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Welcome to the WWE 2013 First Quarter Earnings Call. My name is Ellen and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session.

I will now turn the call over to Michael Weitz, Senior Vice President of Investor Relations for WWE. Mr. Weitz, you may begin.

Thank you and good morning, everyone. Welcome to WWE's first quarter 2013 earnings conference call. Joining me for today's discussion are Vince McMahon, our Chairman and CEO and George Barrios, our CFO. We have issued our earnings release earlier this morning and have posted the release our earnings presentation and other supporting materials on our website at corporate.wwe.com.

In these materials, we have changed our measure of profit from EBITDA, earnings before interest, taxes, depreciation and amortization to OBIDA operating income before depreciation and amortization. We have made the change to be more consistent with our media peers. Additionally, we have focused our business and segment reporting on OBIDA rather than profit contribution. We believe that by relating overhead to our revenue generating operations the revised approach provides a better measure of business profitability.

For any non GAAP financial measures discussed on this call, reconciliations to GAAP measures can be found in our earnings release and in our website presentation.

In today's discussion, we'll make several forward looking statements. These statements are based on management estimates, actual results may differ due to numerous factors as described in our presentation and in our filings with the SEC.

At this time, it's my privilege to turn the call over to Vince.

Good morning, everyone. We had mixed results as relates to our performance. OIBDA was down 8.7%, which is about consistent with our guidance. We increased our content investment, we had lower results in terms of home entertainment, international licensing, but our metrics - there are key metrics really increased and done considerably well in terms of live events, which is an average attendance of up about 3%, our pay-per-view buys are up an astounding 17%. Our television ratings are really strong with raw - about a 6% increased and smack down with a 5% increase in an environment in which television ratings consistently go down.

As far as achievements are concerned, even though it's not in this quarter, WrestleMania was a huge success. For us it was the highest grossing of about $72 million, certainly the most profitable in history. A lot of emphasis was placed on this year's WrestleMania, not just form a financial standpoint, but from an overall umbrella standpoint, which we think will reap rewards in the weeks, months and years to come.

We completed an agreement with Yahoo, continuing with our efforts as far as digital is concerned, we launched our pay-per-view on Xbox and Samsung, which in the past had - this was increased revenue for us.

We released - as far as film is concerned, notwithstanding the impairment on Dead Man Down, the balance of our film endeavors, we released The Call, which was very successful, over the $51 million mark in domestic box office, so that more than balances out. We've increased our audience in general to 14 million per week, as far as viewers are concerned, which is considerable. We've also increased our Facebook and Twitter followers, we're up about 73% over that which is expected to continue to increase at about 150 million.

We've entered into other key partnerships as it relates to CSR, among them, Special Olympics and Things About Nature. As far as the more strategic look is concerned, talent is always very important to us, we had seven - more than any other pay-per-view, not just WrestleMania, we had seven new talent appear at this year's WrestleMania in an effort to overhaul an entire talent roster and continue building new stars, which is so important.

In addition and speaking of continuing to build new stars, we're going to be opening a new performance center. That announcement was made - performance center of course is down in Florida and that is really working well for us.

We are - as far as the network is concerned, we're continuing to build on that in terms of a subscription model and making progress and so generally speaking, as far as operating metrics, live events, television audience, pay-per-view, we're showing that again, we're continuing to develop strength and we're confident that we can continue to leverage our brand strength, which result of course transforms our business. So with that, George, if you don't mind taking it.

Sure. Thanks, Vince. There's several key topics which I'd like to review today, these include management perspective on our financial performance, some additional detail regarding our first quarter results and the discussion of our business outlook for the remainder of the year. Through first quarter, our financial results as measured by OIBDA declined approximately $8.7 million from the prior year, consistent with our guidance.

The decline reflected several factors that were anticipated and discussed as part of our fourth quarter 2012 earnings call. These factors included additional investment in content production including celebrity guests, talent and staff costs. Lower profits from home entertainment, due to adjustments to prior periods, sell through estimates in both the current and prior year quarter and lower international licensing revenue.

In addition, the quarter was affected by two items that impacted the comparability of our results on a quarter over quarter basis. Film impairment charge and a positive impact form the termination of our video game license with THQ

The weak performance of a recent movie release Dead Man Down resulted in a film impairment charge of $4.7 million, the incremental year over year impact of that charge, however was partially offset by an approximate $3.4 million positive impact to income associated with the bankruptcy of THQ and the transportation to a new video game licensee.

Although the impact to our reported income was positive, THQ's bankruptcy resulted in an economic loss to WWE of approximately $3 million, stemming primarily from foregone game receipts.

The invest in content production were made to enhance our brand strength. Demonstrating the efficacy of these investments, operating metrics such as live event attendance, television audience and pay-per-view busy, which are key leading indicators sustained encouraging trends in the first quarter. The television audience increased by 6% from year end and by 20% from a year ago to 9.1 million homes and nearly 14 million viewers in the US.

Similarly, our combined Facebook and Twitter followers increased 14% over the quarter to over 150 million, in increase 73% over the past 12 months that has elevated our presence in social media. Building the strength of our brands is evidenced in these metrics and taking advantage of that strength is a critical component of our long term strategy.

To review the key drivers of our performance in the quarter, let's turn to page five of our presentation, which lists the revenue and OIBDA contribution by business as compared to the prior year quarter.

To clarify the trends in our financial performance, we have adjusted our results for film impairments and the positive impact of our transition to a new video game licensee were applicable. Schedules that demonstrate the impact of these adjustments can be found in the earnings release and in our website presentation. Revenue from our traditional core businesses excluding filmed entertainment, increased by about 3% or $4 million. The growth was predominantly due to increased rights fees for our content and increased demand for our pay-per-view offerings.

Revenues from our television business increased by 15% or $5 million, representing the most significant source of revenue growth in the quarter. Growth was primarily from the production and licensing of new programming such as the third hour of Raw, WWE Saturday Morning Slam and WWE Main Event. These programs were launched during the latter half of 2012 on the USA Network, the CW Network and ION Television respectively. As a result, we have increased the number of hours of original content that air on domestic television from four to 6.5 hours per week.

In our pay-per-view business, revenue increased 12% or about $1.6 million, reflecting the performance of our Royal Rumble and Elimination Chamber pay-per-views. Buys for these events increased 17% from the prior year quarter, demonstrating their creative strength and audience appeal. Additionally, the average revenue per buy increased 5% from the prior year quarter, with a higher proportion of buys to view our events in high definition, which generally garner a higher retail price.

In our digital media segment, revenue increased 27% or $1.9 million to $9 million driven by higher sales of online advertising including integrated cross platform sales and increased rights fees associated with the licensing of original content to Hulu Plus.

In our consumer products segment, our home entertainment revenue declined 24% for $2.2 million, driven by a reduction in revenue from our international licensing activities and the difference to adjustments to domestic sell through estimates for prior period releases.

Revenue from our international licensing activities declined approximately $1.3 million to the recognition of greater minimum guarantees in the prior year quarter.

Domestic home entertainment revenue fell approxaiote.ly $0.9 million, or 13% as a 47% increase in shipments to over $1.2 million units was offset by a net $3.3 million impact of prior period sell through adjustments. The first quarter of this year included an unfavorable adjustments of five percentage points for lower than anticipated sales of prior period releases while the prior year quarter included a favorable adjustments of 29 percentage points for greater than anticipated sales of prior period releases.

Our licensing revenue of $24 million was essentially unchanged from the prior year quarter. Revenue in the quarter did reflect a $2.1 million positive impact associated with the transition to a new video game licensee, Take 2 Interactive, that was offset by lower revenues from video game, toys and other products. With the aggregate decline coming from our international markets.

In 2009, THQ paid WW a fee to acquire our video game license, which we were amortizing over the term of our agreement for 2017. As a result of THQ's bankruptcy and the termination of our license agreement, we accelerated the recognition of this peak, recording the remaining balance in the first quarter of this year.

However, as a result of THQ's bankruptcy, we did not collect nor recognize a portion of video game royalties due in the first quarter.

As shown on page 12 of our presentation, the net impact of these items was an increase to revenue of $2.1 million and an increase to profit of $3.4 million respectively. You should note that despite the positive impact of the video game transition on revenue and income in the first quarter, WWE incurred an economic loss, stemming primarily from foregone game receipts of approximately $3 million.

Excluding the $2.1 million increase to revenue, estimated sales of our video game at retail declined approximately 12%, driven predominately by a reduction in average retail prices.

Royalties form the sale of toy products also declined approximately 6% or $0.4 million with lower performance in international markets. Across all our product categories, royalties from international licensing, excluding the impact of the video game transition declined approximately 23% or $2.2 million.

Revenue from our live event, including merchandise sales at these events declined 4% or $1.2 million in the quarter, primarily due to the timing of our fan access events which are held annually in conjunction with WrestleMania. Fan access events occurred primarily in the first quarter of 2012, versus the second quarter of 2013. Excluding the impact of fan access, live event revenues increased slightly as increases in the number and performance of our North American events were offset by lower ticket sales in our international markets.

At our events in North America, average attendance increased 3% to approximately 6400 fans, driven by a significant impairment in our smack down events. The quarter had three fewer events in international markets where average ticket prices declined 34% to $82.51 and average attendance declined 26% to approximately 2,500 from the prior year quarter.

These declines in average ticket prices and average attendance were due to weak performance in Turkey and Qatar, which are developing WWE markets as compared to the prior year quarter, which included an especially strong three event tour in Abu Dhabi.

During the quarter, WW studios recognized revenue of $1.9 million as compared to $4.8 million in the prior year quarter reflecting differences in revenue recognition between the various distribution models for our movies.

Although there were three films released in the current quarter, Dead Man Down, The Call and the Marine Three Home front, revenues from these movies will be recognized on a net basis as participation statements are received, rather than upon release as with our self distributed movie, Bending the Rules in the prior year quarter.

In addition, the decline reflected the timing of results generated by our overall portfolio of movies during the quarter, the release of our movie Dead Man Down generated lower domestic box office receipts than anticipated, resulting in a revised ultimate projection for that movie and a $4.7 million impairment charge. As a result, WW Studios generated a loss of $5 million, compared to a loss of $1.3 million in the prior year quarter, which included a $0.8 million film impairment charge.

Excluding the impact of impairments, our movie portfolio generated results just below breakeven compared to an adjusted loss of $0.5 million in the prior year quarter. While not impacting our first quarter. While not impacting our first quarter results, the release of the cal is expected to generate domestic box office receipts of $51 million and yield an ultimate profit to WWE of $5.7 million on an equity investment of $1 million. Currently the movies produced through 2013, under our revised approach to film entertainment are expected to general an internal rate of return of approximately 14% just to ease our cost of capital.

The level of our future movie investments will be predicated on the evaluation of our portfolio rather than on any single film at the end of 2013.

Unallocated SG&A expenses increase mostly to $30.6 million from $30 million in the prior quarter. As defined, these expenses include sales, marketing and talent development costs, which have not been allocated to specific lines of business as well as corporate overhead such as human resources, information technology and finance costs.

During the quarter increases in staff related and consulting expenses were nearly offset by a resolution in bad debt expense.

Operating income before depreciation and amortization, or OIBDA, declined $8.7 million form the prior year quarter. We've mentioned earlier the decline in our results was predominantly from three anticipated factors. Additional investment in content production, including guest talent and staff related costs, lower profits from home entertainment and lower profits from international license.

As evidenced on page five of our presentation, our content related investments more than offset increased rights fees from the licensing of new television programs and digital content.

The result of our television and digital media operations were essentially flat, while the results of our pay-per-view business declined $1.3 million from the prior year quarter. Although the film impairment in the quarter was significant, its 3.9 incremental impact was largely offset by the net impact of our video game transition.

Net income declined $12.3 million to $1.3 million, reflecting the decline in our OIBDA results, increased depreciation and a higher effective tax rate. The change in depreciation derived from our investment in assets to support the creation and distribution of new content, including through our potential network. Our effective tax rate was 37% compared to 7% in the prior year quarter. The lower 7% tax rate in the prior year quarter was primarily due to the recognition of a $4.1 million related to previously unrecognized tax benefits.

Excluding the impact of film impairments, video game transition and a significant prior year tax benefits our adjusted net income was $3.9 million compared to $11.7 million in the prior year quarter.

Page 11 of the balance sheet - of the presentation contains our balance sheet, which remains strong. On March 31st, we held 132 million in cash and investments with no long term debt.

Page 14 shows our free cash flow, which decreased approximately $30 million generating a deficit of $10.8 million compared to positive free cash flow of $19.1 million in the prior year quarter. This decrease [is ruined] by an approximately $12.3 million reduction in operating performance, and $11 million increase in annual payout of management incentive compensation with the return to a more normalized level of management compensation in 2012. The impact of terminating our video game license with THQ and an increase in net tax payments.

Additionally, changes in working capital associated with our international live event tours and pay-per-view event contributed to the decline in net cash flow provided by operating activities compared to the prior year quarter.

Partially offsetting that decline, capital expenditures decreased by approximately $8 million from a higher level of investment spending in the prior year quarter to support our content initiatives. We continue to believe that these content investments will yield significant returns.

Given the duration of magnitude of investments that we are making in our business we believe it's important to reiterate our rationale for these investments. As indicated in our last earnings call and in our published business outlook. We believe we have the potential to double or triple our 2012 OIBDA results by 2015. The primary drivers of this growth include the potential launch of a WW network, the expiration and renegotiation of our largest content agreements in the US and international markets and the execution of our digital strategy, developing - developing digital products such as gratification and mobile gaming.

Regarding a potential WWE Network in the US, our analysis indicates that a fully distributed domestic pay network could generate incremental revenue to WWE reaching $125 and 250 million in incremental OIBDA between $50 million to $150 million. These projected results are based on our research, which indicates that a pay network could ultimately attract between 2 million and 4 million subscribers.

And in the US we believe that a network and other distribution models also represent a sizeable economic opportunity in international markets. The renewal of key content agreements is another primarily source of our earnings growth through 2015, over the next few years, we expect to renegotiate our four largest television agreements in the US, UK and India. Benchmarking our rights fees and the fees paid for other original scripted series and to the fees paid for sports programming indicates that our license agreement has significant upside potential.

Our confidence that we can realize much greater value from our intellectual property through our network and the renewal of content agreements is based on the tremendous global appeal of our brand and the rising value of content.

In order to achieve our targeted growth, it's critical that we maintain investments in key areas of talent development. Content creation and marketing. The second quarter we anticipate that ongoing investment in these areas and the occurrence of one less pay-per-view event will more than offset the strong performance of WrestleMania. However, we continue to expect that our 2013 OIBDA performance excluding the impairment charge associated with Dead Man Down, will be flat to 2012, plus or minus 10%.

In addition, we anticipate that net income will be impacted by incremental expenses from the return to a normalized tax rate at roughly 30% to 35% as compared to 26% in 2012. And an approximate $2 million to $3 million increase in depreciation associated with our capital investments. As we execute on our growth strategy, we'll measure our performance against several key milestones over the next 18 months. These include making progress on a TV rights renewal, completing a network carriage agreement. Developing digital products and improving the performance of our movie portfolio.

While our results in the near term may be challenged, we're committed to establishing a firm platform for meaningful, unprecedented earnings growth. That concludes this portion of our call and I'll now turn it back to Michael.

Ellen, we're ready now, please open the lines for questions.

Thank you. (Operator instructions). Our first question is from Michael Kupinski with Noble Financial. Please go ahead.

Thanks and thanks for taking the question. A couple questions. I was wondering if you can give us a little more color on what's going on in the international market? I know that you indicated Turkey and Qatar being developmental markets and so forth, but we've seen a little weakness on - in the international front on the last couple quarters. What are your thoughts going forward regarding the - those venues?

Sure, I wouldn't focus so much on Turkey and Qatar. While they average 2500 again, it was versus the (inaudible) at Abu Dhabi, so we did a little bit less than we expected, but I think your broader point, Mike is a fair one on the international performance, instead we've been doing a lot of restructuring there, both in who we partner with and also internal management. As you know, we recently brought in a new EVP of international, Garret Meyer to lead that effort.

Also, we brought in Casey Collins a few months ago to lead our global CPG efforts and we've done a fairly large restructuring of our international CPG operations, opened new offices, put new people on the ground. So, it's been an execution element on our part, we're aware of it, we've made changes and we're hopeful that we'll see results in the future. But again, I wouldn't focus on Turkey and Qatar, but I - you're right on the broader point.

And so in terms of the number of venues are you kind of scaling those back for now until you kind of get all these management issues in place or what are you - what should we look for in the near term?

Well, our international events are always profitable. So we will do somewhere between high 60s to low 70s events, 70 events plus or minus, depending on the logistics. That's what we're targeting. It's usually what we target, we'll do 250 in the US and we're hopeful that the events will be successful, and again, it's just because Qatar and Turkey didn't perform as well as Abu Dhabi did last year and we'll be in Abu Dhabi later in the third quarter this year. I wouldn't focus too much on that.

For us, really, on the international side, it's really also, it's a lot of work on the CPG side, a lot of work on our content agreement, that's what we're - that we think drives a lot more growth going forward.

And then, on the cable network front, is there any particular timelines or benchmarks that we should be looking for in the coming months, quarters, whatever?

You know, we said it on the last call that we're going to get out of the prognostication game at this point we're nose to the grindstone driving on the things we need to drive on, which is getting the content ready, which we have, getting the infrastructure ready, which we have, and negotiating with distributors, both domestically and in a couple of international markets. So, we said that over the - by the end of 2015 we think that could be a big driver of growth so we'll stick to that as far as timeline.

And then, in terms of just the overall part of the business. I mean obviously you guys have been kind of dipping into your cash of - at this point, given that the negative free cash flow. Was just wondering is there a point where you guys would consider or might need to consider cutting the dividend or is it at this point you feel comfortable in just kind of going to your cash reserves to kind of fund the expansion plans and so forth? What are your thoughts there?

Yeah, well, we did our outlook release in the first - in the last quarter. One of the things we talked about was our three year plan through 2015 and we said that we felt we had the balance sheet to support the investments, support our core operations and also support the current dividend.

Okay, perfect, thanks guys.

Thanks, Mike.

The next question is from Brad Safalow with PAA Research. Please go ahead.

Hi, thanks for taking my questions. The first question I had was really on the incremental margin profile of the core business and in particular your television right [Cs]. I mean if I look at the OIBDA numbers where were basically flat year over year for television rights [seen], even though you had a $5 million revenue increase, as you start to think about as you layer on more distribution opportunities, contract pricing goes higher, what is the margin profile of that particular element of your business?

For the most part it's a step function, as long as we have two days of television production anytime we license new content. For the most part it falls significantly to the bottom line. So the flat OIBDA that you mentioned is that we have increased our staff costs generally for the production of content including potential networks.

So that begins to compress the gross margin, so the variable margin is tied to the gross margin, as you mentioned, flat and the other element that we had in the first quarter this year on a year over year basis, we invested more in celebrity guest talent than we did last year. So, you saw that compression as well, and the tension that you're always fighting is the short term performance versus investing and strengthening the brand and - because you think that'll drive the long term growth. So, some of that compression was due to that tension.

Okay, that's helpful. And then, what's the carrying value now for Dead Man Down?

A million.

One million you said?

One million right now. Yes.

Okay, and then, I just want to make sure I fully understand, you're profit estimate of $5.7 million on The Call and your investment of $1 million is based after whatever happens in foreign box, pay TV, DVD, everything, right?

Yes, it's based on the current ultimate. That's right.

Okay. And then, as we go forward here, is it safe to assume that you're - I know historically second and third quarters were not really big quarters for you from a video game license perspective, but are we kind of on a like for like basis from a revenue perspective now going forward - for video game licensing.

I didn't get that last part, Brad.

I'm just saying, are you on a - a like for like basis where you're not going to have this volatility in your P&L as a result of the THQ bankruptcy and then licensing out to Take 2 that more or less we should expect that --

(Inaudible) that's right. On that element, yes.

Okay. And then, are the terms of the Yahoo deal in terms of both size of it and how you participate, let's say, in both of maybe its initial license plus ad revenues similar to what you did with Google slash YouTube?

Yeah, we don't like to comment on the commercial terms, given that different partners we'll kind of skip that one.

Is it going to be flowing through your P&L in the second quarter?

No, staring May 3rd.

Okay, starting the third of quarter. And then, the last question I had was on the network. You guys made the decision to distribute the Diva show on E!, it sounds like you're going to -the plan is to put Legends House - our broadcaster distributed at some point this summer, obviously not on your own network, but with someone else. Can you help us understand what were the driving points behind those decisions and how should we think about that in the context of what you're doing with the network, or plan to do with the network?

The show that's on E! Network is obviously a logical extension from a small portion of our demographic as it relates to - one third of our demographic actually relates to women. It's only natural when you consider a third of our audience, it's not (inaudible) - that's not a lot. It's not a lot percentage wise, when we add all of that up, it's a huge number in terms of the number of women. So, it's easier for us to direct that really large number on a network which appeals to women and a new Diva show.

The broader weekend distributor content on any numbers of networks drives significantly the importance of our own network and having the flexibility of being able to have programming debut on the WB network and then back potentially to E! Or E! To WWE, or whatever it is that we're doing with whatever network. As long as they're broadening our footprint on a broadcast basis, it only enhances the value we would bring because we promote from the broader aspect back to WWE network. So, that's really an advantage for us.

And Brad, on your point on Legend South, and I'm not sure I understood it right, but it - we still are planning Legend South as part of our network programming grid.

Okay, but I guess I've heard in the marketplace that you guys are actually thinking about distributing, and I understand this is content that you found almost a year ago now, but you're planning on distributing that at some point this summer with another network partner editor.

As of right now, our plan is to put Legend's South on the network.

Okay, understood. I'll turn it over, thanks.

Thanks.

(Operator instructions). We have no further questions at this time, so I'd like to turn the call back over to Mr. Weitz for closing remarks.

Thank you everyone, we appreciate you listening to the call today. If you have any questions, please reach out to us at WWE. You can reach me at 352-8642 at the 203 area code. Thanks.

Thank you, ladies and gentlemen, this concludes the WWE 2013 first quarter earnings conference call. Thank you for participating, you may now disconnect.