Effective with Q1 2018 Results
WWE (NYSE: WWE) today announced several changes to its financial
reporting, which include a revised business segment structure and
modification of its definition of Adjusted OIBDA. These measures
are attributed to changes in the way management analyzes results
and allocates resources as WWE continues to transform to a digital,
direct-to-consumer business model. The revised approach is intended
to make the Company’s business performance easier to evaluate and
analyze, make its financial statements more informative, and
present results in a more consistent manner to its media peers. In
addition, the Company is highlighting the adoption of a new FASB
standard for revenue recognition, as its implementation impacts the
timing of quarterly results. The Company expects to report its
financial performance reflective of these changes beginning with
the announcement of first quarter 2018 results.
Business Segment
Reporting
Over the past several years, WWE has executed a successful
transformation of its business model, with an increasing share of
revenue coming from the monetization of the Company’s video content
across digital and direct-to-consumer platforms. Given this ongoing
transformation, management has continued to evolve the way it
analyzes business results and allocates resources. To reflect its
revised perspective, the Company is implementing changes in the
structure of its reported segments. As compared to the prior ten
segment structure, the revised organization will be comprised of
three operating segments: Media, Live Events, and Consumer Products
as shown below:
Revised
Segments Key Sources of Revenue
Media
Production and monetization of content
from across platforms, including:
- Advertising, sponsorship, subscription and rights fees
- Long-form and short-form programs
- Distribution across WWE Network, pay television, digital/
socialmedia and filmed entertainment outlets
Live Events
Ticket sales of the Company's global live
events, including primary andsecondary distribution
Consumer Products
Licensing royalties and direct sales of
branded merchandise, including:
- Video and mobile games, toys, apparel and other products
- Sold at retail, online and at WWE venues
In conjunction with the change in reported segments, the Company
plans to allocate certain costs that were previously included in
the Company’s “Corporate & Other” segment, such as talent
development and training, marketing, business strategy and data
analytics, to the revised segments based on their share of total
revenue. The rationale for allocating these costs is that they are
more directly related to the production of content and products
than other costs that support WWE’s operations, and can be more
directly tied to the generation of revenue. The remainder of the
Company’s prior “Corporate & Other” expenses, such as costs
associated with finance, human resources, information technology,
facilities and legal functions, are expected to be reported as
“Corporate” expenses, which in aggregate are considered a
reconciling item rather than a reported segment.
With the implementation of this revised reporting structure,
management plans to provide greater visibility into its secular
revenue streams, such as entertainment rights fees, advertising and
sponsorship revenue. The Company believes that the revised
presentation of results will be more informative to users of the
Company’s financial statements and further that the revised
structure and allocation of expenses will be more consistent with
that of its media peers.
Adjusted OIBDA
Definition
The Company evaluates the operating performance of its segments
based on financial measures such as revenue, OIBDA and Adjusted
OIBDA. The Company has previously identified OIBDA as its primary
measure of performance, which it defines as operating income before
depreciation and amortization (as defined, OIBDA includes
amortization expenses directly related to the Company’s revenue
generating activities including the production and delivery of
media content). The Company has used this measure to assess its
operating results, set goals for management, plan and forecast
future periods, as well as to identify strategies to improve
performance.
To further facilitate the analysis of the Company’s operating
performance, the Company plans to change its primary measure of
performance from OIBDA to Adjusted OIBDA, and to modify its
definition of Adjusted OIBDA to exclude stock-based compensation
expense, a non-cash expense that may vary from period to period
with limited correlation to operating performance. The Company will
continue to exclude certain impairment charges and other
non-recurring material items from its definition of Adjusted OIBDA
as these items also impact the comparability of results between
periods.
The Company believes Adjusted OIBDA is relevant to users of its
financial statements because it provides a meaningful
representation of operating cash flows generated by WWE’s business
segments and management believes it is a primary measure used by
media investors, analysts and peers for purposes of valuation.
Adjusted OIBDA is a non-GAAP financial measure and may be
different than similarly-titled non-GAAP financial measures used by
other companies. WWE views operating income as the most directly
comparable GAAP measure. Adjusted OIBDA should not be considered in
isolation from, or as a substitute for, operating income or other
GAAP measures, such as net income or operating cash flow, as an
indicator of operating performance or liquidity.
In 2018, management expects the Company to achieve another year
of record revenue and previously targeted Adjusted OIBDA of at
least $115 million. Based on the Company’s revised definition of
Adjusted OIBDA, which excludes projected stock compensation
expense, this equates to an approximate 2018 Adjusted OIBDA target
of at least $140 million.1
WWE does not provide a reconciliation of projected Adjusted
OIBDA to Operating income (GAAP) for any future period as WWE
cannot accurately determine the adjustments that would be
required.
Revenue Recognition: Adoption of FASB
Standard
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from
Contracts with Customer (Topic 606)," which WWE adopted as of
January 1, 2018. The adoption of this guidance requires WWE to
record revenue based on current period estimates rather than wait
for statements that show actual results in a prior period. The
revised approach is expected to have the most significant impact on
WWE’s licensing and filmed entertainment businesses, where it
shifts the timing of revenue. The Company anticipates changes in
the quarterly timing of revenue, but does not expect a material
impact on full-year results. Specifically, the Company estimates an
$11 million to $13 million decline in licensing revenue from the
first quarter 2017 to the first quarter 2018, and a comparable
offsetting increase in the fourth quarter 2018.
Note
(1) The Company’s business model and expected results will
continue to be subject to significant execution risks, including
those risks outlined in the Company’s Form 10-K filing with the
SEC.
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 20
languages. WWE Network, the first-ever 24/7 over-the-top premium
network that includes all live pay-per-views, scheduled programming
and a massive video-on-demand library, is now available in almost
all international markets other than embargoed 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: WWE Network (including the risk that we are unable to attract,
retain and renew subscribers); major distribution agreements; our
need to continue to develop creative and entertaining programs and
events; the possibility of a decline in the popularity of our brand
of sports entertainment; the continued importance of key performers
and the services of Vincent K. McMahon; possible adverse changes in
the regulatory atmosphere and related private sector initiatives;
the highly competitive, rapidly changing and increasingly
fragmented nature of the markets in which we operate and greater
financial resources or marketplace presence of many of our
competitors; uncertainties associated with international markets;
our difficulty or inability to promote and conduct our live events
and/or other businesses if we do not comply with applicable
regulations; our dependence on our intellectual property rights,
our need to protect those rights, and the risks of our infringement
of others’ intellectual property rights; the complexity of our
rights agreements across distribution mechanisms and geographical
areas; potential substantial liability in the event of accidents or
injuries occurring during our physically demanding events
including, without limitation, claims relating to CTE; large public
events as well as travel to and from such events; our feature film
business; our expansion into new or complementary businesses and/or
strategic investments; our computer systems and online operations;
privacy norms and regulations; a possible decline in general
economic conditions and disruption in financial markets; our
accounts receivable; our indebtedness; litigation; our potential
failure to meet market expectations for our financial performance,
which could adversely affect our stock; Vincent K. McMahon
exercises control over our affairs, and his interests may conflict
with the holders of our Class A common stock; a substantial number
of shares are eligible for sale by the McMahons and the sale, or
the perception of possible sales, of those shares could lower our
stock price; and the relatively small public “float” of our Class A
common stock. 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
(including under our revolving credit facility), general economic
and competitive conditions and such other factors as our Board of
Directors may consider relevant. Forward-looking statements made by
the Company speak only as of the date made and are subject to
change without any obligation on the part of the Company to update
or revise them. Undue reliance should not be placed on these
statements. For more information about risks and uncertainties
associated with the Company’s business, please refer to the
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors” sections of the Company’s
SEC filings, including, but not limited to, our annual report on
Form 10-K and quarterly reports on Form 10-Q.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180208005435/en/
WWEInvestors:Michael Weitz,
203-352-8642orMichael Guido, CFA, 203-352-8779orMedia:Matthew Altman, 203-352-1177
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