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THE IMPORTANCE OF RONDA ROUSEY, WHERE NXT STANDS IN IMPORTANCE, WHY WWE IS BUYING BACK STOCK, THE NETWORK, HOW THE RASH OF INJURIES HAVE HURT WWE THIS YEAR, INTERNATIONAL ROLLOUT AND MORE: COMPLETE WWE QUARTERLY FINANCIAL CONFERENCE CALL COVERAGE

By Mike Johnson on 2019-02-07 11:00:00

Welcome to PWInsider.com's live, ongoing coverage of WWE's financial conference call for the fourth quarter and complete year, 2018.

Michael Weiss welcomed everyone to the call.  He introduced Vince McMahon, George Barrios and Michelle Wilson.  He noted they introduced two releases today, including the announcement of a share repurchase program.  

Vince McMahon said they achieved record revenue and profit and said "we know what we're doing."  He said international revenue surpassed $300 million for the first time.  Their new deals with FOX and the USA Network will help them achieve even more growth, saying the marketing and push behind them will be "exponential."  He put over their big international shows and said Super Show-Down was their biggest international attendance in 20 years.

Vince said they are continued to expand their reality series, with Miz & Mrs and the continued success of Total Bellas and Total Divas.  He noted the first-ever Evolution PPV and the return of Mixed Match Challenge.  He said they continue to transform WWE.

George Barrios reviewed the financial earnings numbers, which are linked above.  He noted their international events, including Crown Jewel and Super Show-Down had a considerable effect on their revenue.

Michelle Wilson said Super-Show Down, Crown Jewel, Evolution and NXT UK were among the most viewed shows on the WWE Network.  They produced over 1600 hours over their different platforms.  

They are looking forward to increasing their production facilities to create even more localized international content.

They remain the #1 action figure line in the United States.

They have continued to push their mobile gaming footprint with new games.

They are planning to extend their customized t-shirt service to international markets.

They will invest in talent, new content, localized content, new digital products and developing the next iteration of the WWE Network.  They will balance growth and investment and engagement in long-term growth.

They will not be doing a post-Wrestlemania 35 stockholders call since it is so close to the usual quarterly call.

They opened the lines for the Q&A Session.

They were asked about the investments they would make this year and what sort of guidance they can give on that.    Barrios said if you look at their core fixed costs in 2018, that grows at 2-3% annually.  Towards the end of the year, they begin ramping up some strategic investments and that's when you get the full year impact.  If you compare them over the quarters, they even out by the final quarter.  They forecast where they will be for the year and update it just about daily, tuning potential investments as they go.  They want to drive content, especially local content in key international markets.  They will continue to invest in digital content and digitalization of content.  They feel there is a long "tail" for them in monetizing content both in the United States and outside of it.

They were asked about the UK process.  There are a lot of key markets they are still working on, including India, the UK, Latin America and the Middle East.  They will update as they get deals done.    They had said they would have the new agreement in the UK done by the end of 2018 but that hasn't happened yet.  They are hoping of having it done by the middle of this year but don't want to point to a specific date.

They were asked about the metrics of Mixed Match Challenge after the second season and where the series stands going forward.   Wilson said that both seasons of MMC were a great learning experience for WWE about driving viewers to that platform.  The metrics were the same, time viewed and they learned a lot about creating short form content for Facebook, who worked with them.  It was a great experiment and they learned a lot.

They were asked about a potential third hour of Smackdown or a sixth hour of live content, like 205 Live or MMC.  Barrios said live event content is valuable and they have to think about what's the best platform for that content - direct to consumer, paid TV, etc.  They are evaluating what they could do with another live hour and they will "let everyone know."

They were asked about content deals in progress and how they would change their evaluations for 2019.   Barrios said there are deals that are slated to expire and when they do, it will certainly affect the evaluations.  They are in different places with different deals due to timing.  He joked they have a lot of visa stamps in their passports. 

They were asked about big international shows going forward.  Barrios didn't give any real new information on that front.

They were asked about AEW's potential effect on their market.  George Barrios said it was too soon to tell and reiterated that WWE was the top company with the best wrestlers in the world.

They were asked about their standing in China.  They've seen consumption of Raw and Smackdown live in Mandarin and that's been a big help in driving the product in that market.  You can grow digital and social pretty quickly.  They put content producers "on the ground" there and that's helped.  They want to do more localized content there in Mandarin and they are just scratching the surface there.  They are happy with the growth and look forward to deepening that. 

They were asked about where we would see the investments in 2019 show up.  Barrios said some will be seen in the media side, because of the scale of the media business.

They were asked about future Performance Centers may go and were asked how close are we to actually seeing them opening in additional regions.  Barrios said that in a discussion the other day, Vince McMahon said their ability in the next 5-10 years to generation localized content in new countries could be as important as exporting Raw and Smackdown there.   The question for WWE is how and when they expand.  He said the UK PC was the "light scale" of replicating what they have done in Orlando.  WWE starts off small with strategies, learns and then it seems like they are doing it overnight.

They were asked about the decision to buy back stock.  They have a lot of confidence in their free cash flow over the next several years.  Maintaining the strength of their balance sheet was important and authorizing the buyback gave them more flexibility.

They were asked about advertising revenue in 2019.  They aren't going to go into quarter over quarter guides.  Their digital assets, including their relationship with YouTube is included there and they don't want to get into the mechanics of that.  Needless to say, it is very profitable.

They were asked about potential new opportunities for 2019 including the potential of NXT being put on FOX.  Barrios said the culture of the company has always been the continued to reimagine of itself.  They have lots of ideas in the pipeline that is a "really rigorous" process.  He said there are two big changes that have happened over the last decade.  They have become predominantly a media company, vs. something built around tickets and merchandise profits.  The business model has inverted.  The monetization comes across multiple platforms, so the question is always, what's the best place for the content, how does it fit their fans and what are the direct monetization if they move it.  NXT is no difference.  It's not an easy call.  They are open to anything.

They were asked the awareness of the NXT content beyond the WWE Network.  Barrios said if you look at the building of the brand, it's the second most valuable unit in the WWE Network bundle, behind the PPVs.  It's always trending when they do their Takeover events.  They discussed the resurrection of Halftime Heat and ended up beating out a lot of top Superbowl advertisers in trending at the same time.  Trending worldwide isn't easy on SuperBowl Sunday.

They were asked about the new entrants to the streaming world, like AT&T and Disney, and whether any of these competitors could effect WWE's growth.  He said there's nothing in the world like WWE.  He said that WWE is a very unique form of programming that you can't get anywhere else.  The WWE Network is an extension of what they do.  They can fit into so many different things, including a bundle with another company or standing on their own.  They stand very well as an island with a product that is unique.  Michelle Wilson said they poll subscribers regularly and get great feedback and they feel good about what they deliver vs. what others deliver.

They were asked about the Ronda Rousey experiment and how Rousey's potential exit damages WWE and whether that experiment makes it worthwhile.  Vince said Ronda coming in gave them more visibility.  It allows them to reach more women.  It wasn't just about using and bringing in Ronda's brand.  It's a different Ronda and she becomes part of the WWE brand.  Rousey can help them make talent and she is doing just that.  Vince said she is one of the brightest people they have ever done business with.  He said the "Rondas" will come in and out and as long as they know what the dates are, they can work in and around that. 

He said the downside is the performers are not cartoons and there are injuries and outside endeavors, specifically mentioning Roman Reigns and John Cena, who they thought would be around and more involved in storylines this year.  Vince then ran down a list of nearly 15-20 performers who were injured over the last year and said you have to change plans and you roll with it but when the talents are hurt, the stories aren't as good as what was originally planned.  He said it hurts their ratings and even their attendance dropping, as fans don't want to not see the talents that can't perform.  He said it's one of those things they can't control unfortunately.  He praised Rousey's worth overall.

They were asked for details on the "next iteration" for the WWE Network.  They have a big reveal planned so they aren't going to go into details now.  They can integrate a treasure-trove of free video into the WWE Network service.  They believe they can create an opportunity that you can enjoy it over any digital platform.  There is an opportunity for content in other languages beyond English.  They won't roll everything out at the same time but they are excited about it.

That was it for the questions!

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