WWE announces second quarter financials, including latest paid WWE Network subs, ratings declines, live event ticket sales declines

WWE released their second quarter financials and hosted an investors conference call yesterday. The key numbers were a decline in Raw TV ratings for Raw of 11 percent. They touted that it was down 14 percent in Q1, so they managed to cut the decline by 3 percent in the second quarter to 11 percent. Same for Smackdown – ratings declined 13 percent in Q1, but declined only 7 percent in June. It noted that the 7 percent decline was consistent with the top 25 cable networks average decline of 7 percent during that month.

They also noted a decline in live events of 12 percent in Q1, but only 2 percent in Q2.

Their consumption of digital WWE content was up 23 percent, a stat that they’re including as an indication of “shifting” viewing habits of fans from traditional cable to other distribution methods. The revenue difference is stark, though, as they make a giant chunk of their overall revenue from the TV rights fees which come from shows that are seeing declines in viewership, whereas WWE Network revenue are substantial by holding steady, as consumed hours doesn’t directly correlate to increases in actual revenue. The following is the bullet point list in their short press release. A link to their more details press release follows…

WWE FINANCIALS – Q2 2019 PRES RELEASE

Second Quarter 2019 Highlights

• Revenues were $268.9 million as compared to $281.6 million in the prior year quarter
• Operating income was $17.1 million; Adjusted OIBDA¹ was $34.6 million, which exceeded the Company’s guidance
• Announced content distribution deals with BT Sport in the U.K., Fox Sports in Latin America and PP Sports in China, providing strong platforms for reaching WWE audiences
• WWE Network average paid subscribers² were 1.69 million paid subscribers, consistent with the Company’s guidance
• Digital video views increased 17% to 9.0 billion; hours consumed increased 22% to 324 million hours across digital platforms; and social media followers increased 10% to over 1.02 billion³

WWE Network

• The Company initiated the transition of WWE Network to a new platform on July 24, which will provide users with a better experience, a more intuitive interface, and enhanced search functionality
• The new platform enables the introduction of new features and experiences over time, including the addition of free and premium tiers as well as the localization of content in multiple languages
• Produced more than 90 hours of original network content, including live in-ring programs and talent documentaries, such as The Shield’s Final Chapter and WWE 24: The Year of Ronda Rousey, respectively

STAMFORD, Conn., July 25, 2019 – WWE (NYSE: WWE) today announced financial results for its second quarter ended June 30, 2019.

“During the quarter, we made progress on key strategic initiatives,” stated Vince McMahon, Chairman and Chief Executive Officer. “We completed content distribution agreements in key international markets, prepared for the next phase of our WWE Network service, and achieved steady improvement in engagement metrics. As indicated previously, we remain excited about the future, particularly with our debut on Fox in October.”

George Barrios, Co-President, added “In the quarter, our earnings exceeded guidance, however we anticipate a portion of this to reverse and we continue to target full-year Adjusted OIBDA of at least $200 million. The guidance presupposes the staging of a second large scale international event and the completion of a media rights deal in the MENA region. As we optimize near-term results, we will continue to focus on content creation, localization and digitization, including the evolution of our direct-to-consumer network, to drive long-term growth.”

Second-Quarter Consolidated Results

Revenues declined 5% to $268.9 million from $281.6 million in the prior year quarter with lower revenue from the Company’s Media, Live Events and Consumer Products business segments.

Operating Income decreased to $17.1 million from $21.2 million in the prior year quarter, reflecting the decline in revenue and the impact of certain strategic investments, as increases in other fixed costs were partially offset by a year-over-year reduction in accrued management incentive compensation. The Company’s Operating income margin declined to 6% from 8% in the prior year quarter.

Adjusted OIBDA (which excludes stock compensation) was $34.6 million as compared to $43.5 million and the Company’s Adjusted OIBDA margin was 13% as compared to 15% in the prior year quarter, respectively. The current period results exceeded guidance primarily due to enhanced revenue recognized in conjunction with the Company’s recent event in Saudi Arabia, which is expected to reverse in connection with an anticipated fourth quarter event in that country.

Net Income increased slightly to $10.4 million, or $0.11 per diluted share, from $10.0 million, or $0.11 per diluted share, in the second quarter of 2018, reflecting reduced losses on equity investments and a lower effective tax rate.

Effective Tax Rate declined to 25% from 31% in the prior year quarter.

Cash flows used in operating activities were $7.6 million as compared to $74.2 million of cash generated in the prior year quarter driven by unfavorable changes in working capital, which was primarily related to the timing of the Saudi event in June as the prior year event was held in April, as well as lower operating performance.

Free Cash Flow was a $27.5 million use of cash as compared to a $66.4 million source of cash in the second quarter of 2018 primarily driven by the change in operating cash flow and, to a lesser extent, a $12.1 million increase in capital expenditures primarily associated with the Company’s workspace plan.⁴

Cash, cash equivalents and short-term investments were $296 million as of June 30, 2019, and the Company estimates debt capacity under its revolving line of credit of approximately $200 million.

Second-Quarter Key Operating Metrics

During the first quarter 2019 earnings call, the Company discussed the absence of several talent and the belief that these absences had a negative impact on the Company’s engagement metrics. Since the end of April, the Company has achieved steady improvement in key measures.

Domestic TV ratings for Raw declined 14% in the first quarter 2019 from the prior year quarter but improved to a year-over-year decline of 11% in June. The improvement in June occurred despite a tough comparison to game 5 of the NBA championship on Monday, June 10. Similarly, domestic TV ratings for SmackDown declined 13% in the first quarter 2019, but improved to a decline of 7% in June, consistent with the ratings performance of the top 25 cable networks, which declined 7% during the month. Consumption of WWE content across digital AVOD platforms rose from a year-over-year increase of 23% in the first quarter to growth of 28% in June. Finally, average attendance at the Company’s live events in North America, which declined 12% in the first quarter, improved to a decline of 4% for the June period (and was only down 2% for the second quarter 2019).⁵

THE FULL PRESS RELEASE IS AVAILABLE HERE.