TKO Group Holdings Inc (TKO) 2019 Q1 法說會逐字稿

Hello, and welcome to the WWE First Quarter Earnings Webcast.

We have just a few announcements before we begin.

(Operator Instructions) I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations.

Please go, Michael.

Thank you and good morning, everyone.

Welcome to first quarter 2019 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 of our earnings presentation and other supporting materials on our website at corporate.wwe.com.

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.

Good morning, everyone.

I'd like to address any number of things today obviously not to belabor the point in terms of our targeted financial resorts – results, rather in this quarter and at WrestleMania, it was spectacular, et cetera.

We did -- it was a record-breaking crowd in New York and Royal Rumble was great and we have these big events that seem to do extremely well.

Aside from that, you know we're doing some documentaries we haven’t done before on A&E, so we're broadening, broadening tremendously at that scope of our business.

We've got studio shows coming up on FS1, we've got talent on reality shows that are doing very well but notwithstanding all of that, really, when you look at the quarter, and I mentioned this last time on the first quarter, I think going into--or the fourth quarter going into the first quarter, we have a very unusual situation in terms of talents, top talents as well as mid-card talents to being out some 15 talents during the course of that period.

And when you don't have talent, you don't have a storylines.

You don't have storylines then you're not going to do that well in terms of live events, in terms of television ratings, it's like a cascade of things that happen.

I'm happy to say we have all of those talents back.

And in addition to that, we have new talents coming in and during that period of time when top talent was out, we made new talent.

So just belabor the point in terms of where we are with the quarter but the future when you look at that, and I'm not trying to pull the future for you guys except to tell you, what it's going to be like.

There's a -- we've hired new people on our writing team that are really going to help us out in terms of television, television ratings and digital, social, all that sort of stuff.

We've got a new team in terms of live events that have just started now, so we'll see the live events going to continue in an upward trend.

In the coming, in the latter part of September, we're going to have -- it's almost like a -- it's not quite a metamorphosis but we're going to have a whole new beginning.

We're going to -- the promotional value alone notwithstanding, rights fees and what have you, promotional value alone in terms of Fox, in terms of commitments through NBCU is something we've never seen before; not even close.

It's extraordinary and it's -- call it the kickoff, I suppose, and it's going to kick us into, again, an element we've never seen before in terms of promotion with everything WWE, talent, storylines, you name it.

So it's a rising tide of situations that we're really looking forward to and having that carry on throughout the year.

And that's about it.

All right.

Thanks, Vince, and thanks, everyone, for joining us today for a review of Q1 performance, our progress on key strategic initiatives and our business outlook.

As Vince mentioned, we executed our strategy and achieved adjusted OIBDA that was within the range of our guidance.

Our financial performance reflected a 3% decline in revenue from the prior year quarter as the escalation of content rights fees was offset by lower ticket sales at our events and lower sales of merchandise.

In the quarter, we also continued to invest in content, digitization and localization.

We believe these investments enhance our brands and are the foundation for long-term value creation.

Before going into additional detail on the quarter, I'd like to provide some important context.

As Vince mentioned, last quarter we discussed the absence of several talent, our belief that these absences had a negative impact on our engagement metrics.

Q1 saw a continuation of these trends as domestic ratings for Raw and SmackDown declined approximately 14% and 13% respectively and average attendance at our North American events declined 11%.

On a positive note, network average paid subscribers increased 2% and digital video consumption increased 23%.

Looking to the future, we believe our engagement metrics will improve with the return of our talent, emergence of these storylines and new superstars as we launch our new season following a successful WrestleMania.

Moreover, again as Vince mentioned, we remain excited about the debut of SmackDown Live on Fox on October 4. The debut will mark the first time WWE will be available live 52 weeks a year on 120 million homes on a premier broadcast platform.

Finally, as we said before, in addition to absolute performance, we believe relative performance is critically important as it illuminates the value of WWE within the paid TV ecosystem.

In Q1, when excluding NASCAR's premier event, the Daytona 500, WWE delivered greater ever -- average viewership than any professional sports league other than the NFL.

All right.

Moving on to our business performance in the quarter.

Let's turn to Page 5 of our presentation which shows the revenue, operating income and adjusted OIBDA contribution by segment as compared to the prior year.

Looking at our media segment, adjusted OIBDA declined $15.1 million primarily due to increases in fixed cost including the investments that I've previously described.

Revenue was essentially flat as the escalation of core content rights fees was offset by lower ad sales; particularly on YouTube and reflecting unfavorable timing across some other platforms.

WWE Networks average paid subscriber increased 2% to approximately 1.58 million and total subscribers reached 2 million on April 8; the day following WrestleMania.

For the second quarter 2019, we project average paid subscribers of approximately 1.7 million.

As we look ahead, our primary focus for WWE Network is the launch, later this year, of our new platform in partnership with Endeavor Streaming and Massive.

We're excited about the long-term opportunity this new platform will provide so it will give us the flexibility to bring new features and experiences to our fans as well as enable the delivery of our content in multiple languages.

As Vince mentioned on the content front, we developed plans for a weekly studio show on Fox Sports 1 which will debut this fall.

Additionally, we are partnering with A&E to produce 5 documentaries on legendary WWE Hall of Fame Superstars under A&E's Network -- under the networks Iconic Biography banner.

On WWE Network, we continue to expand our live, in ring, content and original programming.

Among the networks most viewed programs during the quarter were our Pay-per-views, in ring events and original series.

These included our NXT TakeOver events, the premium documentary series, WWE Chronicle, and the network exclusive, Halftime Heat.

Halftime Heat aired during the Super Bowl halftime and trended worldwide on Twitter.

Speaking of social media, on social and digital platforms, digital video views increased 15% to 7.7 billion and fans watched 300 million hours of content representing a 23% increase from last year.

Contributing to this growth, we produced approximately 200 hours of social and digital content.

Turning to our live event business, as shown on Page 7 of our presentation, adjusted OIBDA from our live events declined $2.8 million primarily due to weaker performance at our events in North America.

The reduction in ticket sales reflected an 11% decline in average attendance to 4,800 as well as the staging of 9 fewer events.

During the quarter, we continued to stage large scale events.

As Vince mentioned, Royal Rumble attracted more than 48,000 fans at Chase Field in Phoenix and subsequently, WrestleMania broke the record for MetLife Stadium for highest grossing entertainment event at $16.9 million, attracting a capacity crowd of over 82,000 fans.

On the talent front, we held our first ever tryout in India and it was the largest in WWE history.

It featured more than 70 participants and we also announced the talent tryout coming up this summer in China.

In our consumer product segment, adjusted OIBDA declined based on, slightly, based on a $2.7 million reduction in revenue from the prior year quarter primarily due to lower sales of merchandise on WWE Shop.

We also had lower sales of merchandise at our live event venues which can be attributed, in part, to the decline in attendance.

Supporting our merchandise business as we continue to develop new licensing partnerships across product categories.

This included recent agreements with New Era making them the official headwear partner of WWE and Roblox which is a multiplayer online platform with 80 million unique active users which are primarily kids.

At the quarter end, we had nearly 110 million installs across our entire mobile game portfolio.

Page 9 of our presentation shows selected elements of our capital structure as of March 31, 2019.

WWE held approximately $340 million in cash and short-term investments and we estimate that we have approximately $100 million in debt capacity under our revolving credit facility.

The negative free cash flow of $10.1 million in the quarter compared to negative $1.8 million in the prior year quarter.

Favorable changes in working capital were offset by the lower operating performance and a $12.4 million increase in capital expenditures; the latter primarily associated with the company's workspace plan.

Now looking ahead.

The second quarter 2019, we estimated adjusted OIBDA of $19 million to $24 million.

For the full year 2019, we continue to target record revenue of approximately $1 billion and record adjusted OIBDA of at least $200 million.

Achieving our targeted full year 2019 financial results, assumed substantial revenue and adjusted OIBDA of at least $100 million in the fourth quarter.

As a reminder, our new content distribution agreements in the U.S. become affected in that period.

We continue to expect strong year-over-year growth in 2020.

As you know, we're in the process of finalizing our distribution plans for Raw and SmackDown in several international markets.

We expect to finalize these plans later this year and once we have done that and added visibility for 2020 and the rest of our business, we'll provide additional perspective on our strategy, key initiatives, 2020 financial expectations as well as a longer-term financial model.

As said before, we believe our investments in content, digitization and localization will further engage our global fans and deepen the moat around our business.

Our execution in the context of the ongoing media industry trends, we believe create a foundation for sustainable long-term growth and increases in shareholder value.

That concludes this portion of the call and I will now turn it back to Michael.

Thank you, George.

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

(Operator Instructions)

We'll take our first question from Brandon Ross with BTIG.

Wanted to dig in a little bit more on the engagement metrics especially as the AVOD numbers came down so significantly in the quarter.

And just want to -- how can you be confident about a rebound in engagement when while you're getting some superstars back you also have some leaving especially in the women's division which is [rough].

Can you hear me?

Yes.

You broke up a little bit, but I think I got the gist of the question, Brandon.

On the first point on the AVOD, so just to, I think, clarify, we were up 23% in consumption year-over-year.

The sequential trend was down.

We do think that is tied to what Vince mentioned which was the -- that kind of unique moment in time in the absence of a fairly significant number of talent.

The reason we think all these things are related is because we saw the bend in a lot of our trends almost at the same time.

So while you can never be sure, the fact that these things occurred concurrently, we think lends credence to that perspective.

As we look forward, and your point about talent coming and talent leaving, I think the broad historical context is we've got a 35-year history of creating talent and we've done an incredible job transitioning from one generation to the next.

So we feel confident that we've developed the muscle around attracting, developing, retaining talent as well as crafting the storylines to make them shine.

So we've done it in the past, feel confident we'll do it in the future and as Vince mentioned, we feel really good about where the talent base is.

Again, just speaking of Ronda, Ronda has done an extraordinary job for us.

Her challenge was to bring the entire women's division up, as you know, that was our main event at this year's WrestleMania involving Ronda.

Ronda's task that she chose, and of course this is great for us, is to build that whole division, have more visibility on that division and to make stars and to make stars that not only have stories but even after Ronda leaves, you know, and it was -- Obviously, we knew that Ronda was going to leave for -- for her contract.

So when you look at what happened at WrestleMania, and what Becky Lynch and Charlotte and others, the entire division, the focal point and the stories they're coming out -- like Ronda did an awesome job.

She did an awesome job.

Okay.

And you have some obviously important ongoing negotiations right now.

Have the recent engagement metrics at all impacted these negotiations?

Brandon, given that we're in the middle of these discussions, we're going to stay away on commenting on them in any way, shape or form.

Great.

And then just finally, can you speak to how the timing of your annual large scale international show may have affected the cadence of your guidance for the year?

Yes.

At this point, we're not going to guide specifically to elements in the business so we gave the Q2 guide, we talked about the full year so we'll just leave it at that.

And we'll take our next question from Curry Baker.

I guess to start with, maybe on the subscriber front at the network, your outlook for average paid subs in 2Q was down 5% and I think WrestleMania numbers post the event were down 6% year-over-year.

Can you give us any additional color on churn in net adds and I guess big picture, what's driving the current sub subscriber pressure and secondly, with the re-launch of the network later this year, can you maybe talk about how you see that reaccelerating growth on the subscriber front?

So I -- like Vince said in his remarks, I don't want to belabor the point on the talent but ultimately it's the core of what we do and it will impact everything both when it's going great and when there's a little bit of softness.

So we think that WrestleMania, while we're thrilled that we had 2 million people on the platform, if -- as you mentioned, it was down year-over-year, that has been a cascading effect; it's a subscription business, you guys know this, and gals know this better than I do, what happens in a month trickles on for several months afterwards.

So that's what's driving Q2.

As far as the launch, we're really excited, it's something the team has been working on for over a year on the design and the build of the new platform and so we -- as we said in the prepared remarks, it will give us the platform to move forward and bring a lot of features and functionality that their fans have been asking for.

Gives us flexibility in other languages if we so choose.

So all of this obviously doesn't happen on day one, but it creates the underpinnings of us being able to do a lot that we think can reaccelerate growth.

Again, not sure that's a 2019 event, given that the launch will only happen in ‘19, but as we look at the next several years, we're excited about what that will do for us.

Okay.

And maybe just following up on that, do we have a date set for the re-launch?

Is it still like in the third quarter, early fourth quarter or still waiting on that?

Yes.

So we're not going to go public on the date at this point, later this year.

And we'll take our next question from Vasily Karasyov.

The press release calls out the investment in fixed cost as the reason for higher cost growth.

So I was wondering if it's fair to assume that EBITDA in Q3 would also be down year-on-year and then given this is an

[order] this year, once we get to 2020 should that be smoothed out because of the new TV rights kicking in and we should see every quarter approximately in line with Q4 of this year or at least not down year-on-year?

I wonder if you could comment on that.

Yes.

On the cost side, I mentioned I think on the last call as well we began investing in ‘18 towards the back half of the year so the compares on the cost side in the first half of this year are a little bit tougher for us, that's what you're seeing.

Not going to talk about Q3, we've got into Q2, in the full year but we're not going to comment specifically on Q3 at this point.

As far as moving into 2020, a little bit early for us to start talking about that but I think it's fair to say that our expectations, our growth in 2020 over 2019, we'll give a little bit more context to that later on in the year.

And then as we've always said, the -- something that we'll continue to work every day is this balance between as we grow our revenues we have very good unit margins that drive increased growth and profitability and then we have to decide how much of that growth and profitability to reinvest in the business to drive future growth.

And so that's something that we just work every day and we'll keep everyone informed as we make those decisions.

We're not going to say anything more on 2020 right now.

A quick follow-up.

I don't think the guidance mentioned CapEx for this year.

Is the previous guidance still intact?

We haven't talked -- yes, we didn't mention it.

As we've mentioned before, we will have elevated levels of CapEx as we build out the facility that we recently entered into a lease agreement on.

So -- and but those plans are still in progress so they'll be elevated over the next 18 months or so.

And we'll take our next question from David Karnovsky from JPMorgan.

I think last quarter you highlighted that tenants or live shows where you create new video content was stable.

Does that remain the case and you know, if so, are there adjustments that you can make to the [house shows] to maybe stabilize the trend there?

Yes.

I think last quarter like you mentioned, we gave annual trends over time that showed fairly stable and those events where we create media.

In Q1 we actually saw softness there as well in the quarter.

I've said before, quarter to quarter is a little bit tough to compare in our events business on -- just because you're in different venues or mixed issues and so on.

So I tend to look at a lower trend but, David, to the question, yeah, we were down in the -- in the media events as well.

One nuance there was Royal Rumble which this year was in a stadium versus the arena last year so you have some mix there as well but if you isolate that we were down in those.

Got it.

And then just regarding the move to Fox in October, is it possible for you to quantify at all even at a high level your expectation for what this will mean in terms of viewership not only for SmackDown but for Raw and then just kind of given the increased promotion you'll receive.

How are you thinking about the flow-through of this to some of your other business lines like consumer products?

Yes.

Look, I mean, there's some things that -- you know, there's math so we're in 120 million homes on Fox versus 90 million on U.S.A.

So you've got a 33% increase on the homes so that's one.

Number two, as mentioned when we signed the deals, the promotional commitments and our deal with our partners or Fox are fairly significant.

I actually think they're going to over deliver because it's going to be good for them and not us, I also think that may create kind of a rising tie with our partners at U.S.A.

as well.

So that's the -- those are the 2 things we can quantify.

What that means for us and our business; both short-term and long-term, it's a little bit harder but certainly the numbers seem to -- the numbers that we do know are in our favor.

And we'll take our next question from Eric Handler with MKM Partners.

Yes.

Two questions for you guys.

First, wondered if you could talk a little bit about the WWE U.K. development process?

You know, you're currently taping the shows on weekend events, do you think that eventually goes live?

Can you talk maybe about some viewership levels and how the brand has grown and maybe talk a little bit about the performance center there in the U.K.?

Let me give you to Paul Levesque who is in charge of that division and can give us some more color.

Paul?

Sure.

So the U.K. brand has been very successful, one of the most watched weekly programs that the Network has; been very successful for us and we've been shooting the events there on the weekends as the next level of the Network comes in, I think you'll see that viewership increase and that moves forward and that becomes everything that it can be with all lines of business of a touring brand, live takeover specials.

The one that we did there before did tremendously well trending at number one in the world.

That social media exposure is massive with that brand across all platforms for us and it just gives us that exposure and is watched worldwide while it's taking place in including performance from all over Europe and it seems globally and that's a big factor for us as well.

And all part of -- additionally to that, feeding into the entire global culture of WWE, feeding up that pipeline whether that be NXT or then getting to Raw to SmackDown and moving on up the line.

So it just increases the pipeline of talent as well and that's what the U.K. performance center is there for; increasing that pipeline as well.

Okay.

And then just as a follow-up question, and just continuing on the path of talking about 2Q, George, I wonder if you could tell us, you know, there was a divergence between guidance and where consensus was for the quarter.

I wondered if -- have you guys pulled forward any investment spending into 2Q that maybe was planned for early -- later in the year?

I think it's on the cost side, Eric, it's what I talked about since the investments we made in 2018 were back-loaded year-over-year in the first half of the year you see a bigger impact.

That begins abating in the third quarter and then into the fourth.

So it's really primarily that.

It's less around us investing more today, it's more around the compare versus 2018.

We'll take our next question from Eric Katz with Wolfe Research.

So since the talent has now been fully back on the schedule, I know you mentioned, just broadly, that ratings were better than everything except the Indy 500 and NFL.

Can you talk to how that's trending sort of year-over-year compared to your own content in Q1 last year?

Yes.

Look, I think if you did the same numbers for last year because of the -- our decline in performance, you'd see we've declined more than then comps on the page.

What I will say is if you take a longer arch of time, for all of these properties at certain -- you know, on certain years, certain quarters, the performance varies.

There's obviously been years where we've held up better than others, we've had some softness that Vince described the rationale for in Q1 so, if you go quarter-over-quarter, we're certainly softer than some of the comps.

However, in absolute terms, you know, the fact that we're doubling most in 5, 6X, others, I think is important still relatively and our point, and our perspective, we're still able to cut through the clutter with live content.

Okay.

Great.

And with regard to the [third hour] SmackDown, just kind of curious where you are in sort of determining where you might move with that, what direction?

Yes.

So when we talked about the topic, as we've always said, we've been monetizing some way shape or form six hours of content for a long time.

Today that sixth hour is primarily being used on the Network and we'll figure out here over the next several months what we think the best use of -- nothing to update now.

Okay.

Then one last one, core comps and revenue was up a bit more modestly in Q1 than the last few quarters.

Just looking, any particular reason for that?

Yes.

And also if you look at it sequentially, which it doesn't usually happen, that line declined, it's because it's just the way the calendar shapes out.

We had 14 episodes of Raw in the fourth quarter, we only had 12 episodes of Raw in the first quarter.

So that impacted a little bit of the year-over-year.

To your point, it also has that sequential impact.

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

Just going back to SmackDown on Fox.

Obviously, we all know that's going to get additional distribution from being on broadcast but I'm curious from where you guys sit today, do you think Fox is positioning the product for advertisers and even for your fans in a way that makes it meaningfully different or even incrementally different then how it's been presented historically on U.S.A.; we'll have the Fox Upfront coming up in a few weeks, so I'm sure you don't want to get ahead of that.

But I'm just curious if you think they're going to take a different approach both from an advertiser and kind of fan product perspective; and then secondly, just coming back to Q2 guide, is this -- are you guys assuming this -- a Saudi event in the second quarter and the guidance or any kind of color on timing there would be helpful?

Yes.

So I'll take the second one first Ben and then Michelle will talk to the first.

You know, we're going to stay away from guiding on specific elements of -- of the quarter.

So obviously we'll talk about it once we report.

Yes.

On the Fox front, as Vince mentioned, we're obviously very excited to be partnering with them.

They have already fully embraced the fact that WWE is a partner.

We've been already actively part of their pre-upfront presentations which we're extremely excited to be sharing the stage with them and the key advertisers that they have.

What I will say is, you know, as most of you know, U.S.A.

Network, NBC has made tremendous progress over the last 3 or 4 years getting us to over 200 advertisers.

But again, it's important to remember that U.S.A.

network is primarily a general entertainment network and we've been positioned as such, which we are, but we always talk about us being the best of both worlds that we're also live content and we perform live sports.

So we do believe that Fox will be leaning in into the sport aspect of what we're doing.

While it's still the same product, we do believe that they'll bring us to a new advertising base and position us with a slight tweak.

I wouldn't say it's entirely different but important to note that we will be promoted in all of Fox programming; their entertainment programming but specifically NFL on Thursday nights, major league baseball, NASCAR as George mentioned.

So again, we believe that they will leaning in heavily to us.

We are excited about the upfronts, we will be part of both upfronts; both U.S.A., NBC Universal which is in the morning on Monday the 13th and then Fox which is in the afternoon.

And WWE will have a very strong presence in both so we're excited that we'll have, again, 2 partners putting us in front of key decision makers and the advertising community, again, we truly believe it will be a rising tide.

We will take our next question from Laura Martin with Needham & Company.

George, it's just I'm checking my math, you just reported $12 million as adjusted EBITDA for the second quarter, the high end of your guidance is 24.

You said you'll do $200 million for the year of which at least $100 million is in the fourth quarter.

So if I do the math right, I think that means you're at over $60 million that has to come in in the third quarter.

And back to Ben's, building on Ben's question about the Saudi guide, if you don't want to give us like -- I'm just trying to figure out how people get comfortable that you can get back to this $200 million for the year, if $60 million has to come in Q3?

Because my recollection, the way the U.S. deal works, I think it all comes in, in Q4.

So is there any way you can give us comfort that you can actually hit; really it all has to come in the third quarter based on your guide, but that $200 million number other than just -- I just -- I don't know what's happening in 3Q to get you back to that $200 million, that's my first question.

Yes.

So yes, because of some timing elements, Laura, you know, we don't want to start getting 4 quarters of guidance every time we're on the call.

So we said at least $100 million in the fourth quarter, obviously if it was more than that in the fourth quarter the target that you measured for Q3 would be lower.

So I'm not going to get into breaking those 2 quarters up at this point.

We think at least $100 million in the fourth quarter, so -- but it's at least, it's not exactly $100 million.

So we'll see but there may be --

And we do know you have -- And we do know you have to do a Saudi deal this year, presumably you won't wait till the fourth quarter.

So it's either in Ben's quarter in Q2 or in my quarter in Q3, right?

It's got to be one of those 2 and that adds a bunch, right?

Yes.

So we're not going to talk about that, again, so you know, our guide obviously reflects the best assumptions, the best knowledge we have right now.

Okay.

And there's no other thing you'd cadence or anything you can point to in Q3 that would help us, right?

Nothing specific, no.

Okay.

Good.

So then my other question is for Vince about talent development.

So I mean one of the potential interpretations of the rating softness could be maybe some of our talent is aging or audiences are getting tired of it.

And I'm interested, since you've been doing this a long time Vince, what are the metrics you look at to determine when you need to bring in a new, you know, a new winner or a new superstar to reinvigorate the sort of the storylines and -- and do you feel that a lot of these international people, and my recollection is it takes like 5 years to bring in somebody from the beginning to where they can really be at the top of the -- of the ledger, of the main roster, but can you remind us also how long it takes to build one of these John Cena, Roman Reigns kinds of characters?

I'll let Paul handle some of that color, please?

Sure.

So you know, it's interesting.

Obviously, there's no exact timing on -- on what it takes and first of all, we don't bring in superstars, we create them.

So there's no timing on how long that takes.

Some it's immediate, some it takes longer.

We're constantly bringing in talent.

So it's not a matter of how many leave now as we -- as was mentioned earlier when we have absence is, new talents step in.

An example of that would be Kofi Kingston stepping into a role and becoming WWE champion.

You know, as those things happen, those performers rise to another level.

When the other performers come back from that absence, they -- now it's a higher tide.

In 2018 we brought up over 15 talent, a lot of them have succeeded.

We've already brought up ten in 2019 through the system, through the talent development system.

So it's working very effectively and when you look at the roster of superstars, 80% of the main roster of Raw and SmackDown right now have come through that system, have come through our talent and development system.

So the main event players that you see came through that.

So it would be -- it works very well, it's very successful and as was mentioned earlier too, there's a 35-year track record of generation after generation of creating new superstars that are icons in last generations and we have a very good track record of doing that.

So we're very confident in that.

We'll take our next question from Jason Bazinet with Citi.

You know sometimes when companies have a little bit of weakness they blame macro issues instead of company-specific and you guys have been pretty forthright about the challenges you -- affecting live events.

But my question was, when I -- when I look at the decline in live events and compare it to the non-licensing consumer products, you know, the non-licensing consumer products was down almost 20% year-over-year.

And I'm just wondering, do you -- do you look at these numbers and think there might be a little bit of a macro headwind as well or -- or do you think you can attribute all of this to the issues you guys have been so forthright talking about?

Thanks.

Yes.

Look, Jason, it's always hard to parse at that level.

One of the things that we've talked about internally though is that you just saw kind of this bend in the curve across a variety of areas all at the same time.

So it wasn't a -- it didn't feel like a slow build to it.

It was fairly sudden and abrupt and so that's why the best thesis we have is what's been described as kind of this unique moment in time that we saw.

It doesn't mean that there may not be some macro factors but, internally I would tell you the discussion is really more as we've described it.

Your control.

Okay.

(Operator Instructions) We'll take our next question from Alan Gould with Loop Capital Markets.

I've got a few.

First with respect to the talent.

I'm sure in the past you've had -- in the past, you've had talent getting injured, maybe more so now than in the past.

When the talent returns, typically how long of a lag is there until the fan engagement comes back?

I'll -- you know, Alan, it's obviously a really good question and on point given the discussion we've had today and it's not -- it's something that's a little bit more difficult for us to trend out over long arcs of time but, you know, as Vince mentioned, it's not that there was talent absences, that happens continuously for a variety of reasons, it was really more the magnitude all at one time.

That -- that really was what felt unique and, you know, I can speak for the time that I've been at WWE, I only remember one other time where it felt the same way which was Spring 2010, I believe, into the summer.

Obviously, it was a very different business then where, you know, 20% of our business was media as opposed to today which is -- which was 70% in 2018.

So the way it impacts you is different but it felt the same way where you had this -- a fairly abrupt change in the metrics.

We also didn't have the level of engagement metrics that we have today but certainly, you can see some of the financial performance.

And you know, my recollection is that was a 6 to 9 month period of time but I'm not sure that just one data point like that is indicative of what we'll see in the future.

But --

Okay.

If I could ask a couple others.

Could you just give us a -- do you know what the number of domestic and international events are going to be in the 2Q?

It's on your calendar, just haven't gone through event by event.

Yes.

It's like -- yeah, we tend not to talk about that just because there's sometimes some logistical elements that changes but as you know, in the second quarter we do our annual European tour so that's where we'll skew international in the quarter.

So we should assume it should trend similar to last year, is that fair to say?

Yes.

I mean it usually does quarter over quarter but there are small changes and sometimes those changes are, you know, happen fairly close just for logistical reasons.

Okay.

And then George, 2 quick financial questions.

I know you've got the -- on your new lease you have 6 months for free but I was wondering, when does it start impacting your P&L?

Yes.

It will start impacting the P&L once we begin the occupancy.

Obviously, they'll be cash outlays between now and then.

Okay.

And last thing receivables increased by?

Alan, just as a reminder, just the way the structure of the lease it's -- it's below the OIBDA line, just -- it's primarily in the interest and depreciation.

Okay.

That's helpful.

One last thing, receivables increased by $24 million in the quarter, was a pretty big increase, I was just wondering what that was related to.

Can you repeat that?

I think your accounts receivable increased by $24 million in the quarter?

Are there --

Yes.

Again, yes the working capital for us tends to be just driven by timing of events so, you know, it tends to swing between quarters but nothing unusual.

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