Cisco (CSCO) earnings Q2 2021

Chuck Robbins, CEO of Cisco Technologies Inc., speaks during a panel discussion at the World Economic Forum (WEF) in Davos, Switzerland, on Tuesday, January 17, 2017. World leaders, influential executives, bankers and policymakers attend the 47th annual meeting of the World Economic Forum in Davos from January 17th to 20th.

Jason Alden | Bloomberg | Getty Images

Cisco The stock fell 6% in extended trading on Tuesday after the company posted a second quarter result that featured ongoing problems in its top product segment. However, the company’s results and quarterly projections exceeded analyst estimates.

This is how the company did it:

  • Merits: Adjusted for 79 cents per share compared to 76 cents per share, as analysts expected, Refinitiv said.
  • Revenue: According to Refinitiv, $ 11.96 billion versus $ 11.92 billion as analysts expected.

Cisco revenue declined slightly on a yearly basis for the quarter ended January 23 Explanation. Sales declined for the fifth quarter in a row. The weaker economy has dampened the company’s growth prospects, as has the decision by some customers to use cloud services to keep employees working efficiently and staying away during the coronavirus pandemic.

In the company’s leading product segment, Infrastructure Platforms, which includes sales of switches and routers for data center networks, Cisco had sales of $ 6.39 billion, down 3% year over year and above the consensus of 6, $ 23 billion below the analysts surveyed by FactSet.

“The corporate market remains weak, fueled by some extended sales cycles and a prolonged hiatus in spending from some customers caused by the pandemic,” Cisco CEO Chuck Robbins told analysts on a conference call. While switch revenue was flat, router and server revenue declined.

The application unit, including Webex video calling products, had sales of $ 1.35 billion, unchanged year over year, just below the FactSet consensus estimate of $ 1.40 billion. Webex had an average of 600 million users in the quarter, according to Robbins.

“I think you will actually see us next year – this portfolio will keep improving and I think we have a chance to buy back stocks,” said Robbins. Webex competes with Google, Microsoft and Zooming, among other.

Robbins pointed to the dynamism of web-scale customers running large data centers. About a quarter of Cisco’s sales to service providers for the quarter came from web-scale customers.

In the Cisco quarter raised his offer to buy network hardware company Acacia Communications from $ 2.6 billion to $ 4.5 billion. The company too announced It was planned to acquire IMImobile, the cloud communications software maker, for $ 730 million, and it was launched Integrations third party tools for Webex.

In relation to the forecasts, Cisco expects adjusted earnings per share of 80 to 82 cents with revenue growth of 3.5 to 5% in the third fiscal quarter. Analysts polled by Refinitiv had expected adjusted earnings per share of 81 cents and revenue of $ 12.35 billion, which would represent a 3% increase in revenue. The quarter includes an additional week.

Cisco has concerns about its supply chain, reflecting greater concerns about chip shortages, said Scott Herren, the company’s chief financial officer.

“At this point we will get in touch with all important suppliers,” said Herren. “We’re taking advantage of the type of bulk buying we have and are continuing to expand this supply chain to make sure we can protect customer shipments. Hence, there is little headwind on these lines from the current supply chain.” The company’s sales and gross margin forecast reflects supply chain fears, Herren said.

Excluding the after-hours move, Cisco stocks are up 9% year-to-date, while the S&P 500 index is up 4%.

Nominations are open for 2021 CNBC disruptor 50, a list of private startups that are using breakthrough technology to become the next generation of large public companies. Submit through Friday, February 12 at 3 p.m. EST.

CLOCK: Chuck Robbins, CEO of Cisco, ponders how to lead through difficult times

Lions Gate Leisure Corp (LGF.A) (LGF.B) Q3 2021 Earnings Name Transcript

Image source: The Motley Fool.

Lions Gate Entertainment Corp (NYSE:LGF.A) (NYSE:LGF.B)
Q3 2021 Earnings Call
Feb. 04, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lions Gate Entertainment 3Q ’21 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to our host, Head of Investor Relations, James Marsh. Please go ahead.

James Marsh — Head of Investor Relations

Good afternoon. Thanks for joining us for the Lionsgate Fiscal ’21 third quarter conference call. We’ll begin with opening remarks from our CEO, Jon Feltheimer, followed by remarks from our CFO, Jimmy Barge. After their remarks, we’ll open the call for questions. Also joining us on the call today are Vice Chairman, Michael Burns; COO Brian Goldsmith; Chairman of the TV Group, Kevin Beggs; and Chairman of the Motion Picture Group, Joe Drake. And from Starz. We have, President and CEO, Jeff Hirsch; CFO, Scott MacDonald, President of Domestic Networks, Alison Hoffman; and EVP of International, Superna Kalle.

The matters discussed on this call include forward-statements, including those regarding the performance of future fiscal years such statements in the subject to a number of risks and uncertainties, actual results could differ materially and adversely from those described in the forward-looking statements, as a result of various factors. This includes the risk factors set forth in Lionsgate’s most recent Annual Report on Form 10-K, as amended and our most recent quarterly report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, that may be made to reflect any future events or circumstances.

With that, I’ll turn it over to Jon. Jon?

Jon Feltheimer — Chief Executive Officer

Thank you, James and good afternoon everyone. We’re pleased to report a quarter with strong financials, robust subscriber growth at Starz and another outsized performance from our library, as our model continues to show its resilience in the face of the pandemic.

Let me take you through the quarter’s highlights. Starz continued its strong growth, gaining 800,000 subscribers in the quarter, as it increased international over the top subscribers by 26% and posted solid gains in domestic over the top subs. With 28 million global subscribers at quarter’s end, we are well on our way to our goal of 50 million to 60 million global subscribers by 2025, the vast majority of which will be high value streaming subs. Last week, Starz announced a new bundle agreement with Canal+, that will immediately scale our footprint in France, anticipating a future, in which we expect bundles to become an increasingly important part of our distribution strategy.

Our production teams have been doing a great job of keeping our television and film pipelines operating at full capacity, with safety protocols in place, and minimal downtime. Amazingly, in spite of the challenges, we are currently shooting 19 scripted television series, and another 20 unscripted shows around the world. Five feature films have returned to production, three new film productions have started, and in the coming months, we will begin shooting the Wonder sequel White Bird from director Marc Forster. Shotgun Wedding, starring Jennifer Lopez and Josh Duhamel. Are You There God? It’s Me, Margaret, from superstar producer James L. Brooks. Borderlands, teaming Kevin Hart and Cate Blanchett. And John Wick 4, of course, starring Keanu Reeves for release next year.

Our television group continued its strong year, with new series picked up at Starz, Apple Plus, ABC, Fox and HBO Max, while all six series launched last year, they have been renewed for second seasons, with Love Life breaking out to become the top performing original on HBO Max, as we continue to demonstrate our ability to put shows on the air, and keep them there.

These strong content pipelines continue to feed a library that in the quarter achieved another record $765 million in high margin revenue for the trailing 12 months, and we’ve accomplished all of this, while continuing to strengthen our balance sheet, ending the quarter with more than $550 million in available cash, an untapped $1.5 billion revolver, and leverage that has been reduced by more than a full turn in the past year, to under four times, while continuing to fund the growth of all of our businesses without a capital raise and with our own free cash flow.

To drill down on our performance in the quarter, I’d like to continue the narrative, we began on the last call by laying out three of the broader themes that have contributed to our success. First, we [Indecipherable] to mobilize all of our resources behind the growth of Starz. From the acquisition four years ago, through the international rollout that began in 2018, we’ve been converting and scaling Starz into a modern, data driven global subscription leader, that has become the first traditional service to have more over the top and linear subscribers, a critical digital inflection point. By the end of next quarter, we expect streaming revenue to surpass traditional for the first time as well.

Domestically, our programming for a broad spectrum of women and traditionally underserved audiences is differentiating us from our competitors, driving subscriber acquisition and retention, and setting new viewership records. New series P-Valley and Hightown and the docuseries Seduced, are resonating with our audiences. Power Book II: Ghost set viewership and acquisition records in its first season, becoming the highest-performing new series ever on Starz. With its initial season ending on a viewership high, we’re bullish on the performance of future seasons, as well as upcoming instalment of the Power franchise, Raising Kanan and Force. We’ve established ourselves as the go-to-premium service for grown up audiences. Our brand continues to set us apart in a crowded marketplace and we have our biggest and most ambitious Starz slate, coming in the year ahead.

With the programing and marketing spend informed by the consumer data, that we’ve harvested from our direct-to-consumer business, we just completed another quarter of high ARPU Over-The-Top domestic subscriber growth that drove solid revenue gains, while we continue to convert our Comcast linear subscribers into higher value a-la-carte subs ahead of schedule.

Internationally, we’ve expanded into 55 countries, including our STARZPLAY Arabia joint venture, with launches spanning 10 partners and 20 countries in the quarter. We also continue to bolster consumer data and engagement, by rolling out our retail app in another five countries. Our partnerships with global streaming platforms and top local distributors alike are thriving, from Ghost to Gangs of London, Seduced to Spanish Princess, our best of global SVOD content strategy is resonating with consumers, helping to drive our second straight quarter of nearly 30% Over-The-Top subscriber growth. We’re capitalizing on our early traction, by building scale in existing territories, while opportunistically expanding into new ones. Most recently, leveraging the fast start of our Indian platform, Lionsgate Play into Indonesia.

Second, we continue to accelerate the convergence of our studio and platform businesses to support this growth, whether lining up 20 Lionsgate Television premium series for Starz, using our library to drive Starz’s international growth or leveraging our properties and talent relationships across all of our businesses. This afternoon, we announced that our collaboration with 3 Arts on the Serpent Queen, the story of French Royal, Catherine de’ Medici from Bohemian Rhapsody’s Justin Haythe, executive produced by Hunger Games franchise director, Francis Lawrence and 3 Arts Erwin Stoff, has been greenlit at Starz. The latest example of our ability to marshal all of the resources within our Lionsgate family to support the growth of Starz.

As everyone scrambles to vertically integrate their legacy businesses behind the growth of new streaming platforms, our ability to continue converging our studio, platform and talent business is critical.

Third, we continue to deepen our content pipelines, while taking advantage of our distribution optionality. Our strong performance in fiscal ’21 allows us to greatly increase our content and marketing investment in fiscal ’22, to be funded with our own cash flow. We are responding to the record imbalance between content supply and demand in the marketplace, by expanding our slate at Starz, ramping up our scripted series production at Lionsgate Television, and readying a robust film slate that anticipates theaters coming back next year, while addressing huge demand for content across all platforms. Our success in generating strong returns from early PVOD, multi-platform and hybrid models for the films like, Fatale, Antebellum, Run, I Can Only Imagine and The Secret speaks to our ability to monetize current films, while at the same time, working with our theatrical exhibition partners to plan for the future.

One full year into the pandemic, our businesses are doing well, adapting to the changes, overcoming the headwinds, and delivering a strong financial performance, while creating evergreen value for the future. We owe much of the success to be amazing resilience of our employees and our creative talent family, who have double down on their collaborative team spirit, innovated new ways of working and communicating, and demonstrated strength and resourcefulness in the face of a diversity.

Now I’d like to turn things over to Jimmy.

James Barge — Chief Financial Officer

Thanks Jon and good afternoon everyone. I’ll briefly discuss our fiscal third quarter financial results and provide some color on our outlook. In fiscal third quarter, adjusted OIBDA was $134 million, up 8% over last year and driven by strong performance in television with total revenue coming in at $836 million reported. Fully diluted earnings per share was a loss of $0.06 and fully diluted adjusted earnings per share came in at $0.21 per share. Adjusted free cash flow for the quarter was $111 million.

Now, let me briefly discuss the fiscal third quarter performance in the underlying segments, compared to the prior year quarter. You can follow along in our trending schedules that have been posted to our website and show greater detail around our global media network subscribers. Media Networks’ quarterly revenue was $406 million and segment profit came in at $82 million, driven largely by domestic OTT subscriber growth, as well as the strong performance of Starz International, as we continue to rollout in new markets and platforms. Globally, including STARZPLAY Arabia, the company grew OTT subscribers 900,000 sequentially or 7%, as you can see in our training schedules. Domestically OTT subscribers increased 3% sequentially, while international OTT subscribers grew 26%. Total global Media Networks’ OTT subscribers reached 14.6 million, while MVPD subscribers stayed constant at 13.4 million, for a total of 28 million subscribers. We now expect our previous guidance on global media network OTT subscribers to exceed the top end of the 13 million to 15 million subscriber range by the end of the current fiscal year, approaching 50% plus growth year-over-year.

Now turning to our Motion Picture Group; revenue declined or limited theatrical releases to 250 million, while segment profit of $50 million was in line with the prior year, despite a tough comp against the prior year quarter, which included ancillary sales of John Wick. And finally, we had strong performance in television, where revenue for the quarter came in at $228 million, and segment profit increased to $30 million, driven by additional Mad Men licensing and episodic deliveries.

On the balance sheet, we continue to reduce leverage, ending the quarter at 3.6 times trailing adjusted OIBDA or just under three times excluding our investment and STARZPLAY International. We continue to retain significant liquidity, with $551 million of cash on hand and a $1.5 billion undrawn revolver. We remain committed to strengthening our balance sheet and paying down debt.

Now I’d like to turn the call over to James for Q&A.

James Marsh — Head of Investor Relations

Great. Thanks, Jimmy. Carolyn, can we open it up for Q&A?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Steven Cahall from Wells Fargo. Your line is open. Please go ahead.

Steven Cahall — Wells Fargo — Analyst

Thanks. Maybe Jimmy, to start off, I was wondering with just about a month left in the fiscal year, could you maybe give us what your outlook is for fiscal ’21? And then Jon and Jimmy, fiscal ’22 is probably going to look a lot different. So could you give us any sense of how we think about both the cadence for fiscal ’22, but maybe also just as folks are maybe reallocating some budget from in-home entertainment to out-of-home entertainment and you’ve got a bit more cost coming online. How you think about the margins in a year like fiscal ’22? Thanks.

James Barge — Chief Financial Officer

Sure Steve. Thanks for the question. Look, in terms of fiscal ’21, as we said from the beginning of the year, that fiscal ’21 was going to be more front-end weighted, so — and as we look ahead to the segments, we continue to see Media Networks segment being flattish relative to the prior year for on a full year basis, and that’s as we reinvest excess profits there to derisk the model and position us for future growth. And in Motion Picture Group as we said before, I think over the remainder of the year, profits will continue to moderate. Sequentially, particularly with P&A spend on Chaos Walking as that increases in the fourth quarter. And then in TV, we remain on track for significant growth there, profits up 50% for the full year, as Jon has noted in earlier calls. So that kind of rounds out how we would finalize fiscal ’20 or what we’re seeing there…

Jon Feltheimer — Chief Executive Officer

’21.

James Barge — Chief Financial Officer

’21. And in terms of fiscal ’22 looking ahead, there we expect the cadence to be more back-end loaded. So just the inverse of fiscal ’21. So back-end loaded in fiscal ’22. Look we expect strong operational performance in ’22, we’re going to be [Technical Issues] that with increased investment in content and marketing as you’ve heard. With regards to the various businesses, looking at Starz it will reflect the impact in the timing of our content marketing spend. In Motion Picture Group, the P&A spend is going to be more front-end loaded here because of a more front end loaded first half theatrical release slate and then likewise, more back-end loaded in terms of TV, in terms of episodic deliveries. I would say, Weeds is available in the first quarter of this year, fiscal ’22 that is. So we got a strong fiscal ’22 and it’s back-end loaded.

Jon Feltheimer — Chief Executive Officer

Yeah, I’d echo what Jimmy said, I think all of our core businesses won’t look that different. I mean, we are going to have a strong library year. We’re going to continue to sell into strong demand. Our TV business is strong. As I mentioned, we’ve got 39 shows going on right now. And we like the trajectory of our Starz business, both domestically and internationally. So I think it’s going to be another strong year, as Jimmy said.

Steven Cahall — Wells Fargo — Analyst

Thanks. That’s a lot of great color, and if I could ask a quick follow-up, you’ve done a great job of getting leverage down into the threes, should we expect that to tick up a little bit in fiscal ’22?

James Barge — Chief Financial Officer

Sure Steve. Look, you’re right. We were down 1.5 turns in the first nine months of this year. So 3.6 is a relatively low point at the moment in a favorable way. What I would expect as we go into ’22 with the content spend and marketing spend rolling through, you would expect some increase in margins there to some peak kind of mid — early to mid-year leverage ratios, but returning back around four times leverage by the end of fiscal ’22. So that’s a good place to be, relative to where we are in our investment cycle with content marketing.

Steven Cahall — Wells Fargo — Analyst

Great. Thank you.

James Marsh — Head of Investor Relations

Operator, next question please?

Operator

[Operator Instructions] Our next question comes from the line of Tim Nollen with Macquarie Securities. Your line is open. Please go ahead.

Tim Nollen — Macquarie Securities — Analyst

Hi everyone. Thanks very much. Wanted to ask a question about profitability on the OTT side, if there is any color you could give us. Seeing the subs outpacing the linear a quarter or two ago and are seeing revenue outpacing the linear in the next quarter or two, what are your thoughts on how the profitability profile of the Starz OTT service stand-alone looks like?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

Hey Tim, it’s Jeff. Thanks for the question. Now if you look back over the last couple of years, as we were primarily a linear network — bundled network with low ARPU subs and we’ve converted, as you said, over 50% of our — more of our OTT subs. The linear subs and that profitability continues to come up, you look at our ARPU in the last quarter was over $6. I think there is some noise in that number still, based on our — converting from bundled to a-la-carte on Comcast, but we expect long-term to be somewhere between the %5.75 and $6 on ARPU. So a much more profitable subscriber, as we bring them onto the platform. And then if you look internationally, we still think that will end up where we said publicly, somewhere between $3 and $4 when we get out to 2025 and that’s a little bit more of a steeper line, as we accelerate the OTT growth in the international side. So overall, we’re moving to where the consumer is, but we’re also moving to a much more profitable customer.

Tim Nollen — Macquarie Securities — Analyst

Okay, cool. Thanks Jeff. Could I ask maybe another one, probably also you to you too Jeff, about the increasing competition we’re seeing obviously in OTT. I believe you’ve done some work, looking at your data and trying to figure out what content to make available at what times and how to mitigate churn, I wonder if you’ve got any comments on churn and your ability to sustain growth, given how much more crowded the field continues to get?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

It’s a great question. I think if you take a step back and when we look at the industry and how it’s unfolding. This is probably the first quarter with the exception of Paramount+ that’s coming at the end of March, where all the players were kind of on the field right now, and as we’ve said before, that first big broad based streaming services, the Netflix, the Disney pluses, the Hulus that are trying to service everybody in the home, I think that’s where the real competition is going to be, and you’re going to see people competing on ad spend, people competing on price, and people competing on bundling. As we announced today, you saw a Canal+ bundle in Europe. We think we’ll see more of that as we go. But we are really positioned as a complementary service to all those big broad-based services, and so, we think with our programing strategy being very focused on a female audience and underserved audiences and building out that slate. As Jon said, it’s our robust slate yet. We think that we’ve got a really good programming strategy. We’ve got a great lineup and I’m actually going to let Ali talk about the data and how we use the data to schedule and reduce churn, to what we’re seeing in an all-time low in the business right now.

Alison Hoffman — President, Domestic Networks, Starz

Yeah, I think just to comment on the slate, we’ve got returning franchises like Power. I think we’ve got three instalments of Power coming next year. We’ve got Outlander coming next year. So in terms of driving the business, in terms of subscriber acquisition and in terms of retention, we’ve got through that nice flow of flowing viewers from one show into the next, as well as sort of adding and building viewership and building the subscriber base as we go. We’re always — per Jeff note about, in terms of the data, we’re really always driving the lowest subscriber acquisition costs. And so that’s really how we manage the business. We are managing the business to have a really good return on our marketing investment and a really strong return on our content investment as well.

Tim Nollen — Macquarie Securities — Analyst

Great. Can I maybe squeeze one more in, please, also on a similar topic, I know that with Starz International, you’ve got a lot of rights to content from the likes of Paramount and Hulu. I wonder if there is anything that we should think about, might change, given that we’ll get some updates on Paramount+ coming in the next couple of weeks or so? Or indeed anything related to Disney? Just if there’s anything on your access to that international content that might change?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

I am going to have Superna answer that question.

Superna Kalle — Executive Vice President, International Digital Networks

Hi. This is Superna. Thanks for the question. So we have not been seeing a problem with securing fantastic content from producers, nor — certainly from our own studio, we have incredible content on our own slate, that’s very international focused and we think are going to drive a lot of subscribers. Just some examples are, we’re very excited about Serpent Queen, just announced today, as well as Dangerous Liaisons Becoming Elizabeth, and the Power franchise works incredibly well for us. But no, we’ve not been seeing a slowdown in content acquisitions either.

Tim Nollen — Macquarie Securities — Analyst

Great. Thanks.

James Marsh — Head of Investor Relations

Caroline, next question?

Operator

Our next question comes from the line of Alan Gould from Loop. Your line is open. Please go ahead.

Alan Gould — Loop Capital — Analyst

Thanks for taking the question. I’m going to do for the flipside of Tim’s question address it to Kevin. Kevin, seems that the traditional TV is seeing probably change at the most accelerated rate we’ve seen, in terms of ratings and advertising. How does everything play into your job as a producer of content for all of TV, traditional streaming etc?

Kevin Beggs — TV Group Chairman

Thank you. It’s a great question. It has actually never been more robust. Jon touched on our production slate, which includes 13 series for Starz and it has more in development, 14 or 15 across the television landscape outside of the Starz-Lionsgate family and the demand is at an all-time high. One of our strengths is a very diverse portfolio of producers, writers, IP generators, both from within our own company. Amazing brands like John Wick, which we’re developing in series with Jeff and his team, and small movies that have become important mainstays for series like Dear White People. We’re in production on Blindspotting for Starz right now. We have a fantastic partnership with the BBC, that’s yielded two pilots to season in one series order. if the demand is high and everyone wants premium, high end scripted programing. It’s what we’ve been doing for 20 plus years at Lionsgate. It is our own special lane and now that lane, everyone wants to crowd or expanded to a four lane freeway, but very easy for us to do so.

Alan Gould — Loop Capital — Analyst

Okay. If I could just follow-up for either Jon or Jeff, I was reading a trade article from STARZPLAY International, who is talking about possibly doing an IPO in the next few years. Is that the plan on Starzplay International, that was quoting to CEO in that news article?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

Yeah. Look, we feel really great about our STARZPLAY Arabia. We are 32%, we are a controlling shareholder with approval rights, that continue to be the market leader. We feel good about what they’ve built. They’ve secured a [Indecipherable] from RIAA, which is really a validation of how great they are doing in the marketplace. We do have obviously the rights to consolidate and we’ll continue to look at the business and when we think it’s the right thing to do at the right time, then we will look at that as an option.

Alan Gould — Loop Capital — Analyst

Thanks Jeff.

Operator

[Operator Instructions]. And our next question comes from the line of Thomas Yeh from Morgan Stanley. Please go ahead.

Thomas Yeh — Morgan Stanley — Analyst

Hi, thanks. Quick question for Jeff. You mentioned that there is some ARPU trend impact as we move through the Comcast subscriber transition, and lapped a one-year anniversary there. More broadly, it looks like there has been some continued stabilization on traditional linear Starz sub trends. Is there anything you would call out there about underlying drivers that’s reporting uptake, despite broader cord cutting at the industry level?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

It’s a great question. I would say two things to remind everybody that we are not a fully distributed ad-supported network, and so we have a lot of penetration room on our traditional MVPD partners. And so, we think that there is great — again great opportunity for us to grow on the traditional side with their audience, as well as on the OTT side. I’ll also remind everybody, that by the end of this fiscal, will be 80% a-la-carte on the traditional side. So that’s really derisked the traditional business. It has put the incentives aligned with our partners to grow the business together, and as our content slate continues to outperform on their platforms, we’re going together. And I think the really great thing about that is, those are customers who are actually seeking out Starz and choosing Starz. So there are much stickier customers, with churns also coming down.

So we, I think we have an opportunity, both to grow in the fast and more profitable side on the OTT side, but also on the traditional business with our traditional partners.

Thomas Yeh — Morgan Stanley — Analyst

Okay, great. And then just quickly on the film strategy, I’m wondering if you could update us on your views of taking films through their premium VOD window. Is there a right size film, or any puts and takes that helps determine what path a film might take into the monetization going forward?

Joe Drake — Chairman of the Motion Picture Group

Yeah, sure, this is Joe. Thanks for the question. I guess what I would say to you is that, we have — we talked a lot about it, adopted what we’re calling a platform agnostic approach to distributing film. We’re looking at the theater business and we do think that theaters will get open by this summer and maybe earlier and we are prying for that and at the same time we’ve had a number of experiences now in the PVOD space. And what I would say is that, we are seeing multiple opportunities or multiple options for distribution of each title. That’s the way we greenlight our titles now. We look at — we look at the theatrical option and you look PVOD, you look at other models, theatrical to PVOD and greenlight on that basis and we’re just seeing more opportunity than ever before. So I don’t think it’s a — I don’t think it’s a right sized film for that model. I think it just has to do with what film what customers you are trying to reach, where are those customers what’s available in the marketplace at the time? We have — we reorganized our overall structure internally to really bring all those groups together. What I can tell you is that, our distribution and marketing teams are working like never before across every model and unlocking a ton of value.

Thomas Yeh — Morgan Stanley — Analyst

Okay, great. Thank you both.

James Marsh — Head of Investor Relations

Next question Caroline?

Operator

Our next question comes from the line of Jim Goss from Barrington Research. Your line is open. Please go ahead.

James Goss — Barrington Research — Analyst

Okay, thanks. A number — a couple of questions, one regarding the film slate and the — you made an interesting in pointing about sort of John Wick maybe perhaps being fodder for your series. Do you see more and more opportunity for increasing interplay between the film and TV production, especially since Starz has been improving its presence?

Jon Feltheimer — Chief Executive Officer

Absolutely, look we’ve — you’ve heard us talk about Lionsgate 360 a lot over the last couple of years. We are very, very integrated across this entire company, and so whether — when we’re making a movie, when TV is buying rights for television series. We have a regular group that meets and looks at each piece of content, in terms of how we can maximize it across every piece of our platform, I think John Wick and The Continental series is a great example of that. But there are a number of properties, 1619 is a great example of that where we’re working together, to make sure [Speech Overlap]. Blindspotting, yes so there is — it’s sort of a regular part of our business, and I think something that we do better than anybody out there, because we are so integrated and we work in a way that I think that — where I think you find silos in other places, I think this organization is really reaping the benefits of that level of integration and collaboration.

James Goss — Barrington Research — Analyst

Okay. And then with regard to Starz, as you been able to increase its profile globally as well as domestically, can you talk about the consistency of the programming in domestic markets versus the various international markets? Are you able to leverage a lot of the programming and do you have to have a lot of unique content in H1 to make that work? And also you mentioned that Starz, I think had a lot of complementary positioning, relative to some of the other services. Does that — do you feel that creates a better runway, or are you starting to get Starz as a first buy more cases, as you develop a better identity than you had originally?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

Good question. So I think first and foremost, the international expansion is really predicated on leaning on the domestic business as a foundational element. And so the slate, as we continue to increase the marketing and the spending on the domestic content, it has to work globally. And so if you look at Girlfriend Experience as a perfect example. That had been a domestic show. We had moved the storyline to London with a very international cast, with a very international storyline that should work all over the world. The Power franchise is one of the best performing shows in the U.K. and in France and in some markets in LatAm. And so, as we look at putting shows on the domestic network, we’re always looking at how does that play internationally. But we also know that some of those shows won’t play internationally. So we are augmenting those shows with third party purchases from other partners domestically.

And I would say, also I think the really unique industrial logic about putting the companies together, is the ability to lean into the — Joe just talked about the Motion Picture IP to put content on the air in terms of series, whether it’s Blindspotting and The Continental, leaning in with Kevin on some of the library or our originals that we’re producing out of Spain, out of India, out of LatAm. So it really supplements our global content footprint. And so I feel like the slate is really going to work around the world and augment where we need to.

James Goss — Barrington Research — Analyst

Okay, thanks. Appreciate it.

James Marsh — Head of Investor Relations

All right. Thanks, Jim.

Operator

[Operator Instructions] Our next question comes from the line of Kutgun Maral from RBC Capital Markets. Your line is open. Please go ahead.

Kutgun Maral — RBC Capital — Analyst

Great, thank you. Two if I could. First, in terms of the increased investment in content and marketing you expect across the core business in 2022, can you provide more color on where you see the greatest opportunity to lean into, in terms of Starz television or Motion Pictures? And then if you could kind of help frame the magnitude of the increase you’re thinking about, I guess since fiscal ’21 has been so disrupted with COVID, how do we think about the path ahead relative to maybe fiscal ’19 or pre-pandemic fiscal 2020 levels? And then I have a follow-up on Starz?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

Sure. Thanks. Well, absolutely, I mean, speaking of pre-pandemic levels. You know, I would expect the content marketing spend as a percentage of revenues to be pretty much in line with what we incurred in fiscal ’20 as an example. Across all our businesses, we’re finding Motion Picture TV and Starz, great opportunities to drive revenue and secure our future with investments across all three of the business units. So overall, that’s driving increased revenues. So I would expect the overall impact on net profits to be modest.

Kutgun Maral — RBC Capital — Analyst

Understood. Okay, that’s very helpful. Thanks. And then if I could on Starz domestic OTT, in the quarter and net adds, if I think about 300,000, seemed to be a bit of a deceleration versus the earlier days of COVID, when you had of course the very robust trends from the pull forward of demand. I guess, up until this point you’ve grown that subscriber base so impressively, Going forward is this quarter’s pace, what you see as maybe the new normal range of Starz domestic OTT net adds that we should expect going forward?

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

It’s a great question. We had a really big quarter last quarter, but that was I think driven more from the content that we had on the air. We had two monster hits with P-Valley and the premier of Ghost in last quarter, and we saw great subscriber growth there. If you go back in history and you look at every time we put the Power franchise on, well you’d see this really spikes up that quarters. This quarter we had some of our smaller shows on, and so you saw the growth slow a bit. But we expect fourth quarter globally to look much more like second quarter, in terms of the cadence of subscriber gains.

And then, as John said in his prepared remarks, we are coming off our most robust and fully complete slate that we’ve ever had in the business, with three Power shows, P-Valley coming back, Hightown coming back, a bunch of new content that we’re about to announce. And so it’s our best and most complete slate and so you will see acceleration and growth, but also we’ve scheduled this — and Ali can talk about it in a minute. We scheduled it to help reduce churn, and so as we fill out two shows on the air every week, 52 weeks of the year, we should continue to see churn come down to an all-time low, and accelerate the business even more on the front end. Ali, you want to add anything on that?

Alison Hoffman — President, Domestic Networks, Starz

Yeah. Just we will be consistently on the air with shows for women and underrepresented audiences next year. And just to repeat what Jeff said three instalments of the Power franchise and also Outlander happening next year, in addition to a slate of other new series that we really have. Great expectations for them.

Kutgun Maral — RBC Capital — Analyst

Thank you so much.

Operator

And our next question comes from the line of Alexia Quadrani from J.P. Morgan. Your line is open. Please go ahead.

Alexia Quadrani — J.P. Morgan — Analyst

Thank you. I wanted to follow-up on your…

Jon Feltheimer — Chief Executive Officer

Hey Alexia.

Alexia Quadrani — J.P. Morgan — Analyst

Hey there, how are you guys doing? I wanted to follow up on your earlier comments about distribution, you know theatrical versus streaming, and just dig into that a little bit further. You know, ultimately I guess when the pandemic is behind us, I’m curious to how you see the distribution sort of platform — how much it has changed in terms of the decision of how much go to traditional box office, versus streaming? And also, if you have any color on how maybe the economics of the various outlets you know impact your business? And then I have a follow-up?

Jon Feltheimer — Chief Executive Officer

Sure Alexia. So what I would say to you is that, much like Starz, we’re moving — we’ve leaned heavily into content. We will have over 40 films across all of our various distribution platforms that will be released in ’22 and that should grow again into ’23, and that’s a reflection of, one, our expectation that the theatrical market is going to come back, but that these opportunities that we’re taking advantage of now, these new windows, these new ways of distributing consumers, consuming in a different way and platform appetite downstream, we think what we have is an environment where there is actually added opportunity. It’s not one versus the other. And so we’ve leaned into content accordingly, structured the business accordingly.

As it relates to the metrics, certainly what we’ve seen in the last year is that when you are able to collapse some of these windows, you move quickly from theatrical to — into PVOD or directly in into PVOD and then move up some of your other windows, depending on the particular film, which you do and you can also gear marketing spending differently. We’ve been able to be more efficient in certain cases with our marketing spend. We’ve been able to accelerate cash churn in some of these new models. And so it has actually improved our metrics on our films that are released in these alternative models. We’ve also — along with that, the team we call segment to-our-home entertainment team that does this business, has actually accelerated. They’ve increased the volume of content, because they’re seeing the kind of opportunity.

So it’s — the metrics in some of these new models are really compelling, and yet we still believe very strongly in the value of theatrical release and really set up the long-term value for our titles, and ultimately help drive library.

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

The only thing I would add to that, Alexia, I’d add one more thing, which is — every single piece of content that we play with, is a bespoke model. A few people have mentioned already, there is communication between all of our divisions that happens 10 times every single day. And so, when there is a picture — Joe is looking at every one of our distribution channels, including Starz and saying, how can we add value to what would be a normal model here? And as I say, it’s kind of a unique culture that we have at our company.

Alexia Quadrani — J.P. Morgan — Analyst

Thank you. And then just a quick follow-up on the share price; stocks you know pretty much doubled, offloads in recent weeks. I think it’s largely — at least through March, where I did technicals, where we’re seeing that across some these value names in media. Just curious on how you view the share price now, and any drivers behind the move that we might be missing outside of that? Any color there?

James Barge — Chief Financial Officer

Hey Alexia. It’s certainly, nice to see investors beginning to recognize our improving fundamentals. But those fundamentals, they are rapidly increasing our asset base and building real value across all of our core businesses every day. And we obviously appreciate the attention the equity is starting now to garner.

Alexia Quadrani — J.P. Morgan — Analyst

Thank you.

Operator

[Operator Instructions] There are no further questions in the question queue.

James Marsh — Head of Investor Relations

Great. Thank you, Caroline. I’ll just make a closing statement. Here. I would like everyone to please refer to the Press Release and Events tab under the Investor Relations section of the company’s website for a discussion of certain non-GAAP forward-looking measures discussed on the call today. Thank you very much.

Operator

And ladies and gentlemen, this conference will be available for replay after 4:00 PM today through February 6th, at midnight. You may access the AT&T Executive replay system at any time by dialing 1866-207-1041 and entering the access code of 1780119. International participants may dial 402-970-0847. Those numbers again are 1866-207-1041 and international 402-970-0847 with access code of 1780119.

That does conclude our conference for today. Thank you for your participation and for using AT&T conferencing services. You may now disconnect.

Duration: 44 minutes

Call participants:

James Marsh — Head of Investor Relations

Jon Feltheimer — Chief Executive Officer

James Barge — Chief Financial Officer

Steven Cahall — Wells Fargo — Analyst

Tim Nollen — Macquarie Securities — Analyst

Jeffrey A. Hirsch — President and Chief Executive Officer, Starz

Alison Hoffman — President, Domestic Networks, Starz

Superna Kalle — Executive Vice President, International Digital Networks

Alan Gould — Loop Capital — Analyst

Kevin Beggs — TV Group Chairman

Thomas Yeh — Morgan Stanley — Analyst

Joe Drake — Chairman of the Motion Picture Group

James Goss — Barrington Research — Analyst

Kutgun Maral — RBC Capital — Analyst

Alexia Quadrani — J.P. Morgan — Analyst

More LGF analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

World Wrestling Leisure Inc (WWE) This autumn 2020 Earnings Name Transcript

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World Wrestling Entertainment Inc (NYSE:WWE)
Q4 2020 Earnings Call
Feb 4, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the webcast entitled WWE Fourth Quarter 2020 Earnings Conference. We have just a few announcements before we begin. [Operator Instructions]

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

Michael Weitz — Senior Vice President, Investor Relations

Thank you and good morning, everyone. Welcome to WWE’s fourth quarter.

Vincent K. McMahon — Chairman and Chief Executive Officer

It might be in the afternoon, I’m not sure.

Michael Weitz — Senior Vice President, Investor Relations

Welcome to our fourth quarter earnings conference call. Leading today’s discussion are Vince McMahon, WWE’s Chairman and CEO; Nick Khan, WWE’s President and Chief Revenue Officer; Stephanie McMahon, WWE’s Chief Brand Officer; and Kristina Salen, WWE’s Chief Financial Officer. Their remarks will be followed by a Q&A session.

We issued our fourth quarter earnings release earlier this afternoon and have posted the release, our earnings presentation, and other supporting materials on our website.

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 — that all comparisons are versus the year-ago quarter unless otherwise described. [Operator Instructions] And the replay will be available on our website later this evening.

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

Vincent K. McMahon — Chairman and Chief Executive Officer

As you can see we’re generating some pretty strong financial results in a very challenging environment. We continue to produce content, we never missed a week in terms of producing content. It shows the flexibility and our commitment to our audience, which we will always have. We transitioned our flagship programs through our training facility. And then of course, to the Amway Center and then continued on to to what — to something we called the ThunderDome was a great name, any event, it’s a — most of you have seen it. And there’s nothing like it on television allows us to have live fans.

They’re just not in seats. They’re on screens. And some of the other things I do want to mention. Certainly, we — our multi-year agreement with NBC U is on the big box service. To my knowledge, I don’t think there’s any really big deal that’s been announced ever since the COVID stuff began. I really think that’s pretty extraordinary on their part, and definitely on our part as well.

And again, we just — this agreement is really awesome for our WWE fans, our W Universe, as we call it, it’s just gives them more — more value, not just the WWE 999, which is a great value for what we do. But then again, they for less money, they pick up our, our network, as well as all sorts of entertainment. So it’s great for our fans. I think that Nick and Stephanie and Kristina are going to provide a little more perspective on this development.

Looking ahead to 2021. Now, we expect to continue to manage the challenges of the COVID environment, and it continues on. We no doubt will expect a gradual return to ticketed audiences. And that is something that, sure, OK, we have live events, but live events make any money, you’re going to get 20% capacity, 30%, 50%, whereas you breakeven, and so best to be determined by anyone who’s in the live event business and hardly anyone has a handle on exactly when that’s going to happen.

Nonetheless, we are ready. We are the most flexible, adaptable media company in the world. We can turn something around as far as a live event in six weeks. And it just speaks to our ability to innovate as a media company and continue to, in this current environment, create long term value. So that’s generally pretty much where we are.

And, Nick, take it away.

Nick Khan — President and Chief Revenue Officer

Thank you very much, Vince. And thank you everyone for calling in today. A week and a half ago, we made what we believe was a big announcement regarding WWE and Peacock. Starting on March 18, the entire WWE Network and its content will shift to Peacock in the United States. This includes WrestleMania, our vast library and all of our pay-per-view events, starting with Fastlane on March 21. As part of this partnership, WWE will maintain access to valuable audience data.

As we all know, Peacock is free to Comcast, Xfinity and Cox Cable customers. So watching Fastlane and subsequently WrestleMania on April 10 and 11th will be free to all of those consumers. Additionally, WWE Network will be available for $4.99 a month on the ad supported Peacock tier, which is half the price that Vince just mentioned, of $9.99 a month. The price we have been charging for WWE Network in the United States and will continue to be no upcharge of any kind, for any of our events. 499 price is the all in price for our great library and pay per view in ring action.

In addition to the office Saturday Night Live, Modern Family to dick wolf franchises, the English Premier League and the Olympic Games. I believe the last time we all spoke in October; we collectively discussed how the recent org structure changes at NBC, you and Disney are indicative of the fact that streaming had become a top priority for both companies. Many months in advance of those org structure changes, we started to engage in deep conversations with multiple buyers in the marketplace about a potential deal. Ultimately, we felt like the partnership with Peacock was the right move at the right time for our fans and shareholders.

It was Vince McMahon and WWE who were the first movers from closed circuit to pay per view. It was Vince and WWE that were the first movers out of pay per view and into the SVOD world in 2014. And WWE is now again the first mover from a stand-alone SVOD for partnering with a media conglomerate that has tremendous assets, reach and promotional power. With the Peacock deal closed domestically, our focus now shifts to international markets.

In addition to distributing our great domestic content internationally, our focus is to also develop content that is specifically targeted to fans in certain international territories. Two examples of this I’d like to discuss here today. First is India. We recently produced a two hour in ring special with our partner in India, Sony, which featured our developing Indian Superstars. The event, which premiered across Sony’s platforms on India’s Republic Day was available on Sony TEN one, Sony TEN three and Sony MAX, which have a combined reach of 50 million households, as well as on Sony’s streaming platform SonyLIV.

The event took place at the WWE ThunderDome to an all Indian virtual audience. It was announced in Hindi and English, and incorporated stunning and contemporary elements of Indian culture. The international music sensation known as Spinning Canvas, executed an amazing performance in honor of India’s national holiday. We saw record engagement on digital and social content around the event and learn just before this call that the event was viewed live by over 20 million people on the Sony platforms I just mentioned, that’s five times greater than our average weekly ratings for Raw and SmackDown in India, which are both already considered highly rated shows.

We await for live plus seven numbers, which will obviously substantially add to the total viewership number. We believe this event will further grow our product in India, which is already a robust WWE market and demonstrates our commitment to our partner, Sony, and our WWE fans in India. This event is a credit to Vince, Paul Levesque, otherwise known as Triple H and the entire creative and production team who put together this event during a pandemic, while also producing three to four other live in-ring shows a week. You can look forward to more from us in India along these lines.

The second area of our international focus is Latin America and localizing content tailored toward that region. A key part of our strategy is bringing in authentic talent who resonate with particular international markets. You may have seen or read that on the Royal Rumble pay-per-view this past Sunday, Puerto Rican Superstar Bad Bunny performed his new hit single Booker T, which is based on our WWE Hall of Fame Superstar of the same name. An internationally acclaimed recording artist, Bad Bunny’s songs were streamed on Spotify more than 8.3 billion times in 2020, helping to make him the most streamed artist in the world that year. Then low and behold, at the instigation of one of WWE’s up and coming Puerto Rican stars, Damian Priest, Bunny got physically involved later in the night, setting the stage for future storylines.

As of this past Wednesday, this collaboration has led to over 35 million total video views and 2.5 million engagements across YouTube, Facebook, Twitter and Instagram. Total media impressions to date are nearly 170 million, and it was reported on by the top sports and entertainment properties ranging from ESPN to Rolling Stone to Telemundo to TMZ. And within 24 hours, the co-branded Bad Bunny WWE merchandise became the hottest selling drop we’ve had on record on our e-commerce platform, WWE Shop. An idea which was born simply from seeing the cover of the New York Times Sunday Magazine last October, has evolved into one of the most engaging pop culture collaborations in our history, with a targeted focus on the Latinx community.

Look for more of us in the — look for more of this, excuse me, in the LATAM region. In addition to our work in India and LATAM, we also closed new international deals with IV Media in Korea and Foxtel in Australia. And in China, we expanded our broadcast footprint, which already included iQiyi, Yoku and PP Sports by launching Raw on Tencent Video. Let’s also discuss some out of the ring opportunities and deals we are excited about as we continue to expand WWE’s brand Beyond The Ring. In terms of original programming from our WWE Studio, we continue to develop our slate. As you may know, WWE used to finance productions. We stopped doing that a few years ago.

Instead, we’re licensing content, both scripted and unscripted, to buyers in the marketplace. We are pleased at how quickly our portfolio has continued to grow. A few new developments include a multi episode unscripted series order created by and voiced by John Cena, which will be produced with WWE Studios. Additionally, we have closed the deal for WWE Studios to join the NBC show Young Rock, a long time, long time WWE family member, Dwayne Johnson, and my actual family member, my sister, Nahnatchka Khan. The show premieres on Tuesday, February 16, on NBC.

And finally, as you may be aware, we sent championship title belts to many of the major sports lead teams who have won championships. And in some cases, our title belts are more popular than their own trophy. You may have seen Lebron James hold up a WWE championship title belt after winning the NBA title. The Golden State Warriors have done the same as well as the Los Angeles Dodgers and many other teams. This led us to close a deal with a major sports league, where you will be seeing WWE championship title belts that will be made using the team logos of some of the most prominent pro sports franchises. It’s a real testament to the power of our brand.

At this point, I’d like to turn it over to my colleague and friend, Stephanie McMahon.

Stephanie McMahon — Chief Brand Officer

Thanks, Nick. One of the lessons Vince always taught me in business was to always be slightly ahead of the curve, not so far ahead that people don’t understand what you’re doing and certainly not behind. WWE was ahead of the curve with the advent of pay-per-view, bringing WrestleMania directly into people’s homes. Social media allowed one-to-one connection between our superstars and our fans. And when consumers started migrating to what was then a new short-form platform called YouTube, WWE became one of YouTube’s original paid content partners. When research showed our audience was 5 times more likely to consume online video, we cannibalized our pay-per-view business and launched the first live SVOD service of its kind, WWE network.

And now we’re ahead of the curve again, licensing WWE Network, our most premium content, to one of America’s premier streaming services, NBCU’s Peacock. But why now? Because the landscape has changed. COVID-19 and quarantine accelerated a behavioral viewership shift to streaming platforms. Streaming behemoths are investing heavily in technology and infrastructure in order to scale with operational efficiencies creating more flexible pricing options. And the biggest thing all of these providers have in common is the need for branded content. In order to be competitive, we need to pivot away from the technology necessary for an optimum user experience and allocate our resources against what we do best: content creation, production and storytelling.

And we get to do it with a trusted partner we have had for over 30 years, NBCU. Partnering with NBCU’s Peacock not only provides a greater value proposition for our current subscribers. It also allows us to deliver our most premium content to a significantly larger audience, including the 33 million people who have already signed up for the service. Additionally, this partnership gives greater access to NBCU’s best-in-class teams across sales, marketing and promotion as well as some of the most iconic franchises in the United States and around the world. Just imagine, with NBCU and Peacock, every three years is a Super Bowl, every two years is the Olympics, and every year is WrestleMania.

We believe more than ever in the power of our brand. In 2020, WWE’s television viewership held steady once we transitioned out of the Performance Center and invested in WWE ThunderDome. In fact, over the period from August 21 through year-end, which covers our move to the Amway Center and subsequently to Tropicana Field, Raw viewership is essentially unchanged and SmackDown viewership has increased 8% compared to the prior three-month period. During the fourth quarter, digital views increased an estimated 25% and hours consumed increased 44%, excluding the impact of geographical restrictions in India.

In 2020 as a whole, we saw a record 38 billion views and 1.4 billion hours consumed across our AVOD platforms, both representing a 10% increase year-over-year and an 11% increase in revenue. In order to reach new audiences, we maintained our pop culture strategy, bringing celebrities and influencers into our programming and casting WWE superstars outside of our content. In the quarter, Matthew McConaughey’s appearance in the ThunderDome and in other WWE content generated five million impressions. In fact, Jimmy Kimmel used the footage from the ThunderDome in an interview with Matthew just this week.

The biggest opportunity outside of WWE programming was bar none SmackDown women’s champion, Sasha Banks, appearing as a recurring character in Season two of Disney’s Mandalorian. And as Nick already highlighted, this past week, multi platinum artist and award-winning singer song writer Bad Bunny not only performed at the Royal Rumble, he got physically involved, diving off the top rope and then showed up again on Monday Night Raw the next night driving a Bugatti. I think it was the first time I’ve ever seen a Bugatti on Raw. Bad Bunny, one of the most recognized Latinx performers of our generation said being a WWE Superstar has always been his dream.

As a final measure of our brand strength, our advertising and sales revenue outpaced industry trends throughout the year. The quarter was highlighted by an increase in gaming partner activations, including Wargaming World of Tanks, Cyberpunk 2077, 2K Battlegrounds and Microsoft Gears. Additionally, we signed a multiyear partnership with our first banking partner, Credit One, as well as our first official beer partnership with Constellation Brands focusing on Victoria, Corona and Modelo. In fact, if you were watching the Royal Rumble on Sunday night, you would have seen WWE Superstar Rey Mysterio, a lucha legend, wearing the Victoria brand on his mask.

Rey also posted to a 3.6 million followers on Instagram in Spanish about how proud he was to partner with a brand as authentic to the Latino fan base as Victoria. Forbes, Complex and Sports Illustrated were just a few of the outlets that highlighted this integration. And 2021 is already off to a promising start, kicking off a multiyear partnership with cricket wireless as the presenting sponsor of the Royal Rumble, a custom content series with first-time partner GM for the rollout of their Silverado campaign and the announcement of Mars’ Snickers as the returning sponsor of WrestleMania for the sixth consecutive year.

WWE is the perfect partner as more and more brands look to engage consumers with customized content creation and authentic influencers. When you couple that with our over one billion followers across digital and social platforms as well as our broadcast, cable and streaming partners, Fox, USA and Peacock in the states, WWE is poised now more than ever to deliver scale, engagement and reach.

And now I’ll turn the call over to our Chief Financial Officer, Kristina Salen.

Kristina Salen — Chief Financial Officer

Thanks, Stephanie, and hello to WWE shareholders. Today, I’ll review WWE’s financial performance, liquidity and capital structure and business outlook. As a reminder, all comparisons are versus the year ago quarter unless I say otherwise. For the year, WWE achieved record revenue and record profit. WWE’s adjusted OIBDA of $286.2 million was at the high end of our rescinded guidance and reflected nearly a 60% increase of more than $100 million. This growth was driven primarily by higher rights fees from WWE’s U.S. Distribution Agreement.

Throughout 2020, WWE managed a challenging environment, particularly for producers of live content. We estimate that WWE lost more than $90 million in revenue as a result of COVID-19 restrictions, primarily from the loss of ticket sales and the postponement of large-scale international events. WWE never went off the air. As shown on Page three of the presentation, we implemented short-term cost reductions and realized other cost savings that substantially offset these revenue losses. This was a remarkable achievement. But it does foreshadow a tough comparison for 2021.

In the fourth quarter, the absence of a large-scale international event contributed to a 50% or $56.4 million reduction in fourth quarter adjusted OIBDA, which also reflected lower advertising revenue and higher TV production costs. To review the fourth quarter performance in more detail, let’s turn to Page five of the presentation, which shows revenue, operating income and adjusted OIBDA contribution by segment. Looking at the WWE’s Media segment, adjusted OIBDA decreased 37% or approximately $44 million to $73 million, primarily due to the aforementioned event loss and, to a lesser extent, decreased advertising sales and higher production costs.

On December 11, we transitioned the WWE ThunderDome, our state-of-the-art environment for producing Raw and SmackDown to a temporary residency at Tropicana Field in St. Petersburg, Florida. In that stadium setting, we bring nearly 1,000 live virtual fans back to our show and surround them with pyrotechnics, laser displays, augmented reality and drone cameras. This staging increases production costs by approximately 25% per episode. We expect this investment to continue through at least the first half of 2021 as it brings a high level of excitement to our programs and most importantly, brings our fans back into the show.

Despite a challenging environment, WWE continued to produce a significant amount of content. More than 700 hours of programming in the quarter and more than 2,300 hours for the year across television, streaming and social and digital platforms. As we prepare to transition the WWE Network to Peacock, we continue to utilize on the growth in digital consumption, promoting content sampling and subscriptions with the free version of WWE Network. Since the pandemic began WWE subscriptions and consumption have been up meaningfully. In the fourth quarter, 2.2 million total viewers watched content across all tiers, representing a 40% increase and those viewers watched 35 million hours of content, which was 14% higher. Perhaps most importantly, average paid subscribers to the network increased 6% to 1.5 million.

Now let’s turn to WWE’s live event business on Page seven of the presentation. Adjusted OIBDA from Live Events declined by $4.9 million to a loss of $6.7 million due to a $26.7 million decline in Live Events revenue. These declines were due to the loss of ticket revenue resulting from the cancellation of events. Until mid-March, WWE held arena and stadium based events in front of ticketed audiences. During the fourth quarter, however, WWE held no ticketed events. We are delighted to have announced the return of WrestleMania to Tampa Bay on Saturday, April 10 and Sunday, April 11, 2021 and at Raymond James Stadium with ticket availability and safety protocols forthcoming.

However, it remains challenging to predict the pace at which we will return to a weekly live event schedule. We do not anticipate the staging of other ticketed events until at least the second half of 2021. Looking at WWE’s Consumer Products segment on Page eight of the presentation, adjusted OIBDA decreased $3.2 million to $9.1 million, primarily due to lower video game sales and the absence of venue merchandise sales. The drop in video game sales was anticipated as WWE and Take-Two had previously determined to delay the release of WWE’s franchise game until 2021. WWE continued to introduce new products, expand its video game portfolio and develop partnerships across product categories.

For example, during the quarter, WWE continued to build out its video game portfolio, launching WWE Undefeated and WWE Racing Showdown in partnership with Indway and JetSynthesys, respectively. As of year-end, WWE had 140 million installs across its games portfolio. Demonstrating our commitment to product innovation, WWE released 2,000 new products on its e-commerce platform including 18 new championship title cells, which generated category growth of more than 100% for the year. Now let’s turn to WWE’s overall cash generation as shown on Page nine of the presentation. In 2020, we generated approximately $292 million in free cash flow, an increase of $240 million.

The increase was driven by improved working capital, the timing of collections associated with large-scale international events, stronger operating performance and to a lesser extent, lower capital expenditures. As of December 31, 2020, WWE held $593 million in cash and short-term investments. This included $100 million borrowed under WWE’s revolving credit facility which was repaid just in January 2021. And finally, a word on WWE’s business outlook. Last week, we issued guidance for 2021 adjusted OIBDA. As previously indicated, WWE expects restrictions related to the spread of COVID-19, particularly related to ticketed live events to continue at least through the first half of 2021.

Additionally, we anticipate a significant year-over-year increase in expense due to continued higher TV production expenses at WWE’s ThunderDome as well as the return of employees from furlough. We estimate that WWE can achieve 2021 adjusted OIBDA of $270 million to $305 million as revenue growth driven by the Peacock transaction, the gradual ramp-up of ticketed live events, including large-scale international events, and the escalation of core content rights fees is offset by the increase in production and personnel expenses. In our view, the stated 2021 adjusted OIBDA guidance range will be approximately 15% to 20% higher without the ongoing impact of COVID-19, which includes the loss of ticket and merchandise sales of live events and the increased investment in production to further fan engagement.

Turning to WWE’s capital expenditures. In early 2020, and we deferred spending on the company’s new headquarters. Given increasing visibility regarding WWE’s projected performance and liquidity, we are planning to restart this project in the second half of ’21. For 2021, we estimate total capital expenditures of $65 million to $85 million, including funds to begin construction as well as funds to enhance WWE’s technology infrastructure. We are in the process of reevaluating the headquarters project, and we will provide further guidance on future capital expenditures when that work is completed. For the first quarter of 2021, we estimate adjusted OIBDA will decline as incremental profits from Peacock and higher content rights fees are more than offset by the absence of ticketed events, including a large-scale international event, and increased production costs.

The timing and rate of returning ticketed audiences to WWE’s Live Events remains subject to significant uncertainty. And as such, we are not reinstating more specific quarterly guidance at this time. And finally, I’d like to take a moment and talk about WWE’s financial outlook in a post-COVID world, whenever that may be. As analysts and investors will likely use the ex COVID range of 2021 adjusted OIBDA guidance to estimate future performance, I would note that 2022 and future years will be impacted by a variety of factors. Certainly, the contractual escalation of WWE’s core content rights fees will continue to be an important source of growth. However, other factors may temper that growth. Based on the accounting treatment of Peacock revenue, for example, we expect the highest incremental impact of the Peacock transaction to be booked in 2021.

Another key factor to note in the WWE post-COVID business model is that while TV production costs may decline somewhat in 2022 relative to 2021, costs will likely remain higher than in 2019. This is due to the shift in 2020 to a Monday/Friday production schedule compared to a Monday/Tuesday schedule previously. Incremental costs related to this change were masked in 2020 by residency in various locations, particularly in WWE’s own Performance Center in the early months of COVID. WWE continues to adapt its business to the changing environment.

As Vince, Nick and Stephanie indicated, we believe WWE can and will continue to innovate across all business lines as we execute our strategic objectives. We look forward to sharing progress on these initiatives with you all in the future.

And that concludes our prepared remarks, and I’ll turn it back to Michael for Q&A.

Michael Weitz — Senior Vice President, Investor Relations

Thank you, Kristina. Carina, we’re ready now. Please open the lines for questions.

Questions and Answers:

Operator

[Operator Instructions] We’ll go ahead and take our first question from David Joyce with Barclays. Please go ahead.

David Joyce — Barclays — Analyst

Thank you very much. If you could please provide some more color on the cost side of the equation for the Peacock and WWE Network deal. If we could think about the phasing of cost savings and what kind of areas that will come in. Also, if you could talk about the sort of the onetime migration expenses and how that feeds into your guidance this year? Thank you.

Kristina Salen — Chief Financial Officer

Sure, David. It’s Kristina. Thank you for your question. I think from the perspective of migration costs, most of that will be in the first quarter. So it’s embedded in our guidance for both the first quarter and for the full year of 2021 and as are any potential savings from a technology perspective, but I would caution you from a technology perspective in that, I did highlight in my remarks, potential capital expenditures around technology infrastructure. At least, some of the technology savings will be offset by investments in systems that are long overdue. But it is all embedded in the 2021 guidance that we’ve provided.

David Joyce — Barclays — Analyst

All right. Thank you very much.

Kristina Salen — Chief Financial Officer

You’re welcome.

Operator

We’ll go ahead and take our next question from Brandon Ross with LightShed Partners. Please go ahead.

Brandon Ross — LightShed Partners — Analyst

Hello. Thanks for taking the question. I was also hoping you could help us better understand the financial impact of the Peacock deal. And I’m thinking more on the revenue side, are there any potential revenue offsets there against the licensing deal besides obviously, subscriber revenue going away? And then maybe one related for Stephanie. I wanted to think about your sponsorship opportunity following the deal. As I assume, you’re giving network inventory to NBCU, what sponsorship — what’s your sponsorship going to look like in the wake of this deal, particularly around the large pay-per-view events? And how is their sales force going to help you with your other sponsorship ambitions?

Stephanie McMahon — Chief Brand Officer

Sure. We’ll work backwards. I’ll start with that last question, Brandon, and thank you for the question. We can’t really comment on specific deal terms, but Comcast NBCU is an industry leader, particularly in the sales and sponsorship space. And as we mentioned in the comments, never before have we been positioned alongside properties like the Olympics and Sunday Night Football, etc. So we’re looking forward to amplifying our current partnership and certainly working with NBCU and Peacock.

Kristina Salen — Chief Financial Officer

And Brandon, it’s Kristina. Just to answer your question about the incremental revenue opportunity, I think, is ultimately what you were asking about. It is embedded in our guidance. We’re thinking about it from an incremental perspective. And you’re correct. The offset would be the loss of subscription revenue related to the network.

Brandon Ross — LightShed Partners — Analyst

Okay. And no other offsets besides that?

Kristina Salen — Chief Financial Officer

No.

Brandon Ross — LightShed Partners — Analyst

Okay. And then the other question I wanted to ask was about content flexibility given your broad relationship with NBCU. Is there the ability to perhaps move some higher profile content off of the pay-per-views and into Raw to help kind of bring Raw ratings back to growth?

Nick Khan — President and Chief Revenue Officer

I can answer that, Brandon. This is Nick. Thank you for that part of the question. We’re always looking for ratings growth no matter how high the ratings are. It’s all about exceeding NBC’s expectations. So there is flexibility. If the two entities came together and decided to put certain content onto a linear platform, we have the ability to do that. Obviously, both parties, again, would have to agree to that. For now, we’re focused on helping Peacock grow their subscriber base, and we’re confident that we can do it.

Brandon Ross — LightShed Partners — Analyst

Thank you.

Operator

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

Laura Martin — Needham & Company — Analyst

Hi there. Maybe one for Vince first. If we just sold the one million sub business in the US which helped cover the overhead cost of the network, why isn’t that running 50 different countries for 400,000 subs is a good business idea versus doing what you did in Canada, which is just selling the rights to Rogers or syndicating out the rights. How do you think about those two P&L offshoring for the Network?

Nick Khan — President and Chief Revenue Officer

This is Nick. I can assist in answering that. Thank you. I tried to articulate some of our international plan. We have robust thoughts on WWE Network internationally as we did 12 to 24 months ago domestically. So again, we’re always looking at our existing partners in terms of growing our viewership, growing our audience. And that’s going to be one of our many focuses moving forward as it already is.

Laura Martin — Needham & Company — Analyst

Okay. And then my other one is for Kristina. You said here that EBITDA would have been — or OIBDA would have been 15% to 20% higher if you’ve been able to have live events and merch. But I thought one of the great learnings of going into lockdown was that EBITDA margins exploded once you didn’t have live because live sort of breaks even, and it’s great for revenue management, but it actually isn’t very profitable. So could you just walk us through like the longer the lockdown stays, the more EBITDA it seems like you have, not the other way around? What am I getting wrong in that equation?

Kristina Salen — Chief Financial Officer

Hi Laura, thanks for your question.

Laura Martin — Needham & Company — Analyst

Hi.

Kristina Salen — Chief Financial Officer

I think, ultimately, it’s looking at the TV production expense. So we’re spending incrementally to increase our fan engagement and keep the excitement and energy around shows that normally would be live and have ticketed audiences against them. So there’s not incremental revenue associated with the incremental spending that we’re doing in the production of Raw and SmackDown in Tropicana Field right now. So the degree to which we’re able to start bringing fans physically back into arenas and stadiums and getting them to buy tickets, buy merchandise will have a higher incremental margin than just spending money with no revenue against it at all.

Laura Martin — Needham & Company — Analyst

It’s so helpful. Thank you very much.

Kristina Salen — Chief Financial Officer

You’re welcome.

Operator

We’ll take our next question from Curry Baker with Guggenheim. Please go ahead.

Curry Baker — Guggenheim — Analyst

I think my first one is for Nick. Can you maybe walk us through the key revenue opportunities from here now that the network deals done and most all the key TV rights agreements are done, let’s say, MENA. And I think in particular, maybe what the opportunity is for sponsorship, the TAM there, just given that it’s an area that WWE is historically under monetized then relative to other sports leagues?

Nick Khan — President and Chief Revenue Officer

Thanks, Curry. A couple of things there. Our international plan, as I mentioned a few moments ago, is really just getting started. We’re confident where we are internationally. We’re also confident that there’s a lot of room for growth. So we’re looking at new revenue opportunities there. In terms of the sales and sponsorship element, as you may know, Stephanie took that over about six months or so ago. We’ve already seen a strong uptick in the results of that. We think with the NBCU partnership across it with WWE, you’re going to see more of that.

So we’re confident in those revenue opportunities. In terms of the scripted and unscripted television opportunities that I mentioned in the prepared remarks, we’re just getting started and are excited about a number of items in that arena. The championship title belt thing that I mentioned to you, that’s just with one of the major sports leagues. So obviously, we’re going to look to replicate that. Those sell at a decent price point and are a good source of revenue for the company now, and we believe something that can grow substantially in the future.

Curry Baker — Guggenheim — Analyst

Okay. And then my last one is for whoever wants to take it. I mean, one question I get the most from investors is, how will you guys reverse ratings trends? Aside from bands coming back hopefully later this year, which should help boost ratings. What else is the company doing to enhance the product and drive yours back to Raw and SmackDown?

Nick Khan — President and Chief Revenue Officer

So a couple of things, Curry, this is Nick again. We don’t believe that we’ve lost eyeballs. We believe eyeballs tend to shift from linear to digital platforms. So if you look at even our Facebook numbers, which are significantly up the last six months or so, including the revenue against those numbers, we think the eyeballs are there. Like I said, we’re always looking to grow ratings. So now that we’re coming out of a competitive presidential race that a lot of people were focused on. We’re still all in the midst of a virus that a lot of people are focused on. We believe with the continued great in-ring product that the eyeballs are continuing to grow and will result in more linear eyeballs as some of the other stuff that I just mentioned passes. So we feel good about our position, and we think our network partners do as well.

Curry Baker — Guggenheim — Analyst

Okay. Thanks for the questions.

Nick Khan — President and Chief Revenue Officer

Thank you.

Operator

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

Ben Swinburne — Morgan Stanley — Analyst

Hi good afternnoon. Two questions, maybe for Nick. Interesting this Peacock deal, you mentioned or maybe Stephanie mentioned, that you were the company or WWE was the company that started this whole direct-to-consumer trend many years ago. And now all these companies are pouring into that space. I’m wondering if you think you’re going to see the rest of the industry sort of move in the direction you’ve moved in, sort of offloading the rights in a broader platform.

And also, are you giving anything up in this? I mean, direct-to-consumer and having relationships with your fans, obviously strategically important. I think you mentioned, Nick, that you guys are retaining data, so I’d love to hear more about that and how you think about maintaining those relationships in this new model? And then I don’t want to let Kristina down, so I’ll ask her an accounting question. Can you tell us anything about how the mechanics of this deal is going to work on the P&L over time? I’m just wondering, particularly on the pay-per-views, whether there’s going to be volatility we should be aware of or anything you can help us with? Thank you, guys.

Nick Khan — President and Chief Revenue Officer

Thank you, Ben. I think there were like eight compound questions baked in very well done by you. We’ll talking about NBCU and Peacock first. If you look at the big media conglomerates, there’s not one that has the cable, which obviously, the pipes into homes, including broadband, the content, the theme parks and remove any company that has a satellite company. Again, we’re talking about broadband pipes. NBCU is unique in that way. It was sort of the right time to look at it and say, — even if you caught this tease a few weeks ago, on the Football Night in America, pre NFL — pregame NFL show going into their playoff game on Saturday prime time a few weeks ago.

They announced the next three locations of WrestleMania, including the upcoming April 10 and 11 in Tampa. Just that announcement on their linear platform combined, which what we thought was a very creative content output by Paul and Steph in terms of talking about the different cities we’re going to. During a football game, the whole thing went viral. It almost took over social media. And again, the NFL is the NFL, we’re not — certainly, it’s not for us to compare ourselves to them. But we feel great about how that worked.

It was a bit of a tease because the Peacock deal was already done, which is why they tagged that announcement with Raw coming up on Monday night. There’s going to be more of that. We are putting together our 2021 — finalizing our schedule in terms of pay-per-view premium events. Look for events to be piggyback onto big NBC events, where we’ll have that promotional power headed our way. It’s the first time ever that WWE has partnered with someone who has that sort of reach on these events. So we feel good about our chances. In terms of the financial part of it, I would turn that over to Kristina.

Kristina Salen — Chief Financial Officer

Ben, thanks for throwing me an accounting bone. But I’m really glad you brought it up because I think it’s an important thing for all of our analysts and investors to understand. Of course, you all have a lot of experience with content rights deals and the mechanics of them. And there’s two things, though, that I want to underscore here. First, I think in your question, Ben, there was an underlying assumption that there would be volatility around pay-per-views. Just so everyone understands, there is no upcharge around special content for WWE. This is one $4.99, you get everything, get our library, you get our pay-per-view, plus the amazing content coming out of Peacock as well. So there won’t be that kind of volatility.

The second thing I would say, and I touched on it briefly in my prepared remarks is that we’re still working through the accounting from the perspective of just making sure that it’s properly reviewed. But in any case, regardless, 2021 will be the biggest year in the deal from an incremental revenue and adjusted OIBDA perspective, because upon delivery of the deal, so to speak, upon the onset, we have to value the subscribers that we’re transferring over and we have to value any IP that we’re transferring over. And that will be all recognized in 2021. And then in 2022, you’ll have the regular revenue recognition of the ongoing deal. So hopefully, that’s enough geeking out on accounting for you to keep you busy.

Ben Swinburne — Morgan Stanley — Analyst

Grett. Thank you very much everybody.

Nick Khan — President and Chief Revenue Officer

Ben, can I just tag that with one thing, if you’re still with us?

Ben Swinburne — Morgan Stanley — Analyst

I am, of course.

Nick Khan — President and Chief Revenue Officer

Thank you. What I’d mention in terms of the power of broadcast, we don’t believe broadcast is going anywhere. If you look at our partners at Fox, they put together a pre Royal Rumble show for us, which did over one million viewers. We announced the 30th and 29th — I’m sorry, we announced the first and second people to enter into the rumble. All of that stuff matters. That Fox network platform, having them promote into SmackDown, it matters. So again, in terms of broadcast networks, we’re thrilled with Fox, and we’re thrilled with what NBC can do for us promotional wise. Thank you.

Operator

We’ll go ahead and take our next question from David Karnovsky with JPMorgan.

David Karnovsky — JPMorgan — Amalyst

Thanks for the question. Nick, I was wondering if you could discuss how you expect NBCU will evaluate the success of WWE content on Peacock. Since the Nielsen ratings, obviously, don’t apply just interested to think — how do you think the way factors like subscriber adds, advertising yield or maybe just the promotional value of having something like WrestleMania on there?

Nick Khan — President and Chief Revenue Officer

So we think it always comes down — we refer to them as the 3Rs. Ratings, Relevancy and Revenue. Ratings in a subscriber base, obviously, based on subs; relevancy for a product like WrestleMania for them to be as excited as they are about it; and revenue, obviously, it’s a tremendous opportunity for them to sell against it on an ad supported tier at $4.99. So we always look at it by thinking about those 3Rs in terms of our partner satisfaction.

David Karnovsky — JPMorgan — Amalyst

Okay. And then just on a separate topic. Can you speak to how the shutdown of the NBC Sports Network and then the move of sports content over to USA potentially impacts Raw and NXT, either in terms of scheduling or just kind of the overall role that your content has had at that network. And with NXT, do you ever kind of consider moving any of that content over to Peacock, the weekly content?

Nick Khan — President and Chief Revenue Officer

We believe it has no impact on us, The departure of NBC Sports Network. I think we think what you’re seeing in the cable universe is going to be further consolidation. So we know that the bundle has now sort of been unbundled or a little exposed. So the networks that were propped up, and not as strong cable networks that were propped up by the stronger cable networks, like USA, but not as strong ones probably cease to exist across the board. So look for more content migration onto the stronger cable platforms, that there’ll be no effect on Raw or NXT.

David Karnovsky — JPMorgan — Amalyst

Thank you.

Operator

We’ll take our next question from David Beckel with Berenberg. Please go ahead.

David Beckel — Berenberg — Analyst

Great. Thanks so much for the question. I’ll start with the high level one. You talked a lot about the ongoing shift in viewing toward digital platforms and, of course, the Peacock deal really hits the nail on the head there. I’m wondering how this negotiation and this deal might influence future TV deals? Those are obviously, especially in the U.S., quite a ways away. A lot can change between now and then. Are you thinking about the way in which you might license Raw and SmackDown in the US any differently as a result of this deal, maybe taking that on an exclusive basis to a digital platform? And then I have a follow-up.

Nick Khan — President and Chief Revenue Officer

Thanks, David. First of all, we’re always going to look to our incumbent partners to see what their plans are in the future and to make sure that those conversations happen first. We are open to all buyers. So I think it was the LightShed folks who had predicted that Thursday Night Football may go to Amazon exclusively for the first time and the exception on that exclusion is it may also be an NFL Network. But it wouldn’t be on a traditional broadcast network. We agree with that assessment. That’s obviously speculative on someone else’s property, but you see Amazon hovering around.

They tested Live out in the U.K. first with tennis. They then came and tested it out when Thursday Night Football digitally was on Twitter. They took that package and put it on Amazon and has done some interesting things with it. Obviously, there’s an executive change that we all learned about not too long ago. So we’ll see how that shakes out. But we’d like to think we have our finger on the pulse of what most of these buyers are looking for down the road, again, with a heavy emphasis on Fox and NBCUniversal to make sure that they’re taking care of.

David Beckel — Berenberg — Analyst

Great. Thanks. And just as a quick follow-up. Nick, you mentioned the 15% to 20% impact to EBITDA from the pandemic. I was wondering if you could maybe help us splice that a little bit in terms of how that’s comprised. What — or what portion of that is related to production costs versus the other impact you mentioned, which is the loss of ticket sales and merchandise?

Kristina Salen — Chief Financial Officer

Thanks for the question. We haven’t broken it down publicly with regard to percentage impacts. But what we have said is we expect there to be a significant year-over-year increase in WWE’s expense base due to continued higher expenses associated with the production of Raw and SmackDown at Tropicana or any other facility like that post. We have said that our TV production expense is up 25% per episode. And we also pointed out that there’s also an impact of the return of employees from furlough, which won’t start to be a year-over-year comparison really until the second quarter of 2021.

And of course, the biggest X factor in our minds is the return of Live — ticketed live events and the pace at which they ramp, as Vince talked about in his opening remarks. What’s the capacity restriction going to be? How many stadiums are available to us across the United States in any given moment? Are we allowed to sell merchandise? All of these things are kind of up in the air right now. It’s anyone’s best guess in the live event business as to when and then as to how. So all of those are kind of impacting as we think about that 15% to 20% estimate of what we think that ongoing COVID impact is on our numbers for 2021.

Michael Weitz — Senior Vice President, Investor Relations

Thank you, Kristina. We have time — I’m sorry, they have given the length of the call, we’re just going to take one more caller. Thank you.

Operator

We’ll go ahead and take our last question from Vasily Karasyov with Cannonball Research.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. Good afternoon. I wanted to follow-up on Kristina’s point that the company should be looked at in terms of normalized earning power. So if we think back to Saudi Arabian events, can you help us understand the profitability of those events so that we can sort of run sensitivities. If I remember, we can figure out the revenue from the reported financials. But if — I think a couple of years ago, you spoke about the first event being more profitable than the second. So if you could just help us triangulate the EBITDA impact, that would be super helpful.

Kristina Salen — Chief Financial Officer

Sure. I think just looking at this most recent fourth quarter, we’ll give you a great baseline in terms of understanding what the absence of a large-scale international event has on — the impact that it has on our business. As we discussed in the fourth quarter, the absence of a large-scale international event contributed to a 50% or $56.4 million reduction in fourth quarter adjusted OIBDA, and that did also reflect lower advertising revenue and higher TV production costs. So we’re seeing it very starkly in this quarter just reported what the positive or when they come — when a large international event comes back to us, the positive impact that can have on our adjusted OIBDA.

Vasily Karasyov — Cannonball Research — Analyst

All right. A quick follow-up then. Do both of them have the same profitability profile? So if you have one in a year or two in a year, you just multiplied the positive impact by 2? Or the second one is less profitable? Because I think that was the case before.

Kristina Salen — Chief Financial Officer

What I would say is it’s really — in talking about live events, we are in the hyper theoretical right now because, again, even talking about live events in the United States, it’s quite difficult to hypothesize what it will look like. Even in 2022, what some of the restrictions may be, but what I would say is comparing one event to another event in any given year, it depends on where it is, where it is within the country, what the expectations are around the show itself. There are so many factors that go into it that would just be a highly theoretical conversation.

Vasily Karasyov — Cannonball Research — Analyst

Thank you very much.

Kristina Salen — Chief Financial Officer

Thank you.

Michael Weitz — Senior Vice President, Investor Relations

Thank you, everybody. We appreciate you listening to the call today. If you have any questions, please do not hesitate to contact me, Michael Weitz or Michael Guido, your contacts in Investor Relations. Thank you.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Michael Weitz — Senior Vice President, Investor Relations

Vincent K. McMahon — Chairman and Chief Executive Officer

Nick Khan — President and Chief Revenue Officer

Stephanie McMahon — Chief Brand Officer

Kristina Salen — Chief Financial Officer

David Joyce — Barclays — Analyst

Brandon Ross — LightShed Partners — Analyst

Laura Martin — Needham & Company — Analyst

Curry Baker — Guggenheim — Analyst

Ben Swinburne — Morgan Stanley — Analyst

David Karnovsky — JPMorgan — Amalyst

David Beckel — Berenberg — Analyst

Vasily Karasyov — Cannonball Research — Analyst

More WWE analysis

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Levi’s (LEVI) studies This fall 2020 earnings, gross sales beat

Levi’s clothes can be seen on a store shelf in Miami, Florida.

Joe Raedle | Getty Images

Levi Strauss & Co. Total vacation quarter sales reported Wednesday were down 12%, which is an improvement from a decrease of more than 20% in the previous periodThe weak customer traffic in the branches was partially offset by double-digit online growth.

Stocks recently rose more than 1% in after-hours trading after initially falling more than 4%.

CEO Chip Bergh told CNBC that last quarter’s results exceeded the denim maker’s internal expectations and almost met the “best-case scenario” that Levi set at the time Covid pandemic first started hitting the United States and disrupting many businesses.

“We turned very hard [direct to consumer] and in particular for e-commerce, “Bergh said in a telephone interview.” Our e-commerce business was profitable for the fourth quarter and profitable for the full year. “

Levi’s global digital sales, which include online sales of its goods at wholesale partners, represented 23% of sales in the fourth quarter, up from 15% in the year-ago period.

Here’s how Levi Strauss & Co. performed in the fourth quarter of the fiscal year compared to analysts’ expectations using refinitive data:

  • Earnings per share: 20 cents, adjusted compared to 15 cents, expected
  • Revenue: $ 1.39 billion versus $ 1.34 billion expected

For the three-month period ending Nov. 29, Levi made $ 57 million, or 14 cents per share, compared to $ 96 million, or 23 cents per share, the previous year. With no one-time cost, it earned 20 cents per share, which was better than what analysts expected 15 cents using refinitive data.

Net sales decreased 12% from $ 1.57 billion a year ago to $ 1.39 billion. That was better than the $ 1.34 billion forecast by analysts.

Digital sales grew 34% worldwide, including sales on its partner platforms like Amazon.

Levi said revenue from its wholesale partners declined 15% in the quarter, while revenue direct to consumers declined 5% due to fewer in-store visits.

As the coronavirus pandemic continues to disrupt normal business operations, around 40% of stores in Europe and 17% worldwide, including franchise-operated locations, are currently closed, according to the company.

“The recent recurrence of the virus underscores that the ultimate effects of the Covid-19 pandemic remain highly uncertain,” Levi said in his earnings announcement. “The company anticipates its business … will continue to be significantly impacted at least in the first half of 2021, and there is still the possibility of additional Covid-19 inventory and other costs.”

Levi stock was up just over 8% year over year at close of trading on Wednesday. The company has a market capitalization of $ 8.8 billion.

The full press release from Levi Strauss & Co. can be found here.

Boeing (BA) This autumn 2020 earnings

The Boeing 737 Max aircraft prepares to land after a test flight in Seattle, Washington, on September 30, 2020.

Mike Siegel | The Seattle Times | Bloomberg via Getty Images

Boeing reported a record net loss of more than $ 11.9 billion in 2020 – results that worsened after the debut of its 777X aircraft was postponed until the end of 2023 and a charge of $ 6.5 billion in the fourth quarter this open plan program when that failed Coronavirus pandemic hurt demand.

Boeing’s shares fell more than 4% in premarket trading.

Here are the numbers:

  • EPS: With a loss of $ 15.25 per share, it’s immediately unclear whether that compares to a loss of $ 1.80 per share, which is in line with Refinitiv’s consensus estimates.
  • Revenue: $ 15.30 billion versus $ 15.07 billion expected according to Refinitiv estimates

Boeing’s fourth quarter revenue declined 15% year over year to $ 15.3 billion, above analysts’ forecast for revenue of $ 15.07 billion. The company’s net loss rose to $ 8.4 billion from $ 1.01 billion in the fourth quarter of 2019.

The company will outline its prospects for a rebound in another challenging year for aviation as new travel restrictions and coronavirus infections curb already depressed demand for flights.

“The profound impact of COVID-19 on commercial air travel and the 737 MAX grounding are reflected in our performance,” CEO Dave Calhoun said in a statement to employees on Wednesday.

Boeing aircraft deliveries fell to their lowest level in decades, and cancellations hit records last year as the 737 Max continued to expand after two fatal accidents and a slump in travel requirement due to the pandemic.

Boeing executives will discuss their findings with analysts on a 10:30 AM ET call.

The Chicago-based aircraft manufacturer is trying to turn a page after two crashes of its 737 Max that killed all 346 on board. The US aviation authorities cleared the best-selling aircraft for re-flight in November, allowing Boeing to begin shipping around 400 new jets that were manufactured at its Seattle facility but could not be handed over to customers. Customers. American Airlines, United Airlines, Alaska Airlines, Aeromexico and Brazil goal are among the airlines that have received Max Jets so far.

Deliveries are vital to Boeing as airlines pay most of the aircraft price.

Investors also want to know Boeing’s outlook for wide-body aircraft. The production of its 787 Dreamliner aircraft, jets used for international long-haul aircraft, has already been discontinued. This type of travel has been hardest hit by the pandemic.

Dave Calhoun, Boeing CEO, forecast in April that demand for travel will not return to 2019 levels two to three years.

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Morgan Stanley (MS) This fall 2020 earnings beat estimates

Morgan Stanley On Wednesday, fourth quarter earnings and sales exceeded analysts’ expectations for strong trading, investment banking and wealth management results.

The company reported a 51% increase in earnings to $ 3.39 billion, or $ 1.81 per share. Excluding the $ 189 million integration cost associated with last year’s E-Trade acquisition, earnings per share were $ 1.92, compared to an estimate of $ 1.27 by analysts surveyed by Refinitiv. Revenue of $ 13.64 billion was over $ 2 billion above the estimate of $ 11.54 billion.

“The company had a very strong quarter and record results for the full year with excellent performance in all three businesses and regions,” said CEO James Gorman in the press release. “Our unique business model continues to serve us well as we continue to implement our long-term strategy with the acquisitions of E * TRADE and Eaton Vance.”

Expectations were high for robust trade and investment banking results from competitors Goldman Sachs and JPMorgan Chase helped increase winning strokes and Morgan Stanley did not disappoint.

Investment banking had sales of $ 2.3 billion, half a billion dollars more than FactSet’s survey of $ 1.81 billion. The result was due to stocks from the underwriting of stocks, which more than doubled compared to the previous year due to robust IPOs and follow-up activities.

Stock trading generated sales of $ 2.49 billion, $ 350 million more than the estimate of $ 2.14 billion. Fixed income trading grossed $ 1.66 billion, $ 200 million more than analysts expected.

The wealth management division had sales of $ 5.68 billion, nearly $ half a billion more than analysts expected, thanks to higher assets and higher fee-generating activity, as well as the impact of the e-trade deal.

Morgan Stanley has the largest wealth management business of the six largest US banks, which typically benefit from rising markets. This business is supported by the bank $ 13 billion The acquisition of E-Trade announced a year ago and the fourth quarter is the first period in which E-Trade will be integrated into the larger company.

The bank’s shares were virtually unchanged after premarket trading rose 1.9%.

Gorman drove a small winning lap in his annual update on the company’s strategic objectives, highlighting the case that its business is at a turning point. In the next ten years, Gorman’s market share gains and acquisitions will sustainably generate higher sales and returns than in previous periods.

The company kept its long-term goals largely unchanged, saying that the return on tangible equity will be 17% or more, rather than the 15% to 17% range per year earlier.

“We are in the growth phase of this company for the next decade,” Gorman told analysts after the results were released.

Morgan Stanley is the last major US bank to post earnings in the fourth quarter. JPMorgan and Goldman Sachs exceeded analysts’ expectations for sales and earnings, aided by trading, while Citigroup, Wells Fargoand Bank of America disappointed revenue as credit margins tightened.

The shares of New York-based Morgan Stanley rose 33% in 2020, outperforming the KBW Bank Index’s 4.3% decline.

Here are the numbers:

  • Adjusted earnings of $ 1.92 per share versus $ 1.27 estimate by analysts surveyed by Refinitiv.
  • Revenue of $ 13.64 billion versus an estimate of $ 11.54 billion.

Goldman Sachs (GS) This autumn 2020 earnings crushes estimates

David Solomon, Chairman of the Board of Directors of Goldman Sachs & Co., speaks during an interview with Bloomberg Television at the Milken Institute Global Conference in Beverly Hills, California, USA, on Monday April 29, 2019.

Patrick T. Fallon | Bloomberg | Getty Images

Goldman Sachs On Tuesday, they exceeded analysts’ expectations for fourth quarter earnings and sales due to the strong performance of the company’s stock traders and investment bankers.

The bank posted earnings of $ 12.08 per share, defeating the estimate of $ 7.47 per share by analysts polled by Refinitiv. Sales of $ 11.74 billion exceeded expectations by approximately $ 1.75 billion.

The shares of the New York-based bank rose 2.4% in premarket trading.

“We’ve been able to help our customers navigate a challenging environment and as a result have strong results across the franchise while driving our strategic priorities,” said David Solomon, CEO of Goldman, in the press release. “We hope this year brings much-needed stability and a break from the pandemic, but we remain poised to deal with a variety of outcomes and ready to serve our customers’ needs.”

The expectations of Solomon were high. Last week, JPMorgan Chase posted record trading and advisory results in the fourth quarter that helped the bank beat earnings estimates.

At Goldman, stock traders saw revenue grow 40% year over year to $ 2.39 billion, surpassing the estimate of $ 1.89 billion by roughly $ half a billion. Like most of its competitors, the fixed income business fell short of expectations for the quarter, posting revenue of $ 1.88 billion, which is below the estimate of $ 2.06 billion.

Investment banking revenues rose 27% to $ 2.61 billion, beating the estimate of $ 2.15 billion. This is due to higher income from subscriptions to stocks and completed mergers.

“Goldman Sachs’ profits were shockingly good,” said Octavio Marenzi, CEO of capital market management consultancy Opimas. “We expected a strong performance, but Goldman has outperformed almost all of its businesses. Goldman’s activities are focused entirely on investment banking and trading, areas that did well everywhere but particularly well at Goldman.”

Of the six largest US banks, Goldman generates most of its revenue from Wall Street activities, including trading and investment banking. This has been a disadvantage for the company in recent years as retail banking has driven the industry’s record profits. For the final quarter of the year hit by the coronavirus pandemic, Goldman’s model could prove to be an asset.

With unprecedented actions by the Federal Reserve earlier in the year, wide open markets should help usher in the best year for Wall Street trading since the financial crisis. Meanwhile, investment bankers are benefiting from rising demand for IPOs and a record rate of debt issuance.

Goldman shares rose 11% in 2020, outperforming the KBW Bank Index’s 4.3% decline.

Here are the numbers:

Earnings: $ 12.08 per share versus $ 7.47 per share, according to Refinitiv.
Revenue: $ 11.74 billion versus $ 9.9 billion.

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