World Wrestling Entertainment, Inc. (WWE)

UBS 40th Annual Global Media and Communications Conference

December 3, 2012 9:00 am ET

Executives

George Barrios - Chief Financial Officer

Analysts

Janine Shelffo - UBS

Presentation

Janine Shelffo - UBS

Good morning, everybody. I am Janine Shelffo. I am co-head of our Media and Telecom and Internet Investment Banking Group, for those who don't know me, and I am delighted to kick off the morning here in Salon One with WWE. We have George Barrios, Chief Financial Officer of the company, who will be presenting to you.

George has been a regular at this conference since he joined the company in 2008. George?

George Barrios

Thanks, Janine and thanks for having us. Welcome everybody. Today I would like to talk to you about WWE and touch on a few, what we believe, are important strategic issues. Number one, we will talk about what we view the core competencies of the company and essentially our economic mode that is our ability to create compelling content, our ability to drive a real powerful brand in connection with our audience and then our ability to take that powerful content and distribute it in a myriad of ways which gets us to the underpinnings of our business model and one of things that we really, really focus on is the diversification.

Diversification in terms of platform. So the company has roughly $500 million in revenue. That cuts across several media platforms. We are in every form of media that exists and none of the platforms comprise more than 25% of our revenue. So you look at our live events, our television licensing, our integrated sales, our digital media, our pay-per-view business, our toy business, our videogame business. All very healthy, all doing relatively well and none of them, again, comprising more than 25% of our revenues.

The other level of diversification is geographic. Today anywhere between 25% and 30% of our revenues, depending on the period, come from outside the U.S. and within that it comes across 50 countries across the three major regions of the world. So there is significant diversification geographically.

The third thing we will touch on is the financial model. WWE's gross margins sit, again depending on the period and mix of revenues, somewhere between 40% or 50% in any given period. Our variable margins, however, given the way we execute our business, significant revenue share is licensing businesses tend to be in the low to mid 70s. Again, given the mix of the revenues in any given period. So there is a lot of operating leverage within the business.

The other part of the financial model is relatively low capital investments necessary for core business. Company is making some strategic investments, which I will talk about to drive growth in the future but if you just look at the core relatively low capital intensity.

The final element of the discussion today is how we are looking at the future and we will talk about a lot of individual elements of that but I think the things that resonate for us are few as we look at our future. Number one is the power of the brand. So there is a lot of investment and a lot of bandwidth energy within the company continuing to drive the brand. It is our economic mode.

The second is the secular trend of continuing proliferation. This is a global phenomenon, not just in the U.S. which has been the focus. A lot of people tend to focus about the U.S: only but it is really globally. It is how many more new distribution platforms there are for content creators that is creating what we believe is a secular trend in the value of content upswing. So we are very much focused on taking advantage of that.

Then finally international growth. WWE spent the last five to seven years investing fairly heavily in emerging markets and we think that will pay off in the next few years. So those are the elements we will talk about today. Our core competencies, the business model and its diversification, the underlying financial model and strategically how we look forward.

I think one of the, before we started on a lot of that detail, I think it is valuable to just get a sense of how powerful the brand is with our fans around the world.

[MUSIC]

One of the reason we are such great partners for our television partners around the world is diversity of our audience. So when you look at the WWE's audience in the U.S., it’s a pretty good proxy for the global audience. About two thirds male, so definitely skews that way but a third female, a sizable number. In the U.S. that a number of almost 5 million watching our shows every week, females.

When you look at the age groups, it's similar. WWE is a multigenerational family viewing experience. That’s the way the product gets consumed at live events. That’s the way it gets consumed on TV. No age group really over indexes significantly. So roughly the child age group is about 20% of our audience in the U.S. young adults about 20%, adults about 20% and seniors about 20%.

Ethnicity, we over indexes a little bit in the African-American community, in the Latino community, but again the key point is a very diverse audience. And that diversity also gets manifested in the viewership we have every week. Again U.S. data, but relatively indicative outside the U.S. as well. If you looked at our average viewers for Raw and Smackdown in the key demo, men 18 to 34 our average viewers were greater than the average viewers of the NHL, MLB and the NBA on cable as well as the most watched shows on FX.

Read the rest of this transcript for free on seekingalpha.com

Copyright 2012 Seeking Alpha