Fourth-Quarter 2017
Highlights
- Revenue increased 9% to $211.6 million
as compared to the prior year quarter
- Operating income was $27.0 million.
Adjusted OIBDA1 reached $34.8 million, which was in line with
guidance
- WWE Network’s average paid subscribers2
increased to 1.48 million during the fourth quarter 2017,
consistent with the Company’s guidance
- Celebrated the 25th anniversary of
Monday Night Raw in January 2018; SmackDown surpassed 950 episodes
and remained the second longest running episodic program in history
(behind only Raw)
- Formed partnerships to create content
across platforms, including the series Mixed Match Challenge™ which
streams live on Facebook Watch, Miz & Mrs. which will air on
USA, as well as virtual reality experiences from select 2018
special events available on a new WWE channel within the NextVR
app
Full Year 2017
Highlights
- Revenue increased 10% to $801.0
million, the highest in the Company’s history
- Operating income increased 36% to $75.6
million. Adjusted OIBDA increased 40% to $111.9 million, which was
within the range of Company guidance and represented all-time
record performance
- Supporting the global reach of WWE
content, completed multi-year distribution agreements in France,
Japan, South Korea, Australia, Philippines and sub-Saharan Africa
among other countries and regions
- Digital engagement continued to grow
with video views up 32% to 20 billion and social media engagements
up 4% to approximately 1.2 billion from the prior year3
- WWE’s YouTube channel remained the #1
most viewed Sports Channel and the 2nd most viewed channel on
YouTube with 20 billion lifetime views (as of January 31,
2018)
- Demonstrated strength in consumer
products with the #1 selling action figure property in the U.S.
ahead of Star Wars and Marvel Avengers4
- Forbes named WrestleMania as
one of the world’s top 10 most valuable sports event brands for the
fourth year in a row, alongside the Super Bowl, Olympics, FIFA
World Cup and NCAA Men’s Final Four
WWE (NYSE:WWE) today announced financial results for its fourth
quarter and year ended December 31, 2017. For the quarter, the
Company reported Net income of $4.8 million, or $0.06 per share, as
compared to a Net income of $8.0 million, or $0.10 per share, in
the prior year quarter. As discussed below, Net income in the
fourth quarter 2017 reflected charges totaling $11.3 million ($0.14
per diluted share) arising from the enactment of the new tax law.
Operating income increased to $27.0 million from Operating income
of $13.9 million. Excluding items affecting comparability, Adjusted
OIBDA increased to $34.8 million from $20.5 million.
“In 2017, WWE achieved record financial results, generating the
highest level of revenue and Adjusted OIBDA in the Company’s
history. Our operating metrics demonstrate the strength of our
content and brands worldwide, which positions us well to achieve
our long-term objectives. We will continue to focus on creating
compelling content for multiple platforms, leveraging data
analytics and capitalizing on international opportunities to drive
our continued growth,” stated Vince McMahon, Chairman and Chief
Executive Officer.
George Barrios, WWE Chief Strategy & Financial Officer,
added, “We achieved record revenue that exceeded $800 million,
record Adjusted OIBDA that was within the range of our guidance,
and record subscriber levels. As we continue to drive WWE’s digital
and direct-to-consumer transformation while optimizing the
monetization of our long-form content, we expect to balance 2018
OIBDA growth with investment in strategic areas, maximizing our
long-term opportunities and shareholder value.”
2018 Business Outlook
The Company evaluates the operating performance of its segments
based on financial measures such as revenue, OIBDA and Adjusted
OIBDA. 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. The Company plans to begin reporting results
using this revised definition with the communication of first
quarter 2018 results.5
For the first quarter 2018, the Company estimates Adjusted OIBDA
(excluding stock-based compensation expense) of $23 million to $27
million.6,7 As compared to first quarter 2017 results, this range
represents higher profits from the increased monetization of video
content, which are offset by the timing of lower licensing revenue
associated with the adoption of a new FASB standard for revenue
recognition. For the first quarter 2018, the Company also projects
average paid subscribers to WWE Network of approximately 1.53
million.
In 2018, management expects the Company to achieve another year
of record revenue and previously targeted Adjusted OIBDA of at
least $115 million,6,7 which would represent another all-time
record. 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.6,7
WWE is unable to provide a reconciliation of first quarter and
full year 2018 guidance to GAAP measures as, at this time, WWE
cannot accurately determine all of the adjustments that would be
required.
In early 2017, management discussed a step-up in capital
expenditures to expand the Company’s overall production capacity.
The related spending to retrofit a recently purchased facility was
largely delayed until 2018 as plans were finalized. For 2018, the
Company anticipates capital expenditures of $50 million to $70
million, reflecting in part the shift in spending from 2017.
Long-term Growth: Key Content
Distribution Agreements
The monetization of WWE content is a fundamental element of the
Company’s business model. Certain distribution agreements that
represent a significant share of the Company’s television rights
revenue will expire in 2019. These agreements include the licensing
of WWE’s premier programs, Raw and SmackDown, in the U.S., which
will expire on September 30, 2019, as well as in the U.K. and
India, which will expire on December 31, 2019. Management currently
expects to announce its plan for future distribution in the U.S.
sometime between May 2018 and September 2018; for future
distribution in the U.K. by year-end 2018; and for future
distribution in India in the first half of 2019. Although
these announcements could occur either before or after these dates,
management believes that these ranges represent the most likely
periods for such communication.
Impact of New Tax Law (“Tax Cuts and
Jobs Act”)
In the fourth quarter 2017, the Company recorded one-time
charges totaling $11.3 million arising from the enactment of the
new tax law, including a $10.9 million non-cash charge due to the
remeasurement of its deferred tax assets and $0.4 million
associated with the deemed repatriation of foreign earnings. The
remeasurement was due to the reduction of the corporate tax rate
from 35% to 21%, which reduced the future benefit the Company will
realize associated with these assets. The Company believes the
tax bill will provide a long-term benefit to the Company.
Prospectively, the Company expects its effective tax rate to
benefit from the recent changes in the tax law, as the reduced
corporate rate more than offsets the elimination of certain
deductions, including the domestic production activity deduction
and changes affecting the deductibility of certain executive
compensation. Our effective tax rate is expected to decrease from
approximately 36% to between 25-27%, excluding discrete items.
Additionally, due to the immediate expensing of certain capital
expenditures provided for in the legislation and the Company’s
expected capital plans over the next year, it is anticipated that
the Company’s cash taxes will be significantly reduced in the near
term. Due to these recent changes, the Company anticipates
that some portion of our dividends paid in 2018 will likely be
deemed a return of capital to our shareholders.
Comparability of 2017
Results
For the three months ended December 31, 2017, Operating
income included $1.5 million in film impairment charges. For the
full year 2017, Operating income included $5.6 million of expense
primarily related to certain legal matters and other contractual
obligations, and $4.7 million in film impairment charges. As these
material items impact the comparability of results on a
year-over-year basis, they have been excluded from the Company’s
2017 Adjusted OIBDA. For the comparable periods of 2016, there were
no such items that impacted year-over-year comparability.
A reconciliation of Adjusted OIBDA to Operating income (GAAP)
for the three and twelve-month periods ended December 31, 2017
can be found in the supplemental schedules on pages 16-19 of this
release.
Performance of Segments
The schedules below reflect WWE’s performance by line of
business (in millions):1
Three Months Ended Year Ended December 31,
December 31, Net Revenues: 2017 2016
2017 2016 Media Division Network $ 46.2 $ 43.7 $
197.9 $ 180.9 Television 75.3 68.6 270.2 241.7 Home Entertainment
0.9 4.2 8.6 13.1 Digital Media 12.8 8.5 34.5 26.9 Live Events 35.2
38.6 151.7 144.4 Consumer Products Division Licensing 11.3 10.1
52.1 49.1 Venue Merchandise 4.4 4.9 23.8 24.2 WWEShop 14.3 12.8
37.8 34.6 WWE Studios 9.6 2.4 18.6 10.1 Corporate & Other
1.6 1.1 5.8 4.2
Total Net
Revenues $ 211.6 $ 194.9 $ 801.0 $ 729.2
Operating
Income: Media Division Network $ 19.1 $ 13.7 $ 57.3 $ 36.9
Television 39.3 30.6 134.7 114.8 Home Entertainment (0.7) 1.9 1.6
5.3 Digital Media 5.8 1.9 10.0 4.3 Live Events 5.4 6.2 42.3 41.8
Consumer Products Division Licensing 6.5 4.6 31.1 27.4 Venue
Merchandise 1.8 2.1 9.1 9.8 WWEShop 2.8 3.0 8.3 7.3 WWE Studios 0.3
(1.1) (3.6) (0.2) Corporate & Other (53.3) (49.0)
(215.2) (191.7)
Total Operating Income $ 27.0
$ 13.9 $ 75.6 $ 55.7
Adjusted OIBDA: Media Division
Network $ 21.0 $ 15.5 $ 64.2 $ 43.0 Television 40.3 31.9 139.4
119.8 Home Entertainment (0.8) 1.9 1.6 5.3 Digital Media 5.9 1.9
10.2 4.6 Live Events 5.4 6.2 42.3 41.8 Consumer Products Division
Licensing 6.5 4.6 31.1 27.4 Venue Merchandise 1.8 2.1 9.1 9.8
WWEShop 2.8 3.0 8.3 7.3 WWE Studios 1.8 (1.1) 1.1 (0.2) Corporate
& Other (49.9) (45.5) (195.4)
(178.7)
Total Adjusted OIBDA $ 34.8 $ 20.5 $ 111.9 $ 80.1
The following table reflects net revenues by region (in
millions):
Three Months Ended Year Ended December 31,
December 31, 2017 2016 2017 2016
Net Revenues by Region: North America $ 153.4 $ 141.6 $
599.7 $ 539.9 Europe/Middle East/Africa (EMEA) 37.8 34.2 125.6
122.7 Asia Pacific (APAC) 14.3 13.4 61.6 54.7 Latin America
6.1 5.7 14.1 11.9
Total Net Revenues $
211.6 $ 194.9 $ 801.0 $ 729.2
Three Months Ended December 31,
2017 - Results by Region & Business Segment
Revenues increased 9% to $211.6 million from the prior year
quarter driven by the monetization of the Company’s video content.
North American revenues increased 8%, or $11.8 million, primarily
due to the timing and performance of the Company’s film slate,
contractual increases in key television distribution agreements,
higher digital advertising sales, and the growth of WWE Network
subscribers. Revenue growth was partially offset by a decline in
home entertainment sales and the staging of seven fewer live events
during the current quarter. Revenues from outside North America
increased 9%, or $4.9 million, primarily due to the contractual
escalation of television rights fees, higher digital advertising
sales and higher revenue from consumer products in the EMEA and
APAC regions. Growth was partially offset by a reduction in Live
Event revenue, associated with the timing of an NXT tour in the
APAC region in the prior year quarter. Changes in foreign exchange
rates did not materially impact revenues.
Three Months Ended December 31,
2017 – Segment Performance Commentary
The year-over-year changes in the Company’s financial
performance were predominantly driven by its Media division,
particularly the Television, Digital Media and Network segments, as
well as the Company’s filmed entertainment business, WWE Studios. A
discussion of selected business segments is provided in the
narrative below.
Media Division
Revenues from the Company's Media division increased 8%, to
$135.2 million, primarily due to the contractual escalation of
television rights fees, higher digital advertising revenues, and
growth of WWE Network subscribers.
- Television revenues increased
10% to $75.3 million from $68.6 million in the prior year quarter
primarily due to contractual increases in key distribution
agreements.
- Network revenues, which include
revenue generated by WWE Network and pay-per-view, increased 6% to
$46.2 million from $43.7 million. WWE Network subscription revenue
increased 5% to $43.4 million based on a comparable increase in
average paid subscribers to 1.48 million.2Network segment OIBDA
increased $5.5 million reflecting growth in WWE Network
subscription revenue and, as anticipated, lower programming
expenses from the timing of the Company’s pay-per-view events with
one fewer event as compared to the prior year quarter.The Company
continued to increase the global subscriber base of WWE Network,
which had 1.47 million total paid subscribers (1.06 million U.S.
paid subscribers and 0.41 million international paid subscribers)
at the end of the fourth quarter, representing a 5% increase from
December 31, 2016.
The following table provides WWE Network subscriber
performance2,8
As of / Three Month
Ended December 31, December 31, 2017
2016
Ending Total
Subscribers
1,547 1,473
Ending Paid
Subscribers
U.S. 1,065 1,033 International 406 370 Total paid subscribers 1,471
1,403
Average Paid
Subscribers
Quarter 1,484 1,407 Year-to-date 1,533 1,418
WWE Network content, including pay-per-views,
original series, NXT Takeover, and specials continued to drive
viewer engagement. The Company added nearly 300 hours of original
content to WWE Network’s featured programming in 2017, and more
than 2,400 hours of archival content, which resulted in an
on-demand library of approximately 9,400 hours at year-end
2017.
- Digital Media revenues increased
51% to $12.8 million reflecting higher advertising sales and
consumption of WWE video content across digital platforms,
particularly YouTube.
Live Events
Live Event revenues decreased to $35.2 million from $38.6
million in the prior year quarter primarily due to a 7% decline in
average attendance that was partially offset by a 5% increase in
the average effective ticket price. Additionally, the timing of
seven fewer NXT events, the Company’s brand for emerging
developmental talent, contributed to the overall decline in live
event revenue as compared to the prior year quarter.
- There were 101 total events (excluding
NXT) in the current quarter, consisting of 68 events in North
America and 33 events in international markets, as compared to 103
events in the prior year quarter, consisting of 75 events in North
America and 28 in international markets.
- North American live event revenues
decreased 5% to $21.7 million from $22.8 million primarily due to
the staging of seven fewer events. Partially offsetting this
decline was a 4% increase in the average effective ticket price to
$54.70.
- International live event revenue
decreased 15% to $13.5 million from $15.8 million in the prior year
quarter driven by the aforementioned timing of NXT events. The
decline in revenue also reflected a 22% decrease in average
attendance to approximately 5,200 as a result of changes in the mix
of venues and territories, which was partially offset by the
staging of five additional events and an 8% increase in average
ticket price to $73.83.
Consumer Products
Division
Revenues from our Consumer Products division increased 8% to
$30.0 million with higher online sales of branded merchandise and
higher royalties from the sale of licensed toy products. WWEShop
revenues increased $1.5 million based on a 14% increase in sales
volume to approximately 315,000 orders across the Company’s
e-commerce sites and distribution channels, including Amazon.
WWE Studios
Revenues from filmed entertainment increased to $9.6 million as
compared to $2.4 million in the prior year quarter. The increase in
revenue was due to the performance and timing of results from the
Company’s portfolio of movies, including the delivery of Fighting
With My Family, a feature film produced in partnership with Dwayne
“The Rock” Johnson. Based on an evaluation of the Company’s film
assets, however, an impairment charge of $1.5 million was
recognized in the quarter relating to previously released titles.
Excluding the impact of this charge, WWE Studios’ movie portfolio
generated Adjusted OIBDA of $1.8 million as compared to a loss of
$1.1 million in the prior year quarter.
Corporate and Other
Corporate and Other expenses increased to $51.5 million from
$46.6 million in the prior year quarter. As defined, these expenses
include corporate G&A expenses as well as Business Support
costs, such as sales, marketing, and talent development costs,
which are not allocated to specific segments. The $4.9 million rise
reflected a $2.3 million increase in stock compensation,
attributable in part to a rise in the Company’s stock price, as
well as an increase in certain talent expenses.
Operating Income (GAAP)
Operating income increased to $27.0 million from $13.9 million
in the prior year quarter primarily due to the increased
monetization of content across platforms as reflected in the
Company’s Media Division and, to a lesser extent, higher sales and
profits from its Licensing business. The growth in income was
partially offset by the increase in Corporate and Other expenses
(as described above) and $1.5 million in film impairment charges
that have been excluded from Adjusted OIBDA (see discussion of
Adjusted OIBDA below). The Company’s Operating income margin
increased to 13% from 7% in the prior year quarter.
Adjusted Operating Income Before
Depreciation and Amortization (Adjusted OIBDA)
Adjusted OIBDA increased to $34.8 million from $20.5 million in
the prior year quarter. The $14.3 million increase was primarily
due to the increased monetization of content. Media division
profits increased $15.2 million due to the contractual escalation
of rights fees in key content distribution agreements, growth in
WWE Network subscription revenue, lower programming costs
reflecting the timing of pay-per-view events, and higher digital
advertising sales. Additionally, profits from the WWE Studios and
Licensing segments increased $2.9 million and $1.9 million,
respectively, based on timing and performance of film projects and
higher sales of toy products. The overall increase in profits was
partially offset by the increase in Corporate and Other expense (as
described above). The Company’s Adjusted OIBDA margin increased to
16% from 11% in the prior year quarter.
Net Income (GAAP)
Net income declined to $4.8 million from $8.0 million in the
prior year quarter. Net income for the fourth quarter 2017 was
reduced by one-time charges totaling $11.3 million that arose from
the enactment of the new tax law. This included a $10.9 million
non-cash charge due to the remeasurement of our deferred tax assets
and $0.4 million associated with the deemed repatriation of foreign
earnings. The remeasurement was due to the reduction of the
corporate tax rate from 35% to 21%, which reduced the future
benefit the Company will realize associated with these assets.
Excluding the impact of these charges, net income would have
increased to $16.1 million.
Summary Results for the Year Ended
December 31, 2017
Total revenues for the year ended December 31, 2017 were
$801.0 million as compared to $729.2 million in the prior year. For
the full year, the Company reported Net income of $32.6 million, or
$0.42 per diluted share, compared to Net income of $33.8 million,
or $0.44 per share, in the prior year. As discussed below, Net
income for 2017 reflected charges totaling $11.3 million ($0.14 per
diluted share) arising from the enactment of the new tax law.
Operating income increased to $75.6 million from $55.7 million.
Excluding items affecting comparability, Adjusted OIBDA increased
to $111.9 million from $80.1 million.
Year Ended December 31, 2017–
Segment Performance Commentary
Revenues increased 10% to $801.0 million with growth from across
the Company’s business segments. North American revenues increased
11%, or $59.8 million, driven by the contractual escalation of
television rights fees, subscriber growth of WWE Network, and
higher digital advertising sales as reflected in the Company’s
Media Division. In addition, revenue growth in North America also
reflected the performance of Live Events, which was attributable to
the staging of 34 additional events in the year, as well as the
timing and performance of the Company’s film slate, including the
delivery of the feature film, Fighting With My Family. Revenues
from outside North America increased 6%, or $12.0 million, driven
by higher television rights fees and the growth of WWE Network
subscribers, particularly in the APAC and EMEA regions. Partially
offsetting these factors was a reduction in Live Event revenue,
particularly in the EMEA region, that was due, in part, to changes
in the mix of venues. Changes in foreign exchange rates (driven by
the prior year impact of Brexit on the British Pound) adversely
impacted revenues by $2.0 million, primarily from the Network,
Licensing and Live Events segments in the EMEA region. Refer to the
2017 Form 10-K for management’s discussion and analysis of
financial condition and results of operations pertaining to all
segments.
Media Division
Revenues from the Company's Media division increased 11% to
$511.2 million from $462.6 million primarily due to the contractual
escalation of television rights fees, the growth of WWE Network
subscription revenue, and higher digital advertising and
sponsorship sales.
Live Events
Live Event revenues increased 5% to $151.7 million from $144.4
million in the prior year primarily due to the staging of 40
additional events (34 in North America and 6 International), which
was partially offset by an 8% decline in average attendance,
reflecting changes in the mix of venues and territories.
Consumer Products
Division
Revenues from the Company’s Consumer Products division increased
5% to $113.7 million from $107.9 million in the prior year period,
with growth driven by higher royalties from the sale of the
Company’s licensed toy and video game products as well as higher
sales of branded merchandise through WWEShop’s e-commerce sites and
distribution channels, including Amazon.
WWE Studios
Revenues from filmed entertainment increased to $18.6 million as
compared to $10.1 million in the prior year. The increase in
revenue was due to the performance and timing of results from the
Company’s portfolio of movies, including the delivery of the
feature film, Fighting With My Family.
Corporate and Other
Corporate and Other expenses increased to $206.8 million from
$182.9 million in the prior year. As defined, these expenses
include corporate G&A expenses as well as Business Support
costs, such as sales, marketing, and talent development costs,
which are not allocated to specific segments. Corporate and Other
expenses for 2017 included $5.6 million in expenses primarily
related to certain legal matters and other contractual obligations.
Excluding these costs, Corporate and Other expenses increased $18.3
million reflecting an increase in staff costs, stock compensation
attributable to the rise in the Company’s stock price and other
expenses to support key strategic initiatives.
Operating Income (GAAP)
Operating income increased 36% to $75.6 million from $55.7
million in the prior year, primarily due to the increased
monetization of content across platforms as reflected in the
Company’s Network and Television segments. The growth in income was
partially offset by the increase in Corporate and Other expenses
(as described above) and $10.3 million in expense related to items
that impacted the comparability of results on a year-over-year
basis (as described on page 3 of this release). The Company’s
Operating income margin increased to 9% from 8% in the prior
year.
Adjusted Operating Income Before
Depreciation and Amortization (Adjusted OIBDA)
Adjusted OIBDA increased 40% to $111.9 million primarily due to
growth in WWE Network subscriptions, the contractual escalation of
key content distribution agreements and, to a lesser extent, higher
digital advertising sales. These factors were partially offset by
the rise in Corporate and Other expenses (as described above). The
Company’s Adjusted OIBDA margin increased to 14% from 11% in the
prior year.
Net Income (GAAP)
Net income declined to $32.6 million from $33.8 million in the
prior year. Net income for 2017 was reduced by one-time charges
totaling $11.3 million that arose from the enactment of the new tax
law (as described on page 7 of this release). Excluding the impact
of these charges, net income would have increased to $43.9
million.
Cash Flows &
Liquidity
Cash generated from operating activities was $96.6 million in
the current year, compared to $62.1 million in the prior year. The
$34.5 million increase in cash generated by operating activities
was primarily due to improved operating performance.
Free Cash Flow increased $39.7 million as compared to the prior
year period reflecting the change in cash from operating activities
and $4.9 million paid towards the purchase of a building and
underlying real property in the prior year period.9
As of December 31, 2017, the Company held $297.4 million in
cash, cash equivalents and short-term investments, and estimates
debt capacity under its revolving line of credit of approximately
$100 million.
Notes
(1) The definition of OIBDA, Adjusted OIBDA as well
as a reconciliation of Operating Income to OIBDA and Adjusted OIBDA
for the three and twelve months ended December 31, 2017 and 2016
can be found in the Supplemental Information in this release on
pages 16-19. (2) Average paid subscribers are calculated based on
the arithmetic daily mean over the relevant period, and may differ
substantially from paid subscribers at the end of any period due to
the timing of paid subscriber additions and losses. (3) Social
media fan engagements are defined as the cumulative fan response to
WWE content measured by the number of “likes”, “follows”, “shares”,
“mentions”, and “retweets” across social media platforms such as
Facebook, Twitter, YouTube, Instagram and Tumblr. (4) The rank of
the WWE action figure property in the U.S. has been provided by the
NPD Retail Group. (5) For more information see the Company’s
release “WWE Announces Financial Reporting Changes,” Feb. 8, 2018.
(6) 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. (7) WWE is
unable to provide a reconciliation of first quarter 2018 or full
year 2018 Adjusted OIBDA targets to GAAP measures as, at this time,
WWE cannot accurately determine all of the adjustments that would
be required. (8) Metrics reflect subscribers who are direct
customers of WWE Network and subscribers reported under licensed
partner agreements, which have different economic terms for the
network. (9) A reconciliation of Free Cash Flow to Net cash
provided by operating activities for the three and year ended
December 31, 2017 can be found in the Supplemental Information in
this release on page 20.
Additional Information
Additional business metrics are made available to investors on
the corporate website - corporate.wwe.com/investors. Note: As
previously announced WWE will host a conference call at 11:00 a.m.
ET on February 8th to discuss the Company's earnings results for
the fourth quarter and full year 2017. All interested parties are
welcome to listen to a live web cast that will be hosted through
the Company’s web site at corporate.wwe.com/investors. Participants
can access the conference call by dialing 1-855-200-4993 (toll
free) or 1-323-794-2092 from outside the U.S. (conference ID for
both lines: 6215316). Please reserve a line 5-10 minutes prior to
the start time of the conference call.
The earnings presentation referenced during the call will be
made available on February 8, 2018 at corporate.wwe.com/investors.
A replay of the call will be available approximately two 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 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.
World Wrestling Entertainment,
Inc.
Consolidated Income Statements
(In millions, except per share data;
Unaudited)
Three Months Ended Year Ended December
31, December 31, 2017 2016 2017
2016 Net revenues $ 211.6 $ 194.9 $ 801.0 $ 729.2 Cost of
revenues 118.2 117.0 459.0 430.0 Selling, general and
administrative expenses 60.1 57.4 240.4 219.1 Depreciation and
amortization 6.3 6.6 26.0 24.4
Operating income 27.0 13.9 75.6 55.7
Interest expense 4.0 1.2 14.7 3.0 Investment income, net 0.9 0.4
3.4 2.3 Other expense, net (0.2) (0.3) (0.3)
(1.8) Income before income taxes 23.7 12.8 64.0 53.2
Provision for income taxes 18.9 4.8 31.4
19.4 Net income $ 4.8 $ 8.0 $ 32.6 $ 33.8 Earnings
per share: Basic $ 0.06 $ 0.10 $ 0.43 $ 0.44 Diluted $ 0.06 $ 0.10
$ 0.42 $ 0.44 Weighted average common shares outstanding:
Basic 77.1 76.4 76.7 76.1 Diluted 79.4 77.8 78.5 77.5 Dividends
declared per common share (Class A and B) $ 0.12 $ 0.12 $ 0.48 $
0.48
World Wrestling Entertainment,
Inc.
Consolidated Balance Sheets
(In millions; Unaudited)
As of December 31, December 31,
2017 2016 ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 137.7 $ 212.0 Short-term investments, net 159.7 55.1
Accounts receivable, net 65.3 53.2 Inventory 8.3 6.5 Prepaid
expenses and other current assets 20.0 22.5 Total
current assets 391.0 349.3 PROPERTY AND EQUIPMENT,
NET 131.3 132.6 FEATURE FILM PRODUCTION ASSETS, NET 22.3 27.1
TELEVISION PRODUCTION ASSETS, NET 7.3 12.5 INVESTMENT SECURITIES
27.4 25.0 NON-CURRENT DEFERRED INCOME TAX ASSETS 19.0 32.6 OTHER
ASSETS, NET 16.2 21.8 TOTAL ASSETS $ 614.5 $ 600.9
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES:
Current portion of long-term debt $ 4.6 $ 6.1 Accounts payable and
accrued expenses 77.7 70.4 Deferred income 55.9 56.6
Total current liabilities 138.2 133.1 LONG-TERM DEBT
31.0 35.6 CONVERTIBLE DEBT 177.9 161.0 NON-CURRENT INCOME TAX
LIABILITIES 0.5 0.7 NON-CURRENT DEFERRED INCOME 14.0
30.7 Total liabilities 361.6 361.1 COMMITMENTS AND
CONTINGENCIES STOCKHOLDERS’ EQUITY: Class A common stock 0.4 0.4
Class B convertible common stock 0.3 0.4 Additional paid-in capital
422.2 403.4 Accumulated other comprehensive income 2.4 2.9
Accumulated deficit (172.4) (167.3) Total
stockholders’ equity 252.9 239.8 TOTAL LIABILITIES
AND STOCKHOLDERS’ EQUITY $ 614.5 $ 600.9
World Wrestling Entertainment,
Inc.
Consolidated Statements of Cash
Flows
(In millions; Unaudited)
Year Ended December 31, 2017
2016 OPERATING ACTIVITIES: Net income $ 32.6 $ 33.8
Adjustments to reconcile net income to net cashprovided by
operating activities: Amortization and impairments of feature film
production assets 17.4 6.7 Amortization of television production
assets 21.1 26.9 Depreciation and amortization 32.0 29.4 Services
provided in exchange for equity instruments (2.7) (2.9) Other
amortization 6.8 2.4 Stock-based compensation 24.2 18.1 Provision
for deferred income taxes 13.6 12.1 Other non-cash adjustments 0.9
(1.4) Cash (used in) provided by changes in operating assets and
liabilities: Accounts receivable (12.5) 5.5 Inventory (1.8) (0.4)
Prepaid expenses and other assets 0.1 (15.5) Feature film
production assets (12.5) (6.6) Television production assets (15.9)
(28.0) Accounts payable, accrued expenses and other liabilities 8.1
(1.1) Deferred income (14.8) (16.9) Net cash provided
by operating activities 96.6 62.1 INVESTING
ACTIVITIES: Purchases of property and equipment and other assets
(24.7) (29.9) Purchases of short-term investments (142.4) —
Proceeds from sales and maturities of investments 35.7 8.1 Purchase
of equity investments (2.3) (2.3) Net cash used in
investing activities (133.7) (24.1) FINANCING
ACTIVITIES: Repayment of debt (7.5) (14.4) Dividends paid (36.9)
(36.6) Debt issuance costs — (0.7) Proceeds from borrowings under
the credit facilities 1.4 11.6 Proceeds from borrowings on
convertible notes, net of issuance costs 14.5 193.9 Proceeds from
issuance of warrants 1.5 19.5 Purchase of convertible note hedge
(2.6) (34.1) Taxes paid related to net settlement upon vesting of
equity awards (9.2) (5.5) Proceeds from issuance of stock 1.6 1.4
Excess tax benefits from stock-based payment arrangements —
0.9 Net cash provided by (used in) financing activities
(37.2) 136.0 NET DECREASE IN CASH AND CASH
EQUIVALENTS (74.3) 174.0 CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 212.0 38.0 CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 137.7 $ 212.0 SUPPLEMENTAL CASH FLOW INFORMATION: Cash
paid for income taxes, net of refunds $ 14.6 $ 12.5 Cash paid for
interest $ 9.3 $ 1.6 NON-CASH INVESTING TRANSACTIONS: Purchases of
property and equipment recorded in accounts payableand accrued
expenses $ 2.3 $ 2.9 Mortgage assumption $ — $ 23.0
World Wrestling Entertainment,
Inc.
Supplemental Information – Schedule of
Adjustments
(In millions, except per share data;
Unaudited)
Three Months Ended December 31, 2017
2016 AsReported Film Impairments
(1)
Other Adjustments Adjusted As
Reported (2)
Operating income $ 27.0 $ 1.5 $ — $ 28.5
$ 13.9 Interest expense 4.0 — — 4.0 1.2 Investment and other
income, net 0.7 — — 0.7 0.1
Income before taxes 23.7 1.5 — 25.2 12.8 Provision for income taxes
(4) 18.9 0.5 — 19.4 4.8
Net
income (4) $ 4.8 $ 1.0 $ — $ 5.8 $ 8.0 Earnings per
share - diluted $ 0.06 $ 0.01 $ — $ 0.07 $ 0.10
Reconciliation
of Operating income to OIBDA Operating income $ 27.0 $ 1.5 $ —
$ 28.5 $ 13.9 Depreciation & amortization 6.3 —
— 6.3 6.6 OIBDA $ 33.3 $ 1.5 $ — $ 34.8 $ 20.5
Year Ended December 31,
2017 2016 AsReported
Film Impairments (1)
Other Adjustments (3)
Adjusted
As Reported (2)
Operating income $ 75.6 $ 4.7
$ 5.6 $ 85.9 $ 55.7 Interest expense 14.7 — — 14.7 3.0 Investment
and other income, net 3.1 — — 3.1
0.5 Income before taxes 64.0 4.7 5.6 74.3 53.2 Provision for
income taxes (4) 31.4 1.6 2.0 35.0
19.4
Net income (4) $ 32.6 $ 3.1 $ 3.6 $ 39.3
$ 33.8 Earnings per share - diluted $ 0.42 $ 0.04 $ 0.04 $ 0.50 $
0.44
Reconciliation of Operating income to OIBDA Operating
income $ 75.6 $ 4.7 $ 5.6 $ 85.9 $ 55.7 Depreciation &
amortization 26.0 — — 26.0 24.4
OIBDA $ 101.6 $ 4.7 $ 5.6 $ 111.9 $ 80.1
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
asset amortization and impairments, as well as the amortization of
costs related to content delivery and technology assets utilized
for our WWE Network. 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.
Our management uses OIBDA and Adjusted OIBDA measures to
evaluate operating performance of the consolidated business and to
set goals for operating managers. We believe these measures provide
relevant and useful information to current and potential
investors.
(1) The schedule of adjustments reflects items
considered to be material on a quarterly and annual basis.
Adjustments for these items, on a year-to-date basis, may differ
from the total of these items as shown in the Company’s Form 10-K
filing. For the three and twelve months ended December 31, 2017,
Adjustments to OIBDA of $1.5 million and $4.7 million,
respectively, reflect film impairment charges primarily due to
revised ultimate profit expectations for several movies. (2) For
the three and twelve months ended December 31, 2016, there were no
items that impacted the comparability of results on a
year-over-year basis. For these periods, Adjusted results were
equal to As Reported results. (3) Other Adjustments to Operating
income and OIBDA reflects non-recurring expenses of $5.6 million
primarily related to certain legal matters and other contractual
obligations. (4) For the three and twelve months ended December 31,
2017, the Provision for income taxes and Net income reflect an
$11.3 million charge due to the enactment of the new tax law (as
detailed on pages 7 and 9 of this release).
World Wrestling Entertainment,
Inc.
Supplemental Information –
Reconciliation of Adjusted OIBDA
(In millions, except per share data;
Unaudited)
Three Months Ended December 31, 2017 Operating
Income Depreciation OIBDA Adjustments to
OIBDA Adjusted OIBDA Media Division Network $ 19.1 $ 1.9
$ 21.0 $ — $ 21.0 Television 39.3 1.0 40.3 — 40.3 Home
Entertainment (0.8) — (0.8) — (0.8) Digital Media 5.9 — 5.9 — 5.9
Live Events 5.4 — 5.4 — 5.4 Consumer Products Division Licensing
6.5 — 6.5 — 6.5 Venue Merchandise 1.8 — 1.8 — 1.8 WWEShop 2.8 — 2.8
— 2.8 WWE Studios (1) 0.3 — 0.3 1.5 1.8 Corporate & Other
(53.3) 3.4 (49.9) — (49.9)
Total $ 27.0 $ 6.3 $ 33.3 $ 1.5 $ 34.8
Three
Months Ended December 31, 2016 Operating Income
Depreciation OIBDA Adjustments to OIBDA
Adjusted OIBDA Media Division Network $ 13.7 $ 1.8 $ 15.5 $
— $ 15.5 Television 30.6 1.3 31.9 — 31.9 Home Entertainment 1.9 —
1.9 — 1.9 Digital Media 1.9 — 1.9 — 1.9 Live Events 6.2 — 6.2 — 6.2
Consumer Products Division Licensing 4.6 — 4.6 — 4.6 Venue
Merchandise 2.1 — 2.1 — 2.1 WWEShop 3.0 — 3.0 — 3.0 WWE Studios
(1.1) — (1.1) — (1.1) Corporate & Other (49.0)
3.5 (45.5) — (45.5)
Total $ 13.9 $ 6.6
$ 20.5 $ — $ 20.5
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
asset amortization and impairments, as well as the amortization of
costs related to content delivery and technology assets utilized
for our WWE Network. 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.
Our management uses OIBDA and Adjusted OIBDA measures to
evaluate operating performance of the consolidated business and to
set goals for operating managers. We believe these measures provide
relevant and useful information to current and potential
investors.
(1) Adjustment to OIBDA of $1.5 million reflects
impairment charges primarily due to revised ultimate profit
expectations.
World Wrestling Entertainment,
Inc.
Supplemental Information –
Reconciliation of Adjusted OIBDA
(In millions, except per share data;
Unaudited)
Year Ended December 31, 2017 Operating Income
Depreciation OIBDA Adjustments to OIBDA
Adjusted OIBDA Media Division Network $ 57.3 $ 6.9 $ 64.2 $
— $ 64.2 Television 134.7 4.7 139.4 — 139.4 Home Entertainment 1.5
0.1 1.6 — 1.6 Digital Media 10.1 0.1 10.2 — 10.2 Live Events 42.3 —
42.3 — 42.3 Consumer Products Division Licensing 31.1 — 31.1 — 31.1
Venue Merchandise 9.1 — 9.1 — 9.1 WWEShop 8.3 — 8.3 — 8.3 WWE
Studios (1) (3.6) — (3.6) 4.7 1.1 Corporate & Other (2)
(215.2) 14.2 (201.0) 5.6 (195.4)
Total $ 75.6 $ 26.0 $ 101.6 $ 10.3 $ 111.9
Year
Ended December 31, 2016 Operating Income
Depreciation OIBDA Adjustments to OIBDA
Adjusted OIBDA Media Division Network $ 36.9 $ 6.1 $ 43.0 $
— $ 43.0 Television 114.8 5.0 119.8 — 119.8 Home Entertainment 5.3
— 5.3 — 5.3 Digital Media 4.3 0.3 4.6 — 4.6 Live Events 41.8 — 41.8
— 41.8 Consumer Products Division Licensing 27.4 — 27.4 — 27.4
Venue Merchandise 9.8 — 9.8 — 9.8 WWEShop 7.3 — 7.3 — 7.3 WWE
Studios (0.2) — (0.2) — (0.2) Corporate & Other (191.7)
13.0 (178.7) — (178.7)
Total $
55.7 $ 24.4 $ 80.1 $ — $ 80.1
Non-GAAP Measures:
We define OIBDA as operating income before depreciation
and amortization, excluding feature film and television production
asset amortization and impairments, as well as the amortization of
costs related to content delivery and technology assets utilized
for our WWE Network. 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.
Our management uses OIBDA and Adjusted OIBDA measures to
evaluate operating performance of the consolidated business and to
set goals for operating managers. We believe these measures provide
relevant and useful information to current and potential
investors.
(1) Adjustments to OIBDA reflects film impairment
charges of $4.7 million. (2) Adjustments to OIBDA reflects
non-recurring expenses of $5.6 million primarily related to certain
legal matters and other contractual obligations.
World Wrestling Entertainment,
Inc.
Supplemental Information -
Reconciliation of Business Outlook
(In millions, except per share data;
Unaudited)
Reconciliation of Adjusted OIBDA to
Operating Income
Q4 2017 FY 2017 Adjusted OIBDA (1)
$ 34.8 $ 111.9 Depreciation &
amortization (6.3) (26.0) Film Impairments (1.5) (4.7) Asset
Impairments — — Gain (losses) on operating assets — — Restructuring
charges — — Other operating income items — (5.6)
Operating income (U.S. GAAP Basis) $ 27.0
$ 75.6 (1) We define OIBDA as
operating income before depreciation and amortization, excluding
feature film and television production asset amortization and
impairments, as well as the amortization of costs related to
content delivery and technology assets utilized for our WWE
Network. 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.
The Company believes the presentation of
OIBDA and Adjusted OIBDA is relevant and useful for investors
because it allows investors to view our operating performance in
the same primary method used by management to evaluate operating
performance. Additionally, we believe they provide a meaningful
representation of operating cash flows.
World Wrestling Entertainment,
Inc.
Supplemental Information - Free Cash
Flow
(In millions; Unaudited)
Three Months Ended Year Ended December
31, December 31, 2017 2016 2017
2016 Net cash provided by operating activities $ 55.6 $ 36.9
$ 96.6 $ 62.1 Less cash used for capital expenditures: Purchase of
property and equipment and other assets (7.0) (6.0)
(24.7) (29.9) Free Cash Flow $ 48.6 $ 30.9 $ 71.9 $
32.2
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, debt
service, and payment of dividends.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180208005455/en/
WWEInvestors:Michael Weitz,
203-352-8642orMichael Guido, CFA, 203-352-8779orMedia:Matthew Altman, 203-352-1177
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