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WWE released their 2020 second quarter earnings report yesterday, with $223.4 million in revenue compared to $268.9 million in Q2 last year. WWE attributed the difference to the timing of the Saudi Arabia event. Revenue for the first six months was $514.4 million, 14 percent above last year and a record for any first-half-year period in WWE history.
The WWE Network held steady in Q2 with PPVs during that time period based around cinematic-style matches, meant to makeup for the loss of atmosphere from not being able to run large arenas. The average paid subscribers declined 1.5 percent to 1.66 million, but at the end of Q2, the numbers were up 6 percent compared to last year with 1.69 million. WWE Network Q2 revenue was $49.4 million compared to $51.8 million last year.
WWE touted in their financial statement the viewership for WWE Network, in particular the success of the Undertaker docu-series. “On WWE Network, the Company created new content highlighted by the critically acclaimed series, Undertaker: The Last Ride, which was among the most watched originals on WWE Network. Engagement on the streaming service, as measured by video views, increased 66% over the prior year period.”
Their adjusted OIBDA (operating income) increased to $73.5 million, up from $34.6 million. WWE’s expenses were lower in Q2 due to hosting their TV events at the Performance Center and Full Sail University in the Orlando, Fla. area with a staid set-up, greatly reducing production costs. They also pre-taped multiple shows over the course of a couple days, cutting back on talent travel expenses. WWE also cut back on wrestler and staff expenses, including roster cutbacks. Much of WWE’s talent pay is based on sharing area ticket revenue, and that was zero in 2020, so surely wrestler pay is down substantially with some wrestlers on pace to earn more than their downside guarantee finding that tally decreasing as the progresses.
Although WWE wasn’t able to sell merchandise at arenas in Q2, they made up for that with increased eCommerce sales, which nearly doubled to $12.6 million.
Although TV ratings were down sharply in Q2 compared to last year’s Q2, WWE touted in their financial information “Monday Night Raw and NXT ranked as the highest-rated and third highest-rated programs, respectively, on USA Network.”
“Our second quarter financial performance was strong and demonstrated our ability to respond to the challenges posed by COVID-19,” said Vince McMahon, WWE Chairman & CEO. “We continue to adapt our business to the changing environment, focusing on the development of new content for global distribution platforms and increasing audience engagement to drive growth and value for our shareholders.”
The following are the bullet points they chose to focus on in their financial statement release:
Second Quarter 2020 Highlights
- Revenues were $223.4 million as compared to $268.9 million in the prior year quarter reflecting the timing of the Company’s large-scale event in Saudi Arabia; Revenues reached a record $514.4 million year-to-date, representing 14% growth from the prior year period
- Operating income was $55.7 million as compared to $17.1 million in the prior year quarter
- Adj. OIBDA1 increased to $73.5 million from $34.6 million in the prior year quarter
- Free Version of WWE Network was announced on June 1, unlocking a portion of WWE’s content library to expand reach and engagement of its direct-to-consumer streaming service for all fans
- WWE Network average paid subscribers2 declined 1.5% to 1.66 million while ending paid subscribers increased 6% to 1.69 million
- Digital video views increased 10% to a record 9.9 billion and hours consumed increased 15% to a record 374 million across digital and social media platforms3
- eCommerce revenues nearly doubled to $12.6 million, substantially offsetting the loss of venue merchandise sales with 76 fewer events in the quarter
COVID-19 Actions and Business Outlook
- Due to COVID-19 and related government-mandated impacts on WWE, the Company continued its various short-term cost reductions and cash flow improvement actions. (See first quarter 2020 earnings release). These actions contributed to WWE’s enhanced liquidity, which reached $548 million in cash and short-term investments as of June 30, 2020
- The Company is continuing to adapt its business to the changing environment with a focus on enhancing the production of content and furthering fan engagement
- Management may resume its opportunistic acquisition of stock under the Company’s $500 million share repurchase program, subject to WWE’s business outlook and liquidity as well as whether share repurchases compare favorably to other capital allocation alternatives
- Management continues to believe the Company’s growth prospects remain strong and that WWE is well positioned to take full advantage of the changing media landscape and increasing value of live sports rights over the longer term (See COVID-19 Actions and Business Outlook on page 7)
STAMFORD, Conn.–(BUSINESS WIRE)– WWE (NYSE: WWE) today announced financial results for its second quarter ended June 30, 2020.
“Our second quarter financial performance was strong and demonstrated our ability to respond to the challenges posed by COVID-19,” said Vince McMahon, WWE Chairman & CEO. “We continue to adapt our business to the changing environment, focusing on the development of new content for global distribution platforms and increasing audience engagement to drive growth and value for our shareholders.”
Frank Riddick, interim Chief Financial Officer, added “In the quarter, we delivered revenue of $223 million and Adjusted OIBDA of $73.5 million as we continued to offset the impact of cancelled events by reducing costs. Our cash flow remains strong, and we believe we have the capital resources to deliver on our strategic initiatives and growth opportunities.”
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Second-Quarter Consolidated Results
Revenues decreased 17% to $223.4 million from $268.9 million in the prior year quarter primarily driven by decreased sales of tickets and merchandise that resulted from the cancellation, postponement and relocation of live events due to public health concerns related to the COVID-19 outbreak. Media segment revenue increased modestly as the escalation of core content rights fees was substantially offset by the unfavorable timing of the Company’s large-scale event in Saudi Arabia (held in February 2020 vs. June 2019).
Operating Income was $55.7 million as compared to $17.1 million in the prior year quarter, primarily due to a decline in operating expenses that reflected lower content-related production and event costs, short-term cost reductions implemented as a result of the COVID-19 outbreak and, to a lesser extent, a year-over-year reduction in accrued management incentive compensation. The decline in operating expenses was partially offset by a decrease in revenue (as described above). The Company’s Operating income margin increased to 25% from 6% in the prior year quarter.
Adjusted OIBDA (which excludes stock compensation) increased to $73.5 million from $34.6 million in the prior year quarter. The Company’s Adjusted OIBDA margin increased to 33% from 13%.
Net Income reached $43.8 million, or $0.52 per diluted share, from $10.4 million, or $0.11 per diluted share, in the second quarter 2019, primarily reflecting improved operating performance. Current period results also included $7.7 million in an unrealized gain related to a certain equity investment as well as a lower effective tax rate, which were partially offset by the impact of the finance lease that commenced in July 2019 related to the Company’s new headquarters. Excluding the impact of an unrealized gain on a certain equity investment, Adjusted Net Income4 was $37.7 million, or $0.45 per diluted share.
Effective Tax Rate decreased to 20% from 25% in the prior year quarter, primarily driven by increased deductibility of foreign derived intangible income.
Cash flows generated by operating activities reached $74.8 million as compared to $7.6 million of cash used in operating activities in the prior year quarter driven by stronger operating performance as well as improved working capital reflecting the timing of collections in the prior year quarter.
Free Cash Flow totaled $67.7 million as compared to a $27.5 million use of cash in the second quarter 2019 primarily due to the change in operating cash flow and, to a lesser extent, a reduction in capital expenditures.5
Cash, cash equivalents and short-term investments were $548 million as of June 30, 2020, which includes $200 million in cash the Company borrowed under its revolving line of credit during the second quarter 2020.
Return of Capital to Shareholders
For the second quarter 2020, the Company paid $9.3 million in dividends to shareholders.
Management may resume the Company’s $500 million share repurchase program, which was temporarily suspended in April 2020. WWE share repurchases under the program will be executed opportunistically, i.e., when the repurchase price is below WWE’s intrinsic value as conservatively estimated by management. Any repurchase activity will be subject to WWE’s business outlook and liquidity as well as whether share repurchases compare favorably to other capital allocation alternatives.
The schedule below reflects WWE’s performance by operating segment (in millions):1
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