TKO Group Holdings Inc (TKO) 2018 Q2 法說會逐字稿

Hello, everyone, and welcome to the webcast entitled WWE Second Quarter Earnings.

(Operator Instructions)

I will now turn the call over to Michael Weitz, Senior Vice President, Financial Planning and Investor Relations.

Please go ahead, sir.

Thank you and good morning, everyone.

Welcome to WWE's Second Quarter 2018 Earnings Conference Call.

Leading today's discussion are Vince McMahon, our Chairman and CEO; as well as George Barrios and Michelle Wilson, our Co-Presidents.

Their remarks will be followed by a Q&A session.

We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website, corporate.wwe.com/investors.

Today's discussion will include forward-looking statements.

These forward-looking statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings.

Actual results may differ materially, and undue reliance should not be placed on them.

Additionally, the matters we will be discussing today may include non-GAAP financial measures.

Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website.

Finally, as a reminder, today's conference call is being recorded, and the replay will be available on our website later today.

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

Thanks.

As you can obviously see, we delivered strong operating and financial performance during the quarter.

We're, as a result, raising our guidance for the full year.

Of note, we had 2 record-breaking live events within the quarter.

Wrestlemania, as everyone knows what -- every annual -- it's our big annual event.

And a new one, the Greatest Warrior Rumble, which was held in Jeddah, Saudi Arabia.

Both are -- that, by the way, was our largest international event ever in terms of gross.

And all of you know as well, the future distribution of Raw and SmackDown in the U.S., we announced that with USA and USA Network and Fox Sports, with an AAV of 3.6x our original deal.

Of note as well, some of the upcoming events, there's an -- what we call Mae Young Classic, featuring 32 women from around the world.

It's a tournament of sorts.

And speaking of our female performers, we announced just the other day our first-ever women's all -- all women's pay-per-view, which is entitled WWE Evolution.

That's on Sunday, October 28.

Some of the -- and there are good --a number of other new events such as this that we'll be announcing shortly.

We as well are launching the short-form content entitled, really, The Best of WWE Ever Held.

That would be translated in the following languages: in Spanish, Portuguese, German, and plan to produce WWE Now, which is similar to The Best of WWE Now, in Arabic.

And we're pleased with our performance, as I said before, and we're on path to continue to achieve record revenue and record adjusted OIBDA and record subscribers.

George, do you want to take it?

Yes, thanks, Vince.

There are several key topics which we'd like to review today.

These include management discussion of our business performance, progress of key strategic initiatives and our business outlook.

During the second quarter, we delivered strong financial performance as we capitalized on opportunities around the world.

Particularly outside the U.S., our success was manifested in higher content rights fees, advertising and sponsorship sales and network subscriptions.

These factors generated a 79% increase in adjusted OIBDA to more than $43 million.

Based on this positive momentum, our results exceeded our quarterly guidance, and as Vince mentioned, supports us raising our full-year guidance, which I'll discuss further in a moment.

But first let's review our business performance in the quarter and turn to Page 4 of our presentation, which shows the revenue, operating income and adjusted OIBDA contribution by segment as compared to the prior-year quarter.

So starting with our media segment, adjusted OIBDA increased $26.7 million based on a 48% or a $65.4 million increase in revenue.

The revenue growth was driven by the distribution of new content in international markets, higher rights fees in our core content agreement and continued growth of WWE Network.

The significant monetization of new content was an integral component of the quarter's other media and advertising revenue.

Average paid subscribers for WWE Network reached 1.8 million, increasing 10% from the prior quarter.

In terms of adjusted OIBDA, increases in certain production costs and accrued management incentive compensation partially offset the growth in revenue.

The increasing monetization of content, as evidenced in the second quarter, reflected some important operational achievements.

During the quarter, we produced nearly 430 hours of content, monetized new opportunities across platforms and worked to optimize our future distribution.

As Vince mentioned, Monday Night Raw and SmackDown Live remain the highest-rated programs on USA Network.

We secured agreements with USA and Fox Sports effective October 2019 that increased the program's combined AAV, or average annual value in the U.S., to 3.6x that of our prior deal with NBCU.

Extending our reach on television, we also delivered our third captivating season of Total Bellas, we developed a new, highly entertaining series, Ms. And Mrs., that just premiered this past Tuesday night on USA Network, and announced the eighth season return this September of our successful series, Total Divas.

On our streaming service, WWE Network, pay-per-views and original programming continue to drive our viewer engagement.

Some examples of our exciting new programming on the network included the Greatest Warrior Rumble, emanating from Saudi Arabia, the U.K. Championship Tournament and a new season of Camp WWE.

To these we also added more in-ring content with the announcement of our second women's tournament, as Vince mentioned, the Mae Young Classic, which will culminate with a finale at our first-ever women's pay-per-view event of WWE Evolution on Sunday, October 28.

On social and digital platforms, consumption of WWE content increased dramatically.

Through the first 6 months of the year, digital video views increased 58% to 14.4 billion, and our fans watched nearly 510 million hours of content, representing a 71% increase from the first half of last year.

Contributing to this growth, we produced more than 165 hours of social and digital content, including versions of The Best of WWE series in Spanish, Portuguese and German, and we also plan to launch a new series, again as Vince mentioned, WWE Now, which will be in Arabic.

As evidenced by our programs during the quarter, we are becoming more digital, direct-to-consumer and more global every day.

Looking at our other segments, adjusted OIBDA from our live events, as shown on Page 6 of the presentation, declined $3 million, primarily due to a reduction in ticket sales and an increase in production costs.

Ticket sales at North American events were impacted by the staging of 5 fewer events in the quarter and an 8% decline in average attendance.

Live events held in the quarter were highlighted by the staging of 2 record-breaking events, Wrestlemania and The Greatest Royal Rumble.

Building on the successful execution of these large-scale events, we announced WWE Super Showdown, an event to be held in Australia, that will feature the largest roster of WWE Superstars to appear in that country.

Adjusted OIBDA from consumer products was essentially unchanged from the prior-year quarter.

During the quarter, we continued to develop new licensing partnerships and to expand the presence of WWE among children.

Contributing to this result, we continued to increase the penetration of our mobile games.

As of quarter end, we had more than 90 million installed across our game portfolio, led by WWE Champions and WWE Supercard as well as our newest game, WWE Mayhem, which recently surpassed 12 million installed.

Page 8 of the presentation shows selected elements of our cap structure.

As of June 30, 2018, we held approximately $340 million in cash and short-term investments.

Additionally, we estimate that WWE has approximately $100 million in debt capacity under the company's revolving credit facility.

We generated $64.6 million in free cash flow as compared to $1.3 million in the prior-year period, with growth primarily due to strong operating performance and timing in working capital.

Earlier this year, we discussed a step-up in capital expenditures in 2018 to build out our video production infrastructure to support the company's growth.

We have decided to delay that spending as our plans continue to evolve.

Therefore, for 2018 we now anticipate capital expenditures of $30 million to $40 million, just roughly in line with our historical average of approximately 5% of revenue.

We do expect to finalize our plans for the build-out I referenced later this year, and we'll provide further guidance at that time.

As we indicated during our call on June 27, we expect to provide additional long-term perspective regarding WWE's strategic, operating and financial goals after we complete our distribution plan in the remaining markets.

As a reminder, we expect to reach agreement regarding distribution in the U.K. by year end 2018 and in India in the first half of 2019.

In the first half of 2018, we've achieved a 59% increase in adjusted OIBDA of $78.7 million.

In the second half of 2018, we expect adjusted OIBDA to remain relatively flat year-over-year.

This includes projected third quarter adjusted OIBDA of $30 million to $34 million and then strong fourth quarter results.

Based on our actual and projected performance, we're now raising our target for 2018 adjusted OIBDA to a range of $160 million to $170 million, which of course would be an all-time record and exceed our previous guidance of at least $150 million.

This guidance for the second half of 2018 assumes a continued rise in revenue, increases in core fixed costs, additional strategic investments and higher management incentive compensation based on 2018 overperformance.

In addition to these items, projected third quarter results also reflect the timing impact of various initiatives.

In the third quarter, we also estimate average paid subscribers of approximately 1.67 million, representing an approximate 10% increase from the prior-year quarter.

Finally in the fourth quarter, we anticipate meaningful revenue growth based on the escalation of content rights fees, favorable timing of licensing revenue associated with the implementation of the new FASB standard which we previously discussed.

As I have said before, our key strategic goals over the remainder of the year remain unchanged: finalizing the global distribution plans for Raw and SmackDown, creating new content across all platforms, investing in the ongoing digitization of WWE, primarily in data and our product technology, and driving international growth.

We believe this strategy will engage our global fans in more ways than ever before, and this part's very important.

By strengthening this engagement, we deepen the moat around our business, enabling us to focus on the significant opportunities in front of us.

And these opportunities are predicated on several global trends that include the escalating consumption of video across direct-to-consumer, digital and social platforms; the increasing demand for premium, live, branded content by all media companies; and the growing middle class in key developing markets.

Our execution, coupled with these trends, creates a foundation for sustainable long-term growth and increases in shareholder value.

That concludes this portion of our call and I'll now turn it back to Michael.

Thank you, George.

Lisa, we're ready.

Please open the lines for questions.

(Operator Instructions) We'll take our first question from Curry Baker with Guggenheim Securities.

Thanks for the questions.

I have 2. The first is the Saudi Arabia partnerships appeared to have a big impact on results this quarter.

Can you maybe share some more color on the financial impact around that deal in the quarter, your satisfaction thus far, especially with the Jeddah event, and maybe give us some color about how to think about the partnership going forward, and I guess, what's the ultimate opportunity there and what's next on the horizon for the Saudi partnership?

Yes, so on the first part, in alignment with our agreement, we have confidentiality clauses, so we're not going to speak to the specifics any more than what were in the prepared remarks.

It's in our earnings release and in the Q.

I will give kind of a broader conceptual framework.

For the last 10 years or so, we've been talking about investing in data to understand our consumers, our fans, better.

We've talked about investing in video across all platforms, especially an increase in the amount of video we produce for the digital and social platforms.

And we've also talked about investing in our focus on international markets, whether it's people on the ground or people here across all our functions focused on that opportunity.

Because of all of that, the return is based on us being able to monetize the brand, sometimes in ways we see while we're making the investments, and sometimes in new and unique ways.

And I'd characterize the partnership with the GSA in Saudi Arabia as one of those.

And as we mentioned, it's a 10-year partnership.

It will include a major event like we just did, the timing of which we're still working through.

And secondly, the third quarter OIBDA outlook was softer than we had forecast.

Can you maybe walk us through in detail what is driving the unfavorable timing and maybe what the business initiatives are that you flagged as a drag on the third quarter?

Yes, I think as I mentioned, I think it's important to look at the back half in total, which we think is relatively flat year-over-year for the reasons we mentioned.

Core fixed cost growth year-over-year has a tough comp.

We had reduced those costs last year in the fourth quarter because we wanted to make sure we met the targets we set for ourselves last year.

So you're seeing kind of just core fixed costs get back to a normal level.

We're going to continue to invest in the business for the long term.

And then so specific on the third and fourth quarter on the timing, there are some things that we've moved from a year-over-year basis, initiatives that we had in the fourth quarter last year, investments we made, that we've moved up towards the third quarter, with some differences in timing on the routing of events.

So there's a couple of things between the 2 quarters that caused the third quarter to be a little softer and the fourth quarter, again, to show significant growth that we'll talk about in more detail when we report.

We'll take our next question from Ben Swinburne with Morgan Stanley.

2 questions, one that I think tied to the last one, which is just to look at this other revenue growth in the quarter.

You had $60 million of other in media, up from $11 million or $12 million last year.

I know you're not going into details on specific contracts, but could you at least help us understand, George, kind of the revenue recognition policies that are driving when you realize revenues in these kind of agreements and whether or not we should be thinking about this as a recurring benefit over time?

And any color on sort of how that business works as it flows through your financials.

And then maybe a more interesting question, hopefully.

You guys talked about a 60% increase in digital views, 70% increase in hours viewed during the quarter.

I presume those are global statistics.

Do you guys think you produce -- you're producing as much content as there is demand?

I guess what I'm asking is do you see a big opportunity to ramp up production, given what you're seeing out there in terms of global demand for your content?

And if you do, is the organization scaled from an infrastructure and people and systems perspective to sort of ramp that up a lot and meet that demand?

Because you're certainly going to have the money, starting next year, to do it.

So I'm just curious how you think about the supply-demand dynamic around content.

There's a part of this broader discussion of putting the investments we're going to make on the returns we think we're going to achieve, and we want to do that at a later time when we've locked down some of the other still open items, kind of give a broad perspective for WWE and put the model around it, the business model.

But there is no doubt that we are nowhere near reaching the limit of the amount of content that we can create and the amount of engagement that we can drive.

When you look at the numbers, we'll do close to 1 billion hours of consumption across the digital platforms, not including the networks, above 1 billion when you put the direct-to-consumer network.

That number, we think, we can keep growing.

And we can keep growing with new content as well as localizing that content -- more languages, more locally produced content.

We just think the opportunity is enormous.

As you know, Ben, you write about it, this is all a fight for time.

We're all fighting for time, and so the more we can engage fans, the more ways we can entertain them, the more time we can take.

So yes, we -- and as far as do we have the resources, we're going to continue to invest for the long term.

We think this is a 10-plus-year runway if you believe in the global trends we mentioned.

If you believe in those, then you believe in the investment and we're going to keep doing that.

And again, we'll put -- we'll size what we think those investments are at some point in the future.

But similar to the success we're seeing today is because the investments we made over the last 10 years, we think the success we'll see 10 years from now is going to be driven by the investments we make today.

That's how we view the world.

I think on the rev rec question, the less interesting one, the deal in Saudi Arabia is unique, so you see the economics presented in the live events segment, in the media segment across advertising and sponsorship and, as you rightfully mentioned, what we categorize as other.

Now other includes, in addition to revenue related to the Saudi Arabian event, it also includes Divas, it includes Bellas.

That's what we characterize.

It's in essence the non-Raw and SmackDown rights because those are kind of unique agreements.

So that's the rev rec.

I'd say the predominant amount for the Saudi Arabia event is in other, but we're not going to talk about how much.

And it is a recurring; it's a 10-year deal, and so it will be recurring.

The timing, when in the year it will happen, still to be determined.

And again, the timing of the event is what triggers the rev rec across all of the line items I mentioned -- for the most part.

There's some delaying to some of the rights, but the predominant economics are in the second quarter.

We'll take our next question from Eric Katz with Wells Fargo.

I guess just following up on the Saudi question, you mentioned another potentially big event in Australia.

I'm just kind of wondering size-wise.

You mentioned the largest amount of Superstars to appear in that country.

Is this a similar type of deal?

Are you looking to pursue Saudi-type deals throughout the rest of the world at this point?

Yes, I think, look, are we looking to pursue Saudi-type deals?

What we're looking, and it's different market by market, is win the battle for time.

If you do that, you're going to find ways to monetize the brand.

In some ways we have a clear path of what that is.

In others, I think we're going to be surprised.

The first thing is win the battle for time, and then we think the monetization opportunities will present themselves.

Specifically on the Australian event, we're incredibly excited.

We're going to absolutely thrill our Australian fans, but the deal is very different than the GSA deal.

Again, not -- but we won't get specific to the economics.

And then on the decision to pull back on CapEx spending, does that have any short-term impacts on your growth expectations?

And I'm not sure; maybe it would be helpful to maybe describe the original plan there a bit more, if you're willing to?

Yes, I mean, we had mentioned that we had purchased a building here in Stamford near our current video production facility because we needed the capacity.

I mean, today I think you've seen the footprint, Eric.

We're spread around the city of Stamford, in some cases actually have temporary facilities to produce the video.

So we were going to do the build-out for that facility.

It had been planned, a significant portion of that, to happen this year.

We've delayed it because we're evaluating those plans.

Obviously, the opportunities in front of us are incredible.

We, as Ben mentioned, the cash flow profile of the company will change starting the fourth quarter next year, so we're just trying to marry those 2 facts and come up with a plan that we think best drives long-term value for us.

So hopefully, by the end of the year, we'll have solidified those plans and then we can talk about it.

But if you meant -- historically, we've done about 4% to 5% of revenue in CapEx.

We've had a high of around 10% or 11% of revenue, a low of about 3% of revenue.

At the beginning of the year we said it's probably going to be at the upper end of that range.

It turns out for '18, we're actually going to be right dead on in the middle of the range, or the average.

But at some point here in the future, I'd expect we'd have a year or 2 we'd be up at the upper end of the range.

And just one last, I guess another boring one, if you don't mind.

Can you remind us again of the FASB impact on Q4?

Thank you.

Yes.

If you remember, we're talking about the revenue recognition for -- from our licensing business, which we used to record, in essence, on a lag from when the trans -- consumer transactions were happening, which we received a statement from our partners like [McNall or] Take-Two.

Now we're making estimates during the period when the consumer transaction is happening, so where last year you would have seen the primary consumer licensing revenue hit in Q1, this year it will be in Q4.

And we talked about that impacting Q1, that it was around $8 million of OIBDA.

So it's that timing.

Our next question comes from David Karnovsky with JPMorgan.

For the NXT rollout in the U.K., can you talk about why now is the right time to introduce the brand there?

And with the expansion of NXT into the region, does this impact at all how you're thinking about your television distribution within that country?

So I'll take that one, David.

So on the U.K. tournament, why now, I think you know from the prior earnings calls that we've had and information we've put out, we actually did the U.K. tournament previously a year ago, and we saw tremendous results.

So it's not surprising that we repeated that from an engagement perspective on the network.

It was a great success for us.

So as we looked at that as an opportunity to -- similarly, with the Mae Young Classic, the all-women's tournament, those tournaments are driving engagement on our network, obviously, helping with retention and attracting new subscribers.

So again, we just are continuing that plan, so it's not really coming out of the blue per se to repeat the U.K. tournament.

What I'll say as far as our long-term view on that, and George mentioned this as we talked about the ability to continue to create content and is there demand, when we talk about localized content, we absolutely see that as a long-term opportunity for us around the world.

And the U.K. tournament is a perfect example or manifestation of that localized content.

And we believe our ability to tap into local talent and the interests within that marketplace just deepens our engagement with those fans.

So again, we expect to do more of that, moving forward, and that's just kind of the first step in terms of a U.K. tournament.

So again, part of our overall strategy.

Vince mentioned that we're creating some short-form content in local language.

So again, there's just great opportunity for us to continue to do that.

So the time is now and will continue to be for the next 10 years, as George mentioned, on our international opportunities to do more content that is localized for that market.

And I'm sorry, what was the second part of your question?

It was just that whether the rollout of NXT there impacts at all how you're thinking about television distribution for the U.K. renewal.

Not necessarily.

And then I didn't see anything in the release on 2019.

Are you still comfortable with the guide you provided at the end of June?

Yes, we didn't put anything because it hasn't changed, yes.

So we're still committed to delivering over $200 million of adjusted OIBDA.

Our next question comes from Laura Martin with Needham.

Maybe a couple of things.

So can we talk about churn?

You guys have gotten really good at predicting your OTT status.

Are you getting better at keeping the subs?

Are you getting better at attracting subs?

Where do you think -- what's happening with churn and these OTT numbers?

Yes, I mean, as you know, Laura, any subscription business, the most important metric is retention.

So the average kind of trailing 12 months continues to improve.

Obviously, our churn is seasonal because of the large events, especially Wrestlemania, so you get lumps in there.

But the trailing 12 months we continue to improve.

But I will say it's probably something Vince, Michelle and I are never happy with that number.

And ask anyone who runs a subscription business is you always wonder why it isn't 100% retention.

But it keeps improving, but we're committed to getting the retention even better.

And then looking at the -- so following up on something Vince said earlier on, that you had 2 of the largest live events you've ever had, Wrestlemania, which set records, and then Saudi Arabia.

But I'm looking here at the live attendance averages, and they're falling.

And even in '18 second quarter and first quarter, they're down year-over-year the last 2 years.

Is that because of our mix shift towards the NXT, or why -- or is it cannibalistic with the over-the-top network?

I would have thought live events was complementary with the over-the-top network gaining like prominence.

But why would our live event averages be falling, do you think?

Yes.

Well, in essence, in North America it's primarily venue mix, so depending on which venues we work in.

Quarter-over-quarter, it's different venues, so you're going to get a little bit of a mix.

So for us, we think over the trailing 12 months, if you look at it, North American attendance is relatively flat.

And frankly, it's been that way, so we -- both our utilization and the average attendance have been pretty consistent.

So it isn't a mix.

We don't include the NXT numbers because those set the event profiles there and the attendance profile is very different, so we think from an external perspective, to see the trend, it's better to not include those numbers.

So NXT has nothing to do with it.

So nothing strategic.

I would say it's more tactical, depending on which venue.

And similarly, when we -- our international events, it also depends on what countries we play in.

It's not the same country profile year-over-year, which is why I always look at it and encourage investors to look at it this way.

It's trailing 12 months, where you kind of can wash some of the quarterly changes out.

And from that perspective, there's really no change.

And do you just, sort of big picture, do you think the OTT network helps your live performance, or do you think it cannibalizes because people can stay home and watch the same stuff?

No, we absolutely think it helps and even it helps in the marketing of them.

So for example, because we have in the U.S. DMA data of viewership and what people are viewing on the network, we can kind of hone the marketing message when we market digitally for fans.

As an example, when we launched NXT and we're touring outside of Florida and we're trying to decide, because we'd never done it before, what markets we should go into, we used the network data of NXT viewership to kind of select the markets.

And we definitely don't think it's cannibalistic to the live event experience.

And then I'm writing a lot myself about the international sub profile -- profitability profile -- and growth.

Do you think there's any reason that international subs cannot have the same margin profile as in the U.S. over the long term?

Yes, I mean, if you think about the model today, there's really no different on the margin profile, right?

There's a level of fixed because it's a U.S. product only, so we're creating the content and then we're attracting subscribers.

So whether the subscriber comes from Germany, the U.K. or any other country, the U.S., the economic profile is still the same.

It's 80% or so variable margin on the incremental subs.

So that doesn't matter.

We said that in the future we'd like to localize the products and then talked about Spanish language, German, potentially Hindi, and we're working through those plans.

At that point there will be some incremental fixed costs -- not material, but there's some incremental fixed costs around both the product and the technology to localize the actual physical product and then localize the video.

So at that point, you'd have a slightly different margin, but not materially different.

Great numbers.

Congratulations on a great quarter, you guys.

Our next question comes from Vasily Karasyov with Cannonball Research.

I just wanted to try and size up the impact on EBITDA of this spike in revenue in media and other, this -- what you call in the press release "distribution of certain programming content in international markets." You already said that it's going to recur again next year, not clear what quarter.

But my math says that it's around 30% to 35% EBITDA margin.

Can you please say if I'm the ballpark?

And the second question I had is you touched on it a little bit, but you mentioned that one of the investment areas for you is data.

Can you maybe talk more beyond just targeting events, what you just mentioned?

In what ways can a company like yours benefit from data going forward?

Thank you.

Sure.

On the first one, the margins are higher than the ones you mentioned.

Again, we're not going to get specific around them, but they are higher than what you mentioned.

And for us, for any direct-to-consumer business -- and again, we have both the video service direct-to-consumer, we market our live event business, especially domestically direct-to-consumer because most of the purchases are done online.

And then we have a large and what has been a fast-growing commerce business, e-commerce business, around consumer products direct-to-consumer.

So around that, understanding the data of what people like, what Superstars they're favoriting, that helps us tailor the marketing message.

It also allows us to create bundles where it makes sense.

We do a lot of analysis on what people are watching on YouTube, on the network, on Facebook, on our owned and operated.

That data gets circulated internally so people understand what's really driving the engagement.

So it's a myriad of places throughout the organization, but as we continue to grow the number of user accounts that we have, the theory is the better you know them, the more smiles you can put on their faces, the greater the monetization opportunity.

That's in essence the flywheel.

Would you ever sell the data to a third party?

We are -- we use the data to draw -- to put smiles on people's faces.

That's it.

So if we can entertain them, that's what we're using the data to -- so similar to how Netflix uses it.

They learn about their consumers, create programming that will cause their fans to spend more time on their platform.

That's what we do.

Our next question comes from Eric Handler with MKM Partners.

A question, maybe, for some of the talent guys or people in the room.

Just curious.

We're now entering Year 2 of sort of the build-out for the WWE U.K. brand.

How far in the future do you think we are before we take that WWE U.K. brand, and as we look to build out the WWE Network throughout all of Europe, we take that WWE U.K. brand and churn it, morph it into a WWE Europe brand?

So it's a great question, and again, I think that, as I mentioned previously to David's question, that our investment in localizing content will continue to be a priority.

So in terms of the time line, I think it's going to continue to be a priority for us.

How we distribute that content the marketplace will determine, and we'll get more intel on that moving forward.

So again, from a talent development perspective, one of the things that we've also talked about is we have a very successful performance center that we have in Orlando, and Paul Levesque has done a tremendous job building our pipeline for talent.

Interestingly, if you look at the data there, and as George mentioned, everything we do involves data now, about 44% to 45% of the talent that are now in our pipeline are coming from outside of the United States.

So naturally, the question becomes as we're creating local content, is there an opportunity for us to replicate what we're doing around the world and creating and generating not only our pipeline of talent within a region, but how do you then take content and create content around that, that we then can monetize?

So as we're kind of looking future and how we continue to build out that model that we're currently doing here in the U.S., something that we're looking at and will be part of our plans moving forward.

So again, expect that to be part of what you'll hear moving forward.

And then as we talk about customization for, with all the data and all the investments you've made, at what point -- how far away are you with the WWE Network to, so that when people log on, there is a much more customizable home page?

It's coming soon to a theater near you.

We're not going to make any announcements right now.

Stay tuned.

Our next question comes from Daniel Moore with CJS Securities.

Following, obviously, the strong contract renewals and as we look toward the exceptional inflection in cash flow in 2020 and beyond, I know you're not going to talk specifics in terms of numbers, but I guess generally, what types of investments, growth initiatives, are you considering?

Are there any that maybe weren't feasible in the past, or is it kind of more of the same?

And what financial metrics, ROC guidelines, governors should we be thinking about in terms of incremental investments?

Thank you.

Yes, it's interesting.

When we were looking at some old material that we had shared with the board probably 7 or 8 years ago about the investments we were making then and we're going to continue to make, and what we thought we could do in terms of raising the peak-to-trough earning and cash flow trough profile of the business, and it turned out that those old -- investments over-delivered.

We thought we could maybe double, close to triple, those numbers.

And as people have surmised, given the success we've recently had, probably go beyond that.

And at that time, we were $60 million to $75 million of OIBDA.

So as we look to the future, we're doing the same kind of work, and it's thinking what's the size of the opportunity?

What do we think we need to go capture our unfair share?

And then what do we think that drives in terms of shareholder value?

And to your point, we'll give a little bit -- be a little bit more fulsome once we have some remaining items behind us.

But that's kind of the lens we use.

It's -- we don't always have a clear line of sight to what the opportunity will be, but what's the size of the opportunity?

You take a country like India -- what do we think GDP looks like 10 years from now?

What do we think the M&E sector in India therefore looks like 10 years from now?

Given how many smiles we're putting on people's faces there, what do we think our unfair share of that is, and therefore what does -- how much should we be investing?

That's the process.

And again, we're not going to put all the numbers to it today, but that's the process we use.

As opposed to the types of investments, I don't think I'd characterize it as more of the same.

But yes, we're going to continue to invest in our digital products.

We're going to continue to invest on creating more content across every platform: traditional, digital and direct-to-consumer.

Michelle mentioned we're going to do it in more languages across all those platforms.

So in some way, I guess you could say more of the same.

But I think the depth and breadth will be different.

Something like expanding the performance center model globally that allows us to not only increase the talent pipeline, but create actual indigenous, local content with local stars, we think it's an amazing opportunity.

It's a 10- to 20-year opportunity for us to take advantage.

So we'll do that, and that's probably an example of something we might have had to do at a much slower pace if not for the success we've had.

(Operator Instructions) We'll take our next question from Jason Bazinet with Citi.

Just had a quick question on international.

If I look back, 2007 to 2017, about 25% of your revenues came, I think, from outside the U.S. It bounced around a little bit, but not a lot of change.

When you guys think about this 45% of your talent pipeline coming from outside the U.S. and then begin to adjust for things like GDP per capita and the like, what do you think a reasonable mix is for a company like yours that's focused on international?

Look, the way we look at it is the way you just said it.

I mean GDP per capita is -- ultimately, the M&E sector globally tends to be a percentage of the GDP and toward the GDP per capita, however you want to look at it.

So I always tell people if you want to really think about the opportunity for WWE, think about what's the total market, what percentage of the consumption we're getting.

Those things should help you size what the opportunity is for WWE.

It's how we think of the U.S. market, frankly.

So in terms of mix, I'm not going to put a number on it, but I think if you say, "20 years from now, do you think the M&E sector has grown faster outside the U.S. than in the U.S.," I think so because you have countries like India and China whose average GDP and therefore M&E sector is growing.

So our job is to -- and it sounds trite -- but it really is what we do, is put smiles on those faces.

If we do that, then we should get an unfair share, but we've got to do that.

That's hard work.

Maybe one quick follow-up.

As you look at the consumption data that's very robust, is your intuition that the right answer is to double down on the markets where you are internationally, or is the right answer to expand into more geographies?

There's very few geographies that we're not in.

In fact, if you're looking at digital and social, there's not -- if someone has a broadband connection in that country, we're there in that market.

In some markets, we're more invested than in others.

But if you said, are we -- do we need to get into a new market?

Probably not.

Do we need to go deeper in some of these big opportunities?

Yes, we definitely think so.

And there are no further questions at this time.

I would like to turn the conference back over to our speakers for any additional or closing remarks.

Thank you, everyone.

We appreciate your listening today.

If you have any questions, please do not hesitate to contact us.

Thank you and have a good day.

And that concludes today's presentation.

Thank you for your participation, and you may now disconnect.