WWE issued the following:
Fourth-Quarter 2016 Highlights
Revenue increased 17% to $194.9 million as compared to the prior year quarter
Operating income of $13.9 million and Adjusted OIBDA1 of $20.5 million were in line with guidance
WWE Network subscribers increased 14% from the fourth quarter 2015 to 1.41 million average paid subscribers over the fourth quarter 2016, consistent with the Company’s guidance
The Company premiered new original content across platforms, including Total Bellas® (E! network), The Bella
Twins® (YouTube channel), 205 Live™ and WWE Story Time™ (WWE Network)
Announced new UK Championship Tournament to showcase local talent, which successfully engaged both attendees and network viewers in January 2017
Announced SNICKERS® will once again serve as the exclusive presenting partner of WrestleMania® (April 2, 2017), which will be held at the Orlando Citrus Bowl and broadcast live globally on WWE Network
WWE issued $215 million of convertible note financing to support the execution of the Company’s long-term growth strategy and for general corporate purposes2
Full Year 2016 Highlights
Revenue increased 11% to $729.2 million, the highest in the Company’s history, including record levels of revenue from its Network, Television, Live Event, Venue Merchandise, and WWE Shop segments
Total international revenue increased by 11% to a record $189.3 million
Operating income increased 44% to $55.7 million and Adjusted OIBDA3 increased 17% to $80.1 million, with both measures within the relevant range of Company guidance
WWE Network subscribers watched a total of 294 million hours of content (up 15% from 256 million in 2015), yielding an average of 194 hours per household that places it among top cable and broadcast networks
Digital engagement continued to grow with video views up 56% to more than 15.1 billion and social media engagements up 45% to 1.1 billion from the prior year4
STAMFORD, Conn.–(BUSINESS WIRE)– WWE (NYSE:WWE) today announced financial results for its fourth quarter and year ended December 31, 2016. For the quarter, the Company reported Net income of $8.0 million, or $0.10 per share, as compared to a Net loss of $1.2 million, or a $0.02 loss per share, in the prior year quarter. Operating income increased to $13.9 million from an Operating loss of $1.5 million. Excluding items affecting comparability, Adjusted OIBDA increased to $20.5 million from $11.1 million.
“During the past year, we continued to successfully execute our content strategy, which resulted in significant operational achievements and generated record revenue. We grew WWE Network to an average of more than 1.5 million subscribers, attracted record attendance of 101,763 fans at WrestleMania, and strengthened the global reach of our television programs, completing distribution deals in China, Australia, Germany and Spain, among other countries,” said WWE Chairman & CEO Vince McMahon. “The increased engagement with our brands across multiple platforms provides a foundation for achieving our 2017 and long-term financial objectives.”
Q1 2017 Business Outlook
For the first quarter 2017, the Company projects Operating income of $16 million to $20 million and Adjusted OIBDA3 of approximately $23 million to $27 million. Additionally, the Company projects average paid subscribers to WWE Network of 1.48 million (+/- 2%).5 The first quarter 2017 subscriber forecast represents an approximate 15% year-over-year increase from the first quarter 2016, and a sequential quarter increase of 5% from the fourth quarter 2016. The Company’s first quarter 2017 subscriber guidance is based on WWE Network’s subscriber performance in January. As of January 31, 2017, WWE Network had 1.5 million ending paid subscribers including 1.1 million ending paid U.S. subscribers and 0.4 million ending paid international subscribers, which represent growth of 15% and 27% respectively, from January 31, 2016.
2017 Outlook
In 2017, WWE management expects the Company to achieve another year of record revenue and has targeted Operating income of $70 million and Adjusted OIBDA of $100 million, which would be an all-time record (up approximately 25% from 2016 Adjusted OIBDA of $80.1 million).5
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, as reflected in operating expenses and capital expenditures, 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 reiterated previous comments, “Given the current scale and leverage of WWE Network, increases in its subscribers have the potential to drive meaningful growth in revenue and profit.” Mr. Barrios added, “Based on anticipated subscriber growth, we believe we can achieve our targeted record financial results. In 2017, we will continue to evaluate our financial performance and to balance earnings growth with investments that could enable us to deliver a wider range of content, strengthen our engagement with a broadening audience, and support our continuing digital and direct-to-consumer transformation.”
Comparability of Results
For the fourth quarter 2016, there were no material items that impacted the comparability of results on a year-over-year basis. For the fourth quarter 2015, Corporate and Other expense included a $7.1 million non-cash abandonment charge to write-off the value of costs related to a media center expansion project. These costs were incurred several years ago but the expansion was delayed and the Company determined that these plans would no longer be viable and deemed them abandoned.
Three Months Ended December 31, 2016 – Results by Region & Business Segment
Revenues increased 17% to $194.9 million from the prior year quarter with growth from across the Company’s business segments. North American revenues increased 23% ($26.2 million) primarily due to the impact of certain licensed television series (described below), contractual increases in key television distribution agreements, the growth of WWE Network subscribers and the performance of the Company’s Live Events, particularly the staging of 19 additional events during the current quarter. Additionally, the revenue growth in North America reflected higher sales of online merchandise. Revenues from outside North America increased 5% ($2.5 million) primarily due to the growth of WWE Network subscribers and the performance of Live Events, particularly in the APAC and Latin America regions. Revenues from the EMEA region declined on a year-over-year basis primarily due to changes in foreign exchange rates, which impacted a $2.3 million reduction in total Company revenue.
Three Months Ended December 31, 2016 – Segment Performance Commentary
The year-over-year changes in the Company’s financial performance were driven by its Network, Television, Home Entertainment and WWE Shop business segments. A further discussion of key business segments is provided in the narrative below.
Media Division
Revenues from the Company’s Media division increased 17%, to $125.0 million, primarily due to the impact of certain television programming, the contractual escalation of television rights fees, and the growth of WWE Network subscribers.
Network revenues, which include revenue generated by WWE Network and pay-per-view, increased 7% to $43.7 million. WWE Network subscription revenue increased 11% to $41.4 million from $37.2 million in the prior year quarter based on a 14% year-over-year increase in average paid subscribers to 1.41 million. 6 Network segment Operating income decreased to $13.7 million from $15.0 million reflecting an increase in depreciation. Network segment OIBDA of $15.5 million was essentially unchanged from the prior year quarter as the growth in WWE Network subscription revenue was offset by increased programming expenses, including a $3.8 million allocation of certain expenses shared between the Company’s Network and Television segments.7 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 earlier in the year in five countries including Germany and Japan. WWE Network had 1.40 million total paid subscribers (1.03 million U.S. paid subscribers and 0.37 million international paid subscribers) at the end of the fourth quarter, which represented a 15% increase from December 31, 2015.
WWE Network content, including pay-per-views, original series, NXT Takeover, and specials has continued to drive viewer engagement. During the quarter, the Company introduced compelling new content for WWE Network, including live in-ring programs, such as the weekly series 205 Live and NXT Takeover Toronto, as well as the short-form series WWE Story Time. The Company added more than 300 hours of original content to WWE Network’s featured programming in 2016, and more than 2,500 hours of archival content, which resulted in an on-demand library of over 7,000 hours at year-end 2016.
Television revenues increased 23% to $68.6 million from $55.6 million in the prior year reflecting the impact of WWE’s reality series, Total Divas and Total Bellas, as well as contractual increases in key distribution agreements. These reality programs aired a total of 12 episodes, which contributed approximately $8.8 million in revenue to the fourth quarter 2016. There were no scheduled airing of these programs in the prior year quarter. As indicated above, the allocation of certain shared expenses reduced Network segment Operating income and OIBDA and increased Television segment Operating income and OIBDA by $3.8 million in the fourth quarter 2016.
Home Entertainment revenues increased to $4.2 million from $2.6 million due to higher digital sales, an increase in average revenue per unit and an improved sell-through rate as compared to the prior year quarter.
Live Events
Live Event revenues increased 17% to $38.6 million primarily due to the staging of 21 additional events and an 8% increase in the average effective ticket price for the Company’s events.
There were 103 total events (excluding NXT) in the current quarter, consisting of 75 events in North America and 28 events in international markets, as compared to 82 events in the prior year quarter, consisting of 56 events in North America and 26 in international markets.
North American live event revenues increased 23% to $22.8 million from $18.5 million primarily due to the staging of 19 additional events. Partially offsetting this impact, average attendance declined 15% to approximately 5,300 attributable, in part, to changes in venue mix. The average effective ticket price increased 2% to $52.76.
International live event revenue increased 10% to $15.8 million from $14.4 million in the prior year quarter primarily due to a 20% increase in the average effective ticket price to $68.65. Average attendance declined 14% to approximately 6,700 attributable, in part, to changes in the mix of territories.
Consumer Products Division
Revenues from our Consumer Products division increased 16% to $27.8 million driven by higher online sales of merchandise at the Company’s e-commerce sites. WWE Shop revenues increased $2.8 million based on a 29% increase in the number of orders to approximately 276,000 that reflected effective promotion and enhanced product assortment. Revenue per order remained essentially unchanged from the prior year quarter.
Corporate and Other
Corporate and Other expenses decreased to $46.6 million from $52.9 million 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. For the fourth quarter 2015, Corporate and Other expenses included a $7.1 million non-cash abandonment charge to write-off the value of costs related to a media center expansion project as described previously. Excluding this non-cash item, Corporate and Other expense was essentially flat to the prior year quarter.
Operating Income
Operating income increased to $13.9 million from an Operating loss of $1.5 million in the prior year quarter due to a $9.4 million increase in Adjusted OIBDA (as described below) and the absence of a $7.1 million non-cash abandonment charge as in the prior year quarter. These factors were partially offset by a $1.1 million increase in depreciation and amortization. The Company’s Operating income margin increased to 7% from (1%) in the prior year quarter.
Adjusted Operating Income Before Depreciation and Amortization (Adjusted OIBDA)
Adjusted OIBDA increased to $20.5 million from $11.1 million in the prior year quarter primarily due to the increased monetization of the Company’s video content and higher profits from its e-commerce business, WWE Shop. Television and Network profits, on a combined basis, increased $9.1 million with the contractual escalation of key distribution agreements and growth in WWE Network subscriptions, which were partially offset by higher production costs. Profits from the Company’s Home Entertainment and WWE Shop businesses increased based on their revenue growth (as described above). Based on the resulting changes in business mix, the Company’s Adjusted OIBDA margin increased to 11% from 7% in the prior year quarter.
Summary Results for the Year Ended December 31, 2016
Total revenues for the year ended December 31, 2016 were $729.2 million as compared to $658.8 million in the prior year. For the full year, the Company reported Net income of $33.8 million, or $0.44 per share, compared to Net income of $24.1 million, or $0.32 per share, in the prior year. Operating income increased to $55.7 million from $38.8 million. Excluding items affecting comparability, Adjusted OIBDA increased to $80.1 million from $68.7 million.
Year Ended December 31, 2016 – Results by Region and Business Segment
Revenues increased 11% to $729.2 million with growth from most of the Company’s business segments and from all major geographic regions; the Media Division accounted for $37.2 million, or 53%, of the overall revenue growth. North American revenues increased 10% driven by the growth of WWE Network, the contractual escalation of television rights fees, and higher digital advertising sales as reflected in the Company’s Media Division, higher average ticket prices for the Company’s live events, and higher online sales of merchandise at WWE Shop’s e-commerce sites. Revenues from outside North America increased 11% 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 $5.0 million due to unfavorable changes in foreign exchange rates. Refer to our 2016 Form 10-K 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 increased 9% to $462.6 million from $425.4 million primarily due to the growth in WWE Network subscription revenue, contractual increases in key television distribution agreements and higher digital media revenue.
Live Events
Live Event revenues increased 16% to $144.4 million from $124.7 million in the prior year primarily due to a 9% increase in average ticket prices at the Company’s events in North America, including WrestleMania, an increase in international ticket sales, and an expanded touring schedule for the Company’s NXT brand. The Company held 15 additional NXTevents, including eight in international markets, as compared to the prior year.
Consumer Products Division
Revenues from our Consumer Products division increased 10% to $107.9 million from $98.4 million in the prior year, with growth driven by higher sales of branded merchandise through WWE Shop’s e-commerce sites and distribution channels including Amazon.
WWE Studios
WWE Studios recognized revenue of $10.1 million as compared to revenue of $7.1 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.
Corporate and Other
Corporate and Other expenses increased to $182.9 million from $175.3 million 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 the year ended December 31, 2015 included a $7.1 million non-cash abandonment charge to write-off the value of costs related to a media center expansion project as described previously. Excluding this non-cash item, Corporate and Other expenses increased by $14.7 million, or 9%, reflecting investments to support key strategic initiatives.
Operating Income
Operating income increased to $55.7 million from $38.8 million in the prior year quarter due to an $11.4 million increase in Adjusted OIBDA (as described below) and the absence of a $7.1 million non-cash abandonment charge as in the prior year. These factors were partially offset by a $1.6 million increase in depreciation and amortization. The Company’s Operating income margin increased to 8% from 6% in the prior year.
Adjusted Operating Income Before Depreciation and Amortization (Adjusted OIBDA)
Adjusted OIBDA increased to $80.1 million from $68.7 million in the prior year primarily due to the increased monetization of the Company’s video content. Television and Network OIBDA, on a combined basis, increased $17.4 million with the contractual escalation of key distribution agreements and growth in WWE Network subscriptions, which were partially offset by higher production costs.10 Live Event OIBDA increased $3.8 million primarily due to higher ticket sales and effective pricing for the Company’s premier event, WrestleMania, as well as increased international events and attendance. Additionally, higher sales from the Company’s e-commerce business, WWE Shop, contributed to the overall rise in OIBDA. Partially offsetting these growth drivers was a $14.7 million increase in Corporate and Other expenses (on an adjusted basis as described above). Based on the resulting changes in business mix, the Company’s Adjusted OIBDA margin increased to 11% from 10% in the prior year.
Cash Flows & Liquidity
Cash generated from operating activities was $56.6 million in the current year, compared to $49.5 million in the prior year. The $7.1 million increase in cash generated by operating activities was primarily due to improved operating performance.
Capital expenditures increased $9.9 million from the prior year period in continued support of the Company’s content production activities. Capital expenditures in the current year period include $4.9 million paid as part of the consideration towards the purchase of a building and underlying real property located in Stamford, Connecticut.
As of December 31, 2016, the Company held $267.1 million in cash, cash equivalents and short-term investments that reflected proceeds of the Company’s convertible note financing, and estimates debt capacity under its revolving line of credit of approximately $100 million.
