply chain disruption and labor shortages, we continue to make good progress on this project we.

We expect to complete the build out of the facility. This year and are planning to move our employees and operations in waves, but the first wave scheduled for late March.

To date, we spent $188 million in Capex on the New project a few HQ project and have received offsets in the form of tenant improvement allowances of $34 million for a net spend of $154 million.

As you can see we've updated our projections and narrowed the ranges for both the gross and net spend we now expect the net spend to be within a range of $180 million to $190 million as compared to our original estimate of 160 to 180 or.

Our estimate for the total gross spend increased modestly due to some changes in scope and the inclusion of approximately $10 million of capitalized interest in our projections.

As a reminder, the estimated total for the New Headboard project headquarters project includes approximately $70 million of accelerated expenditures for equipment and broadcast production technology that likely would have been spent in the absence of this project.

As we look to the first quarter of 2023, we're targeting adjusted OIBDA in the range of $65 to $75 million.

The estimate reflects a shift in timing of the staging of a large scale international events, which occurred in the first quarter of 2022 into the second quarter of 2023 as a result, we expect a year over year decline in revenue in the quarter. Despite growth in revenue from our media rights agreements.

In conclusion, WWE continued to generate strong financial results in 2022 that reflected robust demand for our events and consumption of our programming across platforms.

I'll leave our long term outlook is supported by the rising value of live sports content and increasing demand for media companies that deliver reach and fan engagement, both domestically and around the globe.

Looking ahead, we believe that WWE remains well positioned to take advantage of significant growth opportunities across all of our lines of business. We look forward to updating you on the progress of these initiatives in the coming quarters.

That concludes our remarks and I'll now turn it back to SaaS.

Thanks, Frank Operator, we're ready for Q&A. Please open the lines.

Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone. If you are joining US today, you say speaker phone. Please make sure. Your mute function is turned off to let your signal to reach our equipment again that is star one if you would like to signal one questions.

Take a question from Brandon Ross with <unk> partners.

Hi, Thanks for taking the question.

Just first.

Digging in on the strategic alternatives I think the potential buyer universe is probably going to be impacted by Vince his desire to remain after a sale or not.

Can you tell investors with certainty that Vince will be willing to and his involvement with Ww we followed.

Following a transaction if that gives shareholders the most value.

Yes.

Without question is declared it to the board has declared it to us and management, it's all about shareholder value. Obviously he is a shareholder so it's not about what role he'll have it's about maximizing that value opportunity.

Okay, and I think recently you said that.

You were looking for I think it was the right partner and the sale of the company can you elaborate what youre looking for in such a partner beyond just the dollars and cents.

A partner that has more than simply deep pockets.

So a partner that understands the media business that's in the media business that understands how to further monetize the media business that certainly understands our product our intellectual property, what we're doing with it what can be done with that media rights, both domestically and internationally, we see the.

<unk> growth opportunity is huge so these are folks in terms of choosing the right partner. These are all things that we're going to be looking at in terms of who can accelerate our business.

And again, what's the best value for our shareholders.

Thank you very much.

Thank you.

And our next question comes from Eric Handler with Ross.

Yes.

Noon. Thanks for the question Nick I Wonder if you could talk a little bit about the UK where.

And where its rate environment last correct me if I'm wrong.

Last deal that you had in the U K that went through.

Sports I believe was down.

Can you give us a sense how that.

Environment has changed now.

Yes, we think number one there are many more buyers as you know and as everyone knows Eric as the U S. Based companies have expanded internationally you have folks who are reaching into the UK looking for programming, who werent looking for similar programming 345 years ago whenever the last deal was done.

So and what may have been a bake off between two primary entities then is now.

A situation, where you have five six plus entities, who are desirous of content like ours. Obviously, we always look favorably upon our incumbent DTC has been a tremendous partner and will be getting into those conversation shortly.

Thanks.

Yes.

<unk>.

Frank.

One of the things you mentioned.

Is that.

<unk> costs have been rising and creating the content is this what you are seeing inflationary is there something going on with an incremental that youre allocating to the business or maybe you can give a little perspective on what's causing these consequences.

No it's not inflation driven it's really investment in.

Improving the quality expanding the talent pool.

Creating a more vibrant shadow so.

We're going to as we noted last year and this year. We believe those are good investments to make and will pay off in the upcoming renewals.

Great.

Thank you and we'll take our next question from Curry Baker with Guggenheim Securities.

Hey, good evening I have one for Nick.

Sponsorship seems like demand for Royal Rumble, and Wrestlemania has been strong.

Can you elaborate on what you're doing different to drive that success, how sustainable it is and would you ever consider monetizing assets like the ring the skirt the ramp that have not historically been.

Monetize for sponsorship it seems like you have a lot of underutilized inventory.

Thanks, Corey in reverse order if that's okay, yes to your question about monetizing the ring assets, it's something we're taking a deep dive into now and that we wanted to do.

In terms of what sort of driven it I think it all started with Stephanie Mcmahon and sort of changing the culture of our sales group.

Two along with the leadership of the new head of sales and sponsorship changing the leadership and mentality from maybe two are yes, so when Pepsi and mountain Dew pitched us on the idea of sponsoring a match.

I think what was done was yes, absolutely we do it and then a conversation with Paul obviously, our head of creative about Hey, we can probably do this right.

Which Paul and the creative team made every accommodation to get it done. So we think thats whats driving it in addition to going into higher levels at.

Each of these potential companies.

Okay I appreciate the question.

Thanks Carey.

And our next question will come from Steven Cahall with Wells Fargo.

Thanks.

Few questions. So maybe first Nick the strategic alternatives process in conjunction with the rights renewals process is the idea that by running those in parallel potential buyers can get a better sense of what the renewal potential as maybe you can just help us understand why.

And the board have decided that those processes work better simultaneously than they would in.

Serialized fashion with the renewals coming later and then maybe.

Paula for Nick It looks like raw ratings, they were down in the fourth quarter. They are down quite a bit since 2019, and then Smackdown ratings have done the opposite they're up nicely both in the quarter and since 2019 can you talk about the differences in those two programs and why you think youre seeing this divergence in performance on ratings.

Maybe an update on NXT ratings as well just because you mentioned that those rates are coming up thank you.

Absolutely Steve. This is on next speaking either strategic and media rights process.

<unk>.

The right of first kick in short order for both of our incumbent partners. So if WWE did new deals for raw and Smackdown. So let's say the current deals as you know our five year deals for the U S media rights. If we did five five year new deals it would take a number of buyers off the table.

Our number of potential buyers off the table. So we wanted to go into it with an approach that any of these potential buyers who I referenced in my notes people, who are looking to own the content that they put on their platforms that they get an opportunity to potentially make an offer while of course, we will re.

Specs all of our contractual language with both of the incumbent partners.

That makes sense on that one.

Yes, yes, yes.

Great on the wall ratings keep in mind, you mentioned fourth quarter with the proliferation of gambling with what we see as an increased enhanced Disney Monday night football schedule with also simulcast of that game I think seven or eight of them on ABC. In addition to the primary ESPN.

Broadcast in addition to the many cast which we think has been wildly successful we're up against different competition. Once NFL season starts on Mondays, we think that has something to do with it. If you look at the rating surge in raw, Paul and the creative team has put in as many efforts to make sure that the quality of the raw product.

Is on par with the quality of the Smackdown product, it's not to suggest that it wasn't before but when youre going up against an 18 week regular season of the NFL and the Monday night football playoff game, which as you recall was the Dallas Cowboys at Tom Brady, It's something that we've put an enhanced focus on to make sure that.

The roster sufficient there while not depleting smack down so even when Frank said, hey, with the costs associated with production included some talent cost, we went and signed more talent and.

And we think all of that is paying off and will pay off.

And <unk>.

Yep, you forgot about it actually.

Yes, yes.

Thank you normally out of left back out, but I wanted to make sure you ask your questions.

We're seeing ratings growth there as well.

USA is thrilled with it and VCU is thrilled with it keep in mind.

Of its own brand is NXT is it's still our farm team, it's our feeder system to get folks called up to the main roster. So the expectation there is not the expectation that we and others have for raw and Smackdown, but certainly the expectation by the outside World is the same as our world inside which is growth which.

I think what Youre seeing.

Great. Thank you. Thank you.

Great.

And moving on to Ben Swinburne with Morgan Stanley .

Thanks, Good afternoon.

You guys gave some good color on some of your international strategies, particularly some of the trends in the U K I was wondering I don't know, if Paul or Nick or both could talk a little bit with the India market, which is another market that at least back in the last cycle. There was a lot of enthusiasm around and maybe it didn't translate to as much upside as hoped but thats in the market with a massive <unk> audience I would love to hear what you're doing there.

And the trends in the business.

And then maybe just following up a bit on Steven's question around the rights renewal in strategic review timeline. Nick I think you were on Bill Simmons will I know you aren't Bill Simmons podcast.

I asked you about.

Trying to conclude this process before getting into the exclusive windows with with your incumbents.

Yes.

Should we think about this is <unk>.

NBC and Fox sort of having any kind of rates.

Your business were to be acquired by somebody else.

It's just an interesting dynamic having these two different processes at the same time Im trying to think about the timeline you have coming up real quick here hopefully that made some sense.

It does Ben in reverse order on this one if that's okay.

One any transaction any sundar any potential successor.

In terms of ownership with a 100% respect the rights at NBC and Fox negotiated with us and we would make sure that those rights are respected. So there is no work around on that we're not interested in the work around on that we're interested in having good productive conversations with each of those partners, which we're excited.

About which again should start right after Wrestlemania, which is conveniently located in Los Angeles.

So fight stadium, where certainly Fox sports as you know is based in a lot of the NBC is so we're excited about that and those will always be respected in terms of India allow me to tell you from our perspective whats going on there and what will go on there we are waiting for the Z Sony in the merger.

<unk> to be approved by the regulatory authorities there, but hope is in April .

Keep in mind, which you already know Covid stunted our growth opportunity in India, and a number of places, but in India, specifically, where I would say it was almost impossible to travel in and out of we couldnt do local events. There. So as soon as we have a sense of when the regulatory approval goes.

What happens on Z and Sony India look for a big live event in India, The best way to grow viewership and I think we're seeing it proven out with our UK shows with the upcoming Montreal show.

And in other markets is to have live events. There, it's a much easier sale for our partners with their AD partners. It's a much easier sale for us with potential partners when they have been to the show and they see the power of that it's just a smoother path. So as soon as that transaction is approved look for us to be there in short order and to.

Start continuing to build that.

That Empire in India.

Thank you so much.

Thanks Brendan.

And we have a question from Peter Zaffino with Wolfe Research.

Hi, Thank you.

Questions a bit of a softball, but I think it's an important one can you just talk about the way the media landscape is changing.

In favor of you in the upcoming rate renegotiations.

Iranian views from clients and frequently that the only real interest in the rights will be from the incumbent NBC.

NBC and Fox and so again, if you just talk about your take on how the media landscape has evolved since 2018 and what that means for the rights negotiations I think it would be helpful.

Absolutely look in in the last negotiation.

There were other bidders so forget other suitors other bidders third party bidders conglomerates that all of you know who made significant offers on each of the two programs. We think the marketplace has expanded since then so keep in mind, we're always going to respect that adhere to the rider first conversation.

<unk>.

But I'm not sure that any third party, who is not in business with us we'd be saying to you or anyone. Similarly, situated we must have that product because it shifts the leverage across the table. Once we're out there in the marketplace unless there's a deal gone early with the incumbents once we're out there in the marketplace. We'll know if past is prologue.

We saw it a few years ago, we expect to see the same thing today, especially with more buyers. So we are quite bullish on it.

And we will cooperate.

Oh I'm sorry go ahead.

No go ahead, Justin Thank you.

Thank you. Our next question will come from Jason Bazinet with Citi.

I just have two quick questions and maybe this is a little strange but if.

Just look at your the cash flow that this business has generated over the last 15 years and I look at your capital structure, which has always been very lean.

It seems like weather.

You sell the company to someone that has more cash flow or.

It does not selling the company we go through this rates renewal.

We're just going to have a lot more firepower at your disposal and I just love you to spend a second and talk about what that incremental cash flow could be used for to drive faster sort of topline growth. That's the first question.

Second question is and this is maybe a little bit too detailed but I was just looking at the trending schedule from the third quarter versus the fourth and it looks like there was a small re class.

Within media.

From the core rights to digital I was just wondering if you could elaborate on that.

It would be helpful. Yes, there was a re class went back several quarters, we discovered there was.

That are in interpreting one of our contracts in allocating the funds between the linear TV part of the deal and the network Rx training part of the deal or it's just a calculation error, we went back and corrected that and restated the periods that had about a $10 million impact.

Our periods, though.

Yes.

No no change in bottom line revenue to media.

With respect to.

I think to your point.

We look at our cash flow characteristics of the business, it's quite strong and based on our assumptions about the rights renewal continue to grow and once we get past the investment in the headquarter will generate a significant amount of free cash and if nothing comes out of the strategic alternatives process that.

Is pursued that we have a number of growth initiatives.

Primarily related to <unk>.

Building, an experiential new PC.

Growth in the international area, and we'll be starting some of that in the fourth quarter and launching a new NXT Europe touring program.

Looking at.

Doing more.

Monetization of our IP, both are our talent IP as well as some of our other IP I think Nick referred to it as marvellous nation of WWE. Those are the key areas of investment and we see lots of opportunity and to the extent that we don't have.

Investments in growth that we think generate the right rate of return will return funds to shareholders.

Want to add anything to that yes, just to your comment about more firepower, we like that so let's see how it all shakes out.

Okay very good thank you. Thanks.

And we will take a question from David Karnofsky with J P. Morgan.

Alright. Thanks.

Thank you Nick maybe to ask the prior NXT question, a different way is it important to position that content for potential buyers broad snack down just given the synergy of running multiple nights of wrestling with one partner or is this kind of a totally separate process.

Then one for Frank with core content the quarter over quarter increase was.

Less than we're used to seeing in the fourth quarter. When you cycle into another year on year domestic deals not sure if that was related to the number of shows or some content moving to cable on the quarter. Just wanted to see if you add more color there. Thanks.

Yes, just I'll take the first one the last one first is yes, we had it's really just timing of shows in the quarter on a year over year basis.

You should expect to see the normal escalation quarter over quarter until we enter into a new contract for those rights.

And in terms of NXT look, we're really happy with our <unk> partnership. So allow me to articulate a couple of reasons why if we do a premium live event on a Saturday.

NBC has Sunday night football, obviously on Sundays for 18 weeks or whatever their full regular season packages you get a lot of promotion out of those two enterprises to raw on Monday, which promotes a lot to NXT on Tuesday, which all of those promote to Smackdown on Friday on Fox. So we like the way that that cadence.

This has worked.

That being said this past.

The past Winter Olympics, so February of last year.

We were preempted on USA on raw I know youre, asking asking about NXT, where preempted in short order on raw and moved to SIFI.

Raw carried 90% of its audience and both the demo and the overall audience from USA to SIFI again with very short notice.

So we're pleased with what we can do on any platform any network with our programming with again, it having worked quite well at NBC U.

Thank you.

Thanks.

Justin Let's take one last question please.

Thank you that question will come from Alan Gould with loop capital.

Hi, Thanks for taking the question.

Nick I was really impressed with the fact that the young demos are doing so well on raw how important is as traditional TV for your overall fan engagement. When you look at TV versus streaming versus digital these days.

Yes, Chris.

Okay.

Looking at some it is still important but it's certainly not as important we don't think to anyone as it once was.

So the TV everywhere notion is something that we like.

Even if you look at the Peacock numbers a lot of those are on mobile devices.

So we like people being able to watch what they want to watch when they want to watch it. So if you look at the way that we certainly designed it for this rate cycle. One program on broadcast Smackdown, one on basic cable raw and you have our premium live events on streaming with Peacock, We think all three of work so as it.

<unk> into the new cycle.

Again Fox is traditional broadcast in terms of free to air We love. It. It's worse in terms of USA. It continues to work Theyre, obviously, a longtime partner of ours and in terms of where the young audiences. We want to make sure. We don't Miss that so a renewed energy focusing on that young audience. We think is part of the reason.

Why you see that spike on raw in the 18 to 34 demo and we want to keep all of that up.

Yes.

Great.

Thanks al Thank.

Thank you everyone for joining us today.

Adjusted you can conclude the call now please.

Thank you that does conclude today's conference. We do thank you for your participation have an excellent day.

Yes.