World Wrestling Entertainment, Inc. (WWE) Q3 2022 Earnings Call Transcript

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Costco Wholesale Corp (COST) on Q2 2022 Results - Earnings Call Transcript

World Wrestling Leisure, Inc. (NYSE:WWE) Q3 2022 Earnings Convention Name November 2, 2022 5:00 PM ET

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Company Individuals

Seth Zaslow – Senior Vice President & Head-Investor Relations

Stephanie McMahon – Chairwoman & Co-Chief Govt Officer

Nick Khan – Co-Chief Govt Officer

Paul Levesque – Chief Content material Officer

Frank Riddick – President and Chief Monetary Officer

Convention Name Individuals

Brandon Ross – LightShed Companions

Curry Baker – Guggenheim Companions

Eric Handler – MKM Companions

David Karnovsky – JPMorgan

Steven Cahall – Wells Fargo

David Joyce – Barclays

Operator

Hiya, and welcome to WWE’s Third Quarter Earnings Convention Name. There will likely be a question-and-answer session. [Operator Instructions]. I’ll now flip the decision over to Seth Zaslow, SVP and Head of Investor Relations. Please go forward, Seth.

Seth Zaslow

Thanks, and good afternoon, everybody. Welcome to WWE’s third quarter 2022 earnings convention name. Main at the moment’s dialogue are Stephanie McMahon, WWE’s Chairwoman and Co-CEO, Nick Khan, WWE’s Co-CEO; Paul Levesque, WWE’s Chief Content material Officer; and Frank Riddick, WWE’s President and Chief Monetary Officer. Their remarks will likely be adopted by a Q&A session.

We issued our earnings launch about an hour in the past and have posted the discharge, our earnings presentation and different supporting supplies on our web site. At the moment’s dialogue will embrace forward-looking statements. These statements replicate our present views are primarily based on numerous assumptions and are topic to dangers and uncertainties disclosed in our SEC filings. Precise outcomes could differ materially, and undue reliance shouldn’t be positioned on them.

Moreover, the issues we will likely be discussing at the moment could embrace non-GAAP monetary measures. Reconciliations of non-GAAP to GAAP data are offered in our earnings launch and presentation, which can be found on our web site.

As a reminder, at the moment’s convention name is being recorded, and a replay will likely be obtainable on our web site.

I might now like to show the decision over to Stephanie.

Stephanie McMahon

Thanks, Seth, and thanks all for becoming a member of us. Q3 was one other document setting quarter for a 3rd quarter, producing 305 million in income and adjusted OIBDA of 91 million, representing will increase of 19% and 17% respectively year-over-year. And we remained solidly on monitor to ship document income and adjusted OIBDA for the total yr.

As a backdrop to the robust monetary efficiency for the quarter. The renewed power round our artistic has boosted viewership throughout platforms. In a world of declining tv rankings, WWE is rising.

Monday Night time Uncooked on USA Community is up nearly 5% year-over-year, whereas the highest 25 cable networks are down 12%. SmackDown on Fox is up 1%, whereas Broadcast Networks are down over 15% year-over-year. In actual fact, SmackDown often attracts over 2 million viewers and ranks primary within the coveted 18 to 49 demo amongst all Friday Night time broadcast packages. Simply earlier than the shut of Q3, the September twenty third episode of SmackDown noticed its largest viewers since 2020.

That ranking particularly is instantly attributable to a primary of its type multimedia marketing campaign known as the White Rabbit undertaking, which was designed to have interaction and intrigue viewers via a collection of clues and cues utilizing a myriad of platforms and know-how, certainly one of which led to SmackDown on September twenty third as a vacation spot. Our Chief Content material Officer, Paul Levesque will converse extra to this in a second.

Yr-to-date viewership of our premium dwell occasions on Peacock is up 38% for a similar interval in 2021. One notable spotlight being Conflict on the Citadel, our first return to a stadium present within the UK in 30 years turning into WWE’s most seen worldwide occasion in each the U.S. on Peacock and within the U.Okay., with a 39% improve in viewership year-over-year.

In actual fact, Conflict grew to become the very best grossing European occasion, setting information for merchandise and ticket gross sales as a result of robust IP and higher storytelling drive all strains of enterprise. In Q3, we additionally noticed the profitable relaunch of WWE Store in partnership with Fanatics as we head into the vacation purchasing season, Fanatics plans to scale the WWE product providing by 25% in comparison with final yr, and our partnership with Panini has been considerably delivering above plan.

This success is largely as a result of a targeted effort to weave product into storyline, and take a contemporary method with companions, opening doorways that had beforehand been closed. Take our partnership with Main League Baseball for instance. As we mentioned on a previous name, WWE has been creating personalized championship title belts for MLB groups, we expedited the manufacturing and distribution of the Yankees titles in response to the thrill round Aaron Choose’s then chase for the homerun document. Orders have been changed by Yankee Stadium in addition to Fanatics, and we immediately bought via the preliminary stock.

We additionally stay bullish on gross sales and sponsorship. Whereas present market situations have impacted our outcomes this yr, we have already got some thrilling offers in place that make us optimistic about our efficiency in 2023.

Talking of the longer term, Nick, Paul, Frank and I are excited in regards to the alternatives forward with a spotlight throughout 5 key areas. After all, the escalation of our media rights and content material, worldwide PCs and the native globalization of the IP throughout a number of strains of enterprise, monetization of our mental property, together with model moats round our superstars, Digital and Internet 3, and regardless of the metaverse turns into, and potential M&A that aligns with our core competencies. We’re simply getting began, and we sit up for sharing extra as we totally develop our plans.

And with that, I’ll flip the decision over to my co-CEO, Nick Kahn.

Nick Khan

Thanks, Steph. And thanks everybody for becoming a member of the decision.

As Steph mentioned, it has been one other robust progress quarter for us, and the Dwell Occasions section is a key driver for that progress. In October, Excessive Guidelines additionally set good information as the very best grossing Excessive Guidelines of all time. We noticed robust ticket gross sales all through, however gross sales began to spike when Paul Levesque and the artistic groups White Rabbit undertaking started, which Paul will focus on later on this name.

Looking forward to 2023, in January we head to San Antonio for the Royal Rumble. This Royal Rumble ticket gross sales have already surpassed the ticket gross sales of our second highest grossing Royal Rumble of all time, which was this previous January’s Rumble in St. Louis. When it comes to ticket gross sales for San Antonio, to-date, now we have a gross gate income exceeding $4.6 million, which places us on monitor to make Royal Rumble 2023, our highest grossing rumble in WWE historical past.

Come February, we’ll stage one other worldwide premium dwell occasion with Elimination Chamber going down on the Bell Middle in Montreal. This would be the first premium dwell occasion in Montreal in 14 years. The Conflict on the Citadel, we count on there to be excessive demand.

For WrestleMania 39, which is able to happen throughout two nights at SoFi Stadium in Los Angeles on April 1 and a pair of, 2023, now we have bought nearly 100,000 tickets already. With out one match or particular person being introduced. We count on to have a sold-out stadium for each nights. Along with what Steph talked about relating to Conflict on the Citadel. We additionally work intently with the Cardiff Tourism Board and the native authorities to safe a sightsee for the occasion. That multimillion greenback dedication added to the wonderful economics of the occasion.

Our dwell occasions have confirmed to be a boon to the native financial system of the cities we go to. Shortly after WrestleMania 38, this previous April, Dallas Mayor Eric Johnson and Arlington Mayor Jim Ross introduced that WrestleMania had over a $200 million financial affect on the Dallas and Arlington areas. Search for extra of us, excuse me search for extra from us within the sightsee house, a brand new monetary alternative for us. We’re in energetic conversations with different native governments and tourism boards about future occasions.

Turning to our media section and worldwide, we have closed a variety of offers since our final fall. In September, we expanded WWE’s rights offers with our mates at Information Corp., after we struck a brand new settlement with Foxtel in Australia, the rights to our dwell reveals will stick with Foxtel ATV channel Fox8 and Foxtel common leisure streaming service binge will change into the house of WWE Community within the area, simply as Peacock is right here in america. As a part of the New Deal, we’ll distribute primetime replays of our largest premium dwell occasions on Fox8 and debut a brand new 24/7 WWE linear channel on Foxtel.

As well as, we not too long ago closed the cope with C&W Communications, the main telco supplier within the Caribbean for distribution of WWE content material on their pay TV service Stream TV. The partnership may even increase our footprint by bringing WWE content material to C&W streaming service for the primary time. And at the moment, we’re happy to announce yet one more worldwide rights deal. In Sub Saharan Africa, now we have prolonged and grown our cope with MultiChoice Group. WWE content material will proceed to be obtainable on its Supersport linear service, however our transfer to increase our footprint. Content material will now be obtainable on MultiChoice as market main sports activities and leisure streaming platform Showmax. This deal additionally includes the introduction of recent localized WWE content material, beginning with content material creation across the WWE expertise search in Africa.

Starting subsequent week, we may have members of the WWE expertise recruiting group touring to Nigeria to begin the search. All three of those offers noticed a rise in rights charges have expanded our distribution footprint in every respective territory and have resulted in us transferring WWE Community to a a lot bigger streaming platform within the area. That is aligned with the long-term objectives this management group beforehand outlined and replicated via the profitable mannequin that we have been capable of obtain right here in america. A accomplice with distribution that expands our attain whereas permitting us to cut back prices by lowering WWE community operations.

Being with worldwide enterprise, in three days, we returned to Riyadh for Crown Jewel. That is our second present within the nation for 2022. And we’re happy to return to our common cadence. Past dwell occasions and media rights offers, we’re additionally seeing early success internationally, with native language originals from WWE Studios. Contra las cuerdas a ten episode Spanish language comedy about an aspiring feminine Lucia Dora govt produced by WWE Studios, is about to debut on Netflix in Q1 2023. We’re happy to be partnered with Netflix and increase our worldwide footprint with this authentic.

Additionally in 2023, WWE Studios will premiere a brand new collection on Hulu, that includes superstars Bianca Belair and Montez Ford, the eighth episode first season is at present in manufacturing. We’re additionally happy to be doing extra enterprise with our mates at Disney and Hulu, the place we additionally not too long ago prolonged our Uncooked re-air rights deal.

We additionally proceed to see success at A&E with 4 totally different Unique Sequence, Biography WWE Legends, Most Wished Treasures, WWE Rivals and Smack Discuss. These reveals are delivering a 15% improve in rankings year-over-year for the time slot.

As you understand from earlier calls, we’re as assured as ever within the WWE product as we head into the subsequent spherical of media rights negotiations. {The marketplace} is hungry and keen to pay a premium for dwell content material, and as Steph detailed on the high of this name, we’re seeing elevated viewership throughout all of our content material. Taken collectively, the sturdy market and our robust rankings, we imagine we’re properly positioned as we start our U.S. media rights talks subsequent yr.

All of us right here we’re additionally watching intently this quarter as Amazon started its partnership with the NFL via Thursday evening soccer. We witnessed firsthand in March 2021, after we moved the WWE Community to Peacock {that a} devoted viewers will migrate to a brand new platform. Two months into the Amazon NFL partnership, we’re seeing success for that partnership and the viewers shifting to streaming. As we all know the debut recreation delivered the very best day ever in prime signups within the firm’s historical past, offering an instantaneous surge to Amazon sub-base. The prime video games are additionally delivering a better variety of 18 to 49 yr outdated’s, in comparison with packages beforehand, making it extra engaging to advertisers.

What we’re seeing now could be sports activities shift into streaming is a duplication of the twin income stream cable mannequin that made conventional sports activities networks so worthwhile, a wholesome subscription charge coupled with a mass viewers that’s engaging to advertisers. As we all know this viewers will proceed to develop over time, driving extra sub income and better CPMs.

As for the trade main NFL let’s all see if Sunday Ticket brings even one other new purchaser into {the marketplace}. And the standard gamers proceed to spend huge to compete as properly. That is what we noticed this previous weekend with the brand new huge 12 Deal. Field and ESPN are paying a 70% improve, regardless of the convention shedding Texas and Oklahoma. That is the ability of dwell. This market and our efficiency offers us confidence heading into 2023.

With that, I would like handy the decision over to Paul Triple H. Levesque.

Paul Levesque

Thanks, Nick.

As Steph talked about on the high of the decision, we’re seeing robust viewership numbers throughout all of our programming. The artistic is working, and the storytelling is resonating with our followers. Past the tv viewership and streaming, we’re seeing progress throughout all of our social channels. In Q3, WWE had essentially the most social video views of any main sports activities league. In actual fact, WWE outpaced the quantity two sports activities league by greater than two occasions.

Moreover, we beat our personal inner information for video views. In July, our WWE Instagram web page had the very best video views within the historical past of the account. In August, our WWE Twitter account, set a document all the time views on the web page. The efficiency is a results of evolving with our platforms, we’re seeing extra engagement, longer watch occasions, and naturally, elevated advert income.

YouTube and TikTok each maintained their already robust positions. WWE stays the eighth most subscribed channel on YouTube with 91 million subscribers. Within the quarter, our channels surpassed 70 billion lifetime views, making it solely the seventh channel in historical past of YouTube to take action.

And on TikTok, we stay the primary most adopted sports activities league on the platform, sitting forward of the NFL, NBA and UFC by tens of millions. As each Nick and Steph talked about earlier than one particular initiative the place we noticed success on social and that led to linear viewing successful as properly is what we internally known as the White Rabbit undertaking, a multiweek lengthy marketing campaign that performed out throughout tv, social and in arenas.

We began the marketing campaign by introducing moments into our dwell occasions, in arenas with no point out of our direct digital or social or linear platforms. We let our followers focus on it amongst themselves and check out to determine what was happening. We then began to weave in additional elaborate parts together with QR codes inside episodes of SmackDown and Uncooked. And once they went to these QR codes, it led viewers to extra clues like interactive video games and puzzles that they’d to determine. It will additionally cause them to cryptic messages to decipher that actually lead you additional down the rabbit gap.

The excitement and pleasure continued to extend as we transfer ahead, the QR codes and hyperlinks resulting in the September 23 SmackDown drove viewership in the course of the 9pm hour by 20% alone, as viewers tuned in to see the marketing campaign. This was essentially the most watched episode of SmackDown since March of 2020. The undertaking would culminate by main you to Excessive Guidelines and the unimaginable return of certainly one of our largest superstars, Bray Wyatt. Bray Wyatt’s return at Excessive Guidelines resulted in a 30% improve in complete viewership and have become essentially the most watched Excessive Guidelines in historical past. Monday Night time Uncooked simply two nights later additionally benefited rising our viewers to almost 2 million up 14% week-over-week towards stiff competitors of Monday Night time Soccer and the Voice.

The marketing campaign additionally drove gross sales on our shopper product group. On the day of Bray’s return, his newly launched t-shirt from Excessive Guidelines grew to become the highest promoting merchandise not simply amongst WWE merchandise, however throughout Fanatics total community of ecommerce websites. The WWE White Rabbit undertaking is an ideal instance of how we will use multimedia method to drive engagement, pleasure, and in the end, income.

Search for us to do extra of those strategic artistic stunts that extends storyline to totally different platforms and are executed past simply our conventional tv home windows. WWE actually is 24/7 programming. As we proceed to search out new methods to advertise established superstars like Bray Wyatt, whereas equally targeted on making a pipeline for the subsequent era of superstars as properly.

In October, we introduced WWE Campus Rush, a multi-campus faculty athlete recruitment tour, which is able to go to high NCAA division one universities in seek for new expertise. This system consists of visiting eight colleges this fall, and 7 extra already scheduled for this spring, with involvement from faculties throughout all the energy 5 conferences.

At every cease on the tour, scholar athletes will hear about all the wonderful alternatives that WWE can supply to them, whether or not in ring or out, alternatives like WWE’s NIL program that they’ll make the most of together with model constructing social media fan engagement and media coaching. We count on to see extra D1 athletes begin transferring via our developmental system over the subsequent yr.

You have heard about our established stars and the celebrities of the longer term. However the elevated pleasure round WWE’s artistic and the WWE normally are opening increasingly alternatives than ever to have interaction with celebrities from exterior of the WWE Universe, serving to us to herald new followers.

One instance this Saturday, we will likely be in Riyadh, Saudi Arabia for Crown Jewel, the place one of many world’s most well-known influencers, Logan Paul, will face off towards the Tribal Chief Roman Reigns. Undoubtedly, Roman may have the complete bloodline with him which might make one surprise if Logan may have his very well-known brother Jake Paul, contemporary off his win towards Anderson Silva in his nook to assist even the percentages that may set us up properly to spherical out the yr with this yr’s Survivor Sequence, turning into Survivor Sequence warfare video games from TD Backyard in Boston, which has our followers very excited. And talking of pleasure, nobody is extra enthusiastic about warfare video games than our President and CFO, Frank Riddick.

Frank Riddick

Thanks, Paul.

As Step and Nick highlighted, we had one other robust quarter. Turning to Slide three of our presentation, within the third quarter we generated income of 305 million and adjusted OIBDA of 91 million, which exceeded the high-end of our steering. Income elevated 19% and adjusted OIBDA elevated 70% year-over-year.

On account of our efficiency via the primary 9 months of the yr, we now count on full yr 2022 adjusted OIBDA to be on the higher finish of the vary of 370 million to 385 million. I am going to contact on the outlook for the fourth quarter in additional element later in my remarks. On web page 4 of our presentation, we element our enterprise efficiency within the quarter, which reveals income working revenue and adjusted OIBDA contribution by section as in comparison with the prior yr quarter.

In the course of the third quarter, we had robust efficiency throughout our companies, as every of our three reporting segments reported double-digit income progress.

our media section on Web page 5, adjusted OIBDA elevated 10% and 15% income progress. Core content material rights charges elevated as a result of contractual escalation of home proper charges from the distribution of our flagship reveals, Uncooked and SmackDown. Because of the timing of the calendar, we additionally aired an extra episode of SmackDown within the present yr.

Worldwide core content material rights charges elevated primarily on account of the media deal that we entered into earlier within the yr. Community income elevated primarily as a result of greater home income associated to our settlement with Peacock. Different media income elevated as a result of supply of third-party authentic programming to A&E in reference to our ongoing partnership.

Promoting and sponsorship income declined as a result of our determination to exit a third-party partnership within the audio house. This determination had a $3 million unfavorable affect on our leads to the quarter, and we’re at present engaged on a brand new cope with one other third-party.

The expansion in income was partially offset by greater working bills. The rise in bills was primarily associated to a rise in third-party authentic programming and better content material associated price. As a reminder, we resumed common touring schedule in July 2021. And subsequently, the tv manufacturing prices for our weekly in-ring content material Uncooked and SmackDown have been comparatively flat year-over-year.

Now let’s flip to our dwell occasion enterprise as proven on Web page six of our presentation. Adjusted OIBDA from our dwell occasions was 10 million and income of 35 million. In the course of the third quarter we continued to expertise robust demand for our dwell occasions. We held 58 complete occasions, 57 in North America and one worldwide occasion. The common attendance in North America was roughly 6300. Common attendance was down year-over-year because the prior yr interval mirrored pent up shopper demand in addition to a better mixture of bigger capability venues.

Worldwide ticket gross sales elevated as a result of staging of a serious stadium occasion Conflict on the Citadel within the present yr.

Transferring to our shopper product section on Web page seven adjusted OIBDA greater than doubled to 19 million on 45% or $11 million of income progress. In the course of the quarter we recorded roughly 10 million in income, primarily on account of a revision to our estimates associated to income recognition for sure licensing agreements with minimal ensures. Previous to the change in estimates, we anticipated to acknowledge roughly 9 million of this quantity within the fourth quarter, which will likely be negatively impacted by this quantity.

Th new merchandise income elevated primarily as a result of a rise in complete occasions. ecommerce gross sales declined primarily as a result of transition of our digital platform to Fanatics. Whereas we stay very constructive in regards to the Fanatics relationship, and count on the Fanatics efficiency to be added to adjusted OIBDA, the construction of the partnership leads to a discount of income as we document the exercise on a internet versus gross foundation.

As we beforehand disclosed a particular committee, consisting of the impartial members of the Board of Administrators was fashioned to conduct an investigation into alleged misconduct by Vince McMahon, who has resigned and one other govt who has left the corporate. The particular committee investigation is now full, and the particular committee has been disbanded. Administration is working with the Board to implement the suggestions of the particular committee associated to the investigation.

Our third quarter outcomes embrace an $18 million expense related to the fee the corporate has incurred associated to the investigation, which has been excluded from adjusted OIBDA.

Going ahead we count on to incur extra prices associated to the investigation. As we beforehand disclosed Mr. McMahon has agreed to pay the affordable price of the investigation not lined by insurance coverage.

Now let’s flip to WWE’s capital construction, as proven on Slide eight of the presentation.

Within the third quarter, we generated 4 million in free money circulate as in comparison with 45 million within the prior yr interval. The lower was as a result of greater capital expenditures associated to the corporate’s new headquarters facility. Within the third quarter we incurred $51 million of capital expenditures, 42 million of which associated to our new headquarters. Excluding the brand new HQ CapEx, free money circulate would have been 46 million within the quarter, or a conversion price of fifty% of adjusted OIBDA.

Yr-to-date, we have spent roughly 97 million on the brand new HQ undertaking and at present anticipate roughly 180 million to 195 million in full yr spending on the undertaking.

The corporate additionally obtained 14 million in third quarter and 27 million via the primary 9 months of the yr, associated to tenant enchancment reimbursements for the headquarter facility. Whereas these quantities scale back our general money outlay for the undertaking they aren’t included in our free money circulate calculation.

In the course of the quarter, we returned 9 million of capital to shareholders via dividend funds. We didn’t repurchase any shares within the quarter as a result of regulatory and authorized necessities associated to the investigation. To-date, we repurchased roughly 5.3 million shares for 289 million and have 211 million obtainable underneath our 500 million repurchase program authorization.

Going ahead, we count on to stay opportunistic in our share repurchases. We are going to proceed to guage numerous components resembling our inventory value, monetary market situations, regulatory issues, and our estimate of the intrinsic worth of our inventory when figuring out our stage of exercise.

As of September 30, WWE held roughly 441 million in money and short-term investments. debt totaled 235 million, together with 214 million related to the carrying worth of our convertible notes. We’ve got no quantities excellent underneath our $200 million revolving line of credit score.

Our present and projected liquidity stays robust, and we proceed to guage our capital construction and financing technique for alternatives to decrease our price of capital and improve shareholder worth.

Turning to our outlook for full yr adjusted OIBDA, in February, we initially offered a spread of 360 million to 375 million. In August, we raised that vary to 370 to 385. We at the moment are focusing on the higher finish of the vary of 370 to 385 million. We’re happy with our outcomes for the primary 9 months of the yr and stay firmly on monitor to ship document income and adjusted OIBDA for the total yr.

As for the fourth quarter of 2022, we’re focusing on adjusted OIBDA within the vary of 83 million to 90 million. The estimate displays year-over-year income progress primarily from an sudden improve in home media rights charges for the corporate’s premium occasions, in addition to the elevated monetization of third-party programming.

This income progress is predicted to be partially offset by the unfavourable affect associated to the timing of shopper product licensing income for sure agreements with minimal ensures that I mentioned earlier in my remarks, in addition to the timing of the airing of the corporate’s flagship weekly programming, particularly SmackDown, which is scheduled to air one much less episode as in comparison with the prior yr interval.

We additionally anticipate that fourth quarter outcomes will replicate a rise in working bills as we proceed to spend money on the creation of our content material.

As we beforehand disclosed our settlement with Hulu for the Uncooked re-air rights expired on the finish of September. In our discussions with Hulu about extending the connection, we expressed our want to align the timing of the rights and home windows for our content material, so it is best positions WWE for the upcoming renewal discussions in 2023.

In consequence, we entered right into a short-term extension that we imagine balances wishes of each side. We’re happy with the end result, however it’s going to create a modest headwind in our financials for fourth quarter and for 2023. As for 2023, we’re at present in the midst of our annual working plan course of and count on to supply a extra fulsome replace on our subsequent earnings name.

Given the significance of the U.S. media renewals for Uncooked and SmackDown, we do count on to proceed to spend money on the creation of our content material the very best place within the enterprise for long-term. We’re additionally protecting an in depth eye on macroeconomic and market situations, together with the potential affect on shopper habits, and any associated affect on our monetary efficiency.

In conclusion, WWE generated robust third quarter outcomes that mirrored sturdy demand for our occasions, and elevated consumption of programming throughout platforms. We imagine our long-term outlook is supported by the rising worth of dwell sports activities content material, rising spending by streaming platforms on dwell and sports activities content material to amass and retain prospects, rising model spend with media corporations that ship attain and fan engagement, and rising premium for celebrities and compelling content material, fueling new IP monetization alternatives, and the expansion of media and leisure in worldwide markets.

Trying forward, we imagine that WWE stays properly positioned to make the most of these vital alternatives to help progress throughout all our strains of enterprise. We sit up for updating you on the progress of those initiatives within the coming quarters.

That concludes our remarks. And I am going to now flip it again to Seth.

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Seth Zaslow

Thanks, Frank. Operator, we’re prepared for Q&A. Please open the strains.

Query-and-Reply Session

Operator

After all, thanks. [Operator Instructions] And we’ll go forward and take our first query from Brandon Ross with LightShed Companions. Please go forward.

Brandon Ross

Hello, thanks for taking the questions. I’ve a pair. Truly going to begin with Frank. And might you discuss a bit of bit about the way you see the fee construction rising within the coming yr or two, particularly as you end up or begin after which hopefully full your new licensing deal? And the way do you consider strategic reinvestment, together with however past city prices as you marry your CFO function together with your new President function? And are there any areas for price construction enchancment that you simply say? I’ve a follow-up.

Frank Riddick

Thanks, Brandon. Sure, we’re clearly, as I mentioned in my feedback, we see the necessity to proceed to spend money on content material creation, significantly as we head into WrestleMania in Los Angeles supporting the renewal discussions developing this subsequent yr. We have not actually decided, steering for margin for 2023, but, we’re nonetheless within the planning course of. And we’re attempting to strike that stability between guaranteeing that we proceed to create the compelling content material that is pushed the rankings, and can end in a significant uptick in our rights. We do see alternatives to handle and management prices, primarily within the non let’s assume, income producing and expertise space, significantly the company prices, which now we have — as we have mentioned up to now Brandon, a excessive stage of price relative to the scale of the corporate, and we see alternatives to do this to stability out different will increase wanted to help the enterprise.

Brandon Ross

Nice. After which for Paul. To begin with, you guys all kicked off the decision by speaking in regards to the success of the artistic and what that is meant. And also you gave a bunch of tangible examples of a few of the stuff you’re doing. Are you able to perhaps put a bow on it by zooming out a bit of and telling us form of what the core tenants of your content material philosophy are, and the way you look to handle that over a year-long cycle?

Paul Levesque

Positive. I feel it is taking a look at, as you mentioned, the year-long cycle of content material creation over that yr, and attempting to type of decide locations that you simply need to go to place them into your artistic type of GPS system, after which determining the way you need to get to these issues. So it is trying additional forward than we have ever achieved earlier than. I feel, as we’re rounding the bend to return into the New Yr, and taking a look at WrestleMania, I am already starting in my thoughts to begin to — with the group collaborate on what we would like subsequent yr’s WrestleMania to appear to be and the way we would like the spring popping out of WrestleMania to switch into the summer time, after which via into the autumn. It is a big cycle. And I feel the additional that we will get forward of it, to know the place we need to go, clearly, our enterprise being totally different than making films or anything, proper with the human beings concerned, damage charges, every part else that come together with it.

However after I have a look at the artistic we’re doing now after I have a look at the success of that, perceive, we’re nonetheless doing that with out Charlotte Aptitude, we’re nonetheless doing that with out Becky Lynch, we’re doing that with out Cody Rhodes, we’re doing that with out Randy Orton. I feel these are vital stars which have — once they return will transfer the needle as properly.

I feel the opposite huge factor for us is, is de facto specializing in character improvement. And as you see a variety of stars returning, you will note stars developing via our developmental system which have by no means been seen on a Uncooked or SmackDown earlier than creating these characters. So that you simply’re invested in them every individually in order that they imply extra throughout the programming itself.

After which actually, for us, it is protecting issues contemporary, attempting issues exterior the field issues, some are going to work, some should not. However I feel the White Rabbit stuff that we talked about loads at the moment was actually exterior of the field considering that got here out of this artistic group. And that leads you to with the ability to strive new stuff you’ve by no means tried earlier than, maintain the successes, lose the losses, I am not afraid of the losses. That is the place I discovered the successes do not educate me practically as a lot because the losses do. So when issues do not work. That is phenomenal. We’ll work out why they did not and the subsequent one will. So I am not afraid of any of that. And it is actually simply transferring ahead however having a plan of the place you need to go. I hope that answered it for you.

Brandon Ross

It did. Thanks very a lot.

Operator

We’ll go forward and transfer to our subsequent query from Curry Baker with Guggenheim Securities. Please go forward.

Curry Baker

Hey, good night, everybody. Thanks for the query. I’ve two for Nick. The primary one is on the U.S. renewal for Uncooked and SmackDown subsequent yr. Are you able to perhaps assist us take into consideration what metrics you are taking a look at? That provides you confidence and the renewal cycle subsequent yr? Is it rankings, latest sports activities rights renewals relative price all of the above simply excessive stage? The way you’re fascinated by the renewal and what’s main you to be so constructive proper now.

Nick Khan

Thanks very a lot, Curry. I feel we all the time checked out what we check with internally because the three R’s, rankings, relevancy and income. And we expect the corporate is firing on all cylinders when it comes to that. Along with {the marketplace} firing on all cylinders, when it comes to what it is paying to totally different entities that ship these issues. So there’s clearly a variety of micro to that macro. However these three macro factors are what we’re constantly taking a look at and speaking about.

Curry Baker

Thanks. After which on the native subsidy entrance for big occasions, clearly, Wells was a pleasant profit there. Do you assume we will see a number of of those subsidies subsequent yr? I do know you talked about, there are some energetic negotiations happening? Or would you characterize this as extra of a 24, 25 alternative?

Nick Khan

Sure. It is one thing we’re taking a deep dive into now. So we definitely imagine that there will likely be extra there. We’ve got a proposal for certainly one of our premium dwell occasions that we like already. So we’re within the technique of attempting to shut that up. And there is going to be greater than that coming. We predict with the financial boon as I described in my remarks that our product brings to totally different cities and nations. We imagine we’re successfully getting the phrase on the market on that. And we’re already beginning to see the outcomes.

Curry Baker

Nice. Thanks for the questions.

Operator

And we’ll transfer on to our subsequent query from Eric Handler with MKM Companions. Please go forward.

Eric Handler

Good afternoon, and thanks for the query. This one for Paul and Paul subsequent yr with type of morph the NXT UK enjoying to NXT Europe. I’m wondering in the event you might discuss a bit of bit about what you assume, or the way you assume, or what you assume NXT Europe can morph into when it comes to larger, higher considered? And from there, what kind of timeline you are considering for enlargement even past Europe?

Paul Levesque

Thanks for the query, Eric. Greater, higher, broader, it is likely to be the tagline for the brand new model, perhaps going ahead.

Eric Handler

I’ve already trademarked it.

Paul Levesque

Oh, actually? All proper, properly, we will discuss it. Frank will deal with that.

Frank Riddick

We don’t pay a lot for these.

Paul Levesque

I feel that what you see in Europe, after we began NXT UK, the will was to type of replicate what we have been doing within the U.S. and we bought to begin on it. After which, COVID hit, and it slowed every part down. After which we wanted to rethink it. So we bought to a spot the place we have been able to go once more. However it’s type of robust to rebrand one thing and reboot it, whilst you’re nonetheless operating it, it is like attempting to vary a tire on a automobile on the freeway.

So we shut it down as Europe evolves and grows, as soon as we carry that again, I feel you’ll start to see it replicating a bit extra of what you see within the U.S. So a system beneath it, for recruiting a system beneath it for bringing in the very best athletes from throughout Europe, whether or not we’re recruiting them from the Olympic stage similar as we’re right here round, faculty athletics is barely totally different there however round athletics and the youth over there. We are going to accomplice with individuals over there. And as we start to carry these athletes in, coaching them, creating them in whether or not in our present PC or as we evolve into one thing larger, attempting to show that right into a feeder system for the general WWE whether or not Uncooked and SmackDown. And I feel that that native globalized type of model there’s very engaging to a variety of our companions in market. And I feel now we have a possibility to make it’s one thing even larger.

And Europe additionally turns into a really attention-grabbing hub for us, for different nations. So I might take for instance, India, whereas we recruit there, it’s extremely troublesome for us to search out athletes carry them to the U.S. to start coaching, it is a very lengthy course of for us. We are able to get them into Europe in a a lot faster trend and get them coaching a lot faster, a lot sooner and have success in a shorter time period. So it turns into a really key hub for us. I feel as soon as Europe is established, you will note us start to have a look at branching that out into different markets as properly.

Eric Handler

Very useful. After which, one follow-up, one other content material query. Couple of years into your NIL cope with U.S. faculty athletes. I am curious as you consider your funding into this undertaking and different faculty recruitment alternatives. One, you’ve gotten like a timeline that you simply assume that you would be able to get these individuals into the Efficiency Middle, two, filter out who can succeed who cannot succeed, what’s type of — what’s your [bid sounds] [ph] with that. After which, how lengthy would it not take them to type of get into NXT or the primary roster?

Paul Levesque

It is attention-grabbing as we have been doing this for a couple of years now. And recruiting, some collegiate athletes, however some barely otherwise, the distinction with these collegiate athletes which might be coming into us via NIH and thru the school rush program that you simply see being carried out now, that stage of excessive finish faculty athletes are used to being skilled and coached at a distinct stage, it incrementally will increase the velocity at which they progress via our program. And we have gotten fairly good at predicting. So there is a very brief window of time as soon as they arrive in, there’s nearly like a six-month type of nearly simply occurs naturally cut-off interval after which there’s one other one barely after that, however perhaps 4 to 6 months later after that, with the group begins to skinny out a bit.

And now we have some expertise proper now which might be airing — which might be showing in NXT programming now which have solely been within the system for perhaps six, eight months. You see them nearly often a yr in or so showing often. However like I mentioned, now we have some which might be six months in which might be showing throughout the present now, in order that the curve shouldn’t be nice. They usually’re selecting it up very quick. And I feel that, due to that and the quantity of athletes which might be turning into increasingly eager about WWE by the day, the longer term is extremely brilliant on that entrance.

Eric Handler

Thanks very a lot.

Operator

We’ll take our subsequent query from David Karnovsky with JPMorgan. Please go forward.

David Karnovsky

Hello. Thanks, Steph, I feel in your ready remarks you talked about as certainly one of your strategic priorities, M&A that aligns together with your core competencies. And acquisitions traditionally, I do not assume it had been a spotlight for the corporate. So simply hoping you might increase a bit on that commentary.

Stephanie McMahon

Positive. I really had taken out the phrases tuck-in that have been really helpful that I used to be purported to say. So it truly is there’s smaller strategic alternatives that we’re taking a look at within the close to time period. And when it comes to the long-term, who is aware of what the longer term may maintain?

David Karnovsky

Okay. After which Nick, I feel it has been a very long time since anybody on this name particularly requested about Canada, however you do have a rights settlement expiring there, I feel in 2024, and I imagine it is nonetheless a high 5 area for you. So I hoped perhaps you might simply present any early view on the way you see the marketplace for the content material areas, you probably go to negotiations.

Nick Khan

We predict the market there’s robust for us, particularly with all the U.S.-based corporations which have now over the previous couple of years gone internationally. As an alternative of a handful of potential patrons in Canada, you’ve gotten a plethora of them. So we love our relationship with our incumbent accomplice Rogers proper now. And we’ll see what the longer term brings. However we’re fairly bullish there.

David Karnovsky

Nice. Thanks.

Operator

We’ll transfer on to our subsequent query from Steven Cahall with Wells Fargo. Please go forward.

Steven Cahall

Thanks. First, Nick, we’re seeing a variety of linear strain on the market in price reducing and promoting. I feel NBC guided to a more durable This autumn outlook. And as you understand, Fox does not have a streaming platform, and it may be more durable for them for SmackDown, perhaps to be worthwhile on adverts over the subsequent few years. So with all that happening, and when you consider rights, and the expectation for rights in 2022, this very lengthy query is, do you continue to assume that packaging linear and broadcast along with a few totally different companions is the appropriate solution to go about it? Or so as to maximize worth? Do you assume you may begin to get extra artistic and have a look at alternatives to perhaps have broadcast solely rights and streaming solely rights so as to herald an even bigger group of bidders since I feel you begin unique negotiations together with your present companions right here fairly quickly.

After which relatedly. Frank, you mentioned the Hulu re-air proper create a modest headwind? I am simply curious in the event you put these out competitively. And will you perhaps increase on why that is a modest headwind? Is it simply because it is a shorter-term deal? It appears like you don’t need us to learn that throughout as being any type of implication for the larger rights renewals. So I would love some extra colour there. Thanks.

Nick Khan

Thanks, Steven. When it comes to the primary a part of that query, we expect nights of the week matter when it comes to return on funding by linear broadcast networks. We additionally assume the way in which that it is ended up for us with Uncooked on primary cable, SmackDown on free to air, and the premium dwell occasions on a streaming service Peacock has labored out completely, in that it allowed us to check every platform out or our product and to see the place we might get a stronger consequence.

We’re pleased with all three of these platforms and the place they are going. Sure, there will be fewer alternatives in primary cable, as there will likely be fewer primary cable networks. However we expect a variety of that content material has clearly been picked up by the streamers when it comes to free-to-air. We’ll see what people do with their 10 o’clock hour. However all indicators are that scripted programming has shifted to streaming, at the very least the premium scripted content material, and that the linear platform, the free-to-air platform is greatest for dwell, which we’re. So we like the way in which that it is heading and stay bullish on it. Frank, I am going to flip over the second half for you.

Frank Riddick

Steven we clearly — you picked up on it. We do not assume it says something in regards to the worth of our content material that negotiation, this battle was sophisticated by our want what we need to do with the second two air rights, in addition to another constraints contractually and the way it may very well be competitively bid. So we simply determined that the shorter-term deal was higher for us. And, we have not disclosed the unique deal, or nor we disclosed the brand new one, however simply, it does not actually say something about the way forward for our rights negotiations in ’23. I do not know if Nick, you need to add something to that.

Nick Khan

Sure, I can add to that. And a part of it was a part of your query, additionally, Steven. When it comes to splitting the rights, in the event you have a look at the NFL in, their latest negotiations, when it went to NBC, so did the digital rights when it went to Amazon, the linear rights weren’t bought wherever else? And sure, after all, within the two native markets, you may get to see it free-to-air. However you noticed that throughout the board uniformly? I am undecided that is going to vary. If it did not change for them, it seemingly does not change for others. So it might be nice on Uncooked and SmackDown to separate them 4 methods as a substitute of two methods. However so long as it is monetized the identical quantity, we’re good with that.

Steven Cahall

Thanks.

Seth Zaslow

Operator, why do not we take one final query, please?

Operator

After all, you guess. And our final query will come from David Joyce with Barclays. Please go forward.

David Joyce

Thanks. Given that you’ve got simply achieved some new offers in Australia, and Africa, and earlier this yr in Canada. May you assist us take into consideration how you’d form of rank order the significance of your markets exterior the U.S. granted, we all know that the [indiscernible]. Simply attempting to consider what this may do for the broader array of monetization alternatives. Thanks.

Nick Khan

Thanks, David, for the query. We predict that the dwell occasions and the rights offers are one and the identical now. So even the query that was requested earlier about Canada and the deal developing there in 2024, as we had talked about earlier, now we have the premium dwell occasion in Montreal in February. You noticed the Cardiff present that we talked about as properly, Labor Day weekend in Wales, clearly, that is all tied in. So our present companions, and new potential patrons can come and see our programming.

If you see our stuff dwell, it is a heck of a better promote. Since you see that viewers response, and the way passionate the fan base is. And whenever you see the rise in viewership, for instance. And sure, the Cardiff present airing dwell in primetime within the UK is a big issue, versus it airing at 2am or 3am, if it was emanating from america. However I feel our rankings premium dwell occasions to premium dwell occasion we’re up like 400%, or one thing to that impact, one thing excessive with that. So UK issues to us, Canada issues to us, the APAC area, we had introduced a yr or so in the past, a cope with Disney for 2 of the nations there. Search for us to concentrate on that. Australia clearly issues.

So there’s going to be extra of an emphasis, Steph, Paul, Frank and I discuss on a regular basis. It is a international localized product that we’re taking pictures for. So after we discuss even the expertise recruiting, staying underneath the brand new Celebrity deal in Africa, that’ll begin subsequent week, if we will discover one subsequent famous person from the nation of Africa, that merely resonates, I am sorry, the continent of Africa that merely resonates on the continent of Africa a giant win for us, if that particular person can cross over and resonate to the U.S. even an even bigger win if they’ll change into a world famous person. And hey, that is stable aim for us. So we just like the technique. We predict we’re implementing it correctly. And the outcomes we’re excited to see.

David Joyce

Nice. Thanks very a lot.

Nick Khan

Thanks.

Endof Q&A

Seth Zaslow

All proper. Effectively, thanks everybody for becoming a member of us at the moment. We admire your curiosity in WWE. Operator, you’ll be able to conclude the decision now.

Operator

And with that, that does conclude at the moment’s name. Thanks to your participation. You could now disconnect.

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