World Wrestling Entertainment, Inc. Class A

Hello and welcome to the WWE Second Quarter 2023 Earnings Conference Call. We have just a few announcements before we begin. If you are listening through a phone line, you may ask a question verbally by pressing star 1 on your touchtone phone. If you wish to be removed from the queue, please press star 2. I will now turn the call over to Seth Zaslow, SVP and Head of Investor Relations. Please go ahead, Seth.

Thank you, and good morning everyone. Welcome to WWE's second quarter 2023 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. We issued our earnings release earlier this morning and have posted the release and other supporting materials to our website. As a reminder, 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. We will also 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.

Good morning and thank you everyone for joining us today. To start, our results in Q2 exceeded the high end of our guidance. We delivered record financial results in the second quarter, record quarterly revenue, and record quarterly adjusted AWBDA. We're on track to deliver another year of record revenue and adjusted AWBDA in 2023, continuing our trend of then record revenue and AWBDA in 2021, and then record revenue and AWBDA in 2022. I, along with Frank Riddick, will touch on some financial and operational highlights from the quarter in more detail. But before I do, I want to take a moment to address a few other topics. First, the TKO transaction. As discussed on our last earnings call in early May, we announced on April 3rd, just a day after a record-breaking WrestleMania, that we came to an agreement with Endeavor to combine WWE and the UFC into a new publicly listed company, TKO Group Holdings. We remain excited about the combination of these highly complementary businesses and rolling out a global live sports and entertainment pure play. We collectively remain focused on completing our regulatory review process. And as we have said from the start, we expect the deal to close in the second half of this year. Second, media rights. We are currently engaged in deal conversations for the domestic rights to our weekly flagship programs, Raw, SmackDown, and NXT. As expected, there is significant interest from the marketplace, and these conversations are progressing well. As these conversations are taking place, we are seeing record viewership for our premium live events and increased ratings for Raw, SmackDown, and NXT. These numbers underscore the enduring strength of our product. Looking at SmackDown first, SmackDown was up 26% in the key 18 to 49 demo and up 12% in total viewers year over year. This compares to broadcast viewership that was down double digits in the key demo and down overall in total viewers for the same period. Amongst both 18 to 49 and 18 to 34, SmackDown ranked number one on Friday primetime for all of broadcast television. On June 2nd, our SmackDown episode reached nearly 1 million viewers in the 18 to 49 demo. Not only our highest 18 to 49 viewership in 2023, but our strongest demo performance in over three years. Turning to RAW, RAW was up 19% in the key demo and 3% in total viewers for the quarter. This compares to cable viewership that was down double digits in both the key demo and down overall in total viewers for the same period. This past quarter, RAW was once again the number one show on USA Network and the number one entertainment program on all of cable. For both programs, Raw and SmackDown had the highest engagement in their history. Viewers are watching longer than ever before. The time spent viewing for Raw is up seven minutes this quarter from last year. And for SmackDown, it's an increase of four minutes, which means more ad dollars for our network partners. Similarly, our third brand, NXT, has also been surging with younger audiences. So far this quarter, NXT is up 49% from last year in the 18 to 49 demo and up 52% from last year in the 18 to 34 demo. Before we go to premium live events, allow me to also acknowledge that almost two weeks ago, our founder, Vince McMahon, underwent major spinal surgery. While remaining the executive chairman of WWE, Vince decided to take a medical leave of absence to focus on his physical recovery. We wish Vince the best in his recovery and will respect his privacy as it relates to his medical matter. On to our premium live events. Since our last call, we staged three premium live events. Each one has continued the trend of delivering record performance across multiple categories. In May, Backlash from San Juan, Puerto Rico was the highest grossing and most viewed Backlash in WWE history, up 34% in viewership from the prior year. Night of Champions, emanating from Jetta, was our most watched live event ever from Saudi, and viewership was up 45% versus our last show from there this past November. Then in July, Money in the Bank from the O2 Arena in London It was the most successful and highest-grossing Money in the Bank of all time, setting the record for the highest-grossing arena event in WWE history. Viewership there also up 14%. This upcoming Saturday is SummerSlam at Ford Field in Detroit. It marks the first WWE event at Ford Field since WrestleMania 2007 and the first SummerSlam in Michigan since 1993. Interest in this premium live event is high, and to date, we have over 43,000 tickets sold and are on track for a sellout. Please note that three of these four premium live events will have taken place outside of the 50 states. This record run of success for our premium live events comes off the heels of WrestleMania 39 from SoFi Stadium in Los Angeles in April, which was the most watched and most profitable WrestleMania in our company's history. Moreover, we were glad to see a recent report from Applied Analysis that highlighted the economic impact that WrestleMania had on the Southern California region. The study found that WrestleMania 39 had a total economic impact of $215 million. Our continued effort to broaden WrestleMania's scope of events brought out-of-town visitors staying an average of four-plus nights in Los Angeles. More than half of attendees traveled to LA from outside of Southern California, with 15% of attendees traveling in from an international location. And visitors had an average annual income of more than $100,000. This performance underscores WWE's ability to drive substantial commerce to a local economy whenever and wherever we stage our premium live events. as we did in Cardiff, Wales last September and San Juan, Puerto Rico three months ago. We're excited to continue to team up with local governments and municipalities to deliver these kind of results and look forward to sharing a few announcements regarding this in the months ahead. Now, if we could discuss live events for a moment. This past quarter was WWE's highest grossing live event quarter of all time, surpassing the previous record by 6%, while setting 34 in-market sales records. In North America, we average nearly 10,000 attendees per event, a year-over-year increase of 45%. Please keep in mind what you already know. We do over 200 live events in North America a year, which seemingly makes that average attendee per event that much more impressive from our point of view. We are not seeing any signs of a slowdown. In fact, fans are purchasing tickets further in advance than we have historically seen. Next, consumer products. The momentum we are seeing is also generating record in-venue merchandise sales. In the quarter, we set records for in-venue sales at WrestleMania, Backlash, and Money in the Bank. WWE Shop also continues to see steady growth as we round the one-year anniversary of our e-commerce deal with Fanatics. Sales for Q2 2023 were up double digits versus the prior year's quarter, and operational costs are down. In sponsorship, there was another growth quarter. At Royal Rumble in January, we saw a 200% sponsorship increase for the event year over year. At Elimination Chamber in February, we registered nearly a 300% sponsorship increase year over year. And at WrestleMania in April, we sold a record $20 million in sponsorship, more than a 100% increase over our previous sales record. For Backlash, we're up 98% in sponsorship year over year. Money in the Bank's sponsorship number is also up, making it our highest grossing international event in terms of sponsorship ever. We continue to expand the number of WWE partnerships with sponsors while executing against our strategy of driving incremental dollars from our existing partners with the average spend per client of 38% for the year. All told, by August, we have already booked our highest grossing sponsorship year in WWE history. In closing, I want to reiterate how pleased we are with the performance of our business as we head into the second half of the year. Our expectation is to deliver another year of record revenue and adjusted WBDA while remaining focused on obtaining final regulatory approval along with our partners at Endeavor so we can proceed together with TKO. With that, I'll now turn the call over to Frank.