By Jason Powell, ProWrestling.net Editor (@prowrestlingnet)
WWE issued the following 2020 fourth quarter and year-end earnings report on February 4, 2021 via Corporate.WWE.com.
Fourth Quarter 2020 Highlights*
* (All comparisons are versus the prior year period unless stated otherwise)
- Revenue was $238.2 million, a decrease of 26% or $84.6 million, reflecting the absence of the Companys large-scale event in Saudi Arabia and ticketed live events
- Operating income was $36.2 million, a decrease of 64% or $63.6 million
- Adjusted OIBDA 1 was $51.2 million, a decrease of 52% or $56.4 million
- WWE transitioned Raw and SmackDown to Tropicana Field in Tampa Bay (December 11), and continued to deliver a spectacular interactive experience, WWE ThunderDome , to fans
- WWE Network average paid subscribers 2 were 1.5 million, an increase of 6%
Full Year 2020 Highlights*
* (All comparisons are versus the prior year period unless stated otherwise)
- W WE produced live, in-ring content without interruption throughout the year, demonstrating the Companys ability to adapt to COVID-19 and unprecedented industry challenges
- Revenue was $974.2 million, an increase of 1% or $13.8 million as the growth in core content rights fees was largely offset by the loss of ticket revenue and the absence of a large-scale international event
- Operating income was $208.6 million, an increase of 79% or $92.1 million, driven by the substantial rise in content rights fees, which have a high incremental margin
- Adjusted OIBDA reached a record $286.2 million, an increase of 59% or $106.2 million
- Digital video views were 38.0 billion, an increase of 10%, and hours consumed were 1.4 billion, an increase of 10%, across digital and social media platforms 3
Full Year 2021 Business Outlook 4
- WWE entered into a multi-year WWE Network U.S. licensing agreement (effective March 18, 2021) with Peacock, NBCUs streaming service. This strategic agreement enables WWE to reach a larger audience and realize a greater economic return as compared to a stand-alone subscription service
- WrestleMania will return to Tampa Bay on Saturday, April 10 and Sunday, April 11, 2021 at Raymond James Stadium with ticket availability and safety protocols forthcoming
- Management expects restrictions related to the spread of COVID-19, particularly related to the cancellation, postponement or reduced capacity of ticketed live events, to continue at least through the first half of 2021. Additionally, management anticipates a significant year-over-year increase in WWEs expense base due to the return of employees from furlough and continued higher expenses associated with the production of its weekly Raw and SmackDown television content at the WWE ThunderDome from its stadium residence. The Company estimates it can achieve 2021 Adjusted OIBDA of $270 – $305 million as revenue growth, driven by the impact of the Peacock transaction, the gradual ramp-up of ticketed live events, including large-scale international events, and the escalation of core content rights fees, is offset by the increase in personnel and production expenses. Management estimates that the stated 2021 Adjusted OIBDA guidance range would be 15% – 20% higher without the ongoing impact of COVID-19, which includes the loss of ticket and merchandise sales at live events and the increased investment in production to further fan engagement. (See 2021 Business Outlook on page 6 for further information)
WWE (NYSE: WWE) today announced financial results for its fourth quarter and year ended December 31, 2020.
“During the fourth quarter, we continued to produce live content in new ways, which successfully increased audience interaction and engagement,” said Vince McMahon, WWE Chairman & CEO. “As we continued to adapt our business to the changing media environment, we completed an important agreement to license WWE Network content to Peacock, which we expect will expand the reach of our brands and enhance the value of our content.”
Kristina Salen, WWE Chief Financial Officer, added “For the year, we achieved record revenue and Adjusted OIBDA, which was at the high end of our rescinded guidance. Adjusted OIBDA increased nearly 60% reflecting the full year impact of our new content distribution agreements in the U.S. and comprehensive efforts to contain costs in challenging times. In 2021, we anticipate Adjusted OIBDA of $270 million to $305 million, reflecting the increasing monetization of our content tempered by the ongoing impact of COVID-19.”
Fourth-Quarter Consolidated Results*
* (All comparisons are versus the prior year period unless stated otherwise)
Revenue was $238.2 million, a decrease of 26% or $84.6 million, primarily due to the absence of the Companys large-scale event in Saudi Arabia as well as the absence of ticket and merchandise sales, all resulting from the cancellation, postponement and relocation of live events due to public health concerns related to COVID-19.
Operating Income was $36.2 million, a decrease of 64% or $63.6 million, primarily driven by the absence of events (as described above) and, to a lesser extent, a $7.0 million increase in management incentive compensation and a $6.0 million increase in stock compensation expense related to forfeitures in the prior year period. The Companys Operating income margin decreased to 15.2% from 30.9%.
Adjusted OIBDA (which excludes stock compensation) was $51.2 million, a decrease of 52% or $56.4 million. The Companys Adjusted OIBDA margin decreased to 21.5% from 33.3%.
Net Income was $13.6 million, or $0.16 per diluted share, a decrease from $69.3 million, or $0.78 per diluted share, in the fourth quarter 2019, primarily reflecting lower operating performance. Current period results also reflected an after-tax loss of $5.8 million related to certain equity investments and $1.0 million in after-tax severance expense resulting from a reduction in force due to COVID-19. Excluding these items, Adjusted Net Income 5 was $20.4 million, or $0.24 per diluted share.
Cash flows generated by operating activities were $62.4 million, a decrease from $119.4 million, driven by lower operating performance.
Free Cash Flow was $56.2 million, a decrease from $106.6 million, primarily due to the change in operating cash flow. 6
Return of Capital to Shareholders
The Company paid $9.3 million in dividends to shareholders during the fourth quarter 2020. There were no share repurchases under the Companys existing share repurchase program during the fourth quarter 2020.
Full Year 2020 Consolidated Results*
* (All comparisons are versus the prior year period unless stated otherwise)
Revenue was $974.2 million, an increase of 1% or $13.8 million, as the growth in core content rights fees was largely offset by the loss of live event ticket and merchandise sales as well as the absence of a large-scale event in Saudi Arabia. These losses resulted from the cancellation, postponement and relocation of live events due to public health concerns related to COVID-19 (beginning in mid-March 2020).
Operating Income was $208.6 million, an increase of 79% or $92.1 million, primarily driven by the substantial increase in core content rights fees, which have a high incremental margin. The increase in operating income was partially offset by a $10.0 million increase in management incentive compensation, an $8.5 million increase in depreciation and amortization primarily associated with the Companys workplace strategy, and a $7.0 million increase in severance expense resulting from a reduction in force due to COVID-19. The Companys Operating income margin increased to 21.4% from 12.1%.
Adjusted OIBDA (which excludes stock compensation) was $286.2 million, an increase of $106.2 million or 59%. Adjusted OIBDA excludes the $7.0 million in severance expense (as described above). The Companys Adjusted OIBDA margin increased to 29.4% from 18.7%.
Net Income was $131.8 million, or $1.56 per diluted share, an increase from $77.1 million, or $0.85 per diluted share, in the prior year, primarily due to stronger operating performance partially offset by the impact of the finance lease that commenced in July 2019 related to the Companys new headquarters. Current period results also reflected an after-tax net loss of $4.4 million, driven by impairment charges on certain equity investments partially offset by net realized gains of marketable securities, and $5.4 million in after-tax severance expense (as described above). Excluding these items, Adjusted Net Income 5 was $141.6 million, or $1.68 per diluted share.
Cash flows generated by operating activities were $319.9 million, an increase from $121.7 million, primarily due to changes in working capital and stronger operating performance.
Free Cash Flow was $292.3 million, an increase from $52.6 million, primarily driven by the increase in operating cash flow and, to a lesser extent, a decrease in capital expenditures. 6
Cash, cash equivalents and short-term investments were $593 million as of December 31, 2020, which includes $100 million borrowed under the Companys revolving line of credit. Of the $200 million borrowed during the second quarter 2020, $100 million was repaid in the fourth quarter 2020 and the remainder was repaid in January 2021. As a result, the Company currently estimates debt capacity under its revolving line of credit of $200 million.
Return of Capital to Shareholders
The Company paid $37.2 million in dividends to shareholders in 2020. There were no share repurchases under the Companys existing share repurchase program during 2020.
Basis of Presentation
For the fourth quarter of 2020, the Companys consolidated pre-tax results included the impact of an $8.6 million loss on investments, primarily related to $4.4 million of impairment charges coupled with $4.2 million in fair market value adjustments of marketable securities prior to their sale, and $1.5 million in severance expense resulting from a reduction in force due to COVID-19. For the twelve-month period ended December 31, 2020, the Companys consolidated pre-tax results included $13.4 million of incremental costs related to the finance lease for the Companys new headquarters, $7.0 million in severance expense resulting from a reduction in force due to COVID-19, and a net loss of $5.7 million related to certain equity investments, which included $15.9 million of impairment charges partially offset by $10.2 million in fair market value adjustments of marketable securities prior to their sale. A reconciliation of Net Income to Adjusted Net Income for the three and twelve-month periods ended December 31, 2020 and 2019 can be found in the supplemental schedule on page 15 of this release.
Results by Operating Segment*
* (All comparisons are versus the prior year period unless stated otherwise)
Media
Fourth-Quarter 2020
Revenue was $210.5 million, a decrease of 20% or $54.1 million, primarily driven by the absence of the Companys large-scale event in Saudi Arabia and, to a lesser extent, decreased sales of advertising and
sponsorship. These factors were partially offset by growth in WWE Network subscription revenue.
WWE Networks average paid subscribers were 1.5 million, an increase of 6%.
Operating income was $67.1 million, a decrease of 41% or $47.5 million, primarily due to a decrease in revenue (as described above), partially offset by a corresponding reduction in event-related and content creation expenses.
Adjusted OIBDA was $73.0 million, representing a decrease of 37% or $43.6 million.
Full Year 2020
Revenue was $868.2 million, an increase of 17% or $125.1 million, primarily driven by the growth of domestic core content rights fees for the Companys flagship programs Raw and SmackDown , partially offset by the absence of a large-scale international event in Saudi Arabia.
WWE Networks average paid subscribers were 1.6 million (flat on a year-over-year basis).
Operating income was $332.5 million, an increase of 74% or $141.7 million, primarily due to an increase in revenue (as described above) and, to a lesser extent, a reduction in operating expenses.
Adjusted OIBDA was $367.8 million, representing an increase of 64% or $143.7 million.
Live Events
Fourth-Quarter 2020
Revenue was $0.7 million, a decrease of 97% or $26.7 million, resulting from the absence of live events and a corresponding decline in ticket sales in North American and international markets. (The fourth quarter 2019 had 50 events in North America and 20 events in international markets.)
Operating income reflected a loss of $7.0 million, a decrease of $6.0 million, as the decline in North America and international ticket sales (as described above) was partially offset by a reduction in event-related expenses.
Adjusted OIBDA reflected a loss of $6.7 million, representing a decrease of $4.9 million.
Full Year 2020
Revenue was $19.9 million, a decrease of 84% or $105.7 million, resulting from the absence of live events and a corresponding decline in ticket sales in North American and international markets beginning in mid-March 2020. (310 events were held in 2019 compared to 42 events held in 2020.)
Operating income reflected a loss of $19.1 million, a decrease of $26.8 million, as the decline in North America and international ticket sales (as described above) was partially offset by a reduction in event-related expenses.
Adjusted OIBDA reflected a loss of $17.6 million, representing a decrease of $27.0 million.
Consumer Products
Fourth-Quarter 2020
Revenue was $27.0 million, a decrease of 12% or $3.8 million, primarily due to lower video game royalties, driven by the absence of a 2021 release of the Companys franchise console game, as well as the decline in venue merchandise sales resulting from the absence of ticketed live events in the quarter (as described above). These factors were partially offset by an increase in eCommerce merchandise sales.
Operating income was $8.9 million, a decrease of 30% or $3.9 million, reflecting a decline in revenue (as described above).
Adjusted OIBDA was $9.1 million, representing a decrease of 26% or $3.2 million.
Full Year 2020
Revenue was $86.1 million, a decrease of 6% or $5.6 million, primarily driven by lower venue merchandise sales resulting from the absence of ticketed-audience events beginning in mid-March 2020, partially offset by increased eCommerce sales.
Operating income was $24.8 million, a decrease of 6% or $1.6 million, reflecting a decline in revenue (as described above) partially offset by lower operating expenses.
Adjusted OIBDA was $26.6 million, representing a decrease of 7% or $1.9 million.
2021 Business Outlook 4
On January 25, 2021, WWE issued guidance for 2021 Adjusted OIBDA. As previously indicated, management expects restrictions related to COVID-19, particularly related to the cancellation, postponement or reduced capacity of ticketed live events, to continue at least through the first half of 2021. Additionally, management anticipates a significant year-over-year increase in WWEs expense base due to the return of employees from furlough and continued higher expenses associated with the production of its weekly Raw and SmackDown television content at the WWE ThunderDome from its stadium residence at Tropicana Field. The Company estimates it can achieve 2021 Adjusted OIBDA of $270 – $305 million as revenue growth, driven by the impact of the Peacock transaction, the gradual ramp-up of ticketed live events, including large-scale international events, and the escalation of core content rights fees, is offset by the increase in personnel and production expenses.
Management estimates that the stated 2021 Adjusted OIBDA guidance range would be 15% – 20% higher without the ongoing impact of COVID-19, which includes the loss of ticket and merchandise sales at live events and the increased investment in production to further fan engagement. Estimates of future performance beyond 2021 will be impacted by the return of these businesses and various other factors.
Although the Company continues to adapt its business to the changing environment, the timing and rate of returning ticket audiences to its live events remains subject to significant uncertainty, and as such management is not reinstating quarterly guidance at this time.
Management continues to believe that WWE has significant long-term opportunities and is well positioned, particularly given its substantial cash and liquidity, to deliver on its strategic initiatives and to drive long-term shareholder value.
Notes
| (1) | The definition of Adjusted OIBDA can be found in the Non-GAAP Measures section of the release on pages 7-8. A reconciliation of three and twelve months ended December 31, 2020 and 2019 Operating Income to Adjusted OIBDA can be found in the Supplemental Information in this release on page 16 | |
| (2) | Average paid subscribers are calculated based on the arithmetic daily mean over the relevant period, and may differ substantially from paid subscribers at the end of any period due to the timing of paid subscriber additions and losses | |
| (3) | Consumption includes videos viewed on third party (Facebook, YouTube, Twitter, Instagram, Snapchat, TikTok, Twitch, etc.) and WWE platforms (WWE.com and WWE App, including the Free Version of WWE Network ) | |
| (4) | The Companys business model and expected results will continue to be subject to significant execution and other risks, including risks relating to the impact of COVID-19 on WWEs business, results of operations and financial condition;entering, maintaining and renewing major distribution agreements; WWE Network ; uncertainties associated with international markets and risks inherent in large live events, and other risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2020 | |
| (5) | A reconciliation of three and twelve months ended December 31, 2020 and 2019 Net Income to Adjusted Net Income can be found in the Supplemental Information in this release on page 15 | |
| (6) | A reconciliation of three and twelve months ended December 31, 2020 and 2019 Free Cash Flow to Net cash provided by operating activities can be found in the Supplemental Information in this release on page 17 |
Non-GAAP Measures
The Company defines Adjusted OIBDA as operating income excluding depreciation and amortization, stock-based compensation expense, certain impairment charges and other non-recurring material items that otherwise would impact the comparability of results between periods. Adjusted OIBDA includes amortization and depreciation expenses directly related to supporting the operations of our segments, including content production asset amortization, depreciation and amortization of costs related to content delivery and technology assets utilized for the WWE Network , as well as amortization of right-of-use assets related to finance leases of equipment used to produce and broadcast our live events. The Company believes the presentation of Adjusted OIBDA is relevant and useful for investors because it allows them to view the Companys segment performance in the same manner as the primary method used by management to evaluate segment performance and to make decisions regarding the allocation of resources. Additionally, the Company believes that Adjusted OIBDA is a primary measure used by media investors, analysts and peers for comparative purposes.
Adjusted OIBDA is a non-GAAP financial measure and may be different than similarly titled non-GAAP financial measures used by other companies. WWE views operating income as the most directly comparable GAAP measure. Adjusted OIBDA (and other non-GAAP measures such as Adjusted Operating Income , Adjusted Net Income and Adjusted EPS which are defined as the GAAP measures excluding certain nonrecurring, material items that impact the comparability between periods) should not be considered in isolation from, or as a substitute for, operating income, net income, EPS or other GAAP measures, such as operating cash flow, as an indicator of operating performance or liquidity.
The Company defines Free Cash Flow as net cash provided by operating activities less cash used for capital expenditures. WWE views net cash provided by operating activities as the most directly comparable GAAP measure. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash WWEs continuing business generates after capital expenditures and is available for reinvesting in the business, debt service, and payment of dividends.
Additional Information
Additional business metrics are made available to investors on the corporate website – corporate.wwe.com/investors . Note: As previously announced WWE will host a conference call at 5:00 p.m. ET on February 4, 2021 to discuss the Company’s earnings results for the fourth quarter and full year ended 2020. All interested parties are welcome to listen to a live web cast that will be hosted through the Companys website at corporate.wwe.com/investors . Participants can access the conference call by dialing 1-855-200-4993 (toll free) or 1-323-794-2092 from outside the U.S. (conference ID for both lines: 3809873). 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 February 4, 2021 at corporate.wwe.com/investors . A replay of the call will be available approximately two hours after the conference call concludes and can be accessed on the Companys website.
Powell’s POV: Vince McMahon, Nick Khan, Kristina Salen, and Stephanie McMahon will host a conference call at 4CT/5ET to discuss the financial report. Check back at the top of the hour for my live notes on the call.
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