WWE (NYSE:WWE) today announced financial results for its fourth
quarter ended December 31, 2014. Revenues for the quarter
increased 19% to $140.5 million from $118.4 million in the fourth
quarter last year. For the quarter, the Company reported a Net loss
of $1.6 million, or $0.02 loss per share, as compared to a Net loss
of $7.9 million, or $0.10 loss per share, in the prior year
quarter. The revenue increase was driven by the Network and
Television segments with earnings growth driven primarily by the
rise in television rights fees. Excluding items affecting
comparability, Adjusted OIBDA increased to $5.1 million from a loss
of $5.6 million and Adjusted Net loss was $0.6 million, or $0.01
loss per share, as compared to a Net loss of $7.9 million, or $0.10
loss per share, in the prior year quarter.
“During the quarter, we remained focused on growing WWE Network,
which surpassed 1 million subscribers in January 2015, just 11
months after launch. Subscriber growth was driven by a successful
free November promotion, the launch of the service in the UK and
the strength of our Royal Rumble event,” stated Vince McMahon,
Chairman and Chief Executive Officer. “We believe that our 2015
road map provides significant opportunities for growth, as we
continue to execute well, innovate faster and expand WWE Network,
the single greatest opportunity to transform WWE’s business
model.”
“In the fourth quarter, we continued to execute our WWE Network
strategy, and we generated earnings growth driven by the escalation
of our television rights fees. For the quarter, our adjusted OIBDA
surpassed our most recent public guidance associated with an
average of 721,000 paid subscribers,” added George Barrios, Chief
Strategy & Financial Officer. “Over the year, key brand metrics
remained strong. Raw and SmackDown TV ratings increased 2% and 3%,
respectively. Consumption of WWE content on YouTube increased more
than 80% to approximately 3.9 billion video views and our social
media presence grew more than 80% and recently surpassed 450
million followers. Importantly, we believe that we have reached a
financial inflection point. In 2015, we expect year-over-year
Adjusted OIBDA growth in every quarter, with growth driven by the
performance of WWE Network, the escalation of our television rights
fees as well as continued innovation across our businesses.”
WWE Network Update: Fourth
Quarter Highlights
Network segment revenues increased 64% from the prior year
quarter and 33% from the prior year reaching a ten-year peak with
the launch of WWE Network. During the quarter, reflecting
management’s belief in the broad appeal of WWE Network content, the
Company introduced a simplified price plan at $9.99 per month with
no commitment (cancel at any time) and migrated current subscribers
to this plan in December. As part of its network strategy, the
Company also continued to feature premium live and original
content, such as its pay-per-views, increased its comprehensive
video-on-demand library to more than 2,700 hours, and rolled out
new "resume play" and “watch list” features across all WWE Network
platforms. After making WWE Network available in international
markets in August, the network continued to grow its global
subscriber base.
- WWE Network added 85,000 subscribers
during the quarter, representing a 12% increase from September 30,
and reached 816,000 subscribers at year-end. The subscriber growth
reflected the acquisition of 336,000 subscribers, which was 17%
above the gross subscriber additions in the preceding quarter.
- Fourth quarter subscriber performance
demonstrated the efficacy of the Company’s free trial offering in
November and underscored the impact sampling could have on
subscriber growth. The November promotion attracted approximately
242,000 trial subscribers.
- The U.S. version of WWE Network was
made available in more than 170 countries and territories beginning
August 12, 2014. At year-end, WWE Network had approximately 44,000
international subscribers.
- WWE Network’s compelling live and new
original content continued to drive viewer engagement. During the
quarter, WWE’s NXT Live program, which features the Company’s
emerging talent, attracted increased viewership and social media
activity as well as fueled e-commerce merchandise sales. Also
exemplifying the power of live content, a network special with
Vince McMahon and Stone Cold Steve Austin® was among the most
watched original programs on the network, generated social media
activity that was among the top 10 worldwide trending topics on
Twitter during the program.
- As the WWE Network subscriber base has
grown, the network continues to cultivate a high level of
satisfaction and subscriber engagement. Viewer data indicates that,
on average over 2014, close to 90% of subscribers accessed WWE
Network at least once per week and 90% of subscribers are satisfied
with WWE Network.
WWE Network Update: Future
Plans
The Company will continue to execute a five-part strategy to
attract subscribers, including making the network available in new
geographies, executing high impact customer acquisition and
marketing programs, creating new content, expanding distribution
platforms, and developing new features.
- WWE Network hits 1 million
subscribers: On January 27, 2015, the company announced that
WWE Network had surpassed 1 million subscribers1 just 11 months
after launch. These results represent a 37% increase (24%
domestically) in subscribers since last reported at the end of
third quarter 2014, driven primarily by a successful free November
promotion, the launch of the service in the UK and significant
additions for the Royal Rumble pay-per-view event. Through January
27, WWE Network had attracted more than 1.4 million unique
subscribers with 71% of these subscribers active as of that
date.
- WWE Network available in the
U.K and Ireland: The Company continues to broaden the global
distribution of WWE Network. WWE Network was made available in the
UK on January 19 for £9.99 per month and Ireland for €12.99 per
month with no commitment and the ability to cancel any time.
- Sampling - February Free:
Based on the successful execution of the network’s free trial
offering in November, all new subscribers who register for the
network in February will receive the month of February for free,
including the opportunity to watch WWE Fast Lane live on Sunday,
February 22.
- Expanded WWE Network Distribution in
Canada, the Middle East and North Africa: Rogers
Communications, the Company’s exclusive network distribution
partner in Canada, has reached agreements with Cogeco Cable Canada,
Eastlink, Shaw and Shaw Direct, TELUS Optik TV and TELUS Satellite,
and Videotron, ensuring WWE Network will be available nationally in
Canada before WrestleMania (March 29). In addition, the Company has
reached an agreement with OSN, the leading pay-TV network in the
Middle East and North Africa, to distribute WWE Network in the
region as a premium linear channel, launching before
WrestleMania.
- New Content / Product Features:
The Company is evaluating opportunities to expand the range of
original network programming to include more exclusive live
specials with sought after interviewees, talk shows, animation, and
short-form content. To highlight debuting programs and identify the
most popular content on the network for subscribers, the Company
plans to roll out additional content carousels in the first half of
2015.
(1) Subscriber numbers in UK/Ireland are subject to local
consumer protection laws and regulations governing fee charges.
2015 Business Outlook
The rate of WWE Network subscriber adoption is a critical
determinant of the Company’s projected future financial
performance. The tables below outline ranges of potential Company
performance for 2015 at different subscriber levels (Reconciliation
of Operating Income to Adjusted OIBDA can be found in the
Supplemental Information included in this release).
The Company is maintaining its 2015 Business Outlook at various
subscriber levels as released on October 30, 2014. The 2015
Adjusted OIBDA table (below) is consistent with the previously
provided business outlook.
Total Company -
Adjusted OIBDA (in millions)
Average
Paid Subscribers1,2
2015
Q1
Average
Paid Subscribers1,2
2015
800 $0 - $5 500 ($10) - $10 850
$1 - $6 1,000 $45 - $65 900 $2 -
$7 1,500 $100 - $120 950 $4 - $9 2,000
$155 - $175 1,000 $5 - $10 2,500
$210 - $230
(1) Average paid subscribers shown in thousands. The average
number of paid subscribers over the 12-months of 2014 was
approximately 567,000. This 12-month average is below the average
for the 2014 period in which WWE Network was operative (WWE Network
was launched on February 24, 2014).
(2) The Company believes that the range of average paid
subscribers shown above for the first quarter 2015 represents a
range of potential outcomes; however, the average paid subscribers
the Company will achieve over the full year 2015 is unknown. The
range of average subscribers over the full year 2015 has been
provided for illustrative purposes rather than as guidance, and has
not be updated or changed since it was initially presented (July
31, 2014).
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
For the fourth quarter of 2014, results included $1.5 million in
film impairment charges primarily related to the expected
performance of the movie, Oculus, which was released theatrically
in April 2014.
For the full year 2014, results also included a one-time pre-tax
restructuring charge of $4.2 million comprised of severance and
other costs ($2.4 million recorded in operating expenses and $1.8
million in depreciation expense), 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. For the full year 2013, results
included $11.7 million in film impairment charges and an
approximate $3.4 million positive impact from the transition of the
Company's video game business to a new licensee in 2013.
In order to facilitate an analysis of financial results on a
comparable basis, the Company's results have been adjusted where
applicable to exclude these items. (See Schedule of Adjustments in
Supplemental Information).
Three Months Ended December 31,
2014 - Results by Region and Business Segment
Revenues increased 19% to $140.5 million primarily due to growth
in North America. North American revenues increased 23%, or $19.8
million, driven by the ramp up in WWE Network subscription revenue
and the escalation of television rights fees as reflected in the
Media Division. Revenues from outside North America increased 7%,
or $2.3 million, reflecting higher revenue from Consumer Products
in the Europe/Middle East/Africa (EMEA) region, including the
Company’s licensed video game and e-commerce merchandise sales
through WWEShop. Revenue growth in the Asia Pacific (APAC) region
reflected an increase in live event revenue. International live
event revenue, however, was flat to the prior year quarter as
growth in APAC was offset by declines in both EMEA and Latin
America (LATAM).
The following tables reflect net revenues by region and by
segment (in millions):
Three Months Ended December 31, 2014
December 31, 2013
Net Revenues By
Region:
North America $ 107.3 $ 87.5 Europe/Middle East/Africa (EMEA) 21.2
21.0 Asia Pacific (APAC) 10.1 7.7 Latin America 1.9 2.2
Total net revenues $ 140.5 $ 118.4
Three Months
Ended December 31, 2014 December
31, 2013
Net Revenues By
Segment:
Media Division $ 89.5 $ 70.8 Live Events 26.9 25.4 Consumer
Products Division 20.4 16.6 WWE Studios 2.9 5.0 Corporate and Other
0.8 0.6 Total net revenues $ 140.5 $ 118.4
Media Division
Revenues from the Company's Media division increased 26% to
$89.5 million with growth driven by the ramp up of WWE Network and
the escalation of television rights fees.
- Network revenues, which include
revenue generated by WWE Network (including advertising revenue)
and pay-per-view, increased 64% to $27.2 million from $16.6 million
in the prior year quarter.
WWE Network generated $23.3 million in
revenue based on an average of 721,000 paid subscribers over the
quarter. WWE Network had approximately 816,000 paid subscribers at
December 31, 2014 as compared to 731,000 paid subscribers at
September 30.
The following table reflects Media Division
revenues (in millions):
Three Months Ended
December 31, 2014 December 31,
2013 Network $ 27.2 $ 16.6 Television 50.5 42.1 Home
Entertainment 7.8 5.1 Digital Media 4.0 7.0 Total $ 89.5
$ 70.8
The following table reflects WWE Network paid
subscribers (in thousands):
As of / Three Months
Ended
As of
Twelve
Months
Ended
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
March 31,
2014
Dec. 31,
2014
Ending paid
subscribers
U.S.
772 703 700 495 772 International 44 28 0 0
44 Total paid subscribers 816 731 700 495
816
Average Paid
Subscribers
Quarter 721 723 665 N/A
Year-to-date(1) 567 515
406 N/A 567
(1) The calculation of average paid
subscribers uses a year-to-date period beginning January 1, 2014
and are below the average that would be calculated using the actual
WWE Network launch date, February 24, 2014.
- Pay-per-view contributed $3.9
million in revenue with approximately 271,000 buys as three events
were produced during the quarter. On a comparable basis, for the
events produced in the current and prior year quarter, current
period pay-per-view buys declined 62% reflecting the availability
of pay-per-view events on WWE Network.
The details for the number of buys are as
follows (in thousands) :
Three
Months Ended Broadcast Month
Events (in chronological order) December
31, 2014 December 31, 2013 October
WWE Battleground — 114 October Hell in a Cell 83 228 November
Survivor Series 100 177 December WWE TLC 39 181 Prior events
49 82 Total 271 782
- Television revenues increased
20% to $50.5 million from $42.1 million in the prior year quarter
primarily due to the renegotiation of a key distribution agreement,
which became effective in the fourth quarter 2014. Additionally,
the growth in television revenues reflected contractual increases
in existing international distribution agreements.
- Home Entertainment net revenues
increased to $7.8 million from $5.1 million in the prior year
quarter predominantly due to the recognition of a $2.1 million
minimum guarantee associated with 2014 sales. Unit shipments
declined 47% due, in part, to the transition of home entertainment
distribution from Cinedigm to Warner Bros., but were partially
offset by an increase in average effective price. The decline in
unit shipments reflected reduced shipments of WWE’s catalog titles,
which are typically characterized by lower prices and margins. The
average effective price increased 65% to $12.55 primarily from the
change in product mix.
- Digital Media net revenues were
$4.0 million compared to $7.0 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.
Additionally, the decline reflected the absence of revenues
associated with the Company’s Magazine Publishing business, which
was discontinued in the third quarter 2014.
Live Events
Live Event revenues increased 6% to $26.9 million primarily due
to the staging of additional events in North America and reflected
higher average attendance in the Company’s international
markets.
- There were 82 total events, including
57 events in North America and 25 events in international markets,
in the current quarter as compared to 78 events in the prior year
quarter, including 52 events in North America and 26 in
international markets.
- North American live event revenue
increased 11% to $15.3 million versus the prior year quarter,
driven by the staging of 5 additional events. Average ticket price
increased 3% to $45.75 while average attendance declined 3% to
approximately 5,700 fans.
- International live event revenue was
essentially unchanged at $11.6 million versus the prior year
quarter. A 15% increase in average international attendance to
6,000 fans was offset by a 14% decline in the average ticket price
and the staging of 1 fewer event. The decline in the average ticket
price reflected changes in territory mix. The prior year quarter
also included three events in Abu Dhabi, an international market
that has historically garnered higher ticket prices.
Consumer Products
Revenues from our Consumer Products businesses increased 23% to
$20.4 million from $16.6 million in the prior year quarter,
reflecting growth in the Company's licensing and WWEShop businesses
as described below.
- Licensing revenues increased 26%
to $9.1 million due to increased video game revenues that derived
from higher royalty rates in the current year quarter.
Additionally, the increase in licensing revenue benefited from
higher sales of downloadable content associated with our franchise
video game, WWE 2K14, and a WWE-branded casual game, WWE
Supercard.
- Venue Merchandise revenues
increased 6% to $3.6 million from $3.4 million in the prior year
quarter reflecting a comparable increase in total attendance with
four additional events in the quarter.
- WWEShop revenues increased 28%
to $7.7 million from $6.0 million in the prior year quarter as a
39% increase in the number of orders to 172,000 was partially
offset by an 8% decrease in revenue per order to $44.98. The
significant increase in orders was driven by increased marketing,
improved product assortment, and a record breaking holiday sales
period.
WWE Studios
WWE Studios recognized revenue of $2.9 million as compared to
revenue of $5.0 million in the prior year quarter primarily due to
the performance and timing of results from the Company’s portfolio
of movies. The fourth quarter 2014 reflected revenue from the
animated feature, Scooby Doo!: WrestleMania Mystery, which
subsequent to its March release has surpassed performance
expectations for that movie. Based on an evaluation of the
Company's film assets, however, an impairment charge of $1.5
million was recognized in the quarter. The charge was primarily
related to revised expectations for the movie, Oculus (released in
April 2014). As a result of the impairment, WWE Studios' movie
portfolio generated a loss of $0.4 million in the quarter compared
to income of $0.1 million in the prior year quarter.
Corporate and Other
Corporate and Other expenses increased $3.3 million to $38.2
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 are not allocated to specific
segments. The increase in Corporate and Other expense during the
quarter supported the expansion of the Company's international
infrastructure and talent development.
Operating Income Before Depreciation
and Amortization (OIBDA)
OIBDA results increased to $3.6 million from a loss of $5.6
million in the prior year quarter. Excluding the impact of film
impairment charges, Adjusted OIBDA increased $10.7 million driven
by the escalation of television rights fees and the recognition of
contractual guarantees in Home Entertainment (described above).
Profits also increased across most of the Company’s businesses.
These increases were partially offset by investment to support key
content and brand initiatives. Network segment OIBDA results were
essentially flat to prior year quarter as the growth in subscribers
and subscription revenue was offset by the loss of pay-per-view
revenue and increased app development, programming, marketing, and
customer service costs. Investment in WWE’s international and
talent development infrastructure contributed to a $3.3 million
increase in Corporate and Other expenses. Based on the resulting
changes in business mix, the Company’s Adjusted OIBDA margin
improved to 4% from (5%) in the prior year quarter. (See Schedules
of Adjustments in Supplemental Information).
Depreciation and
amortization
Depreciation and amortization expense totaled $6.1 million for
the current year quarter as compared to $6.6 million in the prior
year quarter.
Investment Income, Interest and Other
Income, Net
Investment income, interest and other income, net yielded
expense of $1.0 million in the current year quarter compared to
income of $0.3 million in the prior year quarter. The increase in
expense was driven by losses that derived from changes in foreign
exchange rates.
Effective tax rate
The current year quarter's effective tax rate was 54%
versus the prior year quarter effective tax rate of 34%. Both the
current quarter and the prior year quarter include tax benefits
associated with the Company’s operating losses. The Company
believes it will be able to utilize these benefits in future
periods.
Summary Results for the Year Ended
December 31, 2014
Total revenues for the year ended December 31, 2014 were
$542.6 million as compared to $508.0 million in the prior year. For
the current year, the Company reported an Operating loss of $42.2
million and a Net loss of $30.1 million, or $0.40 per share as
compared to Operating income of $5.9 million, and Net income of
$2.8 million, or $0.04 per share, in the prior year. The Company
also reported an OIBDA loss of $15.5 million for the current year
as compared to OIBDA of $30.4 million in the prior year.
Excluding items that impacted comparability on a year-over-year
basis, the Company reported an Adjusted Operating loss of $34.9
million, an Adjusted OIBDA loss of $11.6 million and an Adjusted
Net loss of $22.8 million, or $0.31 per share compared to Adjusted
Operating income of $14.2 million, Adjusted OIBDA of $38.7 million
and Adjusted Net income of $8.2 million, or $0.11 per share, in the
prior year.
Year Ended December 31, 2014 -
Results by Region and Business Segment
Revenues increased 7% to $542.6 million driven by growth in
North America. North American revenues increased 9%, or $34.5
million, driven by the ramp up in WWE Network subscription revenue
and the escalation of television rights fees as reflected in the
Media Division. Revenues from outside North America were flat to
the prior year as contractual increases in the Company's
international television agreements were offset by the impact of
staging 11 fewer events 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):
Year Ended December 31, 2014
December 31, 2013
Net Revenues By
Region:
North America $ 426.2 $ 391.7 Europe/Middle East/Africa 69.1 72.4
Asia Pacific 41.0 37.3 Latin America 6.3 6.6 Total net
revenues $ 542.6 $ 508.0
Year Ended December
31, 2014 December 31, 2013
Net Revenues By
Segment:
Media Division $ 339.9 $ 302.7 Live Events 110.7 113.1 Consumer
Products Division 78.1 78.5 WWE Studios 10.9 10.8 Corporate and
Other 3.0 2.9 Total net revenues $ 542.6 $ 508.0
Media Division
Revenues from the Company's Media Division increased 12% to
$339.9 million primarily driven by the launch and ramp up of WWE
Network 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 as well as
lower revenues associated with the Company’s Magazine Publishing
business, which was discontinued in the third quarter 2014.
Year Ended December 31, 2014
December 31, 2013 Network $ 115.0 $ 86.3 Television
176.7 163.4 Home Entertainment 27.3 24.3 Digital Media 20.9
28.7 Total $ 339.9 $ 302.7
Live Events
Live Event revenues were $110.7 million as compared to $113.1
million in the prior year primarily due to lower attendance
capacity at WrestleMania (due to stadium configuration) and the
staging of 3 fewer events.
Year Ended December 31, 2014
December 31, 2013 Live events $ 108.5 $ 111.5 Travel
Packages 2.2 1.6 Total $ 110.7 $ 113.1
Consumer Products
Division
Revenues from Consumer Products were $78.1 million for the
current year as compared to $78.5 million in the prior year, as a
reduction in Licensing revenue was offset by increased merchandise
sales on the Company’s e-commerce website, WWEShop. The decline in
Licensing revenue was primarily due to the transition to a new
video game partner, Take-Two Interactive, and lower sales of the
Company’s franchise video game, WWE 2K14 as well as lower sales of
toy products. The increase in revenue from WWEShop was primarily
from mobile shop optimization, improved product assortment, and
increased distribution with Amazon UK.
Year Ended December 31, 2014
December 31, 2013 Licensing $ 38.6 $ 43.6 Venue
merchandise 19.3 19.4 WWEShop 20.2 15.5 Total $ 78.1
$ 78.5
WWE Studios
During the current year, WWE Studios recognized revenue of $10.9
million as compared to $10.8 million in the prior year, reflecting
the timing of results from the Company's portfolio of movies. In
2014, WWE Studios revenue reflected results from the strong
performance of The Call (released in March 2013) and Scooby Doo!:
WrestleMania Mystery (released in March 2014). Additionally, six
other movies were released in the current year (Jingle All the Way
2, Road to Paloma, Leprechaun:Origins, Queens of the Ring; See No
Evil 2 and Oculus) as compared to six releases in the prior
year.
WWE Studios OIBDA results improved by $13.2 million due, in
part, to a $10.2 million reduction in film impairment charges.
Corporate and Other
Corporate and Other expenses increased $24.2 million to $154.4
million from the prior year. 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 $22.1 million
increase supported the Company's content and brand initiatives,
including 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 $15.5 million as compared to
income of $30.4 million in the prior year. 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 $29.7 million reduction in Network
segment OIBDA as the growth in subscription revenue was more than
offset by the loss of pay-per-view revenue and increased
programming, marketing, customer service and app development costs.
Investment in WWE’s content and brand initiatives resulted in a
$24.2 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 the recognition of contractual guarantees in
Home Entertainment, increased profits from the escalation of the
Company’s television rights fees and improved film performance.
Based on the impact of increased investment and resulting
changes in business mix, the Company's OIBDA margin was (3)% in
2014 as compared to 6% in the prior year. Excluding the impact of
restructuring related expenses, film impairments and the video game
transition, Adjusted OIBDA resulted in a loss of $11.6 million in
the current year as compared to income of $38.7 million in the
prior year, and the Adjusted OIBDA margin was (2)% in the current
year as compared to 8% in the prior year. (See Schedules of
Adjustments in Supplemental Information.)
Depreciation and
amortization
Depreciation and amortization expense totaled $26.7 million for
the current year as compared to $24.5 million in the prior year.
Depreciation and amortization expense in both the current and prior
years 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
Income, Net
Investment income, interest and other income, net yielded
expense of $7.1 million in the current year as compared to $1.3
million in the prior year. The current year included a $4.0 million
impairment of an equity investment. Additionally, investment
income, net declined by $0.7 million due to lower average balances
of cash and short term investments and interest expense increased
$0.4 million related to asset backed financing for the new Company
jet. Other expense increased $0.7 million from the prior year
primarily due to losses derived from changes in foreign exchange
rates.
Effective tax rate
The effective tax rate was 39% in the current year as compared
to 39% in the prior year. The current year includes a tax benefit
associated with the Company’s net operating loss. The Company
believes it will be able to utilize these benefits in future
periods.
Cash Flows &
Liquidity
Net cash generated by operating activities was $54.7 million for
the year ended December 31, 2014 as compared to $23.8 million
in the prior year. Cash flow generation was driven by a $50 million
advance payment associated with recently executed television
distribution agreement, and was partially offset by the Company's
operating losses. The advance is reflected in the Company’s
financial statements as deferred income and will be recognized as
revenue as earned over the term of the agreement.
Purchases of property and equipment and other assets (excluding
the purchase of a corporate aircraft) declined by $13.1 million
primarily due to lower current year investment in assets to support
the creation and distribution of new content, including through WWE
Network.
As of December 31, 2014, the Company held $115.4 million in
cash and short-term investments and estimates debt capacity under
the Company's revolving line of credit to be approximately $169
million.
Additional Information
Additional key performance indicators are made available to
investors on a monthly basis on the Company's website at
ir.corporate.wwe.com.
Note: As previously announced, the Company’s Chairman & CEO,
Vincent K. McMahon, and the Company’s Chief Strategy &
Financial Officer, George Barrios, will host a conference call on
February 12, 2015 beginning at 11:00 a.m. ET to discuss the
Company's earnings results for the fourth quarter and full year 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 1-855-200-4993 (toll free) from the U.S.
and Canada or 1-913-489-5104 from outside the U.S. and Canada
(Conference passcode for both lines: 7751938). Please reserve a
line 15 minutes prior to the start time of the conference call.
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
Year Ended December 31, 2014
December 31, 2013 December 31, 2014
December 31, 2013 Net revenues $ 140.5 $ 118.4
$ 542.6 $ 508.0 Cost of revenues 92.7 80.4 377.6 323.0
Selling, general and administrative expenses 44.2 43.6 180.5 154.6
Depreciation and amortization 6.1 6.6 26.7
24.5 Operating (loss) income (2.5 ) (12.2 ) (42.2 ) 5.9
Loss on equity investment — — (4.0 ) — Investment income,
net 0.2 0.3 0.7 1.4 Interest expense (0.6 ) (0.5 ) (2.1 ) (1.7 )
Other (expense)/income, net (0.6 ) 0.5 (1.7 ) (1.0 ) (Loss)
income before income taxes (3.5 ) (11.9 ) (49.3 ) 4.6
(Benefit from) provision for income
taxes
(1.9 ) (4.0 ) (19.2 ) 1.8 Net (loss) income $ (1.6 ) $ (7.9
) $ (30.1 ) $ 2.8
(Loss) earnings per share: diluted
$ (0.02 ) $ (0.10 ) $ (0.40 ) $ 0.04 Weighted average common
shares outstanding: Diluted 75.5
75.1
75.3 75.4
World Wrestling Entertainment,
Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
As of December 31, 2014
December 31, 2013 ASSETS CURRENT
ASSETS: Cash and cash equivalents $ 47.2 $ 32.9 Short-term
investments, net 68.2 76.5 Accounts receivable, net 40.1 59.6
Inventory 4.7 2.9 Deferred income tax assets 15.5 12.2 Prepaid
expenses and other current assets 12.9 16.1 Total
current assets 188.6 200.2 PROPERTY AND EQUIPMENT,
NET 114.0 133.5 FEATURE FILM PRODUCTION ASSETS, NET 26.5 16.0
TELEVISION PRODUCTION ASSETS, NET 5.8 10.8 INVESTMENT SECURITIES
7.2 8.3 NON-CURRENT DEFERRED INCOME TAX ASSETS 19.6
—
OTHER ASSETS, NET 20.9 9.7 TOTAL ASSETS $ 382.6
$ 378.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: Current portion of long-term debt $ 4.3 $ 4.3
Accounts payable and accrued expenses 57.6 47.9 Deferred income
38.7 30.1 Total current liabilities 100.6 82.3
LONG-TERM DEBT 21.6 25.4 NON-CURRENT INCOME TAX LIABILITIES
1.7 4.9 NON-CURRENT DEFERRED INCOME
52.9
—
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 353.7 347.0 Accumulated other comprehensive income
3.2 3.5 Accumulated deficit (151.8 ) (85.3 ) Total stockholders’
equity 205.8 265.9 TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY $ 382.6 $ 378.5
World Wrestling Entertainment,
Inc.
Consolidated Statements of Cash
Flows
(In millions)
(Unaudited)
Year Ended December 31, 2014
December 31, 2013 OPERATING ACTIVITIES: Net
(loss) income $ (30.1 ) $ 2.8 Adjustments to reconcile net income
to net cash (used in)/provided by operating activities:
Amortization and impairments of feature film production assets 5.5
19.1 Amortization of television production assets 25.9 7.0
Depreciation and amortization 29.0 24.5 Loss on equity investment
4.0 — Amortization of bond premium 1.3 2.0 Amortization of debt
issuance costs 0.7 0.5 Stock-based compensation 7.5 5.5 Provision
for (recovery from) doubtful accounts 1.2 — Services provided in
exchange for equity instruments (0.4 ) (0.9 )
Loss on disposal of property and
equipment
0.3 — (Benefit from) provision for deferred income taxes (25.4 )
1.4 Other non-cash adjustments (0.3 ) (0.1 ) Cash (used
in)/provided by changes in operating assets and liabilities:
Accounts receivable 17.9 (9.0 ) Inventory (1.9 ) (1.1 ) Prepaid
expenses and other assets (9.3 ) (2.1 ) Feature film production
assets (16.0 ) (9.1 ) Television production assets (20.9 ) (11.5 )
Accounts payable, accrued expenses and other liabilities 4.3 (6.7 )
Deferred income 61.4 1.5 Net cash provided by
operating activities 54.7 23.8 INVESTING ACTIVITIES:
Purchase of corporate aircraft and related improvements — (30.9 )
Purchases of other property and equipment and other assets (11.9 )
(25.0 ) Proceeds from sale of corporate aircraft 3.2 — Net proceeds
from infrastructure improvement incentives 2.9 — Purchases of
short-term investments (35.4 ) (37.0 ) Proceeds from sales and
maturities of investments 42.2 44.3 Purchase of equity investments
(2.2 ) (2.2 ) Net cash used in investing activities (1.2 ) (50.8 )
FINANCING ACTIVITIES: Proceeds from the issuance of note payable
0.4 31.0 Repayment of long-term debt (4.1 ) (1.4 ) Dividends paid
(36.2 ) (36.0 ) Debt issuance costs (0.8 ) (0.7 ) Proceeds from
issuance of stock 1.0 0.7 Excess tax benefits from stock-based
payment arrangements 0.5 0.3 Net cash used in
financing activities (39.2 ) (6.1 ) NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 14.3 (33.1 ) CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 32.9 66.0 CASH AND CASH
EQUIVALENTS, END OF PERIOD $ 47.2 $ 32.9 SUPPLEMENTAL
CASH FLOW INFORMATION: Cash paid for interest $ 1.4 $ 1.0 NON-CASH
INVESTING TRANSACTIONS: Non-cash purchase of property and equipment
$ 1.5 $ 1.7
World Wrestling Entertainment,
Inc.
Supplemental Information – Schedule of
Adjustments
(In millions, except per share
data)
(Unaudited)
Three Months Ended December 31, 2014
Three Months Ended
December 31, 2013
As Reported Film Impairment
Adjusted As Reported Adjusted
Operating (loss)income $ (2.5 )
$ 1.5 $ (1.0 ) $
(12.2 ) $ (12.2 )
Investment, interest and other income, net (1.0 ) — (1.0 )
0.3 0.3
(Loss) income before taxes
(3.5 ) 1.5 (2.0 ) (11.9 ) (11.9 )
Benefit from (provision for) taxes
1.9 (0.5 ) 1.4 4.0 4.0
Net (loss) income $ (1.6 ) $ 1.0
$ (0.6 ) $ (7.9 ) $ (7.9 )
(Loss) earnings per share
$ (0.02 ) $ 0.01 $ (0.01 ) $ (0.10 ) $ (0.10 )
Reconciliation of Operating income to OIBDA Operating (loss)
income $ (2.5 ) $ 1.5 $ (1.0 ) $ (12.2 ) $ (12.2 ) Depreciation
& amortization 6.1 — 6.1 6.6 6.6
OIBDA $ 3.6 $ 1.5 $ 5.1 $ (5.6 ) $ (5.6
)
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
amortization and related 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 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)
Year Ended December 31, 2014 Year
Ended December 31, 2013
As
Repor-
ted
Film
Impair-
ment
Restruct.
Expense
Loss on
Investment
Jet Adj.
Value
Adjusted
As
Reported
Film
Impair-
ment
Video
Game
Transition
Adjusted Operating (loss) income $
(42.2 ) $ 1.5 $
4.2 $ — $ 1.6 $
(34.9 ) $ 5.9 $ 11.7
$ (3.4 ) $ 14.2
Investment, interest and other expense, net (7.1 ) —
— 4.0
—
(3.1 ) (1.3 ) —
—
(1.3 ) Income before taxes (49.3 ) 1.5 4.2 4.0 1.6
(38.0 ) 4.6 11.7 (3.4 ) 12.9
Benefit from (provision for) taxes
19.2 (0.5 ) (1.5 ) (1.4 ) (0.6 ) 15.2 (1.8 ) (4.1 ) 1.2 (4.7 )
Net (loss) income $ (30.1 ) $ 1.0
$ 2.7 $ 2.6 $ 1.0 $ (22.8 ) $
2.8 $ 7.6 $ (2.2 ) $ 8.2 (Loss)
earnings per share $ (0.40 ) $ 0.01 $ 0.04 $
0.03 $ 0.01 $ (0.31 ) $ 0.04 $ 0.10 $
(0.03 ) $ 0.11
Reconciliation of Operating income
to OIBDA Operating (loss) income $ (42.2 ) $ 1.5 $ 4.2 $ — $
1.6 $ (34.9 ) $ 5.9 $ 11.7 $ (3.4 ) $ 14.2 Depreciation &
amortization 26.7 — (1.8 ) — (1.6 )
23.3 24.5 — — 24.5 OIBDA $ (15.5
) $ 1.5 $ 2.4 $ — $ — $ (11.6 )
$ 30.4 $ 11.7 $ (3.4 ) $ 38.7
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
amortization and related 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 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 2015 Business Outlook
(In millions, except per share
data)
(Unaudited)
Reconciliation of Operating income to
Adjusted OIBDA(1)
WWE 2015 Q1 Potential Performance at Different Subscriber
Levels
Average Paid
Subscribers
(000s)2,3
Operating
Income
Depreciation
OIBDA
Adjustments
to OIBDA4
Adjusted
OIBDA1
800 $ (7 ) - $ (2 ) $ 7 $ 0
-
$ 5 $ 0 $ 0
-
$
5
850 $ (6 ) - $ (1 ) $ 7 $ 1
-
$ 6 $ 0 $ 1
-
$ 6 900 $ (5 ) - $ 0 $ 7 $ 2
-
$ 7 $ 0
$
2
-
$
7
950 $ (3 ) - $ 2 $ 7 $ 4
-
$ 9 $ 0 $ 4
-
$ 9 1,000
$
(2
) - $ 3 $ 7 $ 5
-
$ 10 $ 0 $ 5
-
$ 10
WWE 2015 Potential Performance at Different
Subscriber Levels
Average
Paid
Subscribers
(000s)2,3
Operating
Income
Depreciation OIBDA
Adjustments
to OIBDA4
Adjusted
OIBDA1
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 paid subscribers shown in thousands. The average
number of paid subscribers over the 12-months of 2014 was
approximately 567,000. This 12-month average is below the average
for the 2014 period in which WWE Network was operative (WWE Network
was launched on February 24, 2014).
(3) The Company believes that the range of average paid
subscribers shown above for the first quarter 2015 represents a
range of potential outcomes; however, the average paid subscribers
the Company will achieve over the full year 2015 is unknown. The
range of average subscribers over the full year 2015 has been
provided for illustrative purposes rather than as guidance, and has
not be updated or changed since it was initially presented (July
31, 2014).
(4) 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 Year Ended
December 31, 2014 December 31, 2013
December 31, 2014 December 31, 2013 Net cash
provided by operating activities $ 59.9 $ 11.6 $ 54.7 $ 23.8
Less cash used for capital expenditures: Purchase of property and
equipment and other assets (excluding corporate aircraft) (2.7 )
(6.7 ) (11.9 ) (25.0 )
Free Cash Flow $ 57.2 $ 4.9 $ 42.8
$ (1.2 )
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 and for
payment of dividends.
WWEInvestors: Michael Weitz
203-352-8642Media: Tara Carraro 203-352-8625
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