WWE Reports Strong Q4 2017 Results, Record Revenues For 2017

WWE today announced financial results for its fourth quarter and year ended December 31, 2017. For the quarter, the Company reported Net income of $4.8 million, or $0.06 per share, as compared to a Net income of $8.0 million, or $0.10 per share, in the prior year quarter. Also, WWE Network's average paid subscribers increased to 1.48 million during the fourth quarter 2017.

"In 2017, WWE achieved record financial results, generating the highest level of revenue and Adjusted OIBDA in the Company's history. Our operating metrics demonstrate the strength of our content and brands worldwide, which positions us well to achieve our long-term objectives. We will continue to focus on creating compelling content for multiple platforms, leveraging data analytics and capitalizing on international opportunities to drive our continued growth," said WWE CEO Vince McMahon.

For the full year 2017, revenue increased 10% to $801.0 million, the highest in the company's history. Below are highlights from a press release that they sent to us, you can read the full release on the WWE Corporate website by clicking here.

They sent us this press release:

WWE® Reports Strong Fourth-Quarter Achieving Record Results for 2017

Fourth-Quarter 2017 Highlights

* Revenue increased 9% to $211.6 million as compared to the prior year quarter
* Operating income was $27.0 million. Adjusted OIBDA1 reached $34.8 million, which was in line with guidance
* WWE Network's average paid subscribers increased to 1.48 million during the fourth quarter 2017, consistent with the Company's guidance
* Celebrated the 25th anniversary of Monday Night Raw in January 2018; SmackDown surpassed 950 episodes and remained the second longest running episodic program in history (behind only Raw)
* Formed partnerships to create content across platforms, including the series Mixed Match Challenge? which streams live on Facebook Watch, Miz & Mrs. which will air on USA, as well as virtual reality experiences from select 2018 special events available on a new WWE channel within the NextVR app

Full Year 2017 Highlights

* Revenue increased 10% to $801.0 million, the highest in the Company's history
* Operating income increased 36% to $75.6 million. Adjusted OIBDA increased 40% to $111.9 million, which was within the range of Company guidance and represented all-time record performance
* Supporting the global reach of WWE content, completed multi-year distribution agreements in France, Japan, South Korea, Australia, Philippines and sub-Saharan Africa among other countries and regions
* Digital engagement continued to grow with video views up 32% to 20 billion and social media engagements up 4% to approximately 1.2 billion from the prior year3
* WWE's YouTube channel remained the #1 most viewed Sports Channel and the 2nd most viewed channel on YouTube with 20 billion lifetime views (as of January 31, 2018)
* Demonstrated strength in consumer products with the #1 selling action figure property in the U.S. ahead of Star Wars and Marvel Avengers4
* Forbes named WrestleMania as one of the world's top 10 most valuable sports event brands for the fourth year in a row, alongside the Super Bowl, Olympics, FIFA World Cup and NCAA Men's Final Four

STAMFORD, Conn.– WWE (NYSE:WWE) today announced financial results for its fourth quarter and year ended December 31, 2017. For the quarter, the Company reported Net income of $4.8 million, or $0.06 per share, as compared to a Net income of $8.0 million, or $0.10 per share, in the prior year quarter. As discussed below, Net income in the fourth quarter 2017 reflected charges totaling $11.3 million ($0.14 per diluted share) arising from the enactment of the new tax law. Operating income increased to $27.0 million from Operating income of $13.9 million. Excluding items affecting comparability, Adjusted OIBDA increased to $34.8 million from $20.5 million.

"In 2017, WWE achieved record financial results, generating the highest level of revenue and Adjusted OIBDA in the Company's history. Our operating metrics demonstrate the strength of our content and brands worldwide, which positions us well to achieve our long-term objectives. We will continue to focus on creating compelling content for multiple platforms, leveraging data analytics and capitalizing on international opportunities to drive our continued growth," stated Vince McMahon, Chairman and Chief Executive Officer.

George Barrios, WWE Chief Strategy & Financial Officer, added, "We achieved record revenue that exceeded $800 million, record Adjusted OIBDA that was within the range of our guidance, and record subscriber levels. As we continue to drive WWE's digital and direct-to-consumer transformation while optimizing the monetization of our long-form content, we expect to balance 2018 OIBDA growth with investment in strategic areas, maximizing our long-term opportunities and shareholder value."

2018 Business Outlook

The Company evaluates the operating performance of its segments based on financial measures such as revenue, OIBDA and Adjusted OIBDA. To further facilitate the analysis of the Company's operating performance, the Company plans to change its primary measure of performance from OIBDA to Adjusted OIBDA, and to modify its definition of Adjusted OIBDA to exclude stock-based compensation expense. The Company plans to begin reporting results using this revised definition with the communication of first quarter 2018 results.5

For the first quarter 2018, the Company estimates Adjusted OIBDA (excluding stock-based compensation expense) of $23 million to $27 million.6,7 As compared to first quarter 2017 results, this range represents higher profits from the increased monetization of video content, which are offset by the timing of lower licensing revenue associated with the adoption of a new FASB standard for revenue recognition. For the first quarter 2018, the Company also projects average paid subscribers to WWE Network of approximately 1.53 million.

In 2018, management expects the Company to achieve another year of record revenue and previously targeted Adjusted OIBDA of at least $115 million,6,7 which would represent another all-time record. Based on the Company's revised definition of Adjusted OIBDA, which excludes projected stock compensation expense, this equates to an approximate 2018 Adjusted OIBDA target of at least $140 million.6,7

WWE is unable to provide a reconciliation of first quarter and full year 2018 guidance to GAAP measures as, at this time, WWE cannot accurately determine all of the adjustments that would be required.

In early 2017, management discussed a step-up in capital expenditures to expand the Company's overall production capacity. The related spending to retrofit a recently purchased facility was largely delayed until 2018 as plans were finalized. For 2018, the Company anticipates capital expenditures of $50 million to $70 million, reflecting in part the shift in spending from 2017.

Long-term Growth: Key Content Distribution Agreements

The monetization of WWE content is a fundamental element of the Company's business model. Certain distribution agreements that represent a significant share of the Company's television rights revenue will expire in 2019. These agreements include the licensing of WWE's premier programs, Raw and SmackDown, in the U.S., which will expire on September 30, 2019, as well as in the U.K. and India, which will expire on December 31, 2019. Management currently expects to announce its plan for future distribution in the U.S. sometime between May 2018 and September 2018; for future distribution in the U.K. by year-end 2018; and for future distribution in India in the first half of 2019. Although these announcements could occur either before or after these dates, management believes that these ranges represent the most likely periods for such communication.

Impact of New Tax Law ("Tax Cuts and Jobs Act")

In the fourth quarter 2017, the Company recorded one-time charges totaling $11.3 million arising from the enactment of the new tax law, including a $10.9 million non-cash charge due to the remeasurement of its deferred tax assets and $0.4 million associated with the deemed repatriation of foreign earnings. The remeasurement was due to the reduction of the corporate tax rate from 35% to 21%, which reduced the future benefit the Company will realize associated with these assets. The Company believes the tax bill will provide a long-term benefit to the Company.

Prospectively, the Company expects its effective tax rate to benefit from the recent changes in the tax law, as the reduced corporate rate more than offsets the elimination of certain deductions, including the domestic production activity deduction and changes affecting the deductibility of certain executive compensation. Our effective tax rate is expected to decrease from approximately 36% to between 25-27%, excluding discrete items. Additionally, due to the immediate expensing of certain capital expenditures provided for in the legislation and the Company's expected capital plans over the next year, it is anticipated that the Company's cash taxes will be significantly reduced in the near term. Due to these recent changes, the Company anticipates that some portion of our dividends paid in 2018 will likely be deemed a return of capital to our shareholders.

Comparability of 2017 Results

For the three months ended December 31, 2017, Operating income included $1.5 million in film impairment charges. For the full year 2017, Operating income included $5.6 million of expense primarily related to certain legal matters and other contractual obligations, and $4.7 million in film impairment charges. As these material items impact the comparability of results on a year-over-year basis, they have been excluded from the Company's 2017 Adjusted OIBDA. For the comparable periods of 2016, there were no such items that impacted year-over-year comparability.

A reconciliation of Adjusted OIBDA to Operating income (GAAP) for the three and twelve-month periods ended December 31, 2017 can be found in the supplemental schedules on pages 16-19 of this release.

You can read the full press release on the WWE Corporate website at this link.