On Thursday, WWE CEO & Chairman Vince McMahon, along with WWE President Nick Khan and WWE Executive Stephanie McMahon held a financial earnings call for Q1 (2021), with Vince commenting on WWE resuming live touring later in the year once the pandemic settles down. What is detailed below is a complete recap of that call from start to finish.
* The call got started a touch late, starting at 5:09 ET/2:09 PT.
* After the initial declarations and legal statements, Vince McMahon took over and thanked everyone. He said they’re coming out of COVID and were in survival mode, but they rethought the way they do business and opened what he calls the “WWE Treasure Chest.” He put over the management team as innovative and finding ways to drive new revenue stream, new products, and new content creation. He said he doesn’t think he’s been as excited as he is now.
* Nick Khan took over and said since the last call there have been significant developments in the media industry that signals to them a marketplace that continues to put a medium on live content. He promised an update on new content and an update on a return to live events. He noted the recent completion of content distribution deals like Amazon grabbing the Thursday NFL package and how the NFL and NHL got substantial increases in their rights fees, which indicates increased demand for live content even with linear ratings down. They believe that this is indicative of where the marketplace is headed and that the majority of networks are looking at linear and streaming rights, and the days of splitting those rights look to be over for now. They’re content that their rights portfolio are positioned in longterm growth and says that they and Peacock were thrilled with the results for WrestleMania.
* Khan highlighted the promotion from FOX and USA for WrestleMania and says that it was a success for subscriptions for Peacock, which makes them excited for potentially replicating that to “key international territories.” He talked about their Tencent deal in china, which has seen a 30x increase in viewership in the country. He also pointed out their success in India and the UK.
* Khan also talked about new streams of revenue and pointed out their first NFT releasing, many of which sold out in seconds. They plan to do more NFTs in the near future.
* He said that they remain focused on original programming to WWE Studio including a multi-episode anime series sold to Crunchyroll and Young Rock which is a big success on NBC, USA, and Peacock. He also hypes the ratings success of the Steve Austin Biography special which was the highest-rated episode in 16 years, and that WWE’s Most Wanted Treasures retained 79% of that audience.
* Finally, he said to stay tuned for an announcement showcasing their return to live touring, then turned it over to Stephanie.
* Stephanie talked about the success of WrestleMania, touting their 50,000 attendance number, and said that it would be remiss if she didn’t mention how amazing it felt to hear fans from the stage. She said they felt the power of belonging and that it was a full circle moment, “providing a hope for the future.” She mentioned the new signature “Then. Now. Together. Forever.” She put over the fanbase to promote the “record-breaking performance” across platforms including new audiences through Peacock and talked about all the work done to make the launch happen in short order. She said one executive at Peacock called it a “best in class example” of how this sort of thing should work, and said WM was the most watched live event in Peacock’s young history.
* Stephanie said WM media coverage increased 25% and that individual news stories repped 1.2 billion impressions. She runs down the weekend, highlighting Jey Uso’s Andre the Giant win, Bianca Belair vs. Sasha Banks, Bebe Rexha, Wale rapping Big E. down to the ring, and Bad Bunny and Logan Paul’s performance and their success in audience. She noted the 14 promotional partners for this week including Snickers, Old Spice, Papa Johns, and Draft Kings.
* She talked about how Draft Kings is now an official gaming partner of WWE with their free-to-play pools, and said video views across WM week hit 1.1 billion and 32 million hours across platforms. Those are a 14% and 9% increase, and she calls WM the most social program of the weekend. She also brings up the Undertaker NFTs as well as the community activations for charity work such as vaccination PSAs and Special Olympics work, plus Feeding Tampa Bay.
* Stephanie hyped the success of Raw After Mania and NXT’s jump in the ratings in its move to Tuesday, then said that they’re excited to build on the success as they move to WrestleMania Backlash.
* She went over the key brand metrics: Raw viewership is stable since they moved out of the PC to the ThunderDome, and Smackdown ratings are up 9%. She noted that Bad Bunny’s appearances led to leaps in the Hispanic demographics and said digital consumption was up 7%. YouTube crossed 75 million subscribers and is the 4th most viewed channel in the world. Sponsorship and sales revenue was up 19% excluding an international event (i.e. Saudi shows). She highlights the creation of their digital content for GM’s Chevy Silverado and Old Spice and said in their view, WWE is well-positioned to continue to elevate the brand, grow business, and engage new and existing consumers across platforms.
* Salen took over and said transitioning WWE Network to Peacock while prepping WM was a major accomplishment, putting over the speed and innovation that the team put forward. She ran down the comparisons, saying that the 1st Quarter still saw a challenging environment and revenue was $263.5 million, down 9% due to live event cancellation and loss of merch sales due to COVID-19. Adjusted OBIDA grew 9% in spite of that, reflecting upfront recognition of their licensing agreement and a decline in operating expenses due to live event costs.
* The adjusted OBIDA for media was $107 million, up 4% on increased revenue and profit from Peacock as well as escalation of content fees. She said operating results continue to be impacted by the year-over-year increase in production costs, but they acheived efficiences quarter over quarter, and that the investment in the ThunderDome will continue into Q2. Salen said that they produced nearly 650 hours of content across the quarter on various platforms and continue to develop their original programming.
* Live event adjusted OBIDA was a loss of $3.4 million due to the 97% decline in live event revenue. They look forward to the return of regular ticketed events, but predicting the pace of that return is “challenging” and as of this moment they don’t anticipate it until the second half of the year.
* Consumer product OBIDA was $6.7 million, up 76% due to higher royalties and profit from video games including mobile. She highlights new products like title belts and a suite of Stone Cold merch, plus action figures at Walmart.
* Overall cash generation was about $54 million, down slightly. Improved operating performance and more were offset by the timing of collections associated with network revenue. They returned $84 million of capital to shareholders including share repurchases and dividends. As of March 31st, WWE holds about $461 million in cash and short-term investments. WWE estimates credit capacity of $200 million.
* Talking about the business outlook, last quarter, they issued guidance for 2021 adjusted OBIDA of $270 million to $305 million. It reflects estimated revenue growth driven by Peacock and the gradual rampup of live events, plus the escalation of core content fees. They’re not changing guidance at this time, but its subject to the usual.
* They anticipate increased spending on the new WWE HQ as they restart the project in the second half of the year. They estimate total capital expenditures of $65 to $85 million to begin construction and enhance WWE”s technology infrastructure. For Q2, they estimate a decline of adjusted OBIDA as incremental profits by Peacock and content rights fees are more than offset by increased production, personnel, and other operating costs such as ThunderDome. They’re not reinstating more specific quarterly guidance at this time.
* It was question time, and the first asked about the sponsorship front. Khan deferred to Stephanie, who said that they see there’s a lot of potential and upside in sponsorship, mirroring what sports leagues have done. She points out that they have opportunities through their talent who are influencers and their ownership of all their IPs, which gives them opportunities that other leagues don’t. Khan added regarding Peacock that they will be selling sponsorship opportunities with the service and are now getting their ducks in the role to further monetize it.
* Asked about ratings and what lift they expect as they return to the more normal product and anything new being done on storyline and talent front to re-energize things. Khan said they look at ratings the way buyers do — a combination of linear, streaming, everything. He said their numbers are robust and said it’s a challenge in linear content for everyone as eyeballs are going away from it compared to other methods. They’ve seen increases as they’ve launched new methods, and said that the return of fans will help them in a big way, which they’re yearning for.
* Asked about the traction on Peacock and if they can size the viewership of WrestleMania compared to last year, Khan said Peacock has asked them not to do that but said that when you wake up in the morning to phone calls and emails from Peacock and NBCU, it means they’re thrilled and that’s what happened Sunday night and Monday morning. He noted expanding the fanbase was one of the key reasons they did the deal.
* The next question was about the strategy of moving NXT to Tuesday and if they think about or care about AEW. Khan reiterated the party line that they’re competition for everything including non-wrestling content, and all they’re concerned about is their own product’s viewership. He noted that things like NHL on Wednesdays weren’t a consideration and said that the efficiency made sense for myriad reasons to do consecutive nights between Monday and Tuesday. They’re happy with the increase and not focused on anyone else.
* Regarding other suiters for sports content, Khan said he thinks Apple TV is readying for something and they’re keeping an eye on them, noting that they’re not just looking at digital companies but companies like Disney and Comcast, who will be significant competitors to everyone.
* The next caller asked if they were able to sell rights to other companies for the next three years or so, Khan said “there’s so much” and it’s why their focus is international based. Their domestic license is through October 2025 on Raw and Smackdown, but new content is not. Licensing existing content internationally is what they’re deeply involved in now and there’s a lot of upside there. The caller asked about the OBIDA growth and how it was offset by the Saudi event, and some numbers relating. Salen said the key thing to understand about their growth is driven by accounting for the Peacock transaction and the offset is due to not only Saudi Arabia, but also all live events. Salen said that there was little licensing fees to Peacock for the quarter, and that will be reflected more in the second quarter. She also pointed out the importance of production costs in operating expenses, and how last year’s Q2 they were in their training facility.
* Asked about touring returns in the second half and whether they’ll continue to have a residency, Salen said that they haven’t yet decided but they hope to go to full touring when they return. Their guidance assumes that they go full touring in the second half of the year, which they’re looking to get back to.
* Asked about the increase of e-commerce and if that was due to the lack of live event merchandising, Salen said that they’ve taken advantage of trends to make fans permanent shoppers of WWE Shop, highlighting their new title belts and launching more Legends-related merch. Khan noted how the brick and mortar business has changed but that they’re bullish on the return of live event merchandising.
* The next question was about the NFT opportunities, and Khan said that they will absolutely be in that business in a long-term capacity, calling them the “baseball cards of the digital world.” Their owning of their IP gives them the big opportunities to do so. They have a plan in place that they’re excited about.
* Asked about expansion to international PCs and how much that’s changed, Khan said that they haven’t changed but have just been delayed by COVID. He pointed out the WWE Superstar Spectacular for India which did five times their usual rating in India. They did that in Florida and it’s hard to do international events or build international PCs, but hopefully they’ll be out of it so soon. Salen also put over their brand strength which has helped them find partners in those markets.
* Asked about the Peacock deal and if it covers anything regarding new deals not yet struck in sponsorships, Stephanie said that any sponsorships on Peacock are done between the two companies. When you’re dealing with teams that sold for the Olympics and the Super Bowl, it gives them chances they haven’t had before.
* The next question was about how they approach investment processes going forward, and Salen said that in a normal environment they’re a high incremental margin business, which has nice cash flow, and their innovations are allowing them to develop from what’s already there so they don’t have to build entirely new investments. There will be new investments such as the new HQ and technological revamping, and they’re excited about that kind of thing.
* Asked about if Peacock outperformed their expectations, and how NXT performed, Salen said that there hasn’t been any change in that timing except that some of the impact of their guidance hit in Q1 that they thought would hit in Q2. As to NXT, it was expected and they’re happy with how it turned out.
* Nick Khan answered the last question about how the company got into NFTs, saying that they were neophytes into it at the start of the pandemic, but now it’s as high as their knowledge of media space. They still have more to learn, but they’re confident in what they know.
* With that, the call ended.
(Credit: 411Mania)
