WWE issued the following:
WWE® Reports Q3 2016 Results & Targets Record 2017 Adjusted OIBDA of $100 Million
Third Quarter 2016 Highlights
Revenue of $164.2 million was on par with a record third quarter in 2015, which benefited from the WWE series, Tough Enough and Total Divas; 2016 revenue-to-date increased 8% from 2015 to $534.3 million
Q3 2016 OIBDA of $24.5 million and Operating income of $18.3 million were in line with the Company’s guidance1
WWE Network subscribers increased 24% from the third quarter 2015 to 1.46 million average paid subscribers over the third quarter 2016, consistent with the Company’s guidance
WWE Network’s Net Promoter Score ranked second among major U.S. OTT services, behind only Netflix, according to research by Parks and Associates (Hulu and MLB.TV ranked 3rd and 4th)
The Company completed a content distribution deal in Germany (ProSieben) to grow WWE’s international audience
Through the first nine months of 2016, digital engagement continued to grow with video views up 71% to 11.5 billion and social media engagements up 43% to 873 million from the prior year
NBCU secured 50 new blue chip advertisers for WWE programming in a two-year period
2017 Outlook
The Company outlines management expectations for 2017, which include continued WWE Network subscriber growth, record revenue, targeted Adjusted OIBDA of $100 million and Operating income of $70 million2
STAMFORD, Conn.–(BUSINESS WIRE)–WWE (NYSE:WWE) today announced financial results for its third quarter 2016. The Company reported Net income of $11.1 million, or $0.14 per diluted share, as compared to Net income of $10.4 million, or $0.14 per diluted share, in the prior year quarter.
“During the quarter, we continued to effectively execute our content strategy, which has resulted in record revenues to-date in 2016 and increased consumption across our media platforms,” said WWE Chairman & CEO Vince McMahon. “This growth illustrates meaningful progress against our long-term strategic plan and provides the foundation for achieving our 2017 financial objectives.”
George Barrios, WWE Chief Strategy & Financial Officer, stated “We achieved a 24% increase in average paid subscribers to WWE Network and generated profits that were within the range of our guidance. We expect continued year-over-year growth in subscribers and profits for the fourth quarter resulting in strong full year performance that is in-line with our previous business outlook.”
Fourth Quarter and Full Year 2016 Business Outlook
The Company projects fourth quarter Adjusted OIBDA of approximately $20 million to $24 million (Operating income of $12 million to $16 million) and average paid subscribers to WWE Network of 1.40 million (+/- 2%). The fourth quarter subscriber forecast represents an approximate 4% sequential decline from the third quarter 2016 and a 13% increase from the fourth quarter 2015. The Company also projects 2016 Adjusted OIBDA of $80 million to $84 million (Operating income of $54 million to $58 million) and average paid subscribers to WWE Network of approximately 1.42 million representing growth of 25% for the full year.3
2017 Outlook
In 2017, WWE management expects the Company to achieve another year of record revenue and has targeted Adjusted OIBDA of $100 million, which would also be an all-time record (up approximately 20% from projected 2016 Adjusted OIBDA of $80 million to $84 million), and Operating income of $70 million. Supporting the continued growth in the Company’s revenue and profits, management anticipates contractual increases in television rights fees from key distribution agreements and expects the level of WWE Network subscribers will continue to increase, albeit at a lower rate, on a year-over-year basis. As management believes there is a significant long term growth opportunity for WWE, the company plans to continue to invest in key areas to optimize WWE’s long-term performance while driving strong bottom line performance.
Providing perspective on the growth of WWE Network and the company’s targeted profit expansion, Mr. Barrios commented, “Given the current scale and leverage of WWE Network, increases in its subscribers have the potential to drive meaningful growth in revenue and profit; therefore, we define success by the achievement of sustained year-over-year increases in this measure. Based on anticipated subscriber growth, we believe we can achieve our targeted record financial results in 2017. Moreover, the continued growth of WWE Network would enable us to deliver a wider range of content, strengthening our engagement with a broadening audience of ardent fans. In addition to supporting our 2017 financial objective, growth of WWE Network would provide us with greater flexibility as the media landscape continues to evolve.”2
Comparability of Results
Third quarter 2015 revenue included approximately $14 million associated with the licensed reality series Total Divas and Tough Enough, which aired 21 episodes in the prior year period. These episodes did not have a material impact on OIBDA in the prior year quarter. There were no comparable airings in the third quarter 2016.
Three Months Ended September 30, 2016 – Results Overview
Revenues for the quarter were $164.2 million, essentially flat to the prior year. North American revenues decreased 6% from the prior year quarter predominantly due to the prior-year impact of certain licensed television programs (described above), a lower effective royalty rate for our franchise video game, WWE 2K16, and lower sales of our toy products. These factors were partially offset by the growth of WWE Network subscribers and increased television rights fees in key distribution agreements. Revenues from outside North America increased 13% driven by the increased monetization of content, as reflected in the Media Division and by higher Live Event revenue, particularly in the EMEA and APAC regions. Revenue in the current period was reduced by approximately $1.0 million due to unfavorable changes in foreign exchange rates.
Three Months Ended September 30, 2016 – Segment Performance Commentary
The year-over-year changes in the Company’s financial performance were driven by its Network, Television, Licensing, WWE Studios and Corporate & Other business segments. A further discussion of key business segments is provided in the narrative below. Refer to our third quarter 2016 Form 10-Q for management’s discussion and analysis of financial condition and results of operations pertaining to all of our segments.
Media Division
Revenues from the Company’s Media division decreased 4%, to $110.4 million, primarily due to the impact of certain television programming, which more than offset the increased revenue from the growth of WWE Network subscribers and the contractual escalation of television rights fees.
Network revenues, which include revenue generated by WWE Network and pay-per-view, increased 10% to $45.1 million. WWE Network subscription revenue increased 18% to $42.8 million from $36.4 million in the prior year quarter based on a 24% year-over-year increase in average paid subscribers to 1.46 million.
Network segment OIBDA of $17.4 million was essentially unchanged from the prior year quarter as the growth in WWE Networksubscription revenue was offset by increased programming expenses, including a $3.2 million allocation of certain expenses shared between the Company’s Network and Television segments.4 A portion of the increase in Network programming expenses relates to the Company’s previously communicated strategic investments.
The Company continued to increase the global subscriber base of WWE Network, as measured on a year-over-year basis, with launches over the trailing 12 months in five countries including Germany and Japan. WWE Network had 1.44 million total paid subscribers at the end of the third quarter, which represented a 17% increase from September 30, 2015. WWE Network had 1.07 million U.S. paid subscribers and 373,000 international paid subscribers at quarter-end.
WWE Network content, including pay-per-views, original series, NXT Takeover, and specials have continued to drive viewer engagement. During the quarter, the Company introduced compelling new content for WWE Network, including NXT Takeover Brooklyn III, Holy Foley!, WWE Draft Center Live, and Cruiserweight Classic, a ten-week global tournament. The Company is on pace to add more than 300 hours of original content to the network’s featured programming in 2016, and more than 2,500 hours of archival content to WWE Network, which would result in an on-demand library of over 7,000 hours at year-end 2016.
Television revenues decreased 14% to $56.3 million from $65.2 million in the prior year as contractual increases in key distribution agreements were more than offset by the prior year impact of WWE’s licensed reality series, Total Divas and Tough Enough. There were no scheduled airings of these programs in the third quarter 2016, while the prior year quarter reflected approximately $14 million in revenue from the fourth season of Total Divas (13 episodes) and Tough Enough (8 episodes). As indicated above, the allocation of certain shared expenses reduced Network segment OIBDA and increased Television segment OIBDA by $3.2 million in the third quarter 2016.
Live Events
Live Event revenues increased 10% to $28.6 million primarily due to the staging of 5 additional international events.
There were 82 total events (excluding NXT) in the current quarter, including 71 events in North America and 11 events in international markets, as compared to 85 events in the prior year quarter, including 79 events in North America and 6 in international markets.
North American live event revenues of $21.0 million were essentially unchanged from the prior year quarter as increases in average attendance and ticket prices were offset by the impact of eight fewer events. Average attendance increased 4% to 5,300, and the average effective ticket price increased 3% to $50.51.
International live event revenue increased 56% to $7.0 million from $4.5 million in the prior year quarter primarily due to the impact of five additional events. Average attendance declined 8% to 8,200 and average effective ticket prices declined 15% to $72.13, attributable, in part, to changes in the mix of territories.
Consumer Products
Revenues from Consumer Products decreased 4% to $21.6 million as higher online sales of merchandise at the Company’s e-commerce sites were more than offset by a reduction in licensing revenue. Licensing revenues decreased 22% to $9.0 million primarily due to a lower effective royalty rate for our franchise video game, WWE 2K16, and lower sales of our toy products. (As a reminder, the lower effective royalty rate derived from an increasing rate structure over the 2015 year as compared to a flat rate structure in 2016. For the full year, the Company expects the rate for 2016 will be comparable to the average rate for 2015.)
WWE Studios
Revenues from filmed entertainment increased to $2.5 million as compared to $1.7 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. During the quarter, WWE Studios released two feature films, Scooby Doo! & WWE: Curse of the Speed Demon and Interrogation. WWE Studios OIBDA increased $1.8 million due, in part, to the increase in revenues, and agreed changes to the terms of distribution of a previously released film, which resulted in lower expenses.
Corporate and Other
Corporate and Other expenses increased to $44.8 million in the current year quarter from $41.9 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 $2.9 million rise in Corporate & other expense reflected investments in data analytics, global branding, and certain talent initiatives.
Operating Income Before Depreciation and Amortization (OIBDA)
OIBDA was $24.5 million as compared to $23.4 million in the prior year quarter. The increase in OIBDA reflected the increased monetization of the Company’s video content. Television and Network profits, on a combined basis, increased $5.5 million due to the contractual escalation of key distribution agreements and growth in WWE Network subscriptions, which were partially offset by higher production costs.4 These growth factors were offset, in part, by a $2.5 million reduction in Licensing profits from a lower effective video game royalty rate and lower sales of toy products, as well as an increase in Corporate and Other expenses as described above. The Company’s overall OIBDA margin was 15% in the current year quarter as compared to 14% in the prior year quarter.
Nine Months Ended September 30, 2016 – Results Overview
Total revenues for the nine months ended September 30, 2016 were $534.3 million as compared to $492.6 million in the prior year period. Operating income for the current year period was $41.8 million versus $40.3 million in the prior year period. Net income was $25.8 million, or $0.33 per diluted share, as compared to Net income of $25.3 million, or $0.33 per diluted share, in the prior year period. OIBDA was $59.6 million for the current nine month period as compared to OIBDA of $57.6 million in the prior year period.
Nine Months Ended September 30, 2016 – Segment Performance Commentary
Revenues increased 8% to $534.3 million from $492.6 million with growth from across the Company’s business segments. North American revenues increased 7% driven primarily by the growth of WWE Network, higher Live Events and Digital Media revenue, as well as higher online sales of branded merchandise as reflected in WWE Shop. Partially offsetting this growth was a decline in television revenue as the escalation of rights fees in key distribution agreements was more than offset by the impact of airing fewer episodes of the Company’s licensed reality series. Revenues from outside North America increased 14% driven by the growth of WWE Network, increased television rights fees as well as higher live event and e-commerce merchandise sales, particularly in the EMEA region. Revenue in the current period was reduced by approximately $2.7 million due to unfavorable changes in foreign exchange rates.
Additional Information
Additional business metrics are made available to investors on the corporate website ir.corporate.wwe.com. Note: As previously announced WWE will host a conference call at 11:00 a.m. ET on October 27th to discuss the Company’s earnings results for the third quarter of 2016. 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) or 1-913-489-5104 from outside the U.S. (conference ID for both lines: 5141090). 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 October 27, 2016 at ir.corporate.wwe.com. 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 25 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 currently available in more than 180 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/.
