Last updated at 8:29 pm ET.
Key takeaways and analysis
Nick Khan says Vince McMahon is willing to leave
Nick Khan in Q&A assured investors “without question” that Vince McMahon will leave the company if that’s part of a company sale that is the best deal for investors. “He’s declared it to the board,” Khan said. “He’s declared it to us in management. It’s all about shareholder value. It’s not about what role he’ll have. It’s about maximizing that value opportunity.”
Many, including me, believe Vince may be on a slow roll toward regaining the power he originally had. It seems likely he ultimately would like to return to being the head of creative, a move that’s probably safer to make after a possible company sale and/or a new media deal for Raw and Smackdown are in place. It’s not clear to what extent business partners would care whether the former CEO has seven known sexual misconduct allegations against him regains his earlier power, but it’s an outcome I believe would be detrimental to the content, to the company’s morale, and it’s ability to attract talent who wary of working with Vince.
It’s encouraging to hear Khan say Vince is willing to go if that’s the best thing for shareholders, but it’s hard to take at face value. It requires believing that Vince values the money he’d make from a sale more than he’d value a pathway to return more fully to power. Lawyers who wish to file class action complaints on behalf of shareholders will be taking note if a sale doesn’t materialize or if it might be argued a better sale could’ve been gotten if we end up with a company transaction that preserves a role for Vince.
Khan in the end isn’t a mind reader and only Vince may know what his true intentions are and what conditions he’s willing to accept.
Despite palace intrigue, WWE’s popularity is moving in a positive direction
You have to read carefully through a lot of hype when listening to a company whose message is that everything is always wonderful, but WWE’s fan popularity, consumer sales, and sponsorship sales are all important areas that are moving in the right direction.
The positive deltas for viewership of PLEs on Peacock aren’t very meaningful when the platform has doubled subscribers in the last year.
What’s more meaningful is Raw, Smackdown, and NXT viewership are all doing at least as well, and, in many cases, better than they were last year. As noted on the call, it’s true that younger viewership in particular has improved. Q1 to date, with viewers aged 18 to 34, Raw, Smackdown, and NXT are up 21%, 5%, and 6%, respectively. In Q4 those deltas for the same three shows were +15%, +5%, and +26%.
Domestic ticket sales in Q4 were up, averaging 5,500 compared to 5,200 in the prior year, and that’s with six more events, so total tickets were up to a greater degree.
Concretely, WWE comes out of Royal Rumble with interesting stories around Sami Zayn, Roman Reigns, and Cody Rhodes.
Any trust being accumulated with fans who may be tuning back in is fragile, given the last several years of widely-criticized creative that coincided with a decline in the popularity of WWE’s consumer engagement.
Sponsorship sales have grown dramatically for the Royal Rumble and for Wrestlemania. That’s an area analysts have long focused on as being under-monetized. Khan expressed willingness to finally put sponsors on the ring apron and canvas, a move I believe Vince has always been opposed to.
WWE reports Q4 and full year 2022 results this evening after market close with a conference call at 5 pm ET.
There’s intrigue as to whether Vince McMahon will participate in the earnings call, after his forceful return to the company as executive chairman in January. Given his diminished participation on calls in his last years as CEO, I wouldn’t bet on hearing from him.
No executives are named in the company’s call advisory, a break from the usual. Stephanie McMahon was a fixture on these calls in recent years and resigned last month after her father leveraged his way back on the board of directors.
Most likely to speak are CEO Nick Khan and president and chief financial officer Frank Riddick. Chief content officer Paul Levesque spoke on the previous call and could appear again to highlight successes with content including at last Saturday’s Royal Rumble.
Financially, expect WWE to confirm 2022 was its most profitable year ever and highest annual revenue ever.
I’ve estimated $1.3 billion in revenue for 2022 and net income of $205 million.
For the fourth quarter (October to December) WWE projected $83 million to $90 million in adjusted OIBDA, the company’s preferred non-GAAP profit metric.
Analysts expect EPS for the quarter of about 58 cents and revenue of around $335 million.
Expect analyst Q&A to be the most interesting part of the call, as usual. A potential company sale is top of mind. Vince says he’s back to explore that, and the stock price continued to climb in response. Executives will probably be guarded talking about the subject, though.
Some predictions for WWE’s reporting today on the full year of 2022:
- Revenue: $1.295 billion
- Net income: $206 million
- Adjusted OIBDA: $382 million
- Total attendance (worldwide): 1,422,700
- Average attendance (worldwide): 6,200
- North America average attendance: 6,100
- North America total attendance: 1,330,700
Earnings information is released
WWE reports net income for 2022 of $195.6 million and annual revenue of $1.2915 billion. As expected, both are new records for the company even when adjusting for inflation.
WWE reported adjusted OIBDA (the non-GAAP profit metric they provide for guidance) for Q4 of $90.2 million, just over the range of their guidance.
EPS for the quarter was 45 cents, somewhat below expectations.
The press release notes each PLE in Q4 was the most-viewed event in its history. Crown Jewel was the most-viewed int’l event. Royal Rumble was the most viewed Rumble.
Keep in mind Peacock subscribers in Q4 were more than 2x from the prior year.
Credit to WWE for not excluding the December 26 “Best of” show from the Raw average for Q4, which was the lowest in Raw history. Excluding it, Raw was flat for the quarter.
These slides, as usual, show Raw and Smackdown (+7%) sustaining viewers better than their networks and broader TV.
With its holiday tour in Q4, WWE averaged 5,500 paid attendees, better than last year’s 5,200. And with 6 more events than last year.
The international tour, with 2 fewer events than last year, averaged 4,200, better than last year’s 3,700.
WWE online ad-supported video watch time continues to fall. While view counts (which probably have different definitions across platforms) are more stable.
WWE states adjusted OIBDA guidance for 2023 at $395 million to $410 million, which would be a new annual record.
The company also expects 2023 to set a new record for annual revenue again.
Sound like the NXT deal with NBCU isn’t aligned to expire with Raw and Smackdown, from this note on “key initiatives that could have meaningful implications on the Company’s performance” in 2023.
WWE provides statements in the earnings release on Vince McMahon’s return to explore a sale and the special investigation into his and John Laurinaitis’s alleged misconduct.
The statement reads similarly to previous comments.
WWE estimates $65 million to $75 million in adjusted OIBDA for Q1. Lower revenue and profitability than the previous year because the Saudi event will be in Q2 rather than Q1 this year.
Conference call notes
WWE CEO Nick Khan begins with prepared remarks, noting annual financial records and increased reach of content.
Nick takes a moment to address changes and Vince’s return and “strategic alternatives review”.
Nick notes they’re using the Raine Group to evaluate a company transaction. “There’s more interest than ever in owning content and intellectual property.”
Nick thanks Stephanie McMahon.
Nick says WWE set in-market gate records for Raw and Smackdown in more than 20 cities.
He expects Wrestlemania to be sold out on both nights. The new season of Smackdown is averaging 2.3 million viewers, up 6%. Raw is up 2%. “All of TV is down 18%”.
He notes December 30, last Friday’s Smackdown, and the Raw 30 ratings, which were exceptionally high.
“Raw is seeing big gains in young viewers.” P18-34 is up.
Royal Rumble was the highest-grossing and most-viewed Royal Rumble in history.
Nick gives % deltas for PLE viewership versus prior year’s event of the same name:
- Royal Rumble: +52%
- Extreme Rules: +36%
- Crown Jewel: +70%
- Survivor Series: +46%
PLEs in 2022 vs. 2021: +43%
My note: Peacock subscribers are up 100% in Q4 year-over-year. The possible audience for those events has increased rapidly as the service subscriber base matures.
Venue merchandise sales for Survivor Series and Rumble set new records for those events.
Nick says sponsorship revenue is up 98% so far in 2023 from the same period last year. Sales for Rumble nearly tripled.
Paul Levesque will speak next.
Levesque praises talent and the writing team in prepared remarks. Rhea Ripley winning the Rumble, Pat McAfee on commentary, Logan Paul, Cody Rhodes winning, Pitch Black sponsorship match, Bloodline angle, and Sami Zayn are mentioned from Royal Rumble.
Levesque highlights YouTube and social media numbers. He says WWE is the leading sports league on TikTok. They’ve signed a licensing deal (seemingly with TikTok). International and talent accounts will be launched.
Logan Paul jumping off the top rope at Summerslam was WWE’s most-watched video on social media.
Levesque says members of the first NIL class have transitioned to full-time training at the PC, “with their TV debuts on the horizon soon.”
Levesque says, “I also want to add having Vince around has been great… Having him back and involved even at just the board level comes with his incredible insight.”
CFO/president Frank Riddick says pre-order and social media engagement for WWE 2K is above the rate of the previous WWE 2K console game release.
Riddick notes, as stated in the earnings release, “certain payments” (Vince McMahon’s NDAs with women) are still being recorded on WWE’s books as payments continue to be paid.
Vince’s NDAs are long-term payment agreements. WWE says the payments are made by Vince personally.
Riddick says the first wave of employees moving to the new headquarters building is scheduled for late March.
Q&A with analysts is next.
Question & answer notes
Brandon Ross thinks potential buyers will be impacted by Vince’s desire to remain after a sale. Is Vince willing to end his involvement?
Nick says, “Yes. It’s all about shareholder value. It’s not about what role he’ll have.”
Nick takes a question on interest in US media rights. He says more buyers are interested in WWE media rights than in the last round. More than just the 2 buyers in the previous round.
What are you doing differently to drive success in engagement with Rumble and Wrestlemania. Would you ever monetize ring skirting and other assets?
Nick says, yes, they’re looking into putting sponsors on skirting and other assets.
Why run a possible company transaction and media rights in parallel?
Nick says the right of the first bid “kick in in short order” for incumbents for Raw and Smackdown. It gives more bidders the chance to make an offer.
Why are Smackdown ratings doing better than Raw? And what about NXT ratings?
Nick says competition from MNF is a factor. NXT is seeing ratings growth. USA Network is thrilled.
Would NBCU or Fox have rights if you’re acquired?
Nick says any transaction would respect the rights that NBCU and Fox hold. He alludes to the first renewal rights window beginning just after Wrestlemania.
Whether WWE is acquired or not, there’s going to be a lot of cash available. How are you going to use it?
Riddick after the new HQ spending is done, there will be a new PC and NXT Europe touring program. Further monetization of IP. Funds can also be returned to shareholders.
How important is traditional TV to overall fan engagement?
Nick says it’s still important but not as important as it once was. A lot of Peacock viewing is on mobile devices.
The call has ended.
Brandon Thurston has written about wrestling business since 2015. He’s also worked as an independent wrestler and trainer.
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