You should read the following discussion in conjunction with the audited Consolidated Financial Statements and related notes included elsewhere in this report.
Our operations are organized around the following principal activities:
Media:
?The Media segment reflects the production and monetization of long-form and short-form video content across various platforms, including broadcast and pay television and streaming, as well as digital and social media. Across these platforms, revenues principally consist of content rights fees associated with the distribution of our programming content, subscriptions to WWE Network, and advertising and sponsorships. Live Events: ?Live events provide ongoing content for our media platforms. Live Event segment revenues consist primarily of ticket sales, as well as revenues from events for which we receive a fixed fee and the sale of travel packages associated with the Company's global live events. As a result of the global spread of the coronavirus pandemic ("COVID-19"), these revenues had been greatly limited fromMarch 2020 through the first half of 2021. InJuly 2021 , we resumed our domestic and international live event touring schedules.
Consumer Products:
?The Consumer Products segment engages in the merchandising of WWE branded products, such as video games, toys and apparel, through licensing arrangements and direct-to-consumer sales. Revenues principally consist of royalties and licensee fees related to WWE branded products and sales of merchandise distributed at our live events and through eCommerce platforms. BeginningJuly 2022 , we launched an exclusive, multi-year partnership with Fanatics to create a new, enhanced experience for WWE fans globally, and transitioned our digital retail platform to Fanatics.
Results of Operations
The Company presents Adjusted OIBDA as the primary measure of segment profit (loss). The Company defines Adjusted OIBDA as operating income before depreciation and amortization, excluding stock-based compensation, certain impairment charges and other non-recurring items that management deems would impact the comparability of results between periods. Adjusted OIBDA includes depreciation and amortization expenses directly related to supporting the operations of our segments, including content production asset amortization, depreciation and amortization of costs related to content delivery and technology assets utilized for WWE Network, as well as amortization of right-of-use assets related to finance leases of equipment used to produce and broadcast our live events. The Company believes the presentation of Adjusted OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate segment performance and make decisions about allocating resources. Additionally, we believe that Adjusted OIBDA is a primary measure used by media investors, analysts and peers for comparative purposes. Adjusted OIBDA is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. A limitation of Adjusted OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in our business. Additionally, Adjusted OIBDA excludes stock-based compensation, a non-cash expense that may vary between periods with limited correlation to underlying operating performance, as well as other non-recurring items that management deems would impact the comparability of results between periods. Adjusted OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA. Unallocated corporate general and administrative expenses largely relate to corporate functions such as finance, investor relations, community relations, corporate communications, information technology, legal, facilities, human resources and our Board of Directors. These unallocated corporate general and administrative expenses will be shown, as applicable, as a reconciling item in tables where segment and consolidated results are both shown. 23
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Summary
Year Ended
(dollars in millions, except where noted)
The following tables present our consolidated results followed by our Adjusted OIBDA results: Increase 2022 2021 (decrease) Net revenues Media$ 1,033.9 $ 936.2 10 % Live Events 123.1 57.8 113 % Consumer Products 134.5 101.2 33 % Total net revenues (1) 1,291.5 1,095.2 18 % Operating expenses Media 569.1 499.4 14 % Live Events 86.4 46.0 88 % Consumer Products 75.1 62.8 20 % Total operating expenses (2) 730.6 608.2 20 % Marketing and selling expenses Media 62.5 60.0 4 % Live Events 11.6 4.9 137 % Consumer Products 4.8 4.4 9 % Total marketing and selling expenses (3) 78.9 69.3 14 % General and administrative expenses (4) 161.4 120.8 34 % Depreciation and amortization 37.3 40.9 (9) % Operating income 283.3 256.0 11 % Interest expense 21.2 33.6 (37) % Other income, net 2.3 7.5 (69) % Income before income taxes 264.4 229.9 15 % Provision for income taxes 68.8 52.5 31 % Net income$ 195.6 $ 177.4 10 % (1)Our consolidated net revenues increased by$196.3 million , or 18%, in 2022 as compared to 2021. This increase was driven by$72.8 million of incremental ticket and merchandise sales due to the return of ticketed audiences at our live events for a full year, coupled with the timing of our large-scale international events. Revenues in 2022 also include$32.1 million in incremental revenues primarily associated with the contractual escalations of our key domestic distribution agreements for our flagship programs, as well as$31.0 million of additional revenues driven by the delivery of third-party original programming. Additionally, revenues in 2022 include additional consumer product licensing revenues of$25.5 million primarily driven by the recognition of minimum guarantees related to the Company's licensed collectibles and higher sales of the Company's licensed video games. For further analysis, refer to Management's Discussion and Analysis of our business segments. (2)Our consolidated operating expenses increased by$122.4 million , or 20%, in 2022 as compared to 2021. This increase was primarily driven by the timing of our large-scale international events, coupled with higher event-related costs associated with the resumption of live event touring and higher production-related costs associated with our premium live events. In 2022, we incurred$70.6 million of higher production-related costs within our Media segment, primarily driven by the timing of our large-scale international events and additional production costs associated with our premium live events and third-party programming. In 2022, we also incurred$29.9 million of higher event-related costs within our Live Events segment, primarily driven by the impact of additional events associated with the return to live event touring for a full year. 2022 also includes$7.5 million of certain variable costs within our Consumer Products segment driven by higher sales of our licensed products and merchandise. Operating expenses in 2022 included higher staff-related costs, including management incentive compensation costs, resulting from the benefit associated with the combination of WWE's television, digital and studios teams into one organization in 2021. For further analysis, refer to Management's Discussion and Analysis of our business segments. (3)Our consolidated marketing and selling expenses increased by$9.6 million , or 14%, in 2022 as compared to 2021. This increase was primarily driven by higher costs for advertising and sponsorships driven by the impact of additional events associated with the return to live event touring for a full year. For further analysis, refer to Management's Discussion and Analysis of our business segments. (4)Our consolidated general and administrative expenses increased by$40.6 million , or 34%, in 2022 as compared to 2021. This increase was primarily driven by$21.7 million of professional fees and severance expenses associated with the investigation by the Special Committee of independent members of the Company's Board of Directors. In 2022, we also incurred$8.8 million of additional staff-related costs, including management compensation costs, and$3.6 million of additional insurance expenses. This increase was also driven by$4.4 million of incremental costs in 2022 associated with certain payments to be made by the Company's controlling stockholder. These increases were partially offset by$8.1 million of severance expenses in 2021 primarily associated with the combination of WWE's television, digital and studios teams into one organization. For further analysis, refer to Management's Discussion and Analysis of our business segments. 24
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2022
2021
Reconciliation of Operating Income to Adjusted OIBDA % of Rev % of Rev Operating income$ 283.3 22 %$ 256.0 23 % Depreciation and amortization 37.3 3 % 40.9 4 % Stock-based compensation 34.9 3 % 19.1 2 % Other adjustments (1) 29.1 2 % 8.1 1 % Adjusted OIBDA$ 384.6 30 %$ 324.1 30 % (1)Other adjustments in 2022 include$21.7 million of professional fees and severance expenses associated with the investigation by the Special Committee of independent members of the Company's Board of Directors, as well as$7.4 million of expenses related to certain payments to be made by the Company's controlling stockholder. Other adjustments in 2021 included severance expenses primarily associated with the combination of WWE's television, digital and studios teams into one organization. Increase 2022 2021 (decrease) Adjusted OIBDA Media$ 428.7 $ 390.5 10 % Live Events 27.2 7.7 253 % Consumer Products 56.6 35.5 59 % Corporate (127.9) (109.6) 17 %
Total Adjusted OIBDA$ 384.6 $ 324.1 19 % Media The following tables present the performance results and key drivers for our Media segment: Increase 2022 2021 (decrease)
Net Revenues
Network (including pay-per-view) (1)
596.8 566.2 5 % Advertising and sponsorship (3) 66.6 71.5 (7) % Other (4) 148.5 73.5 102 % Total net revenues$ 1,033.9 $ 936.2 10 % (1)Network revenues consist primarily of license fees associated with the domestic distribution of WWE Network content to NBCU (effectiveMarch 18, 2021 ), as well as subscription fees from customers of WWE Network and license fees associated with our international licensed partner agreements. Network revenues for the year endedDecember 31, 2021 include the upfront revenue recognition related to the delivery of certain WWE Network intellectual property rights to NBCU. (2)Core content rights fees consist primarily of licensing revenues from the distribution of our flagship programs, RAW and SmackDown, as well as our NXT programming, through global broadcast, pay television and digital platforms.
(3)Advertising and sponsorships revenues within our Media segment consist primarily of advertising revenues from the Company's content on third-party social media platforms and sponsorship fees from sponsors who promote their products utilizing the Company's media platforms, including promotion on the Company's digital websites and on-air promotional media spots.
(4)Other revenues within our Media segment reflect revenues from the distribution of other WWE content, including, but not limited to, certain live in-ring programming content in international markets, scripted, reality and other programming.
2022
2021
Reconciliation of Operating Income to Adjusted OIBDA % of Rev % of Rev Operating income$ 387.5 37 %$ 363.4 39 % Depreciation and amortization 14.8 1 % 13.4 1 % Stock-based compensation 26.4 3 % 13.7 1 % Other adjustments - - % - - % Adjusted OIBDA$ 428.7 41 %$ 390.5 42 % Media net revenues increased by$97.7 million , or 10%, in 2022 as compared to 2021. Other revenues within the Media segment increased by$75.0 million , driven primarily by the timing of our large-scale international events, coupled with$31.0 million of incremental revenues related to the timing of delivery associated with third-party original programming. Our core content rights fees 25
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increased by$30.6 million , or 5%, driven primarily by the contractual escalations of our key domestic distribution agreements for our flagship programs, RAW and SmackDown. These increases were partially offset by a decrease in Network revenues of$3.0 million , or 1%, primarily driven by the upfront revenue recognition in 2021 related to the delivery of certain WWE Network intellectual property rights to NBCU. The decline was partially offset by increased content license fees associated with the delivery of new WWE Network content in 2022. Media Adjusted OIBDA as a percentage of revenues declined slightly in 2022 as compared to 2021. The timing of our large-scale international events as well as the increases in core content rights fees and the impact of third-party original programming were offset by$31.2 million of higher production-related costs to support the creation of the Company's media content coupled with a reduction in Network revenues. Live Events The following tables present the performance results and key drivers for our Live Events segment: Increase 2022 2021 (decrease) Net Revenues North American ticket sales$ 97.9 $ 46.3 111 % International ticket sales 12.1 4.6 163 % Advertising and sponsorship (1) 4.8 0.9 433 % Other (2) 8.3 6.0 38 % Total net revenues$ 123.1 $ 57.8 113 % Operating Metrics (3) Total live event attendance 1,429,800 664,700 115 % Number of North American events 218 88 148 % Average North American attendance 6,070 6,880 (12) % Average North American ticket price (dollars)$ 73.13 $ 76.05 (4) % Number of international events 13 13 - % Average international attendance 8,130 4,930 65 % Average international ticket price (dollars)$ 114.66 $ 78.37
46 %
(1)Advertising and sponsorships revenues within our Live Events segment primarily consist of fees from advertisers and sponsors who promote their products utilizing the Company's live events (i.e., presenting sponsor of fan engagement events and advertising signage at the event).
(2)Other revenues within our Live Events segment primarily consist of the sale of travel packages associated with the Company's global live events, as well as revenues from events for which the Company receives a fixed fee.
(3)Metrics exclude the events for our developmental NXT brands that typically conduct their events in smaller venues with lower ticket prices.
2022
2021
Reconciliation of Operating (Loss) Income to Adjusted OIBDA % of Rev % of Rev Operating (loss) income$ 25.0 20 %$ 6.9 12 % Depreciation and amortization 0.1 0 % - - % Stock-based compensation 2.1 2 % 0.8 1 % Other adjustments - - % - - % Adjusted OIBDA$ 27.2 22 %$ 7.7 13 % Live events net revenues, which include revenues from ticket sales and travel packages, increased by$65.3 million , or 113%, in 2022 as compared to 2021. Revenues from our ticket sales increased by$59.1 million due to the impact of the full year return of ticketed events in 2022, including a return to full capacity attendance for our annual WrestleMania events, as well as other domestic and international premium live events.
Live Events Adjusted OIBDA as a percentage of revenues increased in 2022 as
compared to 2021. This increase was driven by the increase in ticket sales, as
discussed above, partially offset by increased event-related costs of
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Consumer Products
The following tables present the performance results and key drivers for our Consumer Products segment: Increase 2022 2021 (decrease) Net Revenues Consumer product licensing$ 77.5 $ 52.0 49 % eCommerce 33.2 39.1 (15) % Venue merchandise 23.8 10.1 136 % Total net revenues$ 134.5 $ 101.2 33 % Operating Metrics Average eCommerce revenue per order (dollars)$ 64.88 $ 65.92 (2) % Number of eCommerce orders 290,200 586,600 (51) % Venue merchandise domestic per capita spending (dollars)$ 14.74 $ 14.67 0 % 2022 2021 Reconciliation of Operating Income to Adjusted OIBDA % of Rev % of Rev Operating income$ 54.4 40 %$ 33.8 33 % Depreciation and amortization 0.2 0 % 0.2 0 % Stock-based compensation 2.0 1 % 1.5 1 % Other adjustments - - % - - % Adjusted OIBDA$ 56.6 42 %$ 35.5 35 % Consumer Products net revenues increased by$33.3 million , or 33%, in 2022 as compared to 2021. This increase was driven by an increase in consumer product licensing revenues of$25.5 million , or 49%, primarily due to$16.9 million of incremental revenues associated with our licensed collectibles, primarily driven by the revenue recognition for certain agreements with minimum guarantees, as well as higher sales associated with our trading cards. Consumer product licensing revenues in 2022 also include$6.3 million of higher sales of the Company's licensed video games, including our franchise game WWE 2K22. Venue merchandise revenues increased by$13.7 million , or 136%, primarily driven by the impact of a full year of merchandise sales at our ticketed events. Our eCommerce revenues declined by$5.9 million , or 15%, primarily driven by the impact of theJuly 2022 transition of our digital retail platform from direct-to-consumer to a third-party partner as they ramp up their operations.
Consumer Products Adjusted OIBDA as a percentage of revenues increased in 2022 as compared to 2021. This increase was driven by increased revenues, as discussed above, partially offset by an increase in certain variable costs primarily driven by the impact of higher sales associated with our licensed products.
Corporate
Unallocated corporate general and administrative expenses largely relate to corporate administrative functions, including finance, investor relations, community relations, corporate communications, information technology, legal, facilities, human resources and our Board of Directors. The Company does not allocate these general and administrative expenses to its business segments. 2022
2021
Reconciliation of Operating Loss to Adjusted OIBDA % of Rev % of Rev Operating loss$ (183.6) (14) %$ (148.1) (14) % Depreciation and amortization 22.2 2 % 27.3 2 % Stock-based compensation 4.4 0 % 3.1 0 % Other adjustments (1) 29.1 2 % 8.1 1 % Adjusted OIBDA$ (127.9) (10) %$ (109.6) (10) % (1)Other adjustments in 2022 include$21.7 million of professional fees and severance expenses associated with the investigation by the Special Committee of independent members of the Company's Board of Directors, as well as$7.4 million of expenses related to certain payments to be made by the Company's controlling stockholder. Other adjustments in 2021 included severance expenses primarily associated with the combination of WWE's television, digital and studios teams into one organization. 27
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Corporate Adjusted OIBDA decreased by$18.3 million , or 17%, in 2022 as compared to 2021. This decrease was primarily driven by$11.2 million of additional staff-related costs, including management incentive compensation, as well as insurance costs.
Depreciation and Amortization
(dollars in millions)
Increase 2022 2021 (decrease)
Depreciation and amortization
Depreciation and amortization expense decreased by$3.6 million , or 9%, in 2022 as compared to 2021. This decline was driven by the impact of prior period capital expenditures that have fully depreciated. The Company anticipates depreciation and amortization expense to increase beginning in 2023 as the capital expenditures related the Company's newStamford headquarter lease will begin to depreciate as we move in during the first half of 2023. Interest Expense (dollars in millions) Increase 2022 2021 (decrease)
Interest expense
Interest expense, which relates primarily to interest and amortization associated with our convertible notes, our real estate and equipment finance leases, the revolving credit facility and mortgage, declined by$12.4 million in 2022 as compared to 2021. Interest expense in 2021 included$5.6 million of interest expense related to the unamortized debt discount associated with our convertible notes, which was derecognized as ofJanuary 1, 2022 upon the adoption of ASU 2020-06. Additionally, in 2022, the Company capitalized$4.0 million of interest expense associated with its projects in progress. Interest expense in 2022 also includes a reduction of$3.2 million of interest expense associated with the Company's finance leases. This reduction was primarily driven by the amendment to the Company'sStamford headquarter lease during the fourth quarter of 2021 that reduced the lease space by approximately 33,000 rentable square feet. Other Income, Net (dollars in millions) Increase 2022 2021 (decrease) Other income, net$ 2.3 $ 7.5 (69) % Other income, net, which is comprised of interest income, gains and losses recorded on our equity investments, realized translation gains and losses, and rental income, decreased by$5.2 million in 2022 as compared to 2021. During 2021, the Company recognized a gain of$6.7 million on the partial termination of approximately 33,000 rentable square feet as part of an amendment to its newStamford headquarter lease. Income Taxes (dollars in millions) Increase 2022 2021 (decrease)
Provision for income taxes
26 % 23 %
The effective tax rate increased in 2022 as compared to 2021. This increase was driven by state income taxes and the limitation in the 162(m) deduction for executive compensation.
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Liquidity and Capital Resources
We had cash and cash equivalents and short-term investments of$478.7 million and$415.8 million as ofDecember 31, 2022 and 2021, respectively. Our short-term investments consist primarily ofU.S. Treasury securities, corporate bonds and government agency bonds. Our debt balance totaled$235.4 million and$222.8 million as ofDecember 31, 2022 and 2021, respectively, and includes the carrying value of$214.1 and$201.1 million related to our convertible senior notes dueDecember 15, 2023 as ofDecember 31, 2022 and 2021, respectively. COVID-19 has negatively impacted the global economy, disrupted business operations and created significant volatility and disruption to financial markets. Significant uncertainty remains as to COVID-19. While restrictions have lessened and we have resumed our domestic and international live event touring schedules, the extent and duration of the pandemic could continue to disrupt global markets and may affect our ability to generate cash from operations. Additionally, please refer to Part I, Item 1A, Risk Factors, which provides a discussion of risk factors related to COVID-19. We believe that our existing cash and cash equivalents and short-term investment balances, along with cash generated from operations, will be sufficient to meet our ongoing operating requirements for at least the next twelve months, inclusive of dividend payments, debt service, content production activities, planned capital expenditures and any discretionary repurchase of shares of our common stock under our share repurchase program, as described below. The Company also has available capacity of$200.0 million under its Revolving Credit Facility, as defined below. The Company estimates that total capital expenditures related to the Company's new headquarter facility, which will be completed in 2023, will be approximately$290 million to$310 million in the aggregate, partially offset by tenant improvement allowances, tax credits and proceeds from the sale of other real estate assets. Excluding these items, the total net cost of the Company's new headquarter is estimated within a range of$180 million to$190 million . The Company expects total capital expenditures will return to approximately 4% to 5% of revenues once construction of the Company's new headquarter has been completed. InFebruary 2019 , the Company's Board of Directors authorized a stock repurchase program of up to$500.0 million of our common stock. Repurchases may be made from time to time at management's discretion subject to certain pre-approved parameters and in accordance with all applicable securities and other laws and regulations. The extent to which WWE repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including liquidity, capital needs of the business, market conditions, regulatory requirements and other corporate considerations. Repurchases under this program may be funded by one or a combination of existing cash balances and free cash flow. The stock repurchase program does not obligate the Company to repurchase any minimum dollar amount or number of shares, and may be modified, suspended or discontinued at any time. We repurchased approximately 695,000 shares of our common stock in the open market for an aggregate cost of$40.0 million during the year endedDecember 31, 2022 . The Company suspended the stock repurchase program during the second quarter of 2022 and has not yet resumed the program. As it relates to our Convertible Notes (defined below), which pursuant to the terms are currently convertible, we believe that if note holders elect to convert their notes prior to maturity onDecember 15, 2022 , the Company has sufficient means to settle the Convertible Notes using any combination of any existing or new liquidity or through the issuance of shares.
Debt Summary and Borrowing Capacity
The Company has$215.0 million aggregate principal amount of 3.375% convertible senior notes (the "Convertible Notes") dueDecember 15, 2023 . See Note 11, Convertible Debt, and Note 3, Earnings Per Share, in the Notes to Consolidated Financial Statements for further information on the Convertible Notes, including the dilutive nature of the Convertible Notes. InMay 2019 , the Company entered into an amended and restated$200.0 million senior unsecured revolving credit facility with a syndicated group of banks, withJPMorgan Chase Bank, N.A . acting as Administrative Agent (the "Revolving Credit Facility"). The Revolving Credit Facility has a maturity date ofMay 24, 2024 . As ofDecember 31, 2022 , the Company was in compliance with the provisions of our Revolving Credit Facility, there were no amounts outstanding, and the Company had available capacity under the terms of the facility of$200.0 million . InSeptember 2016 , the Company acquired land and a building located inStamford, Connecticut adjacent to our production facility. In connection with the acquisition, we assumed future obligations under a loan agreement, in the principal amount of$23.0 million , which loan is secured by a mortgage on the property. Pursuant to the loan agreement, the assets ofWWE Real Estate , a subsidiary of the Company, represent collateral for the underlying mortgage, therefore these assets will not be available to satisfy debts and 29
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obligations due to any other creditors of the Company. As ofDecember 31, 2022 and 2021, the amounts outstanding of the mortgage were$21.3 million and$21.7 million , respectively.
Cash Flows from Operating Activities
Cash generated from operating activities was$325.6 million for the year endedDecember 31, 2022 , as compared to$182.9 million for the year endedDecember 31, 2021 . The$142.7 million increase in the current year was primarily driven by the timing of collections associated with our large-scale international events and WWE Network revenues, and, to a lesser extent, improved operating performance. These increases were partially offset by unfavorable changes in working capital. During 2022, the Company spent$35.8 million on content production activities, including content for A&E programming, Miz & Mrs., WWE Evil, and various programs for WWE Network and other digital platforms, as compared to$17.7 million in 2021. We anticipate spending approximately$15 million to$25 million on content production during the year endingDecember 31, 2023 . In 2022, we received content production incentives of$19.6 million , as compared to$15.4 million in 2021. During the year endingDecember 31, 2023 , we anticipate receiving$15 million to$20 million in content production incentives. As previously announced, a Special Committee of independent members of the Company's Board of Directors was formed to investigate alleged misconduct by the Company's then-Chief Executive Officer and current Executive Chairman of the Board of Directors,Vincent K. McMahon . The Special Committee investigation is complete.Mr. McMahon initially resigned from all positions held with the Company onJuly 22, 2022 but remains a stockholder with a controlling interest and, as ofJanuary 9, 2023 serves as Executive Chairman of the Board of Directors. We spent$17.0 million of the$21.7 million of costs incurred associated with this investigation during the year endedDecember 31, 2022 . We currently anticipate additional spending associated with the investigation in 2023. We expectMr. McMahon to reimburse the Company for reasonable expenses incurred in connection with the investigation, net of any insurance proceeds. Our accounts receivable represents a significant portion of our current assets and relate principally to a limited number of distributors and licensees. AtDecember 31, 2022 , our largest receivable balance from customers was 19% of our gross accounts receivable. Changes in the financial condition or operations of our distributors, customers or licensees may result in delayed payments or non-payments which would adversely impact our cash flows from operating activities and/or our results of operations. We believe credit risk with respect to accounts receivable is limited due to the generally high credit quality of the Company's major customers.
Cash Flows from Investing Activities
Cash used in investing activities was$177.9 million for the year endedDecember 31, 2022 , as compared to$193.1 million for the year endedDecember 31, 2021 . During the current year, we received proceeds from the maturities and sales of our short-term investments of$263.8 million and purchased$246.0 million of new investments, as compared to proceeds of$222.1 million and purchases of$374.5 million in the prior year. Capital expenditures in 2022 increased by$160.7 million as compared to 2021, including an additional$153.3 million related to construction activity on the Company's new global headquarter space inStamford, Connecticut . Capital expenditures for the year endingDecember 31, 2023 are estimated to range between$150 million and$170 million , with a large portion of this spend associated with the Company's new global headquarter, as previously discussed. During 2022, the Company also received tax credits of$4.3 million relating to our infrastructure improvements in conjunction with prior year qualified capital projects to support our increased content production efforts.
Cash Flow from Financing Activities
Cash used in financing activities was$62.3 million for the year endedDecember 31, 2022 , as compared to$317.1 million for the year endedDecember 31, 2021 . During 2021, the Company repaid$100.0 million from borrowings under the Revolving Credit Facility. The Company paid$40.0 million and$165.6 million for stock repurchases under its approved stock repurchase program during the years endedDecember 31, 2022 and 2021, respectively. Additionally, the Company made dividend payments of$35.7 million and$36.4 million during the years endedDecember 31, 2022 and 2021, respectively. During 2022, the Company received$34.2 million related to tenant improvements associated with construction of its new global headquarter space. Contractual Obligations
We have entered into various contracts under which we have commitments to make contractually required payments, including:
?Scheduled principal and fixed interest payments under our assumed mortgage in
connection with an owned building in
?Convertible Notes with fixed semi-annual interest payments.
?Various operating leases for facilities, sales offices and equipment with terms generally ranging from one to ten years.
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?Finance lease for the Company's new headquarter building with an accounting lease term of 30 years in addition to finance leases of certain equipment utilized in our television production operations with contractual terms generally five years or less (see Note 8, Leases, in the Notes to Consolidated Financial Statements for further information).
?Service contracts with certain vendors and independent contractors, including our talent, with terms ranging from one to twenty years.
?Service agreement obligations related to WWE Network (excluding future performance-based payments which are variable in nature).
Our aggregate minimum payment obligations under these contracts as of
After 2023 2024 2025 2026 2027 2027 Total Long-term debt$ 1.4 $ 1.4 $ 20.8 $ - $ - $ -$ 23.6 Convertible debt (1) 222.0 - - - - - 222.0 Operating leases (2) 4.1 2.7 2.5 2.3 2.2 5.0 18.8 Finance leases (2) (3) 26.3 24.9 21.7 22.1 19.5 519.0 633.5 Service contracts and talent commitments 54.2 26.6 15.9 10.6 0.3 1.3 108.9 Total commitments$ 308.0 $ 55.6 $ 60.9 $ 35.0 $ 22.0 $ 525.3 $ 1,006.8 (1)Convertible debt obligations assume that no notes are converted prior to theDecember 15, 2023 maturity date. See Note 11, Convertible Debt, in the Notes to the Consolidated Financial Statements for additional information. (2)Operating and finance lease obligations disclosed in the table above are presented on an undiscounted basis. See Note 8, Leases, in the Notes to the Consolidated Financial Statements for the discounted amounts which include the amounts for imputed interest. (3)Finance lease payments include$358.4 million related to options to extend our global headquarter lease that are reasonably certain of being exercised.
Our Consolidated Balance Sheet at
Seasonality
Our operating results are not materially affected by seasonal factors; however, we may produce several large-scale premium live events throughout the year, including WrestleMania, which result in increased revenues and expenses during the periods in which these events occur. WrestleMania typically occurs late in our first quarter or early second quarter, while certain other large-scale premium live events may not have set recurring dates. Revenues from our licensing and direct sale of consumer products varies from period to period depending on the volume and extent of licensing agreements and marketing and promotion programs entered into during any particular period of time, as well as the commercial success of the media exposure of our characters and brand. The timing of these events, as well as the continued introduction of new product offerings and revenue generating outlets, can and will cause fluctuations in quarterly revenues and earnings.
Inflation
During 2022, 2021 and 2020, inflation did not have a material effect on our business. Widely reported inflation has occurred, however, and may be ongoing into the foreseeable future. Depending on the severity and persistence of these inflationary pressures, we could see in the future a negative impact on our customers' demand, or ability to pay (including an impact on the collectability of our accounts receivable), for our goods and services.
Critical Accounting Estimates
The preparation of our Consolidated Financial Statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our estimates on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities. The accuracy of these estimates and the likelihood of future changes depend on a range of possible outcomes and a number of underlying variables, many of which are beyond our control. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following judgments and estimates are critical in the preparation of our Consolidated Financial Statements.
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Revenue Recognition with Multiple Performance Obligations
Most of our contracts have one performance obligation and all consideration is allocated to that performance obligation. In contracts that have multiple performance obligations, which may include content licenses associated with the distribution of media content, the production of live events, advertising and sponsorship rights, and consumer product licensing royalties, we allocate the transaction price to each identified performance obligation based upon their relative standalone selling price. The standalone selling prices are determined using observable standalone selling prices when available as well as estimates of standalone selling prices using adjusted market assessment and expected cost plus margin approaches to estimate the price for individual components. Judgment is required to identify and evaluate the treatment of contract terms, determine whether the services are considered distinct performance obligations, and determine the standalone selling price for each distinct performance obligation and allocation of the transaction price to each distinct performance obligation.
Content Production Assets, Net
The Company is primarily a content producer with content production assets consisting of non-live event episodic television series, feature films, and original programming content for WWE Network and other digital platforms. The non-live event episodic television series are predominantly monetized on their own through individual television distribution arrangements. Feature film titles are predominantly monetized on their own through exploitation and exhibition through individual film distribution arrangements or by sale to a third party. The original WWE Network programming and other digital platform content are predominantly monetized as a film group through the collection of licensing fees from distribution partners or through the collection of monthly subscription fees from WWE Network. Amounts capitalized for content production assets typically include development costs, production costs, production overhead, and employee salaries and are net of any film production incentives associated with our feature films. Content production assets related to non-live event episodic television series are expensed upon delivery of the completed programming content to the individual television distributors. Content production assets related to our feature films are amortized in the proportion that revenues bear to management's estimates of the ultimate revenue expected to be recognized from exploitation, exhibition or sale. Our programming content distributed on the WWE Network and other digital platforms is expensed based upon delivery to distribution partners or based on viewership consumption patterns if on the subscription-based WWE Network. Unamortized content production costs are evaluated for impairment whenever events or changes in circumstances indicate that the fair value may be less than its unamortized costs. Income Taxes Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax basis of particular assets and liabilities, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In evaluating our ability to recover deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax assets valuation allowance, which would reduce the provision for income taxes. As ofDecember 31, 2022 and 2021, our deferred tax assets (net of valuation reserve) were$45.6 million and$13.1 million , respectively. The increase in our net deferred tax asset balance in 2022 was primarily driven by increased foreign tax credit carryforwards, coupled with a reduction in tax liabilities due to receipts of tenant improvement allowances. We believe that it is more likely than not that we will have sufficient taxable income in the future to realize these deferred tax assets and as such have not recorded a valuation allowance to reduce the net carrying value. If we determine it is more likely than not that we will not have sufficient taxable income to realize these assets, we may need to record a valuation allowance in the future. We use a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more likely than not sustainable, based solely on their technical merits, upon examination, and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position, as the largest amount that we believe is more likely than not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements represent our unrecognized income tax benefits, which we record as a liability. Our policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense. AtDecember 31, 2022 , our unrecognized tax benefits including interest and penalties totaled$0.1 million . 32
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Recent Accounting Pronouncements
The information set forth under Note 2 to the Consolidated Financial Statements under the caption "Summary of Significant Accounting Policies - Recent Accounting Pronouncements, is incorporated herein by reference.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
This Form 10-K contains, and oral statements made from time to time by our representatives may contain, forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Forward looking statements include, without limitations, statements relating to our outlook regarding future financial results, the impact of recent changes to management and our board of directors (the "Board"); the timing and outcome of the Company's media and other rights negotiations including major domestic programming licenses expected to be negotiated in 2023; the Company's review of strategic alternatives; our plans to remediate identified material weaknesses in our disclosure control and procedures and our internal control over financial reporting; and regulatory, investigative or enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters. The words "may," "will," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect," "outlook," "target," "goal," "guidance" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These statements relate to future possible events, as well as our plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or the performance by us to be materially different from expected future results or performance expressed or implied by any forward-looking statements. These forward-looking statements are subject to uncertainties relating to, without limitation, the impact of actions byMr. McMahon (who has a controlling interest in the Company due to his ownership of a substantial majority of our Class B common stock and whose interests could conflict with those of our Class A common stockholders) which could have adverse financial and operational impacts. The following additional factors, among others, could cause actual results to differ materially from those contained in forward-looking statements: COVID-19, which may continue to affect negatively world economies as well as our industry, business and results of operations; a rapidly evolving and highly competitive media landscape; WWE Network; computer systems, content delivery and online operations of our Company and our business partners; privacy norms and regulations; our need to continue to develop creative and entertaining programs and events; our need to retain and continue to recruit key performers; the possibility of a decline in the popularity of our brand of sports entertainment; possible adverse changes in the regulatory atmosphere and related private sector initiatives; the highly competitive, rapidly changing and increasingly fragmented nature of the markets in which we operate and/or our inability to compete effectively, especially against competitors with greater financial resources or marketplace presence; uncertainties associated with international markets including possible disruptions and reputational risks; our difficulty or inability to promote and conduct our live events and/or other businesses if we do not comply with applicable regulations; our dependence on our intellectual property rights, our need to protect those rights, and the risks of our infringement of others' intellectual property rights; potential substantial liability in the event of accidents or injuries occurring during our physically demanding events; large public events as well as travel to and from such events; our expansion into new or complementary businesses, strategic investments and/or acquisitions; our accounts receivable; the construction and move to our new leased corporate and media production headquarters; litigation and other actions, investigations or proceedings; a change in the tax laws of key jurisdictions; inflationary pressures and interest rate changes; our indebtedness including our convertible notes; our potential failure to meet market expectations for our financial performance; our share repurchase program; a substantial number of shares are eligible for sale by the McMahons and the sale, or the perception of possible sales, of those shares could cause our stock price to decline; and the volatility in trading prices of our Class A common stock. In addition, our dividend and share repurchases are dependent on a number of factors, including, among other things, our liquidity and historical and projected cash flow, strategic plan (including alternative uses of capital), our financial results and condition, contractual and legal restrictions, general economic and competitive conditions and such other factors as our Board may consider relevant. Forward-looking statements made by the Company speak only as of the date made and are subject to change without any obligation on the part of the Company to update or revise them. Undue reliance should not be placed on these statements. For more information about risks and uncertainties associated with the Company's business and our forward-looking statements, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in this Form 10-K and our otherSEC filings. 33
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