World Wrestling Entertainment, Inc. Class A

Hello, and welcome to WWE's fourth quarter and full year 2022 conference call. All lines are on mute, and after the prepared remarks, there will be a question and answer session. You may ask a question by pressing star then one on 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, Seth.

Thank you, and good afternoon, everyone. Welcome to WWE's fourth quarter and full year 2022 earnings conference call. Joining us on today's call are Nick Kahn, WWE's chief executive officer, Paul Levesque, 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. Actual 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. Reconciliations 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 the replay will be available on our website. With that, I'd now like to turn the call over to Nick.

Thank you, Seth. 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. In 2022, we grew that number to $1.3 billion, up 18% from the prior year. We also generated record profitability with adjusted EBITDA 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 have been a few changes in WWE's management structure during the past year. Vince McMahon, our founder and longtime 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 Reign 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 in owning content and intellectual property. So with the expiration 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. Though still early in the strategic alternatives review, we intend to consider a broad range of options via a thorough process. 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. Stephanie has had an immeasurable impact on our company. We 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 Levesque, and President and CFO, Frank Riddick. Our team has engineered record performance over the past year, and we're confident we will execute on the company's key initiatives in the year ahead. Turning to the past quarter and fiscal 2022, it was another record revenue year marked by our first full year of touring for live events since the pandemic. We saw 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 in 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, bringing in a gate of over $7.7 million at the Alamo Dome in San Antonio. This surpassed our previous Royal Rumble gate record by almost $2 million. In early January, we announced that we broke our company's all-time gate record for any WrestleMania with this coming April's two-night WrestleMania 39 at SoFi Stadium in Los Angeles. And that's before the announcement of a single match. We fully expect April's WrestleMania 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 are seeing similar growth in TV viewership. The 2022-2023 season of SmackDown on Fox is off to a strong start, averaging 2.3 million viewers, up 6% from a year ago. Raw is up 2%. to 1.6 million average viewers. This comes as all of TV is down 18%. Our final SmackDown of 2022 produced an audience of 2.6 million, the highest in 24 months. As for Raw, its 30th anniversary show less than two weeks ago drew our biggest ratings in nearly three years. SmackDown 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 were 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, Raw is seeing big gains in young viewers. Raw is 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 you're seeing with Raw is one of the strongest growth stories in all of television for the young demo. Ratings growth, increased watch time, drawing younger audiences, these numbers underscore how WWE is bucking the trends of national 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 a 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. The following are year-over-year comparisons. 2022 Extreme Rules viewership was up 36%. 2022 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 measuring premium live events on international viewership, we're up 17% year over year. One of the standout premium live events from 2022 was Clash at the Castle in Cardiff, Wales, this past September. The event set records for viewership, ticket sales, and merchandise sales for a WWE international event. It was WWE'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 Wales, 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 Cardiff event and the money it 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 this success, we're headed back to the UK this July 4th weekend for Money in the Bank at the O2 Arena on Saturday, July 1st. our first premium live event in London in over two decades. The Cardiff and London events dovetail with our upcoming rights renewal in the UK for Raw and SmackDown. Please also keep in mind that WWE Network remains a standalone agnostic service in the UK. Our success in the region puts us in a strong position as we begin those conversations. Staying with international, later this month, we head to Montreal for Elimination Chamber, our first premium live event in Montreal in 14 years. We are already tracking towards more than 12,000 people in attendance, which will make it another sold-out event. These international events drive increased gig 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 and London shows, we are offering premium experience packages through On Location. This is the first time we've offered premium experiences for international shows since partnering with Endeavor 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. Stateside, we continue to offer On Location packages at our 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 continue to deliver, and our localized merchandise approach once again yielded year-over-year growth. Extreme Rules, in October of 2022, generated the most in-venue merchandise revenue in the event's history, resulting in a 62% increase over Extreme Rules 2021, which held the previous record. Survivor Series in November of 2022 also generated the most in-venue merchandise revenue in that event's 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 event's history, with a 135% increase over Royal Rumble 2021, resulting in the highest domestic in-venue merchandise sales ever for a WWE event outside of the WrestleManias. We are also seeing growth for wweshop.com since partnering with Fanatics last July. For the November and December holiday season, sales were up almost 25% year over year. And our trading card business also continues to deliver healthy results. Our partner Panini executed seven product drops throughout the year, leading to record annual revenue for WWE's trading card business. One area I also wanted to hit on as we head into the new year is the 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. The 2023 average client spend is already up 98% from the same time last year. The 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 libida. With that, I'll now turn the call over to Paul.