Exceeds Earnings Expectations and Raises
2014 Outlook
WWE (NYSE:WWE) today announced financial results for its third
quarter ended September 30, 2014. For the quarter, the Company
reported a Net loss of $5.9 million, or $0.08 per share, compared
to Net income of $2.4 million, or $0.03 per share, in the third
quarter last year. Excluding items affecting comparability,
Adjusted OIBDA was $5.1 million and Adjusted Net loss was $0.6
million, or $0.01 per share in the current year quarter, compared
to Adjusted OIBDA of $16.7 million and adjusted Net income of $7.0
million, or $0.09 per share, in the prior year quarter.
“During the quarter, we delivered stronger financial performance
than anticipated and surpassed our guidance while making
significant progress on the execution of our WWE Network strategy,”
stated Vince McMahon, Chairman and Chief Executive Officer. “To
capitalize on the substantial opportunity created by WWE Network,
it’s time to remove all the barriers to those that want WWE. We are
excited to introduce a new simplified price plan at $9.99 per
month, and like Netflix with no commitment/cancel anytime. This
reflects our belief in the broad appeal of WWE Network content.
Additionally, we continue to develop the international platform for
WWE Network and plan to make the network available in the U.K. on
an OTT basis in November. WWE Network continues to be the single
greatest opportunity to transform WWE’s business model and we
remain optimistic about our potential to drive long-term
growth.”
“As we expanded WWE Network to 731,000 subscribers, our Adjusted
OIBDA of $5.1 million surpassed our guidance, which indicated an
Adjusted OIBDA loss ranging from $10 million to $15 million with an
average of 723,000 subscribers. Given our performance in the
quarter, we have improved our 2014 Adjusted OIBDA outlook ranges by
approximately $15 million to $20 million,” added George Barrios,
Chief Strategy & Financial Officer. “Key metrics continued to
show strength. Raw and SmackDown TV ratings increased 2% and 3%,
respectively. WWE’s social media presence has increased 71% to over
420 million followers. In addition, revenue from the Company’s
seven new key television agreements is expected to increase from
approximately $130 million in 2014 to approximately $235 million in
2018, providing over $100 million of revenue growth subject to
counterparty risks.”
WWE Network Update: Third
Quarter Highlights
- Network segment revenues increased 68%
from the prior year quarter and 26% on a year-to-date basis,
reflecting the launch of WWE Network. Viewership of WWE Network's
most compelling content increased as evidenced by the Night of
Champions in September. Domestic transactions related to that
event, as measured by a combination of network subscribers and
pay-per-view buys, was nearly 9 times the event’s 85,000 domestic
pay-per-view buys in the prior year quarter.
- WWE Network added 31,000 subscribers in
the quarter, representing a 4% increase from June 30, and reached
731,000 subscribers at quarter-end. Subscriber growth reflected the
acquisition of 286,000 subscribers, which was 71% above the gross
subscriber additions in the period between April 7 (the day after
WrestleMania) and June 30 (WWE Network added 182,000 gross
subscribers during the April 1- April 6 period, which included
WrestleMania). Through September 30, WWE Network had attracted
approximately 971,000 unique subscribers with 75% of these
subscribers active as of that date.
- The U.S. version of WWE Network was
made available in more than 170 countries and territories beginning
August 12. Between that date and September 30, WWE Network acquired
approximately 30,000 international subscribers, representing 10% of
gross additions. Additionally, on August 12, the Company introduced
a $12.99 (cancel at any time) plan, which reached 23,000
subscribers at quarter end.
- Viewer data continues to indicate that,
on average, close to 90% of subscribers access WWE Network at least
once per week and 99% access WWE Network at least once per month.
Driving that engagement is WWE Network’s compelling live and new
original content. Notably, the Company’s SummerSlam event, which
aired live on WWE Network, ranked 1st on Nielsen’s Twitter TV
Ratings1, achieving the largest social media presence of any series
or special during the week of August 11, beating every program in
this Nielsen category on U.S. cable and broadcast networks.
WWE Network Update: Future
Plans
- New Simplified Price Plan:
Beginning November 1, the Company will introduce a new simplified
price plan at $9.99 per month with no commitment (cancel at any
time). Current subscribers will benefit from this new simplified
plan as they are migrated to this new plan beginning in December.
The new pricing structure reflects management’s belief in the broad
appeal of WWE Network content and is comparable to that of other
subscription-based content platforms including Netflix and Hulu
Plus. Additionally, all new subscribers who register for the
network in November will receive the month of November for free,
including the opportunity to watch Survivor Series live on Sunday,
November 23rd.
- WWE Network to be available
in the U.K.: The Company continues to develop the international
platform for WWE Network and plans to make the U.S. version of WWE
Network available in the U.K. on an over-the-top basis in
November.
- New Content / Product Features:
New content recently added to the network includes WWE Rivalries.
The original series, which provides a documentary-style look at
some of the greatest moments in WWE history, debuted on October 27.
In addition to providing new live and original content, the network
has increased access to the Company’s comprehensive video-on-demand
library to more than 2,500 hours from more than 1,500 hours at
launch. Also enhancing subscribers’ viewing experience, the Company
plans to roll out new "resume play" and “watch list” features
across WWE Network media platforms by the end of December.
- Limited advertising: WWE Network
began including a limited amount of advertising on October 13 with
Pepsi, Mattel, K-Mart, Take-Two Interactive, and Pure Talk USA as
the network’s initial sponsors. The Company’s advertising strategy
anticipates no commercial breaks during scheduled programming,
limited advertising between shows, and occasional advertising
before the network’s video-on-demand content.
(1) Nielsen’s Twitter TV Ratings rank programs by their unique
audience on Twitter, i.e. the total number of Twitter accounts that
accrue impressions ascribed to a related program episode.
2014 and 2015 Business
Outlook
Compared to its previous Business Outlook (released July 31),
the Company has improved its 2014 Adjusted OIBDA outlook by
approximately $15 million to $20 million on an adjusted basis at
all WWE Network subscriber levels. The improvement reflects the
significant cost savings achieved to date.
The rate of WWE Network subscriber adoption is a critical
determinant of the Company’s projected future financial
performance. The table below outlines ranges of potential Company
performance at different subscriber levels in both 2014 and 2015
(Reconciliation of Operating Income to Adjusted OIBDA can be found
in the Supplemental Information included in this release).
The 2015 Adjusted OIBDA outlook is consistent with guidance
previously provided.
Total Company - Adjusted OIBDA ($ in millions)
(1)
AverageSubscribers(2)
Q4 2014E
AverageSubscribers(2)(3)
2014E
AverageSubscribers(2)
2015E 500 $ (13)-(8) 500 $ (31)-(26)
500 $ (10)-10 575 $ (12)-(7) 575 $ (23)-(18)
1,000 $ 45-65 650 $ (10)-(5) 650 $ (16)-(11)
1,500 $ 100-120 825 $ (5)-0 825 $ 3-8 2,000
$ 155-175 1,000 $ 0-5 1,000 $ 21-26 2,500
$ 210-230 (1) Adjusted OIBDA ranges for each
period correspond to the average subscribers shown for each period.
(2) Average subscribers shown in thousands. (3)
Average subscribers shown for 2014
represent the average level of subscribers over the 12 months of
2014. WWE Network launched in the U.S. on February 24, 2014. The
average level of subscribers over the 3-month and 9-month periods
through September 30, 2014 were approximately 723,000 and 515,000,
respectively.
Long-Term Growth
The strengthening of WWE’s content distribution agreements is
one of the Company’s primary long-term growth drivers, which also
include the development of a global WWE Network, the monetization
of the Company’s digital and social media presence, and the
cultivation of international business opportunities.
In the third quarter 2014, WWE finalized television distribution
agreements in the U.S., India, Canada, Mexico and UAE. With the
completion of these agreements as well as agreements previously
completed in the U.K. and Thailand, management has greater clarity
about the timing and magnitude of TV rights revenue through
2018.
Final terms of these agreements indicate a higher rate of growth
from a slightly lower 2014/2015 base. The average annual value
(AAV) of the Company’s new content agreements is consistent with
prior disclosures. While management now anticipates lower
television revenue in 2015 than in previous disclosures, the
Company's overall 2015 OIBDA guidance remains unchanged.
The Company's seven key television agreements (as referenced
above) account for television revenue that is expected to increase
from approximately $130 million in 2014 to approximately $235
million in 2018. As such, over the period from 2014 to 2018, these
key television deals provide over $100 million of revenue growth
subject to counterparty risk.
Basis of Presentation
During the first quarter of 2014, the Company launched WWE
Network, which changed the way that certain content is delivered to
our customers. In conjunction with this change, management
reevaluated the way it manages and reports the business. The launch
of WWE Network coupled with the continued convergence within the
media landscape has resulted in a change in the Company’s
management reporting to its chief operating decision maker. These
changes necessitated a change in the Company’s segment reporting to
align with management’s operational view. The Company now
classifies its operations into ten reportable segments, which
include the following: Network (which includes our pay-per-view
business), Television, Home Entertainment and Digital Media,
individual segments that comprise the Media Division; Live Events;
Licensing, Venue Merchandise, WWEShop, individual segments that
comprise the Consumer Products Division; WWE Studios and Corporate
and Other.
Comparability of Results
In the current year quarter, the Company recorded a one-time
pre-tax restructuring charge of $4.2 million comprised of severance
and other costs ($2.1 million recorded in Corporate and Other
Expenses, $0.3 million in Digital Media segment expense, and $1.8
million in depreciation expense) and a $4.0 million impairment of
an equity investment. During the prior year quarter, the Company
recorded $7.0 million in film impairment charges.
Results for the nine months ended September 30, 2014 included a
$4.2 million restructuring charge, a $4.0 million impairment of an
equity investment, and a $1.6 million adjustment to reduce the
carrying value of the old Corporate Aircraft to its estimated fair
value in conjunction with the sale of this asset, which occurred
during the third quarter 2014. Results for the nine months ended
September 30, 2013 include $11.7 million in film impairment charges
and an approximate $3.4 million positive impact from the transition
of the Company's video game to a new licensee in 2013. In order to
facilitate an analysis of financial results on a comparable basis
where noted, the Company's results have been adjusted to exclude
these items. (See Schedule of Adjustments in Supplemental
Information).
Three Months Ended September 30,
2014 - Results by Region and Business Segment
Revenues increased 6% to $120.2 million from the prior year
quarter due to growth in North America. North American revenues
increased 7% driven primarily by an increase in Media Division
revenues as the ramp up in WWE Network subscription revenue was
partially offset by lower revenue from the Company's Pay-Per-View,
Television, Home Entertainment and Digital Media businesses.
Revenues from outside North America were essentially flat to the
prior year quarter.
The following tables reflect net revenues by region and by
business segment (in millions):
Three Months Ended
September 30, 2014
September 30, 2013
Net Revenues By
Region:
North America $ 93.9 $ 87.4 Europe/Middle East/Africa (EMEA) 11.6
11.2 Asia Pacific (APAC) 13.7 13.7 Latin America 1.0
1.0 Total net revenues $ 120.2 $ 113.3
Three Months Ended September 30, 2014
September 30, 2013
Net Revenues by
Division/Segment:
Media Division $ 76.9 $ 72.7 Live Events 21.8 25.1 Consumer
Products Division 18.5 12.6 WWE Studios 1.9 1.8 Corporate and Other
1.1 1.1 Total net revenues $ 120.2 $ 113.3
Media Division
Revenues from the Company's Media division increased 6% to $76.9
million with growth driven by the ramp up of WWE Network. Growth
from the Company's Network segment was partially offset by lower
Television, Home Entertainment and Digital Media revenue as
described below.
- Network revenues, which include
revenue generated by WWE Network, pay-per-view and video-on-demand,
increased 68% to $26.1 million from $15.5 million in the prior year
quarter.
- WWE Network generated $22.4 million in
subscription revenue based on an average of 723,000 paid
subscribers over the quarter. WWE Network had approximately 731,000
paid subscribers at September 30, 2014 as compared to 700,000 paid
subscribers on June 30.
Three Months Ended September 30,
2014 September 30, 2013 Network $ 26.1
$ 15.5 Television 42.2 44.8 Home Entertainment 3.6 5.2 Digital
Media 5.0 7.2 Total $ 76.9 $ 72.7
The following table reflects WWE Network subscribers (in
thousands):
As of / Three Months Ended
As of /
NineMonthsEnded
Sept. 30,2014
June 30,2014
March 31,2014
Sept. 30,2014
Ending paid
subscribers
U.S. 703 700 495 703 International 28 0 0 28 Total paid subscribers
731 700 495 731
Average Paid
Subscribers
Quarter 723 665 N/A Year-to-date 515 406 N/A 515
- Pay-per-view contributed $3.7 million
in revenue with approximately 294,000 buys for the three events
produced during the quarter. On a comparable basis (excluding the
impact of prior period events), pay-per-view buys declined 56%
reflecting the availability of pay-per-view events on WWE
Network.
The details for the number of pay-per-view buys (in thousands)
are as follows:
Three Months Ended
BroadcastMonth
Events (in
chronological order)
September 30, 2014
September 30, 2013 July Money in the Bank
'13/Battleground '14 99 199 August SummerSlam 147 296 September
Night of Champions 48 175 Prior events (9 ) 91 Total 285
761
- Television revenues decreased 6%
to $42.2 million from $44.8 million in the prior year quarter as
contractual increases for existing programs were more than offset
by the production and monetization of five fewer episodes of Total
Divas, a program that debuted in July 2013, due to timing.
Additionally, the decline in television revenues reflected the
timing of one fewer episode of Raw in the U.S. (due to one less
Monday in the third quarter of 2014 as compared to the third
quarter of 2013).
- Home Entertainment net revenues
decreased to $3.6 million from $5.2 million in the prior year
quarter, reflecting a 40% decline in units shipped, and a decrease
in the average effective price. The decline in unit shipments
reflected reduced shipments of WWE's catalog titles, which are
typically characterized by lower prices and profit margins than new
releases. The average effective price declined 19% to $9.22 as
retail pricing pressure on both new releases and catalog titles
more than offset the impact of product mix. (On a year-to-date
basis, average pricing has declined 6% from the prior year
period.)
- Digital Media net revenues were
$5.0 million compared to $7.2 million in the prior year quarter.
The decline reflected lower advertising across various platforms as
well as lower monetization of the Company's pay-per-view webcasts
via WWE.com as these events became available on WWE Network.
Live Events
Live Event revenues decreased 13% to $21.8 million from $25.1
million in the prior year quarter primarily due to the staging of
fewer events in the Company's international markets.
- The Company staged 79 events in the
current quarter as compared to 76 events in the prior year quarter.
There were 73 events held in North America this quarter versus 62
in the prior year quarter, and 6 events held in international
markets versus 14 events in the prior year quarter.
- North American events generated
revenues of $17.3 million as compared to $17.5 million in the prior
year quarter. The impact of staging 11 additional events in North
America was offset by a 7% decline in average attendance to 5,100
fans, a 5% decline in average ticket prices to $44.60, and a
reduction in event-related sponsorship revenue.
- International live events generated
revenues of $4.3 million as compared to $7.5 million in the prior
year quarter. The 43% revenue decline was due to the staging of 8
fewer events in international markets. Partially offsetting this
decline, average attendance increased 15% to 7,700 fans and average
ticket prices increased 28% to $92.89. The changes in average
ticket prices and attendance were predominantly due to changes in
country mix.
Consumer Products
Division
Revenues from Consumer Products businesses were $18.5 million as
compared to $12.6 million in the prior year quarter, primarily due
to the increases in the Company's licensing and e-commerce
businesses as described below.
- Licensing revenues were $10.0
million as compared to $5.7 million in the prior year quarter,
primarily driven by a higher effective royalty rate for the
Company's franchise video game.
- Venue Merchandise revenues
increased 5% to $4.2 million from $4.0 million in the prior year
quarter primarily due to an increase in total attendance at the
Company's North American events.
- WWEShop revenues increased 48%
to $4.3 million from $2.9 million in the prior year quarter driven
by a 50% increase in the volume of online merchandise orders to
more than 89,900 orders globally. Orders increased primarily due to
mobile shop optimization and a new distribution model utilizing
Amazon U.K. The average revenue per order declined 3% to $47.59
from the prior year quarter.
WWE Studios
WWE Studios revenue increased to $1.9 million from $1.8 million
in the prior year quarter, reflecting the timing of results from
the Company’s portfolio of movies. Revenue recognized in the
current year quarter was primarily associated with the 2013 slate
of film releases. WWE Studios' movie portfolio generated a loss of
$0.4 million in the quarter compared to a loss of $7.4 million in
the prior year quarter, which included $7.0 million in film
impairment charges. Movies released in 2014, such as Scooby Doo!
WrestleMania Mystery (direct-to-DVD) and Oculus (theatrical), have
shown performances that are in-line with expectations.
Corporate and Other
Corporate and Other expenses increased $7.6 million to $36.4
million from the prior year quarter. As defined, these expenses
include corporate G&A expenses as well as sales, marketing, and
talent development costs, which cannot be allocated to specific
segments. The increase in Corporate and Other expense during the
quarter included $2.1 million in severance and related
restructuring charges. Excluding the impact of restructuring, the
$5.5 million increase in expenses supported the expansion of the
Company's international infrastructure, talent development and
brand marketing.
Operating Income Before Depreciation
and Amortization (OIBDA)
OIBDA results declined to $2.7 million from $9.7 million in the
prior year quarter. Excluding the impact of restructuring and film
impairment charges, Adjusted OIBDA declined $11.6 million
predominantly due to the ramp up of WWE Network and investment
across WWE to support key content and brand initiatives. The ramp
up of WWE Network resulted in a $5.1 million reduction in OIBDA as
the growth in subscribers and subscription revenue was more than
offset by the loss of pay-per-view revenue and increased
programming, marketing, and customer service costs. Investment in
WWE’s content and brand initiatives resulted in a $5.5 million
increase in Corporate and Other expenses (as described above).
Based on the increased investment, the Company’s Adjusted OIBDA
margin was 4% in the current year quarter as compared to 15% in the
prior year quarter.
Depreciation and
Amortization
Depreciation and amortization expense totaled $7.7 million for
the current year quarter as compared to $6.5 million in the prior
year quarter. Depreciation and amortization expense in both the
current and prior year periods derived from investment in assets to
support the Company's content initiatives, including efforts to
launch WWE Network. The current year quarter includes a charge of
$1.8 million to write down certain assets associated with the
Company's gamification initiative.
Investment Income, Interest and Other
Expense, Net
Investment income, interest and other expense, net yielded
expense of $5.5 million compared to income of $0.1 million in the
prior year quarter. The current year quarter included a $4.0
million impairment of an equity investment and changes in realized
foreign exchange losses of $0.9 million.
Effective tax rate
In the current year quarter, the effective tax rate was 44% as
compared to 27% in the prior year quarter. The recognition of FIN48
releases resulted in tax benefits that increased the effective tax
rate in the current year quarter and decreased the effective tax
rate in the prior year quarter. The current year includes a tax
benefit associated with the Company's operating loss for the
quarter; the prior year was a tax provision as the Company had
pre-tax income. The Company believes it will be able to utilize
these benefits in future periods.
Summary Results for the Nine Months
Ended September 30, 2014
Total revenues for the nine months ended September 30, 2014
were $402.1 million as compared to $389.6 million in the prior year
period. Operating loss for the current year period was $39.7
million as compared to income of $18.1 million in the prior year
period. Net loss was $28.5 million, or $0.38 per share, as compared
to Net income of $10.7 million, or $0.14 per share, in the prior
year period. OIBDA was a loss of $19.1 million for the current nine
month period as compared to income of $35.9 million in the prior
year period.
Excluding items that impacted comparability on a year-over-year
basis, Adjusted Operating loss was $33.9 million compared to income
of $26.4 million in the prior year period, and Adjusted Net loss
was $22.2 million, or $0.30 per share, compared to Net income of
$16.1 million, or $0.21 per share, in the prior year period.
Adjusted OIBDA was a loss of $16.7 million as compared to income of
$44.2 million in the prior year period.
Nine Months Ended September 30,
2014 - Results by Region and Business Segment
Revenues increased 3% to $402.1 million primarily due to growth
in North America. Revenues from North America increased 5%, or
$14.7 million, driven by the growth of the Company’s Network
segment. The ramp up of WWE Network subscribers and subscription
revenue significantly exceeded the loss of pay-per-view revenue as
pay-per-view events became available on WWE Network. Increased
revenue from television distribution and higher online merchandise
sales through WWEShop were more than offset by lower revenue from
the licensing of the Company’s franchise video game and digital
advertising. Revenues from outside North America declined 3%
primarily due to the impact of staging ten fewer live events in
international markets, which offset increased revenue from
television distribution in international markets. There was no
significant impact from changes in foreign exchange rates in the
current year period.
The following tables reflect net revenues by region and by
segment (in millions):
Nine Months Ended September 30,
2014 September 30, 2013
Net Revenues By
Region:
North America $ 318.9 $ 304.2 Europe/Middle East/Africa 47.8 51.4
Asia Pacific 31.0 29.6 Latin America 4.4 4.4 Total
net revenues $ 402.1 $ 389.6
Nine Months
Ended September 30, 2014 September
30, 2013
Net Revenues By
Division/Segment:
Media Division $ 250.4 $ 231.9 Live Events 83.8 87.7 Consumer
Products Division 57.7 61.9 WWE Studios 8.0 5.8 Corporate &
Other
2.2
2.3 Total net revenues $ 402.1 $ 389.6
Media Division
Revenues from the Company's Media Division increased 8% to
$250.4 million primarily driven by the launch and ramp up of WWE
Network subscribers and subscription revenue and, to a lesser
extent, increased television revenue. Revenue growth was partially
offset by lower pay-per-view (included in the Network segment) and
Digital Media revenue as the Company's video content became
available on WWE Network. Additionally, the decline in Digital
Media revenue reflected lower advertising across various
platforms.
Nine Months Ended September 30,
2014 September 30, 2013 Network $ 87.8
$ 69.7 Television 126.2 121.3 Home Entertainment 19.5 19.2 Digital
Media 16.9 21.7 Total $ 250.4 $ 231.9
Live Events
Live Event revenues were $83.8 million as compared to $87.7
million in the prior year period primarily due to lower attendance
at WrestleMania (because of stadium configuration) and the staging
of 10 fewer international events.
Nine Months Ended September 30,
2014 September 30, 2013 Live events $
81.6 $ 86.1 Travel Packages 2.2 1.6 Total $ 83.8 $
87.7
Consumer Products
Division
Revenues from Consumer Products businesses were $57.7 million
for the current year period as compared to $61.9 million in the
prior year period, representing a decrease of 7%. The decrease was
primarily driven by the transition to a new video game partner,
Take-Two Interactive, lower sales and contractual changes in the
Company's video game licensing agreement. Partially offsetting this
decline was increased revenue from WWEShop, which benefited from
mobile shop optimization and a new distribution model in the U.K.
utilizing Amazon.
Nine Months Ended September 30,
2014 September 30, 2013 Licensing $
29.5 $ 36.4 Venue merchandise 15.7 16.0 WWEShop 12.5
9.5 Total $ 57.7 $ 61.9
WWE Studios
WWE Studios revenue increased to $8.0 million from $5.8 million
in the prior year period primarily due to the strong performance of
The Call, which was released theatrically in March 2013. WWE
Studios' movie portfolio generated income of $0.9 million compared
to a loss of $12.8 million in the prior year quarter, which
included $11.7 million in film impairment charges. Excluding the
impact of prior-year film impairment charges, WWE Studios generated
income of $0.9 million compared to an adjusted loss of $1.1
million.
Corporate and Other
Corporate and Other expenses increased $20.8 million to $116.2
million from the prior year period. As defined, these expenses
include corporate G&A expenses as well as sales, marketing, and
talent development costs, which cannot be allocated to specific
segments. The increase in Corporate and Other expense during the
period included $2.1 million in severance and related restructuring
charges. Excluding the impact of restructuring, the $18.7 million
increase supported the expansion of the Company's international
infrastructure, talent development and brand marketing.
Operating Income Before Depreciation
and Amortization (OIBDA)
OIBDA results declined to a loss of $19.1 million as compared to
income of $35.9 million in the prior year period. The OIBDA decline
was primarily due to lower profits from the Network segment as WWE
Network continued to develop scale, investments to support key
content and brand initiatives, and a reduction in Licensing profits
stemming from the transition to a new video game partner. The ramp
up of WWE Network resulted in a $29.2 million reduction in Network
segment OIBDA as the growth in subscribers and subscription revenue
was more than offset by the loss of pay-per-view revenue and
increased programming, marketing, and customer service costs.
Investment in WWE’s content and brand initiatives resulted in a
$20.8 million increase in Corporate and Other expenses (as
described above). The reduction in licensing profits reflected
contractual changes in the Company's video game licensing agreement
and a benefit in the prior year period associated with the
transition from THQ to Take-Two Interactive. These factors were
partially offset by improved film performance. Based on the impact
of increased investment and resulting changes in business mix, the
Company's OIBDA margin was (5)% in the first nine months of 2014 as
compared to 9% in the prior year period. Excluding the impact of
film impairments, video game transition and restructuring related
expenses, Adjusted OIBDA resulted in a loss of $16.7 million in the
period as compared to income of $44.2 million in the prior year
period, and the Adjusted OIBDA margin was (4)% in the current
period as compared to 11% in the prior year period. (See Schedules
of Adjustments in Supplemental Information).
Depreciation and
amortization
Depreciation and amortization expense totaled $20.6 million for
the current year period as compared to $17.8 million in the prior
year period. Depreciation and amortization expense in both the
current and prior year periods derived from investment in assets to
support the Company's content initiatives, including efforts to
launch WWE Network. The current year includes a charge of $1.8
million to write down certain assets associated with the Company’s
gamification initiative and a charge of $1.6 million to adjust the
carrying value of the old Corporate Aircraft to the estimate of its
fair value, in conjunction with the sale of this asset.
Investment Income, Interest and Other
Expense, Net
Investment income, interest and other expense, net yielded an
expense of $6.1 million compared to an expense of $1.6 million in
the prior year period. The current year period reflects an
impairment of an equity investment of $4.0 million and lower
investment income than the prior year period.
Effective tax rate
In the current year period, the effective tax rate was 38% as
compared to 36% in the prior year period. The effective tax rate in
the current year period approximates the Company's expected
effective tax rate. The current year includes a tax benefit
associated with the Company's operating loss. The Company believes
it will be able to utilize these benefits in future periods.
Cash Flows &
Liquidity
Cash flows used in operating activities were $5.2 million in the
first nine months of 2014. The use of cash was driven by the
Company's operating losses well as spending to produce feature
films.
Purchases of property and equipment and other assets declined by
$9.1 million from the prior year period.
As of September 30, 2014, the Company held $68.7 million in
cash and short-term investments and currently estimates debt
capacity under the Company’s revolving line of credit to be
approximately $150.0 million.
In October 2014, the Company received a $50 million advance
payment associated with a recently executed television distribution
agreement. The payment is not included in the cash balances or cash
flow (above), but will be reflected in the Company’s fourth quarter
financial statements as deferred income. The advance will be
recognized as revenue as earned over the term of the agreement.
Additional Information
Additional business metrics are made available to investors on a
monthly basis on the corporate website - corporate.wwe.com. Note:
As previously announced, WWE will host a conference call on
October 30, 2014 at 11:00 a.m. ET to discuss the Company's
earnings results for the third quarter of 2014. All interested
parties are welcome to listen to a live web cast that will be
hosted through the Company’s web site at ir.corporate.wwe.com. Participants can access the
conference call by dialing 855-200-4993 (toll free) from the U.S.
and Canada or 913-489-5104 from outside the U.S. and Canada
(Conference passcode for both lines: 7938759). Please reserve a
line 10-15 minutes prior to the start time of the conference
call.
The earnings release and presentation to be referenced during
the call will be available at ir.corporate.wwe.com. A replay of the call will be
available within 24 hours after the conference call concludes and
can be accessed on the Company's web site.
About WWE
WWE, a publicly traded company
(NYSE: WWE), is an integrated media organization and recognized
leader in global entertainment. The company consists of a portfolio
of businesses that create and deliver original content 52 weeks a
year to a global audience. WWE is committed to family friendly
entertainment on its television programming, pay-per-view, digital
media and publishing platforms. WWE programming reaches more than
650 million homes worldwide in 35 languages. WWE Network, the
first-ever 24/7 over-the-top premium network that includes all 12
live pay-per-views, scheduled programming and a massive
video-on-demand library, is currently available in more than 170
countries. The company is headquartered in Stamford, Conn., with
offices in New York, Los Angeles, London, Mexico City, Mumbai,
Shanghai, Singapore, Dubai, Munich and Tokyo.
Additional information on WWE (NYSE: WWE) can be found at
wwe.com and corporate.wwe.com. For information on our global
activities, go to http://www.wwe.com/worldwide/.
Trademarks: All WWE programming,
talent names, images, likenesses, slogans, wrestling moves,
trademarks, logos and copyrights are the exclusive property of WWE
and its subsidiaries. All other trademarks, logos and copyrights
are the property of their respective owners.
Forward-Looking Statements: This
press release contains forward-looking statements pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of
1995, which are subject to various risks and uncertainties. These
risks and uncertainties include, without limitation, risks relating
to entering into, maintaining and renewing key agreements,
including television and pay-per-view programming and our new
network distribution agreements; risks relating to the launch and
operations of our new network; the need for continually developing
creative and entertaining programming; the continued importance of
key performers and the services of Vincent McMahon; the conditions
of the markets in which we compete and acceptance of the Company's
brands, media and merchandise within those markets; uncertainties
relating to regulatory matters; risks resulting from the highly
competitive and fragmented nature of our markets; uncertainties
associated with international markets; the importance of protecting
our intellectual property and complying with the intellectual
property rights of others; the risk of accidents or injuries during
our physically demanding events; risks associated with producing
and traveling to and from our large live events, both domestically
and internationally; risks relating to our film business; risks
relating to new businesses and strategic investments; risks
relating to our computer systems and online operations; risks
relating to general economic conditions and our exposure to bad
debt risk; risks relating to litigation; risks relating to market
expectations for our financial performance; risks relating to our
revolving credit facility specifically and capital markets more
generally; risks relating to the large number of shares of common
stock controlled by members of the McMahon family and the
possibility of the sale of their stock by the McMahon's or the
perception of the possibility of such sales; the relatively small
public float of our stock; and other risks and factors set forth
from time to time in Company filings with the Securities and
Exchange Commission. Actual results could differ materially from
those currently expected or anticipated. In addition, our dividend
is 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 on the payment of
dividends, general economic and competitive conditions and such
other factors as our Board of Directors may consider relevant.
World Wrestling Entertainment,
Inc.
Consolidated Income Statements
(In millions, except per share
data)
(Unaudited)
Three Months Ended Nine
Months Ended September 30, 2014
September 30, 2013 September 30, 2014
September 30, 2013 Net revenues $ 120.2 $
113.3 $ 402.1 $ 389.6 Cost of revenues 78.4 71.0 284.9 242.7
Selling, general and administrative expenses 39.1 32.6 136.3 111.0
Depreciation and amortization 7.7 6.5 20.6
17.8 Operating (loss) income (5.0 ) 3.2 (39.7 ) 18.1
Loss on equity investment (4.0 ) — (4.0 ) — Investment
income, net 0.1 0.2 0.5 1.1 Interest expense (0.5 ) (0.4 ) (1.5 )
(1.3 )
Other (expense) income, net
(1.1 ) 0.3 (1.1 ) (1.4 ) (Loss) income before income taxes
(10.5 ) 3.3 (45.8 ) 16.5 (Benefit from) provision for
income taxes (4.6 ) 0.9 (17.3 ) 5.8 Net (loss) income
$ (5.9 ) $ 2.4 $ (28.5 ) $ 10.7 (Loss) earnings per
share: Basic and diluted $ (0.08 ) $ 0.03 $ (0.38 ) $ 0.14
Weighted average common shares outstanding: Basic 75.4 75.0
75.2 74.9 Diluted 75.4 75.4 75.2 75.3 Dividends declared per common
share (Class A and B) $ 0.12 $ 0.12 $ 0.36 $
0.36
World Wrestling Entertainment,
Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
As of September 30, 2014
December 31, 2013 ASSETS CURRENT ASSETS: Cash
and cash equivalents $ 29.6 $ 32.9 Short-term investments, net 39.1
76.5 Accounts receivable, net 56.7 59.6 Inventory 4.5 2.9 Deferred
income tax assets 16.9 12.2 Prepaid expenses and other current
assets 12.1 16.1 Total current assets 158.9
200.2 PROPERTY AND EQUIPMENT, NET 116.4 133.5 FEATURE FILM
PRODUCTION ASSETS, NET
27.9
16.0 TELEVISION PRODUCTION ASSETS, NET 6.2 10.8 INVESTMENT
SECURITIES 7.2 8.3 NON-CURRENT DEFERRED INCOME TAX ASSETS 14.4 —
OTHER ASSETS, NET 20.6 9.7 TOTAL ASSETS $
351.6
$ 378.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: Current portion of long-term debt $ 4.3 $ 4.3
Accounts payable and accrued expenses 69.4 47.9 Deferred income
31.4 30.1 Total current liabilities 105.1 82.3
LONG-TERM DEBT 22.7 25.4 NON-CURRENT INCOME TAX LIABILITIES
1.7 4.9 NON-CURRENT DEFERRED INCOME 6.4 — COMMITMENTS AND
CONTINGENCIES STOCKHOLDERS’ EQUITY: Class A common stock 0.3 0.3
Class B convertible common stock 0.4 0.4 Additional paid-in-capital
352.6 347.0 Accumulated other comprehensive income 3.5 3.5
Accumulated deficit
(141.1
) (85.3 ) Total stockholders’ equity
215.7
265.9 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $
351.6
$ 378.5
World Wrestling Entertainment,
Inc.
Consolidated Statements of Cash
Flows
(In millions)(Unaudited)
Nine Months Ended September 30,
2014 September 30, 2013 OPERATING
ACTIVITIES: Net (loss) income $ (28.5 ) $ 10.7 Adjustments to
reconcile net (loss) income to net cash used in operating
activities: Amortization and impairments of feature film production
assets 3.2 15.5 Amortization of television production assets 19.4
4.0 Depreciation and amortization 22.0 17.8 Loss on equity
investment 4.0 — Amortization of bond premium 1.0 0.4 Amortization
of debt issuance costs 0.5 1.6 Stock-based compensation 6.5 3.5
Recovery from doubtful accounts (0.4 ) (0.3 ) Services provided in
exchange for equity instruments (0.4 ) (0.7 ) Loss on disposal of
property and equipment 0.1 0.3 (Benefit from) provision for
deferred income taxes (21.8 ) 4.0 Other non-cash items (0.3 ) (0.1
) Cash (used in)/provided by changes in operating assets and
liabilities: Accounts receivable
3.0
(17.9 ) Inventory (1.7 ) (0.8 ) Prepaid expenses and other assets
1.4
(0.6 ) Feature film production assets
(15.0
) (6.7 ) Television production assets
(14.8
) (8.7 ) Accounts payable, accrued expenses and other liabilities
8.9
(11.5 ) Deferred income 7.7 1.7 Net cash (used
in)/provided by operating activities
(5.2
) 12.2 INVESTING ACTIVITIES: Purchases of property and
equipment and other assets (9.2 ) (18.3 ) Purchase of corporate
aircraft and related improvements — (29.7 ) Proceeds from sale of
corporate aircraft 3.2 — Net proceeds from infrastructure
improvement incentives 2.9 — Purchases of short-term investments
(2.5 ) (24.1 ) Proceeds from sales and maturities of investments
38.8 30.6 Purchase of cost method investments (2.2 ) (2.2 ) Net
cash provided by/(used in) investing activities 31.0 (43.7 )
FINANCING ACTIVITIES: Proceeds from the issuance of note payable
0.4 29.7 Repayment of long-term debt (3.0 ) (0.3 ) Dividends paid
(27.1 ) (27.0 ) Debt issuance costs (0.8 ) (0.7 ) Proceeds from
issuance of stock 0.9 0.6 Excess tax benefits from stock-based
payment arrangements 0.5 0.3 Net cash (used
in)/provided by financing activities (29.1 ) 2.6 NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(3.3
) (28.9 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 32.9
66.0 CASH AND CASH EQUIVALENTS, END OF PERIOD $
29.6
$ 37.1 NON-CASH INVESTING TRANSACTIONS: Non-cash
purchase of property and equipment $ 0.7 $ 1.6
World Wrestling Entertainment,
Inc.
Supplemental Information – Schedule of
Adjustments
(In millions, except per share
data)
(Unaudited)
Three Months EndedSeptember 30,
2014
Three Months EndedSeptember 30, 2013
AsReported
Restruct.Expense
Loss onInvestment
Adjusted
AsReported
FilmImpairment
Adjusted
Operating (loss) income
$ (5.0 ) $ 4.2 $ —
$ (0.8 ) $ 3.2 $
7.0 $ 10.2
Investment, interest and otherexpense,
net
(5.5 ) — 4.0 (1.5 ) 0.1 — 0.1
(Loss) income before taxes
(10.5 ) 4.2 4.0 (2.3 ) 3.3 7.0 10.3 Benefit from (provision
for) taxes 4.6 (1.5 ) (1.4 ) 1.7 (0.9 ) (2.4 ) (3.3 )
Net (loss) income
$ (5.9 ) $ 2.7 $ 2.6 $ (0.6 ) $ 2.4 $ 4.6
$ 7.0
(Loss) earnings per share
$ (0.08 ) $ 0.04 $ 0.03 $ (0.01 ) $ 0.03 $
0.06 $ 0.09
Reconciliation of
Operating(loss) income to OIBDA
Operating (loss) income $ (5.0 ) $ 4.2 $ — $ (0.8 ) $ 3.2 $ 7.0 $
10.2 Depreciation & amortization 7.7 (1.8 ) — 5.9
6.5 — 6.5 OIBDA $ 2.7 $
2.4 $ — $ 5.1 $ 9.7 $ 7.0
$ 16.7
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
asset amortization and impairments. 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 OIBDA
is that it excludes depreciation and amortization, which represents
the periodic charge for certain fixed assets and intangible assets
used in generating revenues for the Company's business. 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
OIBDA.
Adjusted OIBDA, Adjusted Operating income, Adjusted Net
income and Adjusted Earnings per share exclude certain material
items, which otherwise would impact the comparability of results
between periods. These items include, but are not limited to,
non-cash impairments of film, intangible and fixed assets, gains
and losses on asset sales, as well as material restructuring
charges. The adjusted measures should not be considered as an
alternative to net income, cash flows from operations or any other
indicator of WWE's performance or liquidity, determined in
accordance with U.S. GAAP.
World Wrestling Entertainment,
Inc.
Supplemental Information – Schedule of
Adjustments
(In millions, except per share
data)
(Unaudited)
Nine Months EndedSeptember 30,
2014
Nine Months EndedSeptember 30,
2013
AsReported
Restruct.Expense
Loss onInvestment
Jet Adj.Value
Adjusted
AsReported
FilmImpair.
V.GameTransition
Adjusted
Operating(loss) income
$ (39.7 ) $ 4.2 $
— $ 1.6 $ (33.9 )
$ 18.1 $ 11.7 $ (3.4
) $ 26.4
Investment,interest andother
expense,net
(6.1 ) — 4.0 — (2.1 ) (1.6 ) — —
(1.6 )
(Loss) incomebefore taxes
(45.8 ) 4.2 4.0 1.6 (36.0 ) 16.5 11.7 (3.4 ) 24.8
Benefit from(provision for)taxes
17.3 (1.5 ) (1.4 ) (0.6 ) 13.8 (5.8 ) (4.1 ) 1.2 (8.7 )
Net (loss)income
$ (28.5 ) $ 2.7 $ 2.6 $ 1.0 $ (22.2 ) $ 10.7
$ 7.6 $ (2.2 ) $ 16.1
(Loss) earningsper share
$ (0.38 ) $ 0.04 $ 0.03 $ 0.01 $ (0.30 ) $
0.14 $ 0.10 $ (0.03 ) $ 0.21
Reconciliation of Operating
(loss)income to OIBDA
Operating(loss) income
$ (39.7 ) $ 4.2 $ — $ 1.6 $ (33.9 ) $ 18.1 $ 11.7 $ (3.4 ) $ 26.4
Depreciation &amortization
20.6 (1.8 ) — (1.6 ) 17.2 17.8 —
— 17.8 OIBDA $ (19.1 ) $ 2.4 $ — $ —
$ (16.7 ) $ 35.9 $ 11.7 $ (3.4 ) $ 44.2
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
asset amortization and impairments. 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 OIBDA
is that it excludes depreciation and amortization, which represents
the periodic charge for certain fixed assets and intangible assets
used in generating revenues for the Company's business. 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
OIBDA.
Adjusted OIBDA, Adjusted Operating income, Adjusted Net
income and Adjusted Earnings per share exclude certain material
items, which otherwise would impact the comparability of results
between periods. These items include, but are not limited to,
non-cash impairments of film, intangible and fixed assets, gains
and losses on asset sales, as well as material restructuring
charges. The adjusted measures should not be considered as an
alternative to net income, cash flows from operations or any other
indicator of WWE's performance or liquidity, determined in
accordance with U.S. GAAP.
World Wrestling Entertainment,
Inc.
Supplemental Information –
Reconciliation of 2014 and 2015 Business Outlook
(In millions, except per share
data)
(Unaudited)
Reconciliation of Operating income to
Adjusted OIBDA(1)
WWE 2014 Q4 potential performance at different
subscriber Levels
AverageSubscribers(000s)2
OperatingIncome3
Depreciation OIBDA
Adjustmentsto OIBDA3
AdjustedOIBDA1,3
500
$(20) — $(15)
$7
$(13) — $(8)
$0
$(13) — $(8)
575
$(19) — $(14)
$7
$(12) — $(7)
$0
$(12) — $(7)
650
$(17) — $(12)
$7
$(10) — $(5)
$0
$(10) — $(5)
825
$(12) — $(7)
$7
$(5) — $0
$0
$(5) — $0
1,000
$(7) — $(2)
$7
$0 — $5
$0
$0 — $5
WWE 2014 potential performance at different
subscriber Levels
AverageSubscribers(000s)2
OperatingIncome3
Depreciation OIBDA
Adjustmentsto OIBDA3
AdjustedOIBDA1,3
500
$(60) — $(55)
$27
$(33) — $(28)
$2
$(31) — $(26)
575
$(52) — $(47)
$27
$(25) — $(20)
$2
$(23) — $(18)
650
$(45) — $(40)
$27
$(18) — $(13)
$2
$(16) — $(11)
825
$(26) — $(21)
$27
$1 — $6
$2
$3 — $8
1,000
$(8) — $(3)
$27
$19 — $24
$2
$21 — $26
WWE 2015 potential performance at different
subscriber Levels
AverageSubscribers(000s)2
OperatingIncome
Depreciation OIBDA
Adjustmentsto OIBDA
AdjustedOIBDA1
500
$(38) — $(18)
$28
$(10) — $10
$0
$(10) — $10
1,000
$17 — $37
$28
$45 — $65
$0
$45 — $65
1,500
$72 — $92
$28
$100 — $120
$0
$100 — $120
2,000
$127 — $147
$28
$155 — $175
$0
$155 — $175
2,500
$182 — $202
$28
$210 — $230
$0
$210 — $230
Non-GAAP Measures:
(1) We define OIBDA as operating income before
depreciation and amortization, excluding feature film and
television production asset amortization and impairments. 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 OIBDA is that it excludes depreciation
and amortization, which represents the periodic charge for certain
fixed assets and intangible assets used in generating revenues for
the Company's business. 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 OIBDA.
Adjusted OIBDA, Adjusted Operating income, Adjusted Net
income and Adjusted Earnings per share exclude certain material
items, which otherwise would impact the comparability of results
between periods. These items include, but are not limited to,
non-cash impairments of film, intangible and fixed assets, gains
and losses on asset sales, as well as material restructuring
charges. The adjusted measures should not be considered as an
alternative to net income, cash flows from operations or any other
indicator of WWE's performance or liquidity, determined in
accordance with U.S. GAAP.
(2) Average subscribers shown for Q4 2014 represent the average
subscriber over the three-month period. Average subscribers for
2014 and 2015 represent averages over a 12-month period.
(3) Operating income reflects an approximate $4 million
restructuring charge in Q3 2014 including $2 million in severance
that is excluded from Adjusted OIBDA (the remainder of the
restructuring charge is reflected in depreciation expense above).
Unknown at this time, there may be other items that would be
adjusted for in the presentation above.
World Wrestling Entertainment,
Inc.
Supplemental Information - Free Cash
Flow
(In millions)
(Unaudited)
Three Months Ended Nine
Months Ended
September 30,2014
September 30,2013
September 30,2014
September 30,2013
Net cash provided by/(used in) operating activities $
(0.5
) $ 6.3 $
(5.2
) $ 12.2 Less cash used for capital expenditures: Purchase
of property and equipment and other assets (3.0 ) (5.2 ) (9.2 )
(18.3 ) Free Cash Flow $
(3.5
) $ 1.1 $
(14.4
) $ (6.1 )
Non-GAAP Measure:
We define Free Cash Flow as net cash provided by
operating activities less cash used for capital expenditures.
Although it is not a recognized measure of liquidity under U.S.
GAAP, Free Cash Flow provides useful information regarding the
amount of cash our continuing business is generating after capital
expenditures, available for reinvesting in the business, servicing
and repaying debt, and for payment of dividends.
WWEInvestors:Michael Weitz,
203-352-8642orMedia:Tara Carraro,
203-352-8625
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