Vince McMahon and executives discuss impressive second quarter numbers with shareholders.
WWE Chairman Vince McMahon and executives discuss the WWE Second Quarter 2020 Results with New York Stock Exchange shareholders. Audio courtesy of WWE Corporate.
Second Quarter Results figures below including profits increasing 400 PERCENT year to date. Yet WWE still felt the need to gut talent and staff in the middle of a pandemic. Don’t forget that.
Second Quarter 2020 Highlights
• Revenues were $223.4 million as compared to $268.9 million in the prior year quarter reflecting the timing of the Company’s large-scale event in Saudi Arabia; Revenues reached a record $514.4 million year-to-date, representing 14% growth from the prior year period
• Operating income was $55.7 million as compared to $17.1 million in the prior year quarter
• Adj. OIBDA1 increased to $73.5 million from $34.6 million in the prior year quarter
• Free Version of WWE Network was announced on June 1, unlocking a portion of WWE’s content library to expand reach and engagement of its direct-to-consumer streaming service for all fans
• WWE Network average paid subscribers declined 1.5% to 1.66 million while ending paid subscribers increased 6% to 1.69 million
• Digital video views increased 10% to a record 9.9 billion and hours consumed increased 15% to a record 374 million across digital and social media platforms
• eCommerce revenues nearly doubled to $12.6 million, substantially offsetting the loss of venue merchandise sales with 76 fewer events in the quarter
COVID-19 Actions and Business Outlook
• Due to COVID-19 and related government-mandated impacts on WWE, the Company continued its various short-term cost reductions and cash flow improvement actions. (See first quarter 2020 earnings release). These actions contributed to WWE’s enhanced liquidity, which reached $548 million in cash and short-term investments as of June 30, 2020
• The Company is continuing to adapt its business to the changing environment with a focus on enhancing the production of content and furthering fan engagement
• Management may resume its opportunistic acquisition of stock under the Company’s $500 million share repurchase program, subject to WWE’s business outlook and liquidity as well as whether share repurchases compare favorably to other capital allocation alternatives
• Management continues to believe the Company’s growth prospects remain strong and that WWE is well positioned to take full advantage of the changing media landscape and increasing value of live sports rights over the longer term
STAMFORD, Conn., July 30, 2020 – WWE (NYSE: WWE) today announced financial results for its second quarter ended June 30, 2020.
“Our second quarter financial performance was strong and demonstrated our ability to respond to the challenges posed by COVID-19,” said Vince McMahon, WWE Chairman & CEO. “We continue to adapt our business to the changing environment, focusing on the development of new content for global distribution platforms and increasing audience engagement to drive growth and value for our shareholders.”
Frank Riddick, interim Chief Financial Officer, added “In the quarter, we delivered revenue of $223 million and Adjusted OIBDA of $73.5 million as we continued to offset the impact of cancelled events by reducing costs. Our cash flow remains strong, and we believe we have the capital resources to deliver on our strategic initiatives and growth opportunities.”
Second-Quarter Consolidated Results
Revenues decreased 17% to $223.4 million from $268.9 million in the prior year quarter primarily driven by decreased sales of tickets and merchandise that resulted from the cancellation, postponement and relocation of live events due to public health concerns related to the COVID-19 outbreak. Media segment revenue increased modestly as the escalation of core content rights fees was substantially offset by the unfavorable timing of the Company’s large-scale event in Saudi Arabia (held in February 2020 vs. June 2019).
Operating Income was $55.7 million as compared to $17.1 million in the prior year quarter, primarily due to a decline in operating expenses that reflected lower content-related production and event costs, short-term cost reductions implemented as a result of the COVID-19 outbreak and, to a lesser extent, a year-over-year reduction in accrued management incentive compensation. The decline in operating expenses was partially offset by a decrease in revenue (as described above). The Company’s Operating income margin increased to 25% from 6% in the prior year quarter.
Adjusted OIBDA (which excludes stock compensation) increased to $73.5 million from $34.6 million in the prior year quarter. The Company’s Adjusted OIBDA margin increased to 33% from 13%.
Net Income reached $43.8 million, or $0.52 per diluted share, from $10.4 million, or $0.11 per diluted share, in the second quarter 2019, primarily reflecting improved operating performance. Current period results also included $7.7 million in an unrealized gain related to a certain equity investment as well as a lower effective tax rate, which were partially offset by the impact of the finance lease that commenced in July 2019 related to the Company’s new headquarters. Excluding the impact of an unrealized gain on a certain equity investment, Adjusted Net Income4 was $37.7 million, or $0.45 per diluted share.
Effective Tax Rate decreased to 20% from 25% in the prior year quarter, primarily driven by increased deductibility of foreign derived intangible income.
Cash flows generated by operating activities reached $74.8 million as compared to $7.6 million of cash used in operating activities in the prior year quarter driven by stronger operating performance as well as improved working capital reflecting the timing of collections in the prior year quarter.
Free Cash Flow totaled $67.7 million as compared to a $27.5 million use of cash in the second quarter 2019 primarily due to the change in operating cash flow and, to a lesser extent, a reduction in capital expenditures.
Cash, cash equivalents and short-term investments were $548 million as of June 30, 2020, which includes $200 million in cash the Company borrowed under its revolving line of credit during the second quarter 2020.
Return of Capital to Shareholders
For the second quarter 2020, the Company paid $9.3 million in dividends to shareholders.
Management may resume the Company’s $500 million share repurchase program, which was temporarily suspended in April 2020. WWE share repurchases under the program will be executed opportunistically, i.e., when the repurchase price is below WWE’s intrinsic value as conservatively estimated by management. Any repurchase activity will be subject to WWE’s business outlook and liquidity as well as whether share repurchases compare favorably to other capital allocation alternatives.
Results by Operating Segment
Revenues were $200.1 million as compared to $197.0 million in the prior year quarter, as the escalation of core content rights fees, primarily due to the renewal of the Company’s domestic distribution agreements for its flagship programs, Raw and SmackDown, was largely offset by the timing of the Company’s large-scale international event, Super ShowDown (held in February 2020 vs. June 2019). The timing of this event accounted for declines in Other media and Advertising and sponsorship revenues.
WWE Network’s average paid subscribers declined 1.5% to 1.66 million while ending paid subscribers increased 6% to 1.69 million, marking the first quarterly increase since the fourth quarter 2018.
Operating income increased by $54.7 million to $81.6 million primarily due to a reduction in operating expenses.
Adjusted OIBDA increased to $90.5 million as compared to $37.5 million in the prior year quarter.
Key Highlights: WWE continued to produce its flagship programming without interruption, created original content and further developed its direct-to-consumer service, WWE Network. During the quarter, the Company produced more than 600 hours of content for its television, streaming and social/ digital platforms. Monday Night Raw and NXT ranked as the highest-rated and third highest-rated programs, respectively, on USA Network. The Company also continued to develop new original content and expand its reach across platforms. On television, WWE completed its fifth season of Total Bellas, with average viewership increasing 9% to nearly 1 million viewers per episode,8 and announced its sixth season to premier on E! in Fall 2020. Building on the previously announced partnership to air five “Biography” documentaries featuring legendary WWE talent, WWE and A&E announced a new series The Quest for Lost WWE Treasures, featuring WWE’s Stephanie McMahon and Paul Levesque.
WWE also increased its programming presence on streaming services, recently announcing the availability of more than 100 hours of library content on the Peacock streaming service (August 2020). On WWE Network, the Company created new content highlighted by the critically acclaimed series, Undertaker: The Last Ride, which was among the most watched originals on WWE Network. Engagement on the streaming service, as measured by video views, increased 66% over the prior year period. The Company capitalized on the favorable trend to launch the Free Version of WWE Network on June 1, unlocking a portion of its content library to provide fans the opportunity to experience premium WWE content. The Company also made progress introducing localized pricing in select international markets and in developing the network’s advertising capabilities.
Revenues declined to $1.0 million from $48.8 million in the prior year quarter primarily due to the absence of live events and a corresponding decrease in ticket sales in North American and international markets. The government mandated cancellation and/ or relocation of events contributed to the staging of 53 fewer events in North America and 23 fewer events in international markets.
Operating income reflected a loss of $4.5 million as compared to income of $12.4 million in the prior year quarter, as the decrease in North America and international ticket sales (described above) was partially offset by a reduction in event-related expenses.
Adjusted OIBDA reflected a loss of $4.2 million as compared to income of $13.3 million in the prior year quarter.
Key Highlights: WWE’s ability to stage live events before ticketed audiences continued to be impacted by government mandates related to COVID-19 and public health concerns about in-person gatherings. Despite the challenging environment, WWE displayed its creativity throughout the quarter as the Company adapted its business model to continue to safely stage in-ring performances. Supporting this achievement, the Company established extensive safety measures to protect the health and well-being of its talent and employees. As a result, WWE was among the very few major sports properties to hold live performances and produce new content throughout the quarter, including its flagship programs, Raw and SmackDown, and its premier annual event, WrestleMania.
Revenues declined to $22.3 million from $23.1 million in the prior year quarter reflecting lower sales of merchandise at the Company’s live event venues driven by the absence of all ticketed-audience events in the quarter (as described above). Increased sales at the Company’s eCommerce site, WWE Shop, substantially offset the absence of venue merchandise sales.
COVID-19 Actions and Business Outlook
The spread of COVID-19 and related government mandates have impacted WWE’s business as the Company has been directed to cancel, postpone or relocate its live events beginning in mid-March. To mitigate further potential risks to the Company’s financial performance, management has implemented a comprehensive set of short-term cost reductions and cash flow improvement actions. To enhance WWE’s liquidity, management deferred spending on the Company’s new headquarters, temporarily suspended the repurchase of stock under our $500 million program and borrowed $200 million from our revolving credit facility. For 2020, the Company reduced capital expenditures by approximately $140 million, and now estimates total capital expenditures of $40 – $50 million for the year.
The Company is continuing to adapt its business to the changing environment with a focus on enhancing the production of content and furthering fan engagement. Currently, it is evaluating the personnel requirements to meet these objectives as well as potential investments to support our long-term growth strategy. As the company drives further innovation, management intends to demonstrate financial discipline, balancing its near-term performance and long-term growth objectives.
The Company remains unable to quantify the potential impact of COVID-19 on its business, but the financial impact to the Company may be material. Accordingly, the Company previously withdrew its full year 2020 guidance and based on sustained economic uncertainties, is not reinstating guidance at this time. Management continues to believe the Company’s growth prospects remain strong and that WWE is well positioned to take full advantage of the changing media landscape and increasing value of live sports rights over the longer term.
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