World Wrestling Entertainment, Inc. (NYSE:WWE) Q4 2022 Earnings Call Transcript

World Wrestling Entertainment, Inc. (NYSE:WWE) Q4 2022 Earnings Call Transcript February 2, 2023

Operator: 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. I will now turn the call over to Seth Zaslow, SVP and Head of Investor Relations. Please go ahead, Seth.

Seth Zaslow: 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 Khan, the 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.

Nick Khan: 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 OIBDA 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 long-time 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 Raine Group as its financial adviser 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 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 a measurable 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 Alamodome 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 2-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 to 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 18th of 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 to 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 when 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 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, were headed back to the UK this July 4 weekend for Money In The Bank at the O2 arena on Saturday, July 1, 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 stand-alone 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 hit the 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 kit 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. State side, 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 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. For 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 OIBDA. With that, I’ll now turn the call over to Paul.

Paul Levesque: Thank you, Nick. As Nick hit on, we’re seeing record numbers for our shows, and that is a result of an amazing talent roster and a creative writing team that is as prolific as any in the world. Strong content is the bedrock of this company and drives our business. We’re coming off a record Royal Rumble that featured the young up-and-coming powerhouse via Ripple, who won the Women’s Royal Rumble, also featured the return of one of the most popular and entertaining figures in sports media Pat McAfee, fresh off reinvigorating college game day. We saw the hindering return of social media phenom turn WWE Superstar, Logan Paul, and of course, the return of the American Nightmare Cody Rhodes, who went on to win the Men’s Royal Rumble match and earn himself a championship match at WrestleMania.

The event also featured our first-ever sponsored match highlighting Mountain Dew’s Pitch Black and concluded with an incredible WWE Championship match between Kevin Owens and Roman Reigns, where Superstar, Sami Zayn severed his ties with the blood line which ESPN said €œwas one of the most dramatic moments we’ve ever witnessed in the history of sports entertainment€. It was a historic night that set us up for a number of compelling storylines as we kick off the road to WrestleMania. Leading into the Royal Rumble was our Raw 30th anniversary show on USA that captured more than 2.3 million viewers and won the demo across all of television, including broadcast shows for the night. By way of comparison, the only other content on cable that traditionally beats out broadcast in the demo in the NFL games, and that’s it.

The night showcases the breadth of our talent roster, featuring global legends such as Hulk Hogan and Ric Flair, The Undertaker along with our current generation of talents like Roman Reigns and Bianca Belair. As we see record ratings for our flagship shows on linear and with our premium live events on Peacock, WWE continues to build our industry-leading social channels amassing audiences and establishing new revenue streams. In Q4, WWE’s YouTube channel surpassed 92 million subscribers and remains the most subscribed to sports channel on the platform, and we are one of only 10 channels on YouTube to ever surpass the 90 million subscriber mark. Across all social platforms, WWE social also racked up the most video views of any sports league in 2022, surpassing 16 billion views as we finish out the year.

Royal Rumble Saturday alone, WWE generated over 200 million video views across all WWE accounts. On TikTok, we have established ourselves as the leading sports league as well. In Q4, we surpassed 20 million followers on our flagship TikTok account, making WWE the first sports league to reach that milestone. The success is leading to new revenue opportunities. We recently closed a content licensing deal that will see WWE’s output on the platform increase as well as lead to the launch of several superstar accounts. Additionally, we’ll be launching three international TikTok accounts following the success of our WWE Español handle that is already at 1.8 million followers in its first year. As we continue to prioritize WWE’s global expansion, local language social accounts like these in key territories speak directly to our fans in the region and keep the product in front of them outside the traditional broadcast windows.

In November, WWE’s weekly digital showed the bump, surpassed its 200th episode. The show’s quarter was highlighted with a live sponsored show for fans from TD Garden in Boston for Survivor Series. Look for us to launch more digital original programming in 2023 as it has proven to be an effective platform to pilot new shows and test creative, all while creating new programming for our sales team to sell against. Last but not least, in November at our Crown Jewel premium live event, social media star and a member of the WWE talent roster, Logan Paul, leaped from the top rope under Roman Reigns all while recording the move on a cell phone, that clip alone racked up over 40 million views in less than 24 hours across Logan and WWE social platforms, becoming WWE’s most viewed social highlight of 2022.

He almost did himself this past Saturday at the Royal Rumble when the clip of he and Ricochet colliding from the top rope, which garnered 26.5 million views across all platforms. Of course, this success on social would not be possible without WWE’s roster of superstars. We continue to invest in a robust recruitment and development system to produce the next generation of talent. The foundation of this strategy is our next-in-line program that launched in December of 2021. As we hit the one-year mark of WWE NIL and with last week’s announcement of the program’s third class are stable of nearly 50 athletes now represents 13 sports with 40-plus All-American Honors, 12 NCAA championships and an impressive 13.5 million combined followers across all social media platforms.

Members of the first class have successfully transitioned a full-time training at the Performance Center with their TV debuts on the horizon soon. Additionally, building blocks designed to attract young talent and solidify relationships with stakeholders across sports have recently been launched. WWE Campus Rush successfully premiered in Q4 with visits to Power Five schools, including Ohio State, Clemson, Ole Missand with our spring schedule set to be revealed in the coming weeks. Initiatives with the industry leader in sports performance training at shows and with the nation’s leading sports-focused prep school IMG Academy will only bolster our domestic talent development efforts. Keep in mind that WWE superstars like Bianca Belair, Roman Reigns, Big E, John Cena and of course, Dwayne “The Rock” Johnson where all major college athletes that transitioned to WWE.

We want to make that possible transition as easy as we can for all college athletes. Internationally, we’ve unveiled a new annual campaign alongside our Sub-Saharan broadcast partners at MultiChoice and SuperSport. The search for Africa’s next WWE Superstar, the first integration of the continent-wide talent search will culminate with a multi-day tryout in Lagos, Nigeria later this year. The competition to land a WWE contract is a compelling story in and of itself. We will have exciting news to share soon on our plans to bring the stories of our aspiring superstars to our fans. On original programming, production is underway on our new Hulu documentary series featuring superstars, Montez Ford and Bianca Belair. The series will be rolling out on Hulu later this year.

Last week also saw the debut of our first WWE Studios, a local language original Contra las cuerdas, I think I said that right. The scripted half-hour comedy about an aspiring young Lucia Dora premiered globally on Netflix with incredible success. In just two days of release, it was the third most in-demand show in Mexico. That’s not just on Netflix, but of all new series premiering on any Mexican platform athlete. In addition, it quickly rose to number two on Netflix Top 10 Shows watched in Mexico and has remained on that coveted list ever since it’s premier. Outside of Mexico, the show is in the top 10 in six other countries according to data from parent analytics. Before I conclude, I want to reiterate just how excited I am and how much fun I am having in my role as Chief Content Officer.

Now I also want to add that having Vince around has been great. And I will tell you this, it has allowed me €“ and it will allow me to speak for our entire creative team we’re standing on the shoulders of giants. So having him back and involved, even at just the Board level comes with his incredible insight and he is a tremendous asset to this company. This is the best time of the year. You kick off the road to WrestleMania. It’s an amazing moment for WWE, and I look forward to continuing to build the business alongside this leadership team for the long-term. With that, I’ll now turn the call over to Frank.

Frank Riddick: Thank you, Paul. I’m going to review our financial performance for the quarter and the year and then discuss our outlook and key initiatives for 2023. As Nick highlighted, 2022 was a record year for WWE, both in terms of revenue and adjusted OIBDA. Despite all of the external challenges to the economy, WWE has delivered record results in each of the past three years. We think this is a testament to the strength of our IP and brand as well as the stability and attractiveness of our financial model. Our content remains highly engaging and therefore, desirable to third-party programmers interested in attracting and retaining viewers. In 2022, we generated revenue of nearly $1.3 billion and an adjusted OIBDA of $385 million, which was at the very high end of our revised guidance range and exceeded the range we originally provided at the beginning of the year.

Revenue grew 18% and adjusted OIBDA grew 19% as compared to the prior year. This performance reflected the return to a full year of ticketed live events and strong results in each of our three reporting segments: media, live events and consumer products. Turning to Slide 3 of our presentation. In the fourth quarter, we generated revenue of $325 million and adjusted OIBDA of $90 million, which was at the high end of our guidance. On Page 4 of our presentation, we detail our business performance in the quarter, which shows revenue, operating income and adjusted OIBDA contribution by segment as compared to the prior year quarter. Looking at our Media segment on Page 5. Adjusted OIBDA increased 3% or 9% revenue growth. Network revenue increased due to the timing of our premium live events which resulted in an additional event in the fourth quarter of 2022 compared to the prior year period.

Other revenue included the staging of a large-scale international event in both the current and prior year periods. The increase in other revenue was primarily due to the delivery of third-party original programming to A&E in connection with our ongoing partnership. For content line fees increased due to the contractual escalation of domestic rights fees from the distribution of our flagship shows, Raw and SmackDown. Growth in this line item was partially offset by the timing of the calendar as we aired on less episode of SmackDown in the current year quarter. International core content rights fees increased primarily as a result of the MENA deal that we entered into early in the year. Advertising and sponsorship revenue declined due to continued pressure on third-party digital platforms as well as lower sponsorship deals in the quarter.

The growth in revenue was partially offset by higher operating expenses. The increase in expenses was primarily related to an increase in third-party original programming and higher content-related costs. Television production costs for our weekly entering content draw on SmackDown were relatively flat year-over-year on a per episode basis. Now let’s turn to our Live Events business as shown on Page 6 of our presentation. Revenue from our live events was $24 million and adjusted OIBDA was $1 million. During the fourth quarter, we continued to experience strong demand for our live events. We held 61 total events, 54 in North America and seven international events. Average attendance in North America was approximately 5,500, up nicely year-over-year at 6%.

Moving to our Consumer Products segment on Page 7. Adjusted OIBDA was $9 million on revenue of $22 million. Results in this segment reflected a number of moving pieces. Licensing revenue declined year-over-year as growth in revenue from collectibles was more than offset by a decrease in video game revenue and the revision to our estimates for certain and licensing agreements with minimum guarantees that we highlighted in the third quarter call. The decrease in video gaming revenue was primarily related to the timing of the release of our franchise game, WWE 2K22. As a reminder, we didn’t release version of the game in 2021 and instead moved the release to March of 2022. As a result, and notwithstanding the success of WWE 2K22 for the full year, the booking of the minimum guarantee in Q4 2021 exceeded Q4 2022 video game results.

The latest installment of the game, WWE 2K23 is set for release next month, and we’re very excited about the early feedback for this version with initial preorders and social media interaction well above last year’s launch. E-commerce revenue declined in connection with the transition of our digital platform to Fanatics, which occurred in the third quarter of this year, reflecting the terms of our deal with Fanatics, we record the revenue on a net as opposed to gross basis. Still early days, but we remain quite pleased and excited about the Fanatics relationship and the economics of WWE, which will continue to gain momentum. Along these lines, adjusted OIBDA for our e-commerce business was up year-over-year in the quarter. The new merchandise revenue increased due to an increase in total events and per cap spending, which was up 8% year-over-year.

For the full year, CPG revenue is up 33% and adjusted OIBDA is up 59%. Strategic alternatives review process. As announced on January 6, 2023, Vince McMahon, our Executive Chairman and majority shareholder and cooperation with WWE’S management team and Board of Directors announced the intent to undertake a review of strategic alternatives with the goal being to maximize value for all WWE shareholders. In connection with the strategic alternatives review process, the company has retained outside financial, legal and strategic communication advisors to support WWE’s management team and Board. There could be no assurances given the €“ regarding the outcome or timing of this alternatives review process. We don’t intend to make further announcements until such time it is appropriate.

As we’ve previously disclosed, a special committee consisting of the independent members of the Board of Directors was formed to conduct an investigation into allege misconduct by Mr. McMahon and another executive who is no longer with the company. In November 2022, the company disclosed that the special committee investigation was completed and the special committee was disbanded. Our fourth quarter results include a $2.3 million expense associated with the cost the company has incurred related to the investigation. Going forward, we expect to incur additional costs related to the investigation. As we previously discussed, Mr. McMahon has agreed to pay the reasonable cost of the investigation not covered by insurance. Our results in the quarter also included 7.4 million of expenses reflecting payments that Mr. McMahon has agreed to make related to additional claims that have recently been settled.

These payments were or will be paid by Mr. McMahon personally. Now let’s turn to WWE’s capital structure as shown on Slide 8 of the presentation. In 2022, we generated 126 million in free cash flow as compared to 144 million in the prior year period. The decrease was due to higher capital expenditures related to the company’s new headquarter facility. During the year, we incurred 200 million of capital expenditures, approximately 170 million of which related to our new headquarters. Excluding the new headquarters CapEx, free cash flow would have been 296 million or a conversion rate of 77% of adjusted OIBDA. During the year, we returned 76 million of capital to shareholders including 40 million in share repurchases and 36 million in dividend payments.

We did not repurchase any shares in the fourth quarter due to regulatory and legal requirements. To-date, we’ve repurchased 5.3 million shares at an average price of $54.09 per share, totaling 289 million and have 211 million available under our $500 million repurchase authorization. Going forward, we do not expect to repurchase shares during dependency of the ongoing review of strategic alternatives. As of December 31, 2022, WWE held approximately 479 million in cash and short-term investments. Debt total 235 million including 214 million associated with the carrying value of our convertible notes. We have no amounts outstanding under our $200 million revolving line of credit. Our current and projected liquidity remains strong and we continue to evaluate our capital structure and financing strategy for opportunities to lower our cost of capital and increase shareholder value.

Turning to our outlook for 2023 is shown on Slide 9. We’re targeting an adjusted OIBDA range of 395 million to 410 million, which would be another all-time record for the company and represents growth of 3% to 7% from 2022’s adjusted OIBDA of 385 million. We’re targeting record revenue in 2023 and relatively flat operating expenses. In terms of revenue, we’re projecting growth in media rights fees for the company’s flagship weekly programming and premium live events. We’re making positive strides in our advertising and sponsorship business and are targeting healthy growth in this area. These increases are expected to be partially offset by the timing of our third-party original programming deliveries, and the full year accounting impact of the transition of our digital retail platform to Fanatics.

We remain very excited about the partnership with Fanatics and project that relationship will be accretive to adjusted OIBDA in 2023 and beyond. On the expense side, we expect to continue to invest in the creative side of our business. Given the importance of the U.S. media renewals for Raw and SmackDown, we believe this investment best positions in business for the long term. We expect to partially offset the increasing creative costs with savings in other areas of the business such as IT and related network costs. We’ve made good progress in managing overhead and other cost increases in 2022 and expect to continue to find incremental efficiencies in 2023. Some of the revenue drivers I mentioned will also yield lower expenses in 2023 in particularly the €“ in particular, the reporting of the Fanatics e-commerce partnership and lower third-party original program.

As in any year, there are several key initiatives that will impact our ability to achieve our targets for 2023. These include the renewal of our domestic licensing agreement for NXT, which is expected to expire in September, the renewal of content licensing agreements in various international markets, most notably MENA in March, our ability to enter into new third-party original programming agreements, our ability to grow sponsorship and advertising revenue in line with our projections and the performance of the latest installment of our flagship video game franchise, WWE 2K23, which will be competing and comping with the very successful 2022 release. We’re also continuing to keep a close eye on macroeconomic conditions including the potential impact on consumer behavior and any related impact on our financial performance.

Moving to Slide 10 for 2023, we expect capital €“ total capital expenditures of 150 million to 170 million, including spending of approximately 105 million to 120 million related to our new headquarters facility with the remainder primarily related to the maintenance and enhancement of our existing production and enterprise technology infrastructure. Page 11 of our presentation provides an update on total capital expenditures for the new HQ facility. Despite the challenges related to supply chain disruption and labor shortages, we continue to make good progress on this project. We expect to complete the build out of the facility this year and are planning to move our employees in operations and waves with the first wave scheduled for late March.

To-date, we spent 188 million in CapEx on the new project, new HQ project and have received offsets in the form of tenant improvement allowances of 34 million for a net spend of 154 million. As you can see, we’ve updated our projections and narrowed the ranges for both the gross and net spend. We now expect the net spend to be within a range of 180 million to 190 million as compared to our original estimate of 160 million to 180 million. Our estimate for the total gross spend increased modestly due to some changes in scope and the inclusion of approximately 10 million of capitalized interest in our projections. As a reminder, the estimated total for the new headquarters project includes approximately 70 million of accelerated expenditures for IT equipment and broadcast production technology that likely would’ve been spent in the absence of this project.

As we look to the first quarter of 2023, we’re targeting adjusted OIBDA in the range of 65 million to 75 million. The estimate reflects a shift in timing of the staging of a large scale international event, which occurred in the first quarter of 2022 into the second quarter of 2023. As a result, we expect a year-over-year decline in revenue in the quarter despite growth in revenue from our media rights agreements. In conclusion, WWE continued to generate strong financial results in 2022 that reflected robust demand for our events and consumption of our programming across platforms. We believe our long-term outlook is supported by the rising value of live sports content and increasing demand for media companies that deliver reach and fan engagement both domestically and around the globe.

Looking ahead, we believe that WWE remains well positioned to take advantage of significant growth opportunities across all of our lines of business. We look forward to updating you on the progress of these initiatives in the coming quarters. That concludes our remarks and I’ll now turn it back to Seth.

See also 15 Largest Australian Companies by Revenue and 12 Cash Rich Dividend Stocks To Buy.

Q&A Session

Seth Zaslow: Thanks, Frank. Operator, we’re ready for Q&A. Please open the lines.

Operator:

Q – Brandon Ross: Hi, thanks for taking the questions. Just first digging in on the strategic alternatives. I think the potential buyer universe is probably going to be impacted by Vince’s desire to remain after a sale or not. Nick, can you tell investors with certainty that Vince will be willing to end his involvement with WWE following a transaction if that gives shareholders the most value?

Nick Khan: Yes, without question. He’s declared it to the Board. He’s declared it to us in management. It’s all about shareholder value. Obviously, he is a shareholder. So it’s not about what role he’ll have, it’s about maximizing that value opportunity.

Brandon Ross: Okay. And I think recently you said that you were looking for, I think it was the right partner in the sale of the company. Can you elaborate what you’re looking for in such a partner beyond just the dollars and cents?

Nick Khan: So a partner that has more than simply deep pockets. So a partner that understands the media business, that’s in the media business that understands how to further monetize the media business, that certainly understands our product, our intellectual property, what we’re doing with it, what can be done with it, media rights both domestically and internationally. We see the international growth opportunity is huge. So these are folks in terms of choosing the right partner, these are all things that we’re going to be looking at in terms of who can accelerate our business and again, what’s the best value for our shareholders.

Brandon Ross: Thank you very much.

Nick Khan: Thank you.

Operator: And our next question comes from Eric Handler with Ross MKM.

Unidentified Analyst: Good afternoon. And thanks for the question. Nick, I wonder if you could talk a little bit about the UK sports rights environment. Last €“ correct me if I’m wrong, last deal that you had in the UK that went to BT Sports, I believe was flat to down. Can you give us a sense how that environment has changed now?

Nick Khan: Yes. We think, number one, there are many more buyers as you know, and as everyone knows, Eric, as the U.S. based companies have expanded internationally. You have folks who are reaching into the UK looking for programming who weren’t looking for similar programming three, four, five years ago, whenever the last deal was done. So, in what may have been a bakeoff between two primary entities then is now a situation where you have five, six plus entities who are desirous of content like ours. Obviously, we always look favorably upon our incumbent. BT has been a tremendous partner and we’ll be getting into those conversations shortly.

Unidentified Analyst: Thanks. And as one follow-up there for Frank. One of the things you mentioned in your presentation is that production costs have been rising in creating the content. Is this just, what you’re seeing inflationary? Is there something going on that’s been incremental that you’re allocating to the business? Or maybe you could give a little perspective on what’s causing these costs to rise?

Frank Riddick: No, it’s not inflation driven. It’s really investment in improving the quality, expanding the talent pool and creating a more vibrant show. So we’re going to €“ as we noted last year and this year, we believe those are good investments to make and we’ll pay off in the upcoming renewals.

Unidentified Analyst: Right. Thank you much.

Operator: Thank you. And we’ll take our next question from Curry Baker with Guggenheim Securities.

Curry Baker: Hey, good evening. I have one for Nick on sponsorship. Seems like demand for Royal Rumble and WrestleMania has been strong. Can you elaborate on what you’re doing different to drive that success? How sustainable it is? And would you ever consider monetizing assets like the ring, the skirt, the ramp that have not historically been monetized for sponsorship? Seems like you have a lot of underutilized inventory.

Nick Khan: Thanks, Curry. In reverse order, if that’s okay? Yes. To your question about monetizing the ring assets, it’s something we’re taking a deep dive into now and that we want to do. In terms of what’s sort of driven it, I think it all started with Stephanie McMahon and sort of changing the culture of our sales group to along with the leadership of the new Head of Sales and Sponsorship, changing the leadership and mentality from maybe to a yes. So when Pepsi and Mountain Dew pitched us on the idea of sponsoring a match, I think what was done was, yes, absolutely we do it. And then a conversation with Paul, obviously, our Head of Creative about, hey, we could probably do this right, which Paul and the Creative team made every accommodation to get it done. So we think that’s what’s driving it, in addition to going into higher levels at each of these potential companies.

Curry Baker: Okay. Appreciate the question.

Nick Khan: Thanks, Curry.

Operator: Our next question will come from Steven Cahall with Wells Fargo.

Steven Cahall: Thanks, Seth. Two questions. So maybe first, Nick, the strategic alternatives process is conjunction with the rights renewals process, is the idea that by running those in parallel, potential buyers can get a better sense of what the renewal potential is. Maybe you can just help us understand why Vince and the board have decided that those processes work better simultaneously than they would in a serialized fashion with the renewals coming later. And then maybe for Paul or for Nick, it looks like Raw ratings, they were down in the fourth quarter. They’re down quite a bit since 2019, and then SmackDown ratings have done the opposite, they’re up nicely both in the quarter and since 2019. Can you talk about the differences in those two programs? And why you think you’re seeing this divergence in performance on ratings? And maybe an update on NXT ratings as well just because you mentioned that those rights are coming up. Thank you.

Nick Khan: Absolutely. Steve, this is Nick speaking, the strategic and media rights process. The right of first kick in, in short order for both of our incumbent partners. So if WWE did new deals for Raw and SmackDown, so let’s say, the current deals, as you know, are five-year deals for the U.S. media rights. If we did five-year new deals, it would take a number of buyers off the table or a number of potential buyers off the table. So we wanted to go into it with an approach that any of these potential buyers who I referenced in my notes, people who are looking to own the content that they put on their platforms that they get an opportunity to potentially make an offer, while, of course, we’ll respect all of our contractual language with both of the incumbent partners. Does that make sense on that one?

Steven Cahall: It does, yes.