WWE® Reports Record Results For Fourth Quarter and Full Year 2018

Fourth Quarter 2018 Highlights

  • Revenues increased 29% to $272.5 million as compared to the prior year
    quarter
  • Operating income nearly doubled to $53.4 million from $27.0 million in
    the prior year quarter
  • Adjusted OIBDA1 increased 57% to $64.4 million, exceeding
    Company guidance and representing an all-time record quarter
  • WWE Network average paid subscribers2 increased 7%
    to approximately 1.59 million paid subscribers, consistent with
    Company guidance

Full Year 2018 Highlights

  • Revenue increased 16% to $930.2 million, the highest in the Company’s
    history
  • Operating income increased 51% to a record of $114.5 million
  • Adjusted OIBDA increased 31% to $178.9 million, exceeding Company
    guidance and representing all-time record performance for the second
    consecutive year
  • International revenue increased 58% to $317.8 million from $201.3
    million in the prior year, the highest in the Company’s history and
    the first-time international revenue has exceeded $300 million
  • WWE completed agreements with USA Network (NBCU) and Fox Sports,
    effective October 1, 2019, which increase the average annual value
    (AAV) of its U.S. distribution to 3.6 times that of the prior deal
  • Produced new, large-scale international events (Greatest Royal
    Rumble
    , Crown Jewel and Super Show-Down) and
    compelling content across platforms, including the first all-women’s
    pay-per-view, WWE Evolution (WWE Network) and the launch of Miz
    & Mrs.
    (USA Network)
  • Digital engagement continued to grow with video views up 57% to 31.4
    billion and hours consumed up 77% to 1.2 billion across digital and
    social media platforms3

STAMFORD, Conn.–(BUSINESS WIRE)–WWE (NYSE: WWE) today announced financial results for its fourth quarter
ended December 31, 2018.

“In 2018, WWE generated the highest level of revenue and earnings in the
Company’s history by leveraging our brand strength to increase the
monetization of our content worldwide,” stated Vince McMahon, Chairman
and Chief Executive Officer. “Our long-term growth strategy will
continue to focus on content creation, digitization and international
development.”

George Barrios, WWE Co-President, added “We increased revenue by nearly
$130 million, and achieved a record level of Adjusted OIBDA and network
subscribers. We expect to balance 2019 revenue growth with investment in
strategic areas that extend the moat around our business, enabling us to
continue our business transformation and maximize shareholder value.”

Fourth-Quarter Consolidated Results

Revenues increased 29% to $272.5 million from the prior year
quarter primarily driven by the increased monetization of content and,
to a lesser extent, an $8.1 million favorable impact on licensing
revenue due to the adoption of the new FASB standard for revenue
recognition (ASC Topic 606).

Operating Income nearly doubled to $53.4 million from $27.0
million in the prior year quarter driven by increased profits from the
Media segment. The Company’s Operating income margin increased to 20%
from 13% in the prior year quarter.

Adjusted OIBDA (which excludes stock compensation) increased 57%
to $64.4 million as compared to $41.0 million in the prior year quarter.
The Company’s Adjusted OIBDA margin increased to 24% from 19%.

Net Income was $41.2 million, or $0.46 per diluted share, as
compared to $4.8 million, or $0.06 per diluted share, in the fourth
quarter of 2017. This increase was primarily driven by improved
operating performance and the impact of a one-time charge of $11.3
million in the prior year quarter due to the re-measurement of our
deferred tax assets as a result of the Tax Cuts and Jobs Act of 2017
(the “Tax Act”), which was enacted in December 2017.

Effective Tax Rate declined to 23% from 80% in the prior year
quarter, where the latter reflected the tax impact of the $11.3 million
charge noted above. Additionally, the year-over-year decline in the
effective tax rate reflected the impact of the Tax Act, which reduced
the federal corporate income tax rate to 21% from 35%.

Cash flows generated by operating activities reached $65.2
million and Free Cash Flow totaled $54.3 million as compared to
$55.6 million and $48.6 million, respectively, in the prior year quarter.4
The growth in both measures was primarily due to improved operating
performance, partially offset by the timing of working capital.

Full Year 2018 Consolidated Results

For the twelve months ended December 31, 2018, revenues increased
16% to $930.2 million from $801.0 million primarily driven by growth in
the Media segment. Operating income increased 51% to $114.5
million from $75.6 million, driven primarily by the growth in revenue
(net of related operating expenses), which was partially offset by
higher staff-related costs, including management incentive compensation
and stock compensation resulting from improved operating performance and
the rise in the Company’s stock price. Adjusted OIBDA increased
31% to $178.9 million from $136.1 million. Net income increased to $99.6
million ($1.12 per diluted share) from $32.6 million ($0.42 per diluted
share) in the prior year period.

Cash flows generated by operating activities reached $186.7
million and Free Cash Flow totaled $154.4 million as compared to
$96.6 million and $71.9 million, respectively, in the prior year period.4
The growth in both measures was primarily due to improved operating
performance.

Cash, cash equivalents and short-term investments were
approximately $360 million as of December 31, 2018, and the Company
estimates debt capacity under its revolving line of credit of
approximately $100 million.

The schedule below reflects WWE’s performance by operating segment (in
millions):1

                   
 
Three Months Ended Year Ended

December 31,

December 31,
2018 2017 2018 2017
Net Revenues:
Media $ 205.3 $ 146.4 $ 683.4 $ 535.6
Live Events 34.4 35.2 144.2 151.7
Consumer Products   32.8   30.0   102.6   113.7
Total Net Revenues $ 272.5 $ 211.6 $ 930.2 $ 801.0
 
Operating Income:
Media $ 65.9 $ 40.5 $ 173.1 $ 108.2
Live Events 1.4 0.8 16.6 24.7
Consumer Products 10.0 7.6 23.4 34.8
Corporate   (23.9)   (21.9)   (98.6)   (92.1)
Total Operating Income $ 53.4 $ 27.0 $ 114.5 $ 75.6
 
Adjusted OIBDA:
Media $ 72.1 $ 49.3 $ 210.6 $ 141.7
Live Events 2.0 1.3 20.5 27.1
Consumer Products 10.6 8.4 28.4 37.7
Corporate   (20.3)   (18.0)   (80.6)   (70.4)
Total Adjusted OIBDA $ 64.4 $ 41.0 $ 178.9 $ 136.1
 

Basis of Presentation

For the fourth quarter of 2018, Net income included a net gain of $1.7
million primarily related to the recognition of an upward mark-to-market
adjustment to a marketable equity investment which was recorded in Other
income, net. For the twelve-month period ended December 31, 2018, Net
income included a net gain of $0.9 million driven by the aforementioned
adjustment to a marketable equity investment coupled with an upward
adjustment of a nonmarketable equity investment during the third
quarter. These increases were partially offset by impairment charges to
write-off the carrying value of an equity investment. As the underlying
market value of our marketable equity investment fluctuates, WWE is
exposed to future earnings volatility to the extent WWE continues to
hold this investment. A reconciliation of Net Income to Adjusted Net
Income for the three and twelve-month periods ended December 31, 2018
and 2017 can be found in the supplemental schedule on page 15 of this
release.

For the fourth quarter of 2017, Operating income included $1.5 million
in film impairment charges. For the twelve months ended December 31,
2017, Operating income included $5.6 million in expenses primarily
related to certain legal matters and other contractual obligations, and
$4.7 million in film impairment charges. As these items impact the
comparability of results on a year-over-year basis, they have been
excluded from the Company’s 2017 Adjusted OIBDA. A reconciliation of
2018 Adjusted OIBDA to Operating income (GAAP) for the three and
twelve-month periods ended December 31, 2018 can be found in the
supplemental schedules on pages 16-17 of this release.

Results by Operating Segment

Media

Fourth-Quarter 2018

Revenues increased 40% to a quarterly record of $205.3 million,
primarily due to the distribution of certain live, in-ring programming
content in international markets as reflected in “Other,” which was
partially offset by the timing and performance of the Company’s
portfolio of movies. Additionally, the growth in Media revenue reflected
the contractual escalation of core content rights fees, including
license fees from the distribution of the Company’s flagship programs Raw
and SmackDown, as well as increased sales of advertising and
sponsorship across platforms and the continued growth of WWE Network
that yielded a 7% increase in average paid subscribers to approximately
1.59 million.

                   
 
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Revenues:
Network (including pay-per-view) $ 46.8 $ 44.9 $ 199.3 $ 190.6
Core content rights fees 5 72.2 64.6 269.8 244.3
Advertising and sponsorship 22.8 16.3 69.6 51.8
Other 6   63.5   20.6   144.7   48.9
Total Revenues $ 205.3 $ 146.4 $ 683.4 $ 535.6
 

Operating income increased 63% to $65.9 million from $40.5
million in the prior year quarter primarily due to the growth in revenue
(net of related operating expenses), partially offset by increased fixed
costs including strategic investments and management incentive
compensation from improved operating performance.

Adjusted OIBDA increased to $72.1 million from $49.3 million in
the prior year quarter.

Key Highlights: During the quarter, Monday Night Raw
and SmackDown Live remained the highest-rated programs on USA
Network, which broadcast the 1,000th episode of SmackDown
Live
. The Company completed its eighth captivating season of Total
Divas,
with a ninth season planned in 2019, and announced new
seasons of other popular series, including Total Bellas and Miz
& Mrs
. On its streaming service, WWE Network,
pay-per-views and international specials remained significant drivers of
viewer engagement. Among the network’s most viewed programs were its
international pay-per-view events, Super Show-Down and Crown
Jewel
, its first all-women’s pay-per-view, Evolution, as well
as NXT Takeover: WarGames II, and the newly launched weekly
series, NXT UK. The Company added more than 100 hours of original
content to WWE Network’s featured programming and nearly 450
hours of archival content, which resulted in an on-demand library of
approximately 11,500 hours at quarter-end. For its social and digital
platforms, the Company produced more than 160 hours of content,
including the second season of Mixed Match Challenge on Facebook
Watch.

Full Year 2018

Revenues increased by $147.8 million, or 28%, to $683.4 million
in 2018 over the prior year, primarily driven by the $95.8 million
increase of Other media revenues, due to the addition of certain live,
in-ring programming content in international markets and, to a lesser
extent, the debut of Mixed Match Challenge on Facebook Watch,
which were partially offset by the underperformance of the Company’s
portfolio of movies. Additional drivers of revenue growth included the
increase in core content rights fees (up $25.5 million or 10%),
increased sales in advertising and sponsorship (up $17.8 million or 34%)
and the continued growth of WWE Network (up $9.2 million or 5%)
subscription revenue, with average paid subscribers up 8% to 1.65
million over the prior year. Operating income increased 60% to
$173.1 million, primarily due to the growth in revenue (net of related
operating expenses), partially offset by increased fixed costs including
strategic investments and management incentive compensation from
improved operating performance. Adjusted OIBDA increased 49% to
$210.6 million.

Live Events

Fourth-Quarter 2018

Revenues of $34.4 million were essentially flat to the prior year
quarter as the favorable impact of the Company’s large-scale
international events, including Crown Jewel and Super Show-Down
(reflected in “Other”), was offset by the timing and ticket sales of
events worldwide. The Company staged 14 fewer events in the quarter, in
part, to accommodate these special shows.

  • There were 87 total events (excluding NXT) in the current quarter,
    consisting of 64 events in North America and 23 events in
    international markets, as compared to 101 events in the prior year
    quarter, including 68 events in North America and 33 in international
    markets.
  • North American ticket sales declined $1.1 million primarily due to the
    staging of four fewer events and a 7% decline in average attendance to
    5,000. Partially offsetting these factors, the average ticket price
    increased 6% to $57.75 over the prior year quarter.
  • International ticket sales (which exclude special international
    events) declined $6.2 million primarily due to the staging of 10 fewer
    events and a 12% decline in average ticket price to $64.93, which was
    partially offset by a 33% increase in average attendance to 6,900. The
    year-over-year changes in ticket prices and average attendance were
    due, in part, to changes in the mix of venues and territories.
                   
 
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Revenues:
North American ticket sales $ 19.7 $ 20.8 $ 105.4 $ 112.0
International ticket sales 6.5 12.7 22.3 31.7
Advertising and sponsorship 0.6 0.5 2.1 2.0
Other 7   7.6   1.2   14.4   6.0
Total Revenues $ 34.4 $ 35.2 $ 144.2 $ 151.7
 

Operating income was $1.4 million as compared to $0.8 million in
the prior year quarter, reflecting changes in the mix of events.

Adjusted OIBDA was $2.0 million as compared to $1.3 million in
the prior year quarter.

Key Highlights: Highlighting the Company’s success in staging
large-scale events for its global fanbase, WWE was named the “Best at
Producing Live Event Spectacles” by SportsBusiness Journal,
beating out the NFL, NBA, NHL, MLB and NASCAR among others. Furthering
its success during the quarter, WWE held its first-ever all women’s
pay-per-view, Evolution, in front of a sold-out crowd at Nassau
Coliseum that trended #1 on Twitter for over two hours during the last
game of the World Series and Sunday Night Football.
Historic international events included Crown Jewel and WWE Super
Show-Down,
which was held before the largest audience outside the
U.S. in the last 25 years. Emphasizing the importance of its
international talent base, the Company held its first-ever talent
tryouts in Germany, Chile and Saudi Arabia and, in January 2019, opened
its first international performance center in the United Kingdom.

Full Year 2018

Revenues decreased by $7.5 million, or 5%, to $144.2 million in
2018 primarily due to the staging of 18 fewer events worldwide and lower
attendance (based on capacity) at Royal Rumble, partially offset
by the impact of the Company’s large-scale international events. Operating
income
decreased by $8.1 million to $16.6 million, driven by the
decline in revenue, as well as increased fixed costs, including
strategic investments and management incentive compensation. Adjusted
OIBDA
decreased by $6.6 million to $20.5 million.

Consumer Products

Fourth-Quarter 2018

Revenues increased 9% to $32.8 million from $30.0 million in the
prior year quarter primarily due to the adoption of a new FASB standard
for revenue recognition (ASC Topic 606) that favorably impacted
licensing revenue by $8.1 million. Growth was partially offset by lower
sales of merchandise at the Company’s e-commerce site, WWE Shop, and
lower royalties from the sale of toy products. On a comparable basis,
excluding the impact of ASC Topic 606 in Q4 2018, consumer product
revenues declined 18% from the prior year quarter.

                   
 
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Revenues:
Consumer product licensing $ 17.4 $ 11.3 $ 46.0 $ 52.1
eCommerce 11.6 14.3 34.9 37.8
Venue merchandise   3.8   4.4   21.7   23.8
Total Revenues $ 32.8 $ 30.0 $ 102.6 $ 113.7
 

Operating income was $10.0 million as compared to $7.6 million in
the prior year quarter reflecting the change in revenue.

Adjusted OIBDA was $10.6 million as compared to $8.4 million in
the prior year quarter.

Key Highlights: In partnership with Mattel, WWE maintained its
dominant position in the U.S. with the #1 action figure sold in 2018.
During the quarter, the Company released its latest console game in the
WWE franchise, WWE 2K19, which earned its highest Metacritic
score since 2K began producing the game in 2013 and was nominated
for “Fan Favorite Sports/Racing Game” at the Gamers’ Choice Awards. The
Company also continued to increase the penetration of its mobile games
with more than 100 million installs across its game portfolio, led by WWE
Champions
, which won a 2018 Webby People’s Voice Award, WWE
Supercard
and WWE Mayhem, which recently surpassed 17 million
installs.

Full Year 2018

Revenues decreased by $11.1 million, or 10%, to $102.6 million in
2018 as compared to 2017, driven by lower royalties from the sale of toy
products and lower sales of merchandise at the Company’s e-commerce
site, WWE Shop, partially offset by higher sales of mobile video games. Operating
income
decreased by $11.4 million to $23.4 million, reflecting the
change in revenue. Adjusted OIBDA decreased by $9.3 million to
$28.4 million.

Financial Outlook 2019

In 2019, WWE management expects the Company to achieve another year of
record revenue of approximately $1.0 billion and, as previously
communicated, is targeting Adjusted OIBDA of at least $200 million,
which would also be an all-time record (up at least 12% from Adjusted
OIBDA of $178.9 million in 2018).8

Management believes that increasing fan engagement over the next few
years can enhance WWE’s brand value and strengthen the Company’s ability
to optimize the value of its content over the long-term. Given the
potential magnitude of this opportunity and its importance to long-term
growth, the Company plans to continue to invest in content, digitization
and international development. Key areas of investment for 2019 include
strengthening WWE’s talent base, delivering more localized content,
developing the next iteration of the WWE Network service, and
leveraging fan data to improve business performance. In 2019, management
will continue to evaluate WWE’s financial performance and to balance
current earnings with investments that strengthen engagement and drive
long-term growth.

The Company previously discussed a step-up in capital expenditures to
build out its content production infrastructure. That spending was
delayed as WWE’s workplace strategy continued to evolve. Total capital
expenditures are now estimated at $70 million to $90 million for 2019
with continued spending in 2020 above the historic range of
approximately 4% to 7% of revenue. Management expects to provide further
guidance when the related plans and timeline have been finalized.

First Quarter 2019 Business Outlook

For the first quarter 2019, the Company estimates Adjusted OIBDA of $9
million to $14 million.8 This range of results, as well as
expected performance through the third quarter, represent year-over-year
declines as higher content rights fees are more than offset by increases
in fixed costs, including the timing of strategic investments. For the
first quarter 2019, the Company also projects average paid subscribers
to WWE Network of approximately 1.59 million.8

Achieving the targeted range of full year results assumes substantial
revenue, which supports Adjusted OIBDA of at least $100 million in the
fourth quarter. Importantly, the Company’s new content distribution
agreements in the U.S., which become effective in that period, provide
significant visibility into that expectation, and moreover, into the
strong year-over-year growth that is anticipated in every quarter of
2020.

WWE is unable to provide a reconciliation of full year or first quarter
guidance to GAAP measures as, at this time, WWE cannot accurately
determine all of the adjustments that would be required.

Notes

(1)

  The definition of Adjusted OIBDA can be found in the Non-GAAP
Measures section of the release on page 9. A reconciliation of three
and twelve months ended December 31, 2018 and 2017 Operating Income
to Adjusted OIBDA can be found in the Supplemental Information in
this release on pages 16-17

(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, etc.) and WWE platforms
(WWE.com and WWE App)

(4)

A reconciliation of three and twelve months ended December 31, 2018
and 2017 Free Cash Flow to Net cash provided by operating activities
can be found in the Supplemental Information in this release on page
18

(5)

Core content rights fees consist primarily of licensing revenues
earned from the distribution of our flagship programs, Raw and
SmackDown, through global broadcast, pay television and digital
platforms

(6)

Other forms of media monetization reflect revenues earned from the
distribution of other content, including, but not limited to,
certain live in-ring programming content in international markets,
scripted, reality and other programming, theatrical and
direct-to-home video releases

(7)

Other Live Events includes revenue from the sale of travel packages
associated with the Company’s live events, and commissions earned
through secondary ticketing as well as revenue from events for which
the Company receives a fixed fee

(8)

The Company’s business model and expected results will continue to
be subject to significant execution and other risks, including those
risks outlined in the Company’s Form 10-K filing with the SEC

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 expenses directly related to the Company’s
revenue generating activities, including the amortization of feature
film, television production and WWE Network programming assets.
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
presented to exclude certain material items that impact the
comparability between periods) should not be considered in isolation
from, or as a substitute for, operating income or other GAAP measures,
such as net income or 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.

Contacts

Investors:
Michael Weitz 203-352-8642
Michael
Guido, CFA 203-352-8779

Media:
Matthew Altman 203-352-1177

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