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WWE Announces Third Quarter 2016 Financial Results, Vince McMahon Comments
- Updated: October 27, 2016
WWE issued the following today:
WWE® Reports Q3 2016 Results & Targets Record 2017 Adjusted OIBDA of $100 Million
STAMFORD, Conn.–(BUSINESS WIRE)–
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 Network subscription 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 …
