By Jason Powell, ProWrestling.net Editor (@prowrestlingnet)
WWE issued the following 2021 second quarter earnings report via Corporate.WWE.com.
Second Quarter 2021 Highlights*
* (All comparisons are versus the prior year period unless stated otherwise)
- Revenue was $265.6 million, an increase of 19% or $42.2 million, primarily due to an increase in Media segment revenue driven by the increased monetization of content and, to a lesser extent, an increase in Live Event segment revenue reflecting ticket sales from WrestleMania, the Company’s first ticketed live event since the first quarter 2020
- Operating income was $46.3 million, a decrease of 17% or $9.4 million, primarily driven by higher television and event-related production expense related to WWE ThunderDome and WrestleMania 37 and, to a lesser extent, increased personnel expense, including $8.1 million in severance expense as well as higher compensation expense as employees returned from furlough
- Adjusted OIBDA1 was $68.1 million, a decrease of 7% or $5.4 million
- WWE announced its return to live event touring beginning July 16, 2021, with tickets for events on sale through the end of September 2021. The five events that aired through July 26 have been at or close to full capacity with current demand for future events at least on par with 2019
- Digital video views were a record 11.2 billion, an increase of 13%, and hours consumed were a record 394 million, an increase of 5%, across digital and social platforms2
- Return of capital to shareholders totaled $27.9 million, including $18.8 million in share repurchases and $9.1 million in dividends paid
STAMFORD, Conn.–(BUSINESS WIRE)– WWE (NYSE: WWE) today announced financial results for its second quarter ended June 30, 2021.
“During the second quarter, we generated solid financial results as we continued to focus on building fan engagement,” said Vince McMahon, WWE Chairman & CEO. “With the announced return to live event touring and robust ticket demand, we believe we can further consumption across platforms, maximize new business opportunities and drive long-term growth.”
Kristina Salen, WWE Chief Financial Officer, added “In the quarter, Adjusted OIBDA results reflected an increase in television production expenses to enhance the viewing experience of WWE’s fans. Although Adjusted OIBDA declined, key performance metrics demonstrated positive trends and we continue to realize better than expected television production efficiencies, stronger sponsorship sales and heightened demand for our live events.”
Second-Quarter Consolidated Results*
* (All comparisons are versus the prior year period unless stated otherwise)
Revenue was $265.6 million, an increase of 19% or $42.2 million, primarily due to an increase in Media segment revenue driven by the increased monetization of content and, to a lesser extent, an increase in Live Event segment revenue reflecting ticket sales from WrestleMania, the Company’s first ticketed live event since the first quarter 2020.
Operating Income was $46.3 million, a decrease of 17% or $9.4 million, primarily driven by increased television and event-related production expense due to WWE ThunderDome and WrestleMania 37. In the prior year quarter, WWE produced all televised content, including WrestleMania 36, from its lower production cost training facility. The decrease in operating income was also driven by an increase in personnel expense, which includes $8.1 million in severance expense primarily related to the combination of WWE’s television, digital and studios teams into one organization for a more unified content strategy and more streamlined content production, as well as higher compensation expense as employees returned from furlough. The increase in operating expense was partially offset by an increase in Media segment revenue driven by the increased monetization of content and, to a lesser extent, an increase in Live Event segment revenue reflecting ticket sales from WrestleMania. Additionally, operating income reflected a $4.2 million year-over-year reduction in stock compensation expense primarily due to forfeitures arising from the Company’s business restructuring. The Company’s operating income margin decreased to 17.4% from 24.9%, driven by the increase in production and personnel expenses (described above).
Adjusted OIBDA (which excludes stock compensation) was $68.1 million, a decrease of 7% or $5.4 million. Adjusted OIBDA excludes $8.1 million in severance expense (described above). The Company’s Adjusted OIBDA margin decreased to 25.6% from 32.9%.
Net Income was $29.2 million, a decrease of 33% or $14.6 million, reflecting lower operating performance as described above. Current period results reflected the after-tax impact of $6.3 million in severance expense and compared to the after-tax impact of $6.1 million from an unrealized gain on an equity investment in the prior year period. Excluding these items, Adjusted Net Income3 was $35.5 million, a decrease of 6% or $2.2 million.
Cash flows generated by operating activities were $19.5 million, a decrease from $74.8 million, primarily driven by the timing of collections associated with Network revenue, higher federal income tax payments due to lower foreign tax credits and, to a lesser extent, lower operating performance.
Free Cash Flow was $13.3 million, a decrease from $67.7 million, primarily driven by the change in operating cash flow.4
Cash, cash equivalents and short-term investments were $443 million as of June 30, 2021.
Debt totaled $220 million as of June 30, 2021, including $198 million associated with the carrying value of convertible senior notes due 2023. The Company has no amounts outstanding under its revolving line of credit and estimates related debt capacity of approximately $200 million.
Return of Capital to Shareholders
The Company returned $27.9 million to shareholders in the second quarter 2021, including $18.8 million in share repurchases and $9.1 million in dividends paid. Under the Company’s existing share repurchase program, more than 336,000 shares were repurchased at an average price of $55.77 per share in the second quarter 2021, resulting in approximately $323 million remaining available for repurchase of the $500 million authorization. WWE intends to continue opportunistic repurchases under the program.
Basis of Presentation
For the three and six-month periods ended June 30, 2021, the Company’s consolidated pre-tax results included the impact of $8.1 million in severance expense. For the three-month period ended June 30, 2020, the Company’s consolidated pre-tax results included the impact of an unrealized gain of $7.7 million related to the recognition of an upward mark-to-market adjustment on a certain equity investment. For the six-month period ended June 30, 2020, the Company’s consolidated pre-tax results included a net loss of $3.8 million related to certain equity investments, which included $11.5 million of impairment charges partially offset by an unrealized gain of $7.7 million. A reconciliation of Net Income to Adjusted Net Income for the three and six-month periods ended June 30, 2021 and 2020 can be found in the supplemental schedule on page 13 of this release.
Results by Operating Segment*
* (All comparisons are versus the prior year period unless stated otherwise)
Media
Second-Quarter 2021
Revenue was $233.9 million, an increase of 17% or $33.8 million, primarily driven by the increased monetization of content, including higher content license fees associated with the delivery of WWE Network content, the contractual escalation of core content rights fees from the distribution of the Company’s flagship programs, Raw and SmackDown, as well as license fees from the distribution of original content. Finally, Media revenue increased due to higher sales of advertising and sponsorship across platforms.
Operating income was $80.8 million, a decrease of 1% or $0.8 million, as the increase in revenue (described above) was more than offset by an increase in television production expense due to WWE ThunderDome as well as a $3.4 million decrease in stock compensation expense (as described above).
Adjusted OIBDA (which excludes stock compensation) was $86.2 million, representing a decrease of 5% or $4.3 million.
Live Events
Second-Quarter 2021
Revenue was $9.2 million, an increase of more than 8x or $8.2 million, driven by an increase in ticket sales as the Company staged its marquee annual event, WrestleMania, over two-consecutive sold-out nights. WrestleMania was the Company’s first ticketed-audience event held since the onset of the COVID-19 outbreak more than one year ago.
Operating income was $0.9 million, an increase of 120% or $5.4 million, as the increase in ticket sales (described above) was partially offset by an increase in event-related expenses.
Adjusted OIBDA was $1.1 million, an increase of 126% or $5.3 million.
Consumer Products
Second-Quarter 2021
Revenue was $22.5 million, an increase of 1% or $0.2 million, as higher toy royalties and venue merchandise sales resulting from WrestleMania (described above) offset lower eCommerce merchandise sales. The decrease in eCommerce sales reflected a tough comparison to elevated COVID-related sales in the prior year quarter.
Operating income was $7.9 million, an increase of 4% or $0.3 million, primarily due to changes in product mix and, to a lesser extent, an increase in revenue (described above).
Adjusted OIBDA was $8.4 million, representing an increase of 4% or $0.3 million.
Business Outlook5
In January, the Company issued Adjusted OIBDA guidance of $270 million to $305 million for the full year 2021. During the second quarter, key performance metrics demonstrated positive trends, and the Company continue to realize better-than-expected television production efficiencies, stronger sponsorship sales, and heightened demand for its live events. However, management is not adjusting full year 2021 guidance at this time given ongoing caution regarding the potential impact of COVID-19 and its variants on WWE’s operations.
Additionally, the Company anticipates spending on its new headquarters buildout as the projects re-starts in the second half of 2021. For the full year 2021, the Company estimates total capital expenditures of [$85 million to $105 million]. The increase in capital expenditures for 2021 reflects the acceleration of certain construction spend, as the overall cost of construction – net of tenant incentives, tax credits and other capital offsets – has not materially increased. The total net cost of the Company’s new headquarters through completion is estimated within a range of [$160 million to $180 million].
Notes
- The definition of Adjusted OIBDA can be found in the Non-GAAP Measures section of the release on page 5. A reconciliation of three and six-month periods ended June 30, 2021 and 2020 Operating Income to Adjusted OIBDA can be found in the Supplemental Information in this release on page 14
- 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). Facebook consumption, which is a primary driver of the growth in digital consumption, reflects an increase in the related measurement window from 30 days to 6 months after posting- effective April 1, 2021
- A reconciliation of three and six-month periods ended June 30, 2021 and 2020 Net Income to Adjusted Net Income can be found in the Supplemental Information in this release on page 13
- A reconciliation of three and six-month periods ended June 30, 2021 and 2020 Free Cash Flow to Net cash provided by operating activities can be found in the Supplemental Information in this release on page 15
- The Company’s 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 WWE’s 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. In addition, WWE is unable to provide a reconciliation of full year 2021 guidance to GAAP measures as, at this time, WWE cannot accurately determine all of the adjustments that would be required
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 Company’s 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 WWE’s continuing business generates after capital expenditures and is available for reinvesting in the business, debt service, and payment of dividends.
Powell’s POV: Vince McMahon, Nick Khan, Kristina Salen, and Stephanie McMahon are scheduled to co-host a conference call regarding this report at 4CT/5ET. Check back for my live notes on the call.
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