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World Wrestling Entertainment Inc  (NYSE:WWE)
Q1 2019 Earnings Call
April 25, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Please standby. Hello and welcome to the WWE First Quarter Earnings Webcast. We have just a few announcements before we begin. (Operator Instructions) I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

Michael Weitz -- Senior Vice President, Financial Planning and Investor Planning

Thank you and good morning, everyone. Welcome to our first quarter 2019 Earnings Conference Call. Leading today's discussion are Vince McMahon, our Chairman and CEO; as well as George Barrios, and Michelle Wilson, our Co-Presidents. Their remarks will be followed by a Q&A session.

We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website at corporate.wwe.com. Today's discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them.

Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later today.

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

Vincent K. McMahon -- Co-Founder, Chairman and Chief Executive Officer

Good morning, everyone. I'd like to address a number of things today, obviously not to belabor the point in terms of our targeted financial results rather in this quarter. And that WrestleMania was spectacular, et cetera, we did record breaking crowd in New York and Royal Rumble was great, we have these big events that seemed to do extremely well. Aside from that, we are doing some documentaries, we haven't done before on A&E, so we're broadening tremendously that scope of our business, we've got studio shows coming up on FS1, we've got talent -- reality shows are doing very well, but notwithstanding all of that really, when you look at a quarter and I mentioned this last time on the first quarter, I think going into -- or fourth quarter in to first quarter, we had a very unusual situation in terms of talents -- top talents as well as mid-card talent to being out, some 15 talent of course in that period. When you have talent, you don't have story lines, you don't have story lines, you're not going to do that well in terms of live events, in terms of television ratings, it was like a cascade of things that happened. I'm happy to say, we have all of those challenges. Back in addition to that, we have new challenges coming in.

And during that period of time, when top talent was out, we made new talent so -- and just to belabor the point in terms of where we are with the quarter, but the future and when you look at that and I'm not trying to pull the future for you guys, except to tell you what it's going to be like, there is, we've hired new people in writing team that are really going to help us out in terms of television ratings and digital, social, all that sort of stuff, we've got a new team in terms of live events that have just started now. So we'll see the live events is going to continue on an upward trend.

In coming latter part of September, we're going to have, it's almost like, it's not quite a metamorphosis, but we're going to have a whole new beginning, we're going -- the promotional value alone notwithstanding rights fees and what have you, promotional value alone in terms of Fox, in terms of commitments from NBCU is something we've never seen before, not even close, it's extraordinary. And at the call the kick-off, I suppose and it's going to kick us into again an element we've never seen before in terms of promotion with everything, WWE talent, story lines, you name it, so it's a rising tide situation that we're really looking forward to and having that carry on throughout the year.

And that's about it.

George Barrios -- Co-President

All right. Thanks, Vince. And thanks everyone for joining us today for a review of Q1 performance, our progress on key strategic initiatives and our business outlook. As Vince mentioned, we executed our strategy and achieved adjusted OIBDA that was within the range of our guidance. Our financial performance reflected a 3% decline in revenue from the prior year quarter as the escalation of content rights fees was offset by lower ticket sales at our Events and lower sales on merchandise.

In the quarter, we also continued to invest in content digitization and localization. We believe these investments enhance our brands and are the foundation for long term value creation. Before going into additional detail on the quarter, I'd like to provide some important context. As Vince mentioned last quarter, we discussed the absence of several talent and our belief is these absences had a negative impact on our engagement metrics.

Q1 saw a continuation of these trends, as domestic ratings for Raw and SmackDown declined approximately 14% and 13% respectively and average attendance at our North American events declined 11%. On a positive note, network average paid subscribers increased 2% and digital video consumption increased 23%. Looking to the future, we believe our engagement metrics will improve with the return of our talent, the emergence of new story lines and new superstars and as we launch our new season following a successful WrestleMania.

Moreover, again as Vince mentioned, we remain excited about the debut of SmackDown live on Fox on October 4. The debut will mark the first time WWE will be available live 52 weeks a year on a 120 million homes on a premier broadcast platform. Finally, as we said before, in addition to absolute performance, we believe relative performance is critically important as it illuminates the value of WWE within the PayTV ecosystem. In Q1, when excluding NASCAR's premier event the Daytona 500, WWE delivered greater average viewership then any professional sports league, other than the NFL.

All right, moving onto our business performance in the quarter. Let's turn to page 5 of our presentation, it shows revenue, operating income and adjusted OIBDA contribution by segment, as compared to the prior year. Looking at our Media segment, adjusted OIBDA declined $15.1 million, primarily due to increases in fixed costs, including investments that I previously described. Revenue was essentially flat as the escalation of core content rights fees was offset by lower ad sales, particularly on YouTube and reflecting unfavorable timing across some other platforms. WWE network's average paid subscriber increased 2% to approximately 1.58 million and total subscribers reached 2 million on April 8, the day following WrestleMania.

For the second quarter 2019, we project average paid subscribers of approximately 1.7 million. As we look ahead, our primary focus for WWE network is the launch later this year of our new platform in partnership with Endeavor Streaming and Massive. We are excited about the long-term opportunity this new platform will provide and it will give us the flexibility to bring new features and experiences to our fans as well as enable the delivery of our content in multiple languages.

Michelle Wilson -- Co-President

As Vince mentioned, on the content front, we developed plans for a weekly studio show on Fox Sports 1, which will debut this fall. Additionally, we are partnering with A&E to produce five documentaries on legendary WWE Hall of Fame superstars under A&E's network -- under the network's iconic biography banner. On WWE Network, we continue to expand our live in-ring content and original programming. Among the network's most viewed programs during the quarter were our pay-per-views, in ring events and original series. These included our NXT Takeover events, the premium documentary series, WWE Chronicle and the network exclusive, Halftime Heat. Halftime Heat aired during the Super Bowl halftime and trended worldwide on Twitter.

Speaking of social media, on social and digital platforms, digital video views increased 15% to 7.7 billion and fans watched 300 million hours of content, representing a 23% increase from last year. Contributing to this growth, we produced approximately 200 hours of social and digital content.

Turning to our live event business, as shown on page 7 of our presentation, adjusted OIBDA from our live events declined $2.8 million, primarily due to weaker performance of our events in North America. The reduction in ticket sales reflected a 11% decline in average attendance to 4,800, as well as the staging of nine fewer events. During the quarter, we continued to stage large scale events. As Vince mentioned, Royal Rumble attracted more than 48,000 fans at Chase Field in Phoenix. And subsequently, WrestleMania broke the record for MetLife stadium for highest grossing entertainment event at 16.9 million, attracting a capacity crowd of over 82,000 fans.

On the talent front, we held our first ever trial in India, and it was the largest in WWE history, it featured more than 70 participants and we also announced the talent trial coming up this summer in China.

In our Consumer Products segment, adjusted OIBDA declined based on -- slightly based on a $2.7 million reduction in revenue from the prior year quarter, primarily due to lower sales of merchandise on WWE Shop. We also had lower sales of merchandise at our live event venues, which can be attributed in part to the decline in attendance. Supporting our merchandise businesses, we continue to develop new licensing partnerships across product categories. This included recent agreements with New Era, making them the official headwear partner of WWE and Roblox, which is a multiplayer online platform with 80 million unique active users, which are primarily kids. At the quarter end, we had nearly 110 million installs across our entire mobile game portfolio.

George Barrios -- Co-President

Page 9 of our presentation shows selected elements of our capital structure. As of March 31, 2019, WWE held approximately $340 million in cash and short-term investments and we estimate that we have approximately $100 million in debt capacity under our revolving credit facility. The negative free cash flow of $10.1 million in the quarter, compared to negative $1.8 million in the prior year quarter. Favorable changes in working capital were offset by the lower operating performance and a $12.4 million increase in capital expenditures, the latter primarily associated with the company's Work space plan.

Now looking ahead, for the second quarter 2019, we estimate adjusted OIBDA of $19 million to $24 million. For the full year 2019, we continue to target record revenue of approximately $1 billion and record adjusted OIBDA of at least $200 million. Achieving our targeted full year 2019 financial results assume substantial revenue and adjusted OIBDA of at least $100 million in the fourth quarter.

As a reminder, our new content distribution agreements in the US become effective in that period. We continue to expect strong year-over-year growth in 2020. As you know, we're in the process of finalizing our distribution plans for RAW and SmackDown in several international markets, we expect to finalize these plans later this year and once we've done that and added visibility for 2020 and the rest of our business, we'll provide additional perspective on our strategy, key initiatives, 2020 financial expectations as well as the longer-term financial model.

As I've said before, we believe our investments in content, digitization and localization to further engage our global brands and deepen the mode around our business. Our execution in the context of the ongoing media industry trends, we believe, create a foundation for sustainable long-term growth and increases in shareholder value.

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

Michael Weitz -- Senior Vice President, Financial Planning and Investor Planning

Thank you, George. Dory, we're ready now. Please open the lines for questions.

Questions and Answers:

Operator

(Operator Instructions) We'll take our first question from Brandon Ross with BTIG. Please go ahead, sir.

Brandon Ross -- BTIG -- Analyst

Good morning. Thanks for taking the questions. Wanted to dig in a little bit more on the engagement metrics, especially as the AVOD numbers came down so significantly in the quarter and just wonder, how can you be confident about a rebound in the engagement, while you're getting some superstars back, you also have some leaving especially in the women's division such as -- can you hear me?

George Barrios -- Co-President

Yeah, you broke up a little bit, but I think I got the gist of the question, Brandon. On the first point, on the AVOD, so just I think to clarify, we were up 23% in consumption year-over-year. The sequential trend was down. We do think that is tied to what Vince mentioned, which was the -- that kind of unique moment in time and the absence of fairly significant number of talent. The reason we think all these things are related is because we saw the bend in a lot of our trends, almost at the same time. So when you can never be sure, the fact that these things occurred concurrently, we think lends credence to that perspective.

As we look forward and your point about talent coming and talent leaving, I think the broad historical context is we've got a 35 year history of creating talent and we've done an incredible job transitioning from one generation to the next. So we feel confident that we've developed the muscle around attracting, developing, retaining talent as well as crafting the story lines to make them shine. So we've done it in the past, feel confident we'll do it in the future and as Vince mentioned, we feel really good about where the talent base is.

Vincent K. McMahon -- Co-Founder, Chairman and Chief Executive Officer

And again just speaking of Ronda, Ronda has done extraordinary job for us. Her challenge was to bring the entire women's division up and as you know, that was our main event at this year's WrestleMania involving Ronda. So Ronda's task that she chose and of course it's great for us is to build that whole division, have more visibility on that division, and to make stars and to make stars that, now, you have stories where even after Ronda leaves, (inaudible) Ronda was going to leave for a contract. So when you look at what happened in WrestleMania, and with Becky Lynch and Charlotte and others, the entire division, the focal point and the stories that are coming out of that, Ronda did an awesome job, she did an awesome job.

Michelle Wilson -- Co-President

Okay. And you have some obviously importantly ongoing negotiations right now, have the recent engagement metrics at all impacted these negotiations?

George Barrios -- Co-President

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

Brandon Ross -- BTIG -- Analyst

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

George Barrios -- Co-President

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

Brandon Ross -- BTIG -- Analyst

Thank you.

Operator

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

Curry Baker -- Guggenheim Securities -- Analyst

Hi, thanks for the question, guys. I guess to start with maybe on the subscriber front of the network, your outlook for average paid subs in 2Q was down 5% and I think WrestleMania numbers post the event were down 6% year-over-year. Can you give us any additional color on churn and net adds. And I guess, big picture, what's driving the current subscriber pressure?

And secondly, with the relaunch of the network later this year, can you maybe talk about how you see that reaccelerating growth on the subscriber front? Thanks.

George Barrios -- Co-President

Yeah. So I -- like Vince said in his remarks, I don't want to belabor the point on the talent, but ultimately it's the core of what we do and it will impact everything, both when it's going great and when there is a little bit of softness. So we think WrestleMania, we're thrilled that we had 2 million people on the platform. As you mentioned, it was down year-over-year. That has been a cascading effect, it's a subscription business, you guys know this and you guys know this better than I do, what happens in a month tripled on for several months afterwards. So that's what's driving Q2.

As far as the launch and we're really excited. It's something the team has been working on for over a year on the design and the build of the new platform. And so, as we said in the prepared remarks, it will give us the platform to move forward and bring a lot of features and functionality that our fans have been asking for, give us flexibility in other languages if we so choose, all this obviously doesn't happen on day one, but it creates the underpinnings of us being able to do a lot that we think can reaccelerate growth. Again, not sure that's a 2019 event, given that the launch only happened in '19, but as we look at the next several years, we're excited about what that'll do for us.

Curry Baker -- Guggenheim Securities -- Analyst

Okay, thanks. And maybe just following up on that, we have a date set for the relaunch, is it still like end of third quarter, early fourth quarter, still waiting on that?

George Barrios -- Co-President

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

Curry Baker -- Guggenheim Securities -- Analyst

Okay. Thanks, George.

Operator

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

Vasily Karasyov -- Cannonball Research -- Analyst

Good morning. The press release calls out the investment and fixed cost as the reason for higher cost growth. So I was wondering if it's fair to assume that EBITDA in Q3 would also be down year-on-year. And then given this is (inaudible), this year, once we get to 2020, should that be smoothed out because of the new TV rights kicking in and we should see every quarter approximately in line with Q4 of this year or at least not down year-on-year, I wonder if you could comment on that?

George Barrios -- Co-President

Yeah. On the cost side, as mentioned I think on the last call as well, we began investing in '18 toward the back half of the year, so the compares on the cost side in the first half of this year are a little bit tougher for us, so that's what you're seeing, not going to talk about Q3, we've got into Q2 and the full year, but we're not going to comment specifically on Q3 at this point.

As far as moving into 2020, little bit early for us to start talking about that, but I think it's fair to say that our expectations or growth in 2020 over 2019 will give a bit more context to that later on in the year and then as we've always said, something that we'll continue to work every day is this balance between as we grow our revenues, we have very good unit margins that drives increased growth and profitability, then we have to decide how much of that growth and profitability to reinvest in the business to drive future growth. And so that's something that we just work every day and we will keep everyone informed as we make those decision, we aren't going to say anything more on 2020 right now.

Vasily Karasyov -- Cannonball Research -- Analyst

A quick follow-up then, I don't think the guidance mentioned CapEx for this year, is the previous guidance still intact?

George Barrios -- Co-President

We haven't talked -- yeah, we didn't mention it. As we've mentioned before, we will have elevated levels of CapEx, as we build out the facility that we recently entered into a lease agreement on, so and, but those plans are still in progress, so they will be elevated over the next 18 months or so.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you.

Operator

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

David Karnovsky -- JPMorgan -- Analyst

Thank you. I think last quarter, you highlighted that tenants for live shows where you create video content was stable, does that remain the case and so are there adjustments that you can make to the house shows to maybe stabilize the trend there? Thanks.

George Barrios -- Co-President

Yeah. I think last quarter like you mentioned, we gave annual trends over time to show fairly stable in those events where we create media. In Q1, we actually saw softness there as well in the quarter. I've said before quarter-to-quarter is a little bit tough to compare in our events business, just because you're in different venues or mix issues and so on, so I tend to look at a lower trend, but David, to the question, we were down in those media events as well. One nuance there was Royal Rumble, which this year was in a stadium versus in arena last year, so you have some mix there as well. But if you isolate that, we were down in those.

David Karnovsky -- JPMorgan -- Analyst

Got it. And then just regarding the move to Fox in October, is it possible for you to quantify at all even at a high level, your expectation for what this will mean in terms of viewership, not only for SmackDown but for RAW. And then just kind of given the increased promotion you receive, how are you thinking about the flow-through of this to some of your other business lines like consumer products?

George Barrios -- Co-President

Yeah, look, I mean there are some things that -- there's math, so we are in 120 million homes on Fox versus 90 million on USA, so you got a 33% increase on the homes, so that's one. Number two, as we mentioned when we signed the deals, the promotional commitments in our deal with our partners or Fox are fairly significant. I actually think they're going to over-deliver because it's going to be good for them and us. I also think that may create kind of a rising tide with our partners at USA as well. So that's -- those are the two things we can quantify. What that means for us and our business, both short term and long term, it's a little bit harder, but certainly the numbers seem to -- the numbers that we do know are in our favor.

David Karnovsky -- JPMorgan -- Analyst

Thank you.

Operator

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

Eric Handler -- MKM Partners -- Analyst

Yes, thank you very much, two questions for you guys. First, I wondered if you could talk a little bit about the WWE UK development process, you're currently taping the shows on weekend events, do you think that eventually goes live, can you talk maybe about some viewership levels and how the brand has grown and maybe talk a little bit about the performance that are there in the UK.

Vincent K. McMahon -- Co-Founder, Chairman and Chief Executive Officer

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

Paul Levesque -- Executive Vice President, Talent, Live Events & Creative

Sure. So the UK brand has been very successful, one of the most watched weekly programs that the network has been very successful for us. And we've been shooting the events there at the weekends. As the next level of the network comes in, I think you'll see that viewership increase and as that moves forward, then that becomes everything that it can be with all lines of business of a touring brand, live takeovers, the one that we did there before, did tremendously well, trending number one in the world.

That social media exposure is massive for that brand, across all platforms for us and it just gives us that -- gives us that exposure and it's watched worldwide, while it's taking place and including performance from all over Europe, it's seeing globally and that's a big factor for us as well and all part of. Then additionally to that, feeding into the entire global culture of WWE, feeding up that pipeline, whether that be NXT or then getting to RAW, to SmackDown, and moving on up the lines. So, it just increases the pipeline of talent as well and that's what the UK Performance Center is there for is it's increasing that pipeline as well.

Eric Handler -- MKM Partners -- Analyst

Okay. And then just as a follow-up question. And just continuing on the path of talking about the 2Q. George, I wonder if you could tell us, there was a divergence between guidance and where consensus was for the quarter. I wondered if -- have you guys pulled forward any investment spending into 2Q that maybe was planned for early or later in the year?

George Barrios -- Co-President

I think it's on the cost side, Eric, it's what I talked about since the investments we made in '18 were back loaded. Year-over-year, in the first half of the year, you see a bigger impact that begins abating in the third quarter and then into the fourth, because really primarily that, it's not around us investing more today, it's more around the compare versus '18.

Eric Handler -- MKM Partners -- Analyst

Great, that's helpful. Thank you.

Operator

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

Eric Katz -- Wolfe Research -- Analyst

Thanks, good morning. So since the talent has now been fully back on the schedule, I know you mentioned some just broadly that ratings were better than everything except the kind of 500. So, can you talk to how that's trended sort of year-over-year compared to your own content in Q1 last year?

George Barrios -- Co-President

Yeah. Look, I think if you did the same numbers for last year because of the -- our decline in performance, you see we've declined more than the comps on the page. What I will say is that, I think, if you take a longer arc of time, for all these properties, at certain years, certain quarters, the performance varies. There's obviously been years where we've held up better than others, we've had some softness that Vince described, the rationale for in Q1. So if you went quarter-over-quarter, we're certainly softer than some of the comp. However, in absolute terms, the fact that we're doubling most in 5, 6x, others, I think it's important still relatively M&A -- in our point -- in our perspective, we're still able to cut through the collateral with live content.

Eric Katz -- Wolfe Research -- Analyst

Okay, great. And with regards to the SmackDown, just kind of curious where you are in sort of determining where you might move with that, what direction?

George Barrios -- Co-President

Yeah. So when we've talked about the topic, we've always said, we've been monetizing some way, shape or form six hours of content for a long time. Today, that six hour is primarily being used on the network and we'll figure out here over the next several months, what we think the best use of, nothing to update now.

Eric Katz -- Wolfe Research -- Analyst

Okay. And then one last one. Core constant revenue was up a bit more modest in Q1 than the last few quarters, just looking any particular reason for that? Thank you.

George Barrios -- Co-President

Yeah. And also, if you look at it sequentially, which doesn't usually happen, that line declined, it's because just the way the calendar shift out, we had 14 episodes of Raw in the fourth quarter, we only had 12 episodes of Raw in the first quarter, so that impacted a little bit of the year-over-year, to your point, it also has that sequential impact.

Operator

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

Ben Swinburne -- Morgan Stanley -- Analyst

Thanks, good morning. Just going back to SmackDown on Fox. Obviously, we all know that's going to get additional distribution from being on broadcast, but I'm curious from where you guys sit today, do you think Fox is going to positioning the product for advertisers and even for your fans in a way that makes it meaningfully different or even incrementally different than how it's been presented historically on USA, we'll have the Fox upfront coming up in a few weeks. So I'm sure you don't want to get ahead of that, but I'm just curious if you think they're going to take a different approach, both from an advertiser and kind of sans products perspective.

And then secondly, just coming back to Q2 guide, is this -- are you guys assuming this Saudi event in the second quarter in the guidance or any kind of color on timing there would be helpful.

George Barrios -- Co-President

Yes, I will take the second one first, Ben and then Michelle will talk to the first. We're going to stay away from guiding on specific elements of the quarter. So obviously, we'll talk about it once we report.

Michelle Wilson -- Co-President

On the Fox front, as Vince mentioned, we're obviously very excited to be partnering with them, they have already fully embraced the fact that WWE is a partner. We've been already actively part of their pre-upfront presentations, which we're extremely excited to be sharing the stage with them and the key advertisers that they have. What I will say is, as most of you know, USA Network and YouTube has made tremendous progress over the last 3 or 4 years, getting us to over 200 advertisers, but again, it's important to remember that USA Network is primarily a general entertainment network and we've been positioned as such, which we are, but we always talk about us being the best of both worlds that we're also live content and we perform live sports.

So we do believe that Fox will be leaning in into the score aspect of what we're doing. While it's still the same product, we do believe that they will bring us to a new advertising base and position us with a slight tweak. I wouldn't say is entirely different, but important to note that we will be promoted in all of Fox programming, their entertainment programming, but specifically NFL on Thursday night, major league baseball, NASCAR as George mentioned. So again, we believe that they will be leaning in heavily to us. We are excited about the upfronts, we will be part of both upfronts, both USA, NBC Universal, which is in the morning on Monday the 13 and then Fox, which is in the afternoon and WWE will have a very strong presence in both. So we're excited that we'll have again two partners, putting us in front of key decision makers and the advertising community and again, we truly believe it will be a rising tide.

Ben Swinburne -- Morgan Stanley -- Analyst

Great, thank you.

Operator

We'll take our next question from Laura Martin with Needham and Company. Please go ahead.

Laura Martin -- Needham and Company -- Analyst

Hey, George. Just checking my math, you just reported $12 million of adjusted EBITDA for the second quarter. The high end of your guidance is $24 million, you said you will do $200 million for the year, of which at least $100 million is in fourth quarter. So if I do the math right, I think, that means you're over $60 million -- have to come in the third quarter. And back to -- building on Ben's question about the Saudi guide, if you don't want to give us like, I'm just trying to figure out how people get comfortable that you can get back to this $200 million for the year, if $60 million has to come in Q3, because my recollection, the way the USD works, I think it all comes in Q4. So is there any way you can give us comfort that you can actually hit, really it all has to come in the third quarter based on your guide, but that $200 million number. Other than just -- I just, I don't know what's happening in 3Q to get you back to that $200 million up. That's my first question.

George Barrios -- Co-President

Yeah, because of some timing elements, Laura, we don't want to start giving fourth quarter's guidance every time we were on the call, so we said at least 100 in the fourth quarter. Obviously, if it was more than that in the fourth quarter, the target that you mentioned for Q3 will be lower. So I'm not going to get into breaking those two quarters up at this point, we think at least 100 million in the fourth quarter. So, but it's at least, it's not exactly 100 million. So we'll see, but there may be --

Laura Martin -- Needham and Company -- Analyst

And we do know, you have to do a Saudi deal this year and presumably it's fourth quarter. So, see there and Ben's quarter in Q2 or in my quarter in Q3, right. It's got to be one of those two and that adds a bunch, right?

George Barrios -- Co-President

Yes, so we're not going to talk about that again, so our guide obviously reflects the best assumption, best knowledge we have right now.

Laura Martin -- Needham and Company -- Analyst

Okay. And there is no other thing you cadence or anything you can point to in Q3 that would help us, right?

George Barrios -- Co-President

Nothing specific, no.

Laura Martin -- Needham and Company -- Analyst

Okay, good. So then my other question is for Vince about talent development. So I mean, one of the potential interpretations of the rating softness could be maybe some of our talent is aging or audiences are getting tired of it and I'm interested, since you've been doing this a long time, Vince, what are the metrics you look at to determine when you need to bring in a new winner, a new superstar to reinvigorate the start of the story lines, and do you feel that a lot of these international people, my recollection is it takes like 5 years to bring in somebody from the beginning to where they can really be at the top of the ledger, of the main roster. But can you remind us also how long it takes to build one of these John Cena, Roman Reigns, kinds of characters?

Vincent K. McMahon -- Co-Founder, Chairman and Chief Executive Officer

I'll let Paul Levesque handle some of that color please.

Paul Levesque -- Executive Vice President, Talent, Live Events & Creative

Sure. So it's interesting, obviously, there is no exact timing on what it takes and first of all, we don't bring in superstars, we create them. So there is no timing on how long that takes, some it's immediate, some it takes longer. We're constantly bringing in talent. So it's not a matter of how many leave now as we -- Vince mentioned earlier, when we have absences, new talent step in, an example of that would be Kofi Kingston stepping into a role and becoming WWE Champion.

As those things happen, those performers rise to another level, when the other performers come back from that absence, they -- now, it's a higher tide. In 2018, we brought up over 15 talent, a lot of them have succeeded. We've already brought up 10 in 2019 through the system, through the talent development system. So it's working very effectively and when you look at the roster of superstars, 80% of the main roster of Raw and SmackDown right now have come through that system, have come through our talent development system.

So the main event players that you see came through that. So it works very well. It's very successful, and as was mentioned earlier too, there is a 35 year track record of generation after generation of creating new superstars that are icons in last generation and we have a very good track record of doing that. So we are very confident in that.

Laura Martin -- Needham and Company -- Analyst

Okay, thanks guys.

Operator

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

Jason Bazinet -- Citigroup -- Analyst

Sometimes when companies have a little bit of weakness, they blame macro issues instead of company specific and you guys have been pretty forthright about the talent issue affecting live events, but my question was when I look at the decline in live events and compare it to the non-licensing consumer products, the non-licensing consumer products was down almost 20% year-over-year and I'm just wondering, do you look at these numbers and think there might be a little bit of a macro headwind as well or do you think you can attribute all of this to the issues you guys have been so forthright talking about. Thanks.

George Barrios -- Co-President

Yeah. Look, Jason, it's always hard to parse at that level. One of the things that we've talked about internally though is that you just saw Canada's bending the curve across a variety of areas all at the same time. So there wasn't -- didn't feel like a slow build do it, it was fairly sudden and abrupt and so that's why the best pieces we have as what Vince described as kind of this unique moment in time that we saw, doesn't mean that there may not be some macro factors but internally outside the discussion us really more as we've described it.

Jason Bazinet -- Citigroup -- Analyst

Things in your control. Okay, thank you.

Operator

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

Alan Gould -- Loop Capital Markets -- Analyst

Thank you for taking my questions. I've got a few. First, with respect to the talent. I'm sure in the past, you've had -- in the past, you've had talent getting injured and maybe more so now than in the past. When the talent returns, typically, how long of a lag is there until the fan engagement comes back.

George Barrios -- Co-President

Alan, it's obviously a really good question and I'll point, given the discussion we've had today and it's something that's a little bit more difficult for us to trend down over long parts of time, but as Vince mentioned, it's not that there was talent absences, that happens continuously for a variety of reasons, it was really more the magnitude all at one time, that really was what's felt unique and I can speak for the time that I've been as WWE, I only remember one other time we felt the same way, which was spring 2010, I believe, into the summer. Obviously, it was a very different business then where 20% of our business was media as opposed to today, which was 70% in 2018. So that the way it impacts you is different, but it felt the same way where you had kind of a fairly abrupt change in the metrics. We also didn't have a level of engagement metrics, we have today, but certainly can see some of the financial performance. And my recollection is that was the six to nine month period of time, but I'm not sure that just one data point like that is indicative of what we'll see in the future, but.

Alan Gould -- Loop Capital Markets -- Analyst

Okay, if I can ask a couple others. Just give us, do you know what the number of domestic and international events are going to be in the 2Q, it's on your calendar, just haven't gone through event by event?

George Barrios -- Co-President

Yeah. We tend not to talk about that just because there is sometime some logistical elements that changes, but as you know, on the second quarter, we do our Annual European tour, so that's where we will skew internationally in the quarter.

Alan Gould -- Loop Capital Markets -- Analyst

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

George Barrios -- Co-President

Yeah, I mean, it usually does quarter-over-quarter, but there are small changes and sometimes those changes are -- happened fairly close, just for logistical reasons.

Alan Gould -- Loop Capital Markets -- Analyst

Okay. And then George, two quick financial questions. I know you've got, on your new lease, you have six months for free, but I was wondering, when does it start impacting your P&L?

George Barrios -- Co-President

Yeah, it will start impacting the P&L once we begin the occupancy, obviously, there will be cash outlays between now and then.

Alan Gould -- Loop Capital Markets -- Analyst

Okay. And last thing, receivables increased...

George Barrios -- Co-President

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

Alan Gould -- Loop Capital Markets -- Analyst

Okay, it's helpful. And then last thing, receivables increased by $24 million in the quarter, was a pretty big increase, I was just wondering what that was related to?

George Barrios -- Co-President

Can you repeat that?

Alan Gould -- Loop Capital Markets -- Analyst

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

George Barrios -- Co-President

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

Alan Gould -- Loop Capital Markets -- Analyst

Okay, thank you for the time.

Operator

And it appears there are no further questions in the phone queue at this time.

Michael Weitz -- Senior Vice President, Financial Planning and Investor Planning

Thank you everybody. We appreciate you joining us today and if you have any questions, don't hesitate to contact us.

Operator

This does conclude today's call. Thank you for your participation, you may now disconnect.

Duration: 44 minutes

Call participants:

Michael Weitz -- Senior Vice President, Financial Planning and Investor Planning

Vincent K. McMahon -- Co-Founder, Chairman and Chief Executive Officer

George Barrios -- Co-President

Michelle Wilson -- Co-President

Brandon Ross -- BTIG -- Analyst

Curry Baker -- Guggenheim Securities -- Analyst

Vasily Karasyov -- Cannonball Research -- Analyst

David Karnovsky -- JPMorgan -- Analyst

Eric Handler -- MKM Partners -- Analyst

Paul Levesque -- Executive Vice President, Talent, Live Events & Creative

Eric Katz -- Wolfe Research -- Analyst

Ben Swinburne -- Morgan Stanley -- Analyst

Laura Martin -- Needham and Company -- Analyst

Jason Bazinet -- Citigroup -- Analyst

Alan Gould -- Loop Capital Markets -- Analyst

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