WWE sent out the following:
Maintains Path to Record Full-Year Performance
Third Quarter 2018 Highlights
Revenues reached $188.4 million for the third quarter 2018 and a record $657.7 million for the nine months ended September 30, 2018, representing 12% growth over the prior year period
Operating income was $18.1 million. Adjusted OIBDA1 of $35.8 million exceeded the Company’s guidance
Through the first nine months of 2018, digital engagement increased with video views up 61% to 22.9 billion and hours consumed up 81% to 842 million across digital and social media platforms2
2018 Business Outlook
Full year 2018 Adjusted OIBDA is expected to range from $160 million to $170 million, which would be consistent with the Company’s previous guidance3
WWE has operated in the Middle East for nearly 20 years and has developed a sizable and dedicated fan base. Considering the heinous crime committed at the Saudi consulate in Istanbul, the Company faced a very difficult decision as it relates to its event scheduled for November 2 in Riyadh. Similar to other U.S.-based companies who plan to continue operations in Saudi Arabia, the Company has decided to uphold its contractual obligations to the General Sports Authority and stage the event. Full year 2018 guidance is predicated on the staging of the Riyadh event as scheduled4
STAMFORD, Conn.–(BUSINESS WIRE)– WWE (NYSE:WWE) today announced financial results for its third quarter ended September 30, 2018.
“During the quarter, we remained keenly focused on deepening engagement with our global fan base by delivering compelling original content across media platforms,” said Vince McMahon, WWE Chairman and Chief Executive Officer. “We believe that deepening engagement will enable us to take advantage of favorable global industry trends and drive long-term growth.”
George Barrios, Co-President, added “We continue to effectively execute our strategy and achieved Adjusted OIBDA that surpassed our public guidance. Our performance maintains our path to achieve record revenue, record Adjusted OIBDA and record subscribers for the full year 2018.”
Third-Quarter Consolidated Results
Revenues of $188.4 million increased slightly from the third quarter 2017, as the increased monetization of content as reflected in the Media segment was nearly offset by lower ticket sales at the Company’s live events and a $2.6 million unfavorable impact on licensing revenue due to the adoption of the new FASB standard for revenue recognition (ASC Topic 606).
Operating Income decreased to $18.1 million from $33.9 million in the prior year quarter, reflecting the slight increase in revenue, which was more than offset by increased operating expenses, including increases in fixed costs, the timing of various business initiatives, and higher management incentive compensation based on anticipated strong full-year results as well as the rise in the Company’s stock price. The Company’s Operating income margin was 10% as compared to 18% in the prior year quarter.
Adjusted OIBDA (which excludes stock compensation) was $35.8 million as compared to $45.6 million in the prior year quarter. The Company’s Adjusted OIBDA margin decreased to 19% from 24%.
Net Income was $33.6 million, or $0.37 per diluted share, as compared to $21.8 million, or $0.28 per diluted share, in the prior year quarter.
Effective Tax Rate was (87%) as compared to 30% in the prior year quarter driven by the recognition of $20.7 million of excess tax benefits related to the Company’s share-based compensation awards at vesting, as compared to $1.6 million in the prior year quarter. Excluding this discrete tax item, our effective tax rate was 28% in the current year quarter as compared to 35% in the prior year quarter. The tax benefit recorded during the current year is driven by the increase in the Company’s stock price between the original grant date of the awards and their subsequent vesting date in the third quarter of 2018. Further impacting the decline in the effective tax rate was the reduction of the federal corporate income tax rate as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017.
Cash flows generated by operating activities reached $44.7 million and Free Cash Flow totaled $35.5 million as compared to $27.2 million and $22.0 million, respectively, in the prior year quarter.5 The growth in both measures was primarily due to the favorable timing of working capital.
Year-to-date 2018 Consolidated Results
For the nine months ended September 30, 2018, revenues increased 12% to $657.7 million from $589.4 million. Operating income increased 26% to $61.1 million from $48.6 million, and Adjusted OIBDA increased 20% to $114.5 million from $95.1 million. Net income increased 110% to $58.4 million ($0.66 per diluted share) from $27.8 million ($0.36 per diluted share) in the prior year period.
Cash flows generated by operating activities reached $121.5 million and Free Cash Flow totaled $100.1 million as compared to $41.0 million and $23.3 million, respectively, in the prior year period.5 The growth in both measures was primarily due to improved operating performance and favorable timing of working capital.
Cash, cash equivalents and short-term investments were approximately $316 million as of September 30, 2018, and the Company estimates debt capacity under its revolving line of credit of approximately $100 million.
The schedule below reflects WWE’s performance by operating segment (in millions):1
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Net Revenues:
Media $ 142.1 $ 130.8 $ 478.1 $ 389.2
Live Events 26.7 31.6 109.8 116.5
Consumer Products 19.6 24.0 69.8 83.7
Total Net Revenues $ 188.4 $ 186.4 $ 657.7 $ 589.4
Operating Income:
Media $ 39.3 $ 42.9 $ 107.2 $ 67.7
Live Events (1.1) 3.1 15.2 23.9
Consumer Products 2.8 7.3 13.4 27.2
Corporate (22.9) (19.4) (74.7) (70.2)
Total Operating Income $ 18.1 $ 33.9 $ 61.1 $ 48.6
Adjusted OIBDA:
Media $ 50.4 $ 49.5 $ 138.5 $ 92.4
Live Events 0.2 3.6 18.5 25.8
Consumer Products 4.0 7.8 17.8 29.3
Corporate (18.8) (15.3) (60.3) (52.4)
Total Adjusted OIBDA $ 35.8 $ 45.6 $ 114.5 $ 95.1
Basis of Presentation
For the nine months ended September 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 nine-month periods ended September 30, 2018 can be found in the supplemental schedules on pages 14-15 of this release.
For the third quarter of 2018, Net income included a $2.2 million upward adjustment of an equity investment which was recorded below Operating income as a gain on investment. For the nine-month period ended September 30, 2018, Net income included a $0.8 million net impairment on investment which was recorded below Operating income as a loss on investment. A reconciliation of Net Income to Adjusted Net Income for the three and nine-month periods ended September 30, 2018 and 2017 can be found in the supplemental schedule on page 13 of this release.
Third-Quarter Results by Operating Segment
Media
Revenues increased 9% to $142.1 million, primarily due to the contractual escalation of core content rights fees, namely license fees associated with the Company’s flagship programs Raw and SmackDown, as well as the production and monetization of programming reflected in “Other,” including the launch of Miz & Mrs, an original series which debuted on USA Network, and the season eight premiere of Total Divas. Additionally, the growth in Media revenue reflected increased sales of advertising and sponsorships across platforms, and the continued growth of WWE Network that yielded a 9% increase in average paid subscribers to more than 1.66 million.
Three Months Ended
September 30,
2018 2017
Revenues:
Network (including pay-per-view) $ 49.5 $ 48.3
Core content rights fees 6 65.9 60.4
Advertising and sponsorship 15.0 13.0
Other 7 11.7 9.1
Total Revenues $ 142.1 $ 130.8
Operating income declined to $39.3 million from $42.9 million in the prior year quarter as the growth in revenue was more than offset by increased production costs associated with changes in product mix and, more significantly, by increases in accrued management incentive compensation, based on anticipated strong full-year results and the rise in the Company’s stock price.
Adjusted OIBDA increased to $50.4 million from $49.5 million in the prior year quarter.
Key Highlights:During the quarter, WWE continued to produce compelling content, monetize new opportunities across platforms, and optimize its future distribution. Monday Night Raw and SmackDown Live remained the highest-rated programs on USA Network, which broadcast the 1,000th episode of SmackDown Live on October 16, 2018. Extending its reach on television, WWE completed its third captivating season of Total Bellas, successfully launched a popular new series, Miz & Mrs., and recently premiered the eighth season of Total Divas. On the Company’s streaming service, WWE Network, live in-ring content and original series continued to drive viewer engagement. Among the network’s most viewed programs were its marquis pay-per-view event, SummerSlam, and the women’s tournament, Mae Young Classic 2018, which culminates in the first-ever all women’s pay-per-view event, WWE Evolution (October 28, 2018). In October, the Company continued to expand its offering of live in-ring content with the launch of a new weekly series, NXT UK, and the staging of WWESuper Show-Down, which was among the most viewed programs to-date in 2018. For its social and digital platforms, the Company produced more than 170 hours of content, which were highlighted by the second season start of Mixed Match Challenge on Facebook Watch.
Live Events
Revenues declined to $26.7 million reflecting lower average attendance at the Company’s events worldwide and a reduction in the average ticket price at events held in international markets. The year-over-year changes in ticket prices and average attendance were due, in part, to changes in the mix of venues and territories.
There were 90 total events (excluding NXT) in the current quarter, consisting of 86 events in North America and four events in international markets, as compared to 96 events in the prior year quarter, including 89 events in North America and seven in international markets.
North American ticket sales declined $2.9 million primarily due to an 8% decrease in average attendance to 4,500 and three fewer events staged during the quarter. The average ticket price of $53.68 was essentially unchanged from the prior year quarter.
International live event revenue declined $2.8 million driven by an 18% decrease in average attendance to 5,600 and a 13% reduction in the average ticket price at these events to $93.18.
Three Months Ended
September 30,
2018 2017
Revenues:
North American ticket sales $ 22.4 $ 25.3
International ticket sales 2.3 5.1
Advertising and sponsorship 0.4 0.4
Other 8 1.6 0.8
Total Revenues $ 26.7 $ 31.6
Operating income reflected a loss of $1.1 million as compared to income of $3.1 million in the prior year quarter, primarily due to the reduction in ticket sales and an increase in accrued stock compensation expense (as described above).
Adjusted OIBDA was $0.2 million as compared to $3.6 million in the prior year quarter.
Key Highlights: WWE continued to stage large-scale events for engaging its fans with live, action-packed entertainment. During the quarter, SummerSlam attracted more than 40,000 fans to the related weekend events at the Barclays Center in Brooklyn, New York. In October, WWESuper Show-Down attracted more than 70,000 attendees and became the highest attended event outside the U.S. in the past 25 years. Continuing to strengthen and diversify its global talent base, which makes such events possible, the Company announced it will hold its first-ever talent tryouts in Germany and Chile to attract talent from across Europe and Latin America, respectively.
Consumer Products
Revenues declined 18% to $19.6 million primarily due to the adoption of a new FASB standard for revenue recognition (ASC Topic 606) that adversely impacted licensing revenue by $2.6 million and, to a lesser extent, lower sales of merchandise at WWE venues and e-commerce site, WWE Shop.
Three Months Ended
September 30,
2018 2017
Revenues:
Consumer product licensing $ 8.5 $ 11.3
eCommerce 6.8 7.2
Venue merchandise 4.3 5.5
Total Revenues $ 19.6 $ 24.0
Operating income was $2.8 million as compared to $7.3 million in the prior year quarter reflecting the change in revenue and an increase in accrued stock compensation expense (as described above).
Adjusted OIBDA was $4.0 million as compared to $7.8 million in the prior year quarter based on the change in revenue.
Key Highlights: During the quarter, the Company continued to develop new products to serve the interests of its fans. The Company introduced WWE Custom Tees, a new component of its e-commerce website, WWE Shop, which enables fans to select apparel that reflects their preferences for color and style. Additionally, the Company continued to increase the penetration of its mobile games. As of quarter-end, the Company had more than 95 million installs across its game portfolio, led by WWE Champions and WWE Supercard and including WWE’s newest game, WWE Mayhem, which recently surpassed 15 million installs. WWE Champions generated meaningful growth following the recent addition of the Women’s division to the game.
Fourth Quarter and Full Year 2018 Business Outlook
In the first nine months of 2018, the Company achieved a 12% increase in revenue to $657.7 million and a 20% increase in Adjusted OIBDA to $114.5 million. As previously communicated, the Company anticipates meaningful revenue growth in the fourth quarter based on the escalation of content rights fees and the favorable timing of licensing revenue associated with the implementation of a new FASB standard (ASC Topic 606). The Company estimates fourth quarter 2018 Adjusted OIBDA of approximately $45 million to $55 million.3 The Company also projects average paid subscribers to WWE Network of approximately 1.56 million for the fourth quarter 2018, which contributes to growth of approximately 8% for the full year.3,9
The range of projected fourth quarter results would result in full year 2018 Adjusted OIBDA of $160 million to $170 million, which would be an all-time record consistent with the Company’s previous guidance.3
Fourth quarter and full year 2018 guidance are predicated on the staging of an event in Riyadh, Saudi Arabia on November 2, 2018.4
WWE is unable to provide a reconciliation of full year or fourth quarter guidance to GAAP measures as, at this time, WWE cannot accurately determine all of the adjustments that would be required.
Financial Outlook 2019
The Company is developing its operating and financial plans for 2019 and subsequent years. Given the substantial revenue growth provided by its new U.S. distribution agreements, the Company is currently targeting Adjusted OIBDA of at least $200 million for 2019, during which the new agreements’ rates are effective for only three months.3
Management recognizes the transformative nature of these agreements and expects to provide additional long-term perspective on the Company’s strategic and financial plans after its content distribution strategies in international markets, including the U.K. and India, have been finalized. Management currently expects to finalize its content distribution plans in the U.K. by year-end 2018; and in India during the first half of 2019. The Company’s content distribution strategy could be determined either before or after these dates; therefore, current expectations should not be considered a guarantee of when future announcements will be made. The Company does not disclose the financial terms of individual agreements but expects such future announcements will provide perspective on the aggregate financial impact of its international plans.
