WWE News: WWE Second Quarter Earnings Report Released, Record Revenue

Operating income was $13.4 million as compared to $17.1 million in the prior year quarter, primarily due to a rise in production costs, including talent pay, an increase in accrued management incentive compensation and the reduction in ticket sales (as described above).

Adjusted OIBDA was $14.7 million as compared to $17.7 million in the prior year quarter.

Key Highlights: WWE continued to stage and plan remarkable events for engaging its fans with live, action-packed entertainment. During the quarter, WrestleMania attracted 78,133 fans and broke the record for the Mercedes-Benz Superdome’s highest grossing entertainment event at $14.1 million. The Greatest Royal Rumble in Jeddah, Saudi Arabia, became the largest WWE event held outside the U.S. in the past 16 years. In addition, the Company announced that it will return to China for the third straight year when WWE LIVE Shanghai comes to the Mercedes Benz Arena in September, and will hold a historic event in Australia, with WWE Super Show-Down in October, featuring the largest roster of WWE Superstars to ever appear in that country.

Consumer Products

Revenues increased 9% to $26.7 million primarily due to higher royalties from the sale of licensed consumer products and the timing of merchandise sales related to WWE’s WrestleMania Fan Axxess. The increase in licensing revenues reflected higher royalties from the sale of video games, including the company’s franchise game, WWE 2K19, and the mobile game, WWE Champions (Scopely).

Operating income was $4.6 million as compared to $5.5 million in the prior year quarter as the change in revenue was offset by an increase in operating expenses, including accrued management incentive compensation.

Adjusted OIBDA increased 10% to $6.9 million from $6.3 million in the prior year quarter based on the change in revenue.

Key Highlights: During the quarter, the Company continued to develop new licensing partnerships, such as those with Carl’s Jr.’s and Guardian Essentials to promote kids meals and multivitamins (shaped like WWE Championship belts), respectively, and to expand the presence of WWE among children. The vitamins were made available on WWE’s ecommerce site, WWE Shop, and Amazon.com. The Company also continued to increase the penetration of its mobile games. As of quarter-end, the Company had more than 90 million installs across its game portfolio, led by WWE Champions and WWE Supercard and including WWE’s newest game, WWE Mayhemwhich recently surpassed 12 million installs.

2018 Business Outlook

In the first half of 2018, the Company achieved a 59% increase in Adjusted OIBDA to $78.7 million. In the second half of 2018, the Company expects Adjusted OIBDA to be relatively flat year-over-year. This includes projected third quarter Adjusted OIBDA of $30 million to $34 million and strong fourth quarter results.4 Based on its actual and projected performance, the Company is raising its target for 2018 Adjusted OIBDA to a range of $160 million to $170 million, which would be an all-time record, exceeding its previous guidance of at least $150 million.4

The Company’s guidance for the second half of 2018 assumes a continued rise in revenue, and the impact of increases in fixed costs, strategic investments, and higher management compensation based on 2018 overperformance. In addition to these items, projected third quarter results also reflect the unfavorable timing of various business initiatives. In the third quarter 2018, the Company also projects average paid subscribers of approximately 1.67 million, which represents a 10% increase from the third quarter 2017.

The Company anticipates meaningful revenue growth in the fourth quarter based on the escalation of content rights fees and the favorable timing of licensing revenue associated with the implementation of a new FASB standard (ASC Topic 606).

WWE is unable to provide a reconciliation of full year or third quarter guidance to GAAP measures as, at this time, WWE cannot accurately determine all of the adjustments that would be required.

In early 2018, management discussed a step-up in capital expenditures to build-out the Company’s video production infrastructure and support the Company’s growth. The Company has decided to delay that spending as its plans continue to evolve. For the full year 2018, the Company anticipates capital expenditures of $30 million to $40 million. The Company expects to finalize its plans this year and to provide further guidance at that time.

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