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WWE hosted its Second Quarter conference call with investors this morning. If you read their filing, it was obviously great news for the company. They are firing on all cylinders financially right now.
Michael Weitz opened the call with all of the pertinent release information and then turned the call over to Vince McMahon.
Vince took the floor and said you can see we obviously delivered big time and we are rising guidance due to that. He put over the success of WrestleMania and The Greatest Royal Rumble, which was their largest international event ever. He talked about the new TV deals and then mentioned the Mae Young Classic and the Evolution PPV. He added that there are other new events that will be announced surely. They were be producing The Best Of WWE and WWE Now. He mentioned that they are at the top end of their game in many areas right now. It should be noted that Vince was not at all braggadocios. He approached the great numbers the way that one would expect in his position, that they were earned and deserved.
Vince then turned the call over to George Barrios and Michelle Wilson. George then explained the numbers in the press release, which you can read by clicking here.
*Digital views are huge for WWE (they love YouTube and use it well).
*Event attendance is pretty stagnant but that doesn’t matter a bit since they are now largely a TV/Media company and that is where the money comes from via TV rights, digital views and the WWE Network.
*The $3M hit they took this year looks like they have shut the door on Tout.
*They expect a new UK TV deal by the end of this year and a new deal in India by the beginning of next year.
*They estimate paid subscribers to the Network of 1.67M in the third quarter.
*They feel that strengthening the digitalization of video and delivering it to the consumer is the key to growth.
*No matter what you think about their booking, this company’s business is in amazing shape. It’s credit to the management team.
After the presentation, they turned the call over to investor questions.
The first question concerned the Saudi Arabia deal and its financial impact.
George said that they have confidentiality clauses in those deals so he won’t go into that but did say that they have invested in data to see what the fans want. They also have invested in seeing what international markets want. He said that is what they have done in Saudi Arabia. He said that it’s a ten year deal and it seemed to say that it will have a big yearly event.
When asked about the softness of the third quarter, George said that it’s partially due to investing in the long term, as well as moving initiatives from the fourth quarter last year to the third this year. He will talk about that more on the next call.
They were asked about the Other Media growth in the quarter. He was asked about revenue recognition policy. Will it be a recurring benefit? He was also asked about the growth in digital views and could they be producing even more content to meet a higher demand?
George said there is a broader discussion of taking the new money that will come in to making more with it, but that will be discussed later. With that said, George said that they are not even close to delivering the amount of content that people want to see, both in international and localized content. He said that they will keep investing and they feel they are on a ten year track. He said that they feel the investments that they make today will pay off in ten years, that is how they do things.
Where the Other is concerned, its basically non Raw and Smackdown rights. It’s everything else that they do on TV. The Saudi deal is ten years and there will be a yearly event, when to be determined. That means that money will come in every year.
They were next asked about the October Australia event. Is it a Saudi type deal?
George says that markets are different. When the path is clear they will take it. They are very excited for Australia but it’s very different from the Saudi deal. George won’t go into details.
Asked about capital, he mentioned buying the facility that they bought in Stamford. They delayed doing work on that building while they reevaluate where they are. Cash flows will grow in a big way next year so they want to make sure they are in the right place when they do.
They were asked about the NXT rollout in the UK. Why is now the right time?
Michelle said that they were planning a UK rollout for a while now. They did the tournament last year and it was a success so they did it again this year. The tournaments drive subscribers. That is why they did them. That isn’t what they guy asked!
The caller asked again about NXT rolling out in the UK and how it affects TV rights. She said no.
They were asked about Network churn.
George said that the most important metric is retention. He said that the trailing twelve months it’s up overall but people do come seasonally (for WrestleMania).
They were asked about live attendance and how they are falling. Why is that? She wondered if TV should be complimentary to get people out to shows. Personally I think TV makes it easy for people to skip house shows.
George said that in essence in North America it’s venue mix. He said that attendance has been flat overall.
She asked if the OTT helps live performance or does it make it easy for people to stay home.
George thinks it helps. They can check the data.
They were asked if they could get their margins internationally for the Network up to where they are in the US.
George said yes. Costs could go up in the future if they localize the product and video to specific countries.
George was asked a long question he wouldn’t really answer (and the guy should have known that). He added that they have a lot of data through online purchases and the Network that they use to market to the fans. They feel that the more that they know about their fans, the more that they can put smile on people’s faces. When asked if they would sell the data, he said no.
They were asked about how far away we are from taking the WWE UK brand and make it a WWE Europe brand.
Michelle said that they will continue to prioritize local market investment. They will continue to check data on that. She put over the Performance Center and the great job that Paul Levesque has done. About 45% of their talent in that pipeline comes from outside the US. So they want to find a way to build out the model to monetize that.
How close are we to a customizable home page on the WWE Network?
They said stay tuned.
What growth options are they considering when the new TV money comes in?
We will find out down the road. There isn’t always a clear line of sight, but you look at the big picture and see how much they should invest in different areas. They will continue to invest in their digital content, the depth and breadth will be different. For example, taking the Performance Center global makes sense and they will do that.
They were asked about what they think a reasonable mix would be for international vs. domestic product.
George said think about the total market and what piece they are getting and go from there. He said that with places like India and China growing, they need to get their piece of that action. George said that in some markets they are more invested than other, but they are everywhere due to social media.
That ended the call.
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