WWE Announces 2013 Q1 Results: Revenues Flat , PPV Up, Vince McMahon Comments

As a result of THQ's bankruptcy, WWE did not collect or recognize a portion of anticipated royalties due in the first quarter. Therefore, despite the positive impact of the transition of our video game license on revenue and income in the first quarter, WWE incurred an estimated economic loss of approximately $3.0 million stemming from foregone video game receipts.

Magazine publishing net revenues increased 14% to $1.6 million predominantly from higher newsstand sales as well as higher advertising sales than in the prior year quarter.

Digital Media

Revenues from our Digital Media related businesses were $9.0 million as compared to $7.1 million in the prior year quarter, representing a 27% increase.

WWE.com revenues increased 41% to $5.5 million in the quarter due to higher sales of online advertising, including integrated cross-platform sales, as well as increased rights fees associated with the licensing of certain WWE content to Hulu Plus. The related programming agreement with Hulu commenced in September 2012.

WWEShop revenues increased 9% to $3.5 million in the quarter, primarily due to an 11% increase in the number of online merchandise sales to approximately 73,200 orders. The average revenue per order of $47.97 was essentially unchanged from the prior year quarter.

WWE Studios

WWE Studios recognized revenue of $1.9 million as compared to $4.8 million in the prior year quarter, reflecting differences in revenue recognition between the various distribution models of our movies. Although there were three feature films released in the current quarter (Dead Man Down, The Call and The Marine 3: Homefront), revenues for these movies will be recognized on a net basis as participation statements are received rather than upon release as was the case with our self-distributed movie, Bending the Rules, in the prior year quarter. In addition, the decline reflected the timing of results generated by our overall portfolio of movies. During the quarter, Dead Man Down generated lower domestic box office receipts than anticipated, resulting in a revised ultimate profit projection for that movie and a $4.7 million impairment charge. As a result, WWE Studios generated a loss of $5.0 million compared to a loss of $1.3 million in the prior year quarter, which included a $0.8 million film impairment charge. Excluding the impact of film impairment charges, the WWE Studios' movie portfolio generated a loss of $0.3 million compared to an adjusted loss of $0.5 million in the prior year quarter.

Unallocated SG&A

Unallocated SG&A expense was $30.6 million for the current year quarter as compared to $30.0 million in the prior year quarter. Increases in staff-related and consulting expenses primarily to support our network and content related initiatives were nearly offset by a reduction in bad debt expense. Network-related costs included in unallocated SG&A reached approximately $2.6 million compared to $2.1 million in the prior year quarter.

Operating Income Before Depreciation and Amortization (OIBDA)

OIBDA was $11.3 million in the quarter as compared to $20.0 million in the prior year quarter. The decline in OIBDA was primarily due to three anticipated factors: additional investment in content production, including guest talent and staff costs, lower profits from Home Entertainment and lower profits from international Licensing. Increases in our content-related expenses more than offset increased rights fees from the licensing of new television programs and digital content. The results of our Television and Digital Media businesses were essentially flat to the prior year quarter while the results of our Pay-Per-View business declined $1.3 million from the prior year quarter. The $3.9 million impact of film impairment charges ($4.7 million vs. $0.8 million in the prior year quarter) was nearly offset by an approximate $3.4 million positive impact to OIBDA associated with the termination of our video game license with THQ and the transition to a new video game licensee. The OIBDA margin was 9% in the quarter as compared to 16% in the prior year quarter. Excluding the impact of film impairments and video game transition, Adjusted OIBDA was $12.6 million in the quarter as compared to $20.8 million in the prior year quarter. The adjusted OIBDA margin was 10% in the current quarter as compared to 17% in the prior year quarter. (See Schedules of Adjustments in Supplemental information).

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