WWE Q2 Financial Report

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WWE sent out the following:

Second Quarter 2018 Highlights

  • Revenues increased 31% to $281.6 million, which was the highest quarterly revenue in WWE history
  • Operating income nearly doubled to $21.2 million from $10.7 million in the prior year quarter
  • Adjusted OIBDA1 increased 79% to $43.5 million
  • WWE completed agreements with USA Network and Fox Sports, effective October 1, 2019, which increase the average annual value (AAV) of WWE’s U.S. distribution to 3.6 times that of the prior deal with NBCU
  • WWE Networkaverage paid subscribers2 increased 10% to 1.80 million paid subscribers, consistent with the Company’s guidance
  • Digital engagement continued to grow through the first six months of 2018 with video views up 58% to 14.4 billion and hours consumed up 71% to 509 million across digital and social media platforms3

STAMFORD, Conn.–(BUSINESS WIRE)– WWE (NYSE: WWE) today announced financial results for its second quarter ended June 30, 2018.

“We’re pleased with our continued success in increasing the monetization of WWE content globally,” said Vince McMahon, WWE Chairman and Chief Executive Officer. “This success is evidenced by the completion of our new U.S. distribution agreements with USA Network and Fox Sports, the staging of another record-breakingWrestleMania, and the development of a 10-year strategic partnership with the Saudi General Sports Authority.”

George Barrios, Co-President, added, “During the second quarter, we generated a 79% increase in Adjusted OIBDA. We are raising our 2018 Adjusted OIBDA target to a range of $160 million to $170 million, which would be an all-time record.4 By executing our strategy and engaging our passionate global fan base, we can continue to deepen the moat around our business. We believe this will enable us to drive long-term growth and shareholder value.”

Second-Quarter Consolidated Results

Revenuesincreased 31% to $281.6 million driven by the increased monetization of content as reflected in the Media segment.

Operating Incomenearly doubled to $21.2 million from $10.7 million in the prior year quarter reflecting increased profits from the Media segment, which were partially offset by an increase in management incentive compensation based on anticipated strong full-year results and the rise in the Company’s stock price. The Company’s Operating income margin was 8% as compared to 5% in the prior year quarter.

Adjusted OIBDA(which excludes stock compensation) increased 79% to $43.5 million. The Company’s Adjusted OIBDA margin increased to 15% from 11% in the prior year quarter.

Net Incomeincreased to $10.0 million, or $0.11 per diluted share, as compared to $5.1 million, or $0.06 per diluted share, in the prior year quarter.

Effective Tax Ratedeclined to 31% from 35% in the prior year quarter driven by the reduced federal income tax rate in the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

During the third quarter of 2018, in connection with the vesting of annual stock-based awards, the Company expects to recognize an income tax benefit between $20 million and $25 million, as compared to $1.6 million during the prior year quarter. This benefit results from the difference between the deduction for tax purposes and the compensation cost recognized related to these awards. The increase in the tax benefit during the current year is driven by the increase in the Company’s stock price. The Company expects this benefit to have a significant impact on its effective tax rate during the three months ended September 30, 2018.

Cash flows generated by operating activitiesreached $74.2 million andFree Cash Flowtotaled $66.4 million as compared to $10.8 million and $2.6 million, respectively, in the prior year quarter.5 The growth in both measures was primarily due to improved operating performance.

Year-to-date 2018 Consolidated Results

For the six months ended June 30, 2018, Revenues increased 16% to $469.3 million from $403.0 million. Operating income increased to $43.0 million from $14.7 million, and Adjusted OIBDA increased to $78.7 million from $49.5 million. Net income increased to $24.8 million ($0.29 per diluted share) from $6.0 million ($0.08 per diluted share) in the prior year period.

Cash flows generated by operating activitiesreached $76.8 million andFree Cash Flowtotaled $64.6 million as compared to $13.8 million and $1.3 million, respectively, in the prior year period.5 The growth in both measures was primarily due to improved operating performance.

Cash, cash equivalents and short-term investmentswere $342 million as of June 30, 2018, and the Company estimatesdebt capacityunder its revolving line of credit of approximately $100 million.

Basis of Presentation

For the second quarter of 2017, Operating income included $1.1 million in film impairment charges. For the six months ended June 30, 2017, Operating income included $5.6 million in expenses primarily related to certain legal matters and other contractual obligations, and $3.2 million in film impairment charges. As these items impact the comparability of results on a year-over-year basis, they have been excluded from the Company’s 2017 Adjusted OIBDA. A reconciliation of 2018 Adjusted OIBDA to Operating income (GAAP) for the three and six-month periods ended June 30, 2018 can be found in the supplemental schedules on pages 14-15 of this release.

For the second quarter and six-month period ended June 30, 2018, net income included a $3.0 million impairment of an equity investment which was recorded below Operating income as a Loss on equity investment. A reconciliation of Net Income to Adjusted Net Income for the three and six-month periods ended June 30, 2018 and 2017 can be found in the supplemental schedule on page 13 of this release.

Second-Quarter Results by Operating Segment

Media

Revenuesincreased 48% to $202.6 million, primarily due to the distribution of certain programming content in international markets as reflected in “Other.” Additionally, the growth in Media revenue reflected increased sales of advertising and sponsorships across platforms, the contractual escalation of core content rights fees, including license fees from the distribution of the Company’s flagship programsRawandSmackDown, and the continued growth ofWWE Networkthat yielded a 10% increase in average paid subscribers to 1.80 million.

Operating incomeincreased $22.4 million to $32.0 million primarily due to the growth in revenue, which was partially offset by associated production costs and an increase in accrued management incentive compensation.

Adjusted OIBDAincreased $26.7 million to $44.5 million.

Key Highlights:During the quarter, WWE continued to produce compelling content, monetize new opportunities across platforms, and optimize its future distribution. AsMonday Night RawandSmackDown Liveremained the highest-rated programs on USA Network, WWE secured agreements with USA Network and Fox Sports, effective October 1, 2019, that increase the programs’ combined average annual value (AAV) in the U.S. to 3.6 times that of the prior deal with NBCU. Extending its reach on television, WWE delivered its third captivating season ofTotal Bellas, developed a new series,Miz & Mrs., that premiered on July 24, and announced the eighth season Fall return ofTotal Divas. On the Company’s streaming service,WWE Network, pay-per-views and original programming continued to drive viewer engagement. In partnership with the Saudi General Sports Authority, the Company produced theGreatest Royal Rumble, which was featured onWWE Network. Other examples of exciting new programming on the network included theUK Championship Tournamentand a new season ofCamp WWE. To these, the Company added the promise of more in-ring content to come with the next women’s tournament,Mae Young Classic 2018and the first-ever all-women’s pay-per-view event,WWE Evolution. For its social and digital platforms, the Company produced more than 165 hours of content, including versions of itsBest of WWEseries in Spanish, Portuguese, and German, and plans to launch a new series,WWE Nowin Arabic.

Live Events

Revenuesof $52.3 million were essentially unchanged from the prior year quarter as increases in the average ticket price at events in both North America and international markets was offset by a reduction in average attendance for the Company’s events worldwide. The year-over-year changes in ticket prices and average attendance were primarily due to changes in the mix of venues and territories.

  • There were 90 total events (excluding NXT) in the current quarter, consisting of 61 events in North America and 29 events in international markets, as compared to 92 events in the prior year quarter, including 66 events in North America and 26 in international markets.
  • North American ticket sales declined $2.4 million primarily due to the staging of five fewer events and an 8% decline in average attendance to 5,900. Partially offsetting these factors, the average ticket price increased 5% to $81.71.
  • International live event revenue increased 9% to $13.5 million from $12.4 million in the prior year quarter. The staging of three additional events during the quarter and an 8% increase in average ticket price to $78.31 was partially offset by a 10% reduction in average attendance to approximately 5,700 fans.

Operating incomewas $13.4 million as compared to $17.1 million in the prior year quarter, primarily due to a rise in production costs, including talent pay, an increase in accrued management incentive compensation and the reduction in ticket sales (as described above).

Adjusted OIBDAwas $14.7 million as compared to $17.7 million in the prior year quarter.

Key Highlights:WWE continued to stage and plan remarkable events for engaging its fans with live, action-packed entertainment. During the quarter,WrestleManiaattracted 78,133 fans and broke the record for the Mercedes-Benz Superdome’s highest grossing entertainment event at $14.1 million. TheGreatest Royal Rumblein Jeddah, Saudi Arabia, became the largest WWE event held outside the U.S. in the past 16 years. In addition, the Company announced that it will return to China for the third straight year whenWWE LIVE Shanghaicomes to the Mercedes Benz Arena in September, and will hold a historic event in Australia, withWWE Super Show-Downin October, featuring the largest roster of WWE Superstars to ever appear in that country.

ConsumerProducts

Revenuesincreased 9% to $26.7 million primarily due to higher royalties from the sale of licensed consumer products and the timing of merchandise sales related to WWE’sWrestleMania Fan Axxess. The increase in licensing revenues reflected higher royalties from the sale of video games, including the company’s franchise game,WWE 2K19, and the mobile game,WWE Champions(Scopely).

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