WWE has announced their third quarter financial results, which will be discussed on an 11am ET conference call this morning. For the full press release, scroll down (if some of the tables don’t appear clear, you can click here for the release in .pdf format).
World Wrestling Entertainment(R), Inc. Reports Q3 Results
Operating Income Increased by 67% Over Prior Year Quarter
STAMFORD, Conn., Mar 02, 2006 (BUSINESS WIRE) — World Wrestling Entertainment, Inc. (NYSE:WWE(R)), today announced financial results for its third fiscal quarter ended January 27, 2006. Revenues totaled $103.0 million as compared to $82.7 million in the prior year quarter and operating income was $20.7 million as compared to $12.4 million in the prior year quarter. The Company reported net income of $13.6 million, or $0.19 per share, as compared to $10.9 million, or $0.16 per share, in the prior year quarter.
EBITDA was $23.3 million in the current quarter as compared to $15.4 million in the prior year quarter.
“The third quarter operating results reflect the continued positive momentum generated from our businesses,” stated Linda McMahon(TM), CEO. “Our key drivers for the Live and Televised businesses continue to surpass our expectations. Buys for each of our pay-per-view events in the quarter exceeded those of the prior year while the average attendance at our North American live events continues to show improvement. Additionally, revenues in our Branded Merchandise businesses are well ahead of the prior year quarter, with Home Video and Merchandise leading the charge.”
Mrs. McMahon continued, “The excitement surrounding our move to the USA Network has continued in the third quarter as the increased ratings further demonstrate the rising interest in our unique form of entertainment. We believe this additional interest has positively impacted all of our businesses and we look forward to an exciting fourth quarter, which will be highlighted by our annual pay-per-view extravaganza, WrestleMania(R) 22, which will be broadcast live from Rosemont’s Allstate Arena in Chicago on April 2.”
Results By Business Segment for the 3rd Quarter
Live and Televised Entertainment
Revenues from the Company’s Live and Televised businesses were $60.4 million for the current quarter as compared to $57.2 million in the prior year quarter, reflecting successful international live event tours and a higher number of pay-per-view buys recorded in the current quarter as compared to the same events that aired in the prior quarter.
— Pay-Per-View revenues were $19.1 million versus $15.5 million in the prior year quarter. There were four pay-per-view events produced in the current quarter as compared to three events in the prior year quarter.
The details for the number of buys (in 000’s) are as follows:
Event Q3 F06 Q3 F05
——————————————————- —— ——
Taboo Tuesday(TM) 215 **
Survivor Series(R) 375 373
Armageddon(R) 280 242
New Years Revolution(TM) 292 275
Prior events 201 153
—— ——
Total 1,363 1,043
====== ======
** Our Taboo Tuesday event generated approximately 174,000 buys when it aired in Q2 F05.
— We expect to produce 16 pay-per-view events in fiscal
2006, as compared to 14 events in fiscal 2005.
— Live Event revenues were $18.2 million as compared to $11.3 million in the third quarter of last year.
— There were 72 events, including 19 international events,
during the quarter as compared to 77 events, including 1
international event, during the same period last year.
— The increase in revenues is attributable to additional
international events, which generate significantly more
revenue per event than our North American events due to
the combination of higher average ticket price and higher
average attendance. The international events in the
current quarter had an average ticket price of
approximately $63.00 and average attendance of 8,600,
which generated an average of approximately $440,000 in
revenues per event.
— The North American events in the quarter had an average
ticket price of $36.00 and attendance of approximately
5,200, which generated an average of $186,000 in revenues
per event. The average attendance at our North American
events in the prior year quarter was 4,000, which
generated an average of $145,000 in revenues per event.
— The increased number of international events is due to the
timing of our tours. For the full year 2006, we are
planning a total of 56 international events as compared to
49 international events in fiscal 2005.
— Television Advertising revenues were $2.3 million as compared to $10.8 million in the prior year quarter. This decline was due to the change in the television distribution agreement with USA Network, which became effective in October 2005. Due to this change, we no longer participate in domestic television advertising sales. Advertising revenues in the current quarter include sales of advertising on our Canadian television programs and various sponsorship packages.
— Television Rights Fees revenues were $20.4 million as compared to $19.5 million in the prior year quarter. The increase was primarily due to additional international rights fees from India and South Korea.
Branded Merchandise
Revenues from the Company’s Branded Merchandise businesses were $42.6 million versus $25.5 million in the prior year quarter, reflecting increases across all lines of business. The largest increases in net revenues were generated by the sale of our home videos and the performance of our Internet-based operations. The increase in home video net revenues was driven by a 78% increase in the number of gross units sold. Revenues generated from our Internet-based merchandise and advertising sales operations totaled $8.8 million, or a 105% increase over the prior year quarter.
— Home Video net revenues were $15.1 million as compared to $4.8 million in the prior year quarter. The increase was due in part to an increase of approximately 400,000 gross units sold and an increase in the average sales price of our DVDs, of approximately $4.00 per unit, due to the sale of several higher priced titles in the quarter. These higher priced units included our WrestleMania(R) Anthology box sets and several other multi-disc titles. The best selling title released this quarter was Bret “Hitman” Hart: The Best There Is, The Best There Was, The Best There Ever Will Be, which sold approximately 178,000 gross units.
— Licensing revenues were $12.3 million as compared to $10.3 million in the prior year quarter. The increase was generated by the sales in the multimedia games and toy categories.
— Venue Merchandise revenues were $3.3 million as compared to $2.3 million in the prior year quarter. The increase was due in part to a 13% increase in our per capita customer spend at our North American live events in the current quarter to $9.00.
— WWE Shop revenues were $6.2 million as compared to $2.0 million in the prior year quarter. During the quarter, we processed approximately 93,000 orders on our website as compared to 36,000 orders in the prior year quarter. In addition, the average amount customers spent per order increased by approximately $13.00 to $62.00 in the current quarter.
— Digital Media revenues were $2.6 million as compared to $2.3 million in the period year quarter, reflecting an increase in advertising on our website.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution for the quarter was $46.9 million as compared to $38.3 million in the prior year quarter. Total profit contribution margin was approximately 45% for the current quarter as compared to 46% for the prior year quarter.
The decline in the profit contribution margins is due to the change in the revenue mix between our two segments. This change primarily reflects the absence of domestic television advertising revenues in our Live and Televised segment during the current quarter. As a result, Branded Merchandise businesses comprised approximately 41% of total revenues and 51% of the total profit contribution in the current quarter, as compared to 31% of total revenues and 38% of the total profit contribution in the prior year quarter.
Selling, general and administrative expenses
SG&A expenses were $21.9 million for the current quarter as compared to $21.7 million in the prior year quarter.
Summary Results for the Nine Months Ended
Total revenues through the first nine months of fiscal 2006 were $285.8 million as compared to $248.1 million in the prior year period. Operating income for the current period was $55.4 million versus $27.8 million in the prior year period. Net income was $36.5 million, or $0.52 per share, as compared to $23.0 million, or $0.33 per share, in the prior year period. EBITDA was $63.5 million for the first nine months of fiscal 2006 as compared to $36.7 million in the prior year period. The current year operating income includes approximately $3.4 million in positive legal settlements.
Cash Flows
Net cash provided by continuing operations was $52.0 million for the nine months ended January 27, 2006, as compared to $16.0 million for the nine months ended January 28, 2005. The prior year period included approximately $22.8 million in net cash outflows for the production of our two feature films.
Fiscal 2006 Outlook
Based on our results, which exceeded our plan, we have increased our full year forecast as follows: revenues for fiscal 2006 of between $385.0 and $395.0 million, EBITDA of between $70.0 and $73.0 million, and income from continuing operations of between $42.0 and $44.0 million, or $0.60 to $0.62 per share on a diluted basis.
Note: World Wrestling Entertainment, Inc., will host a conference call on March 2, 2006 at 11:00 a.m. ET to discuss the Company’s third quarter earnings results for fiscal year 2006. All interested parties can access the conference call by dialing 800-895-3606 (conference ID: WWE). Please reserve a line 15 minutes prior to the start time of the conference call. A presentation that will be referenced during the call can be found at the Company website at corporate.wwe.com. A replay of the call will be available approximately three hours after the conference call concludes, and can be accessed at corporate.wwe.com.
World Wrestling Entertainment, Inc. (NYSE: WWE), is an integrated media and entertainment company headquartered in Stamford, Conn. Additional information on the Company can be found at wwe.com and corporate.wwe.com.
Trademarks: The names of all World Wrestling Entertainment televised and live programming, talent names, images, likenesses, slogans and wrestling moves, and all World Wrestling Entertainment logos are trademarks, which are the exclusive property of World Wrestling Entertainment, Inc. All other trademarks are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, entertainment, professional sports, and licensed merchandise; acceptance of the Company’s brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or
anticipated.
World Wrestling Entertainment, Inc.
Consolidated Income Statements
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
————————————–
Net revenues $103,042 $82,719 $285,788 $248,126
Cost of revenues 56,188 44,426 155,995 145,336
Selling, general and
administrative expenses 21,899 21,652 62,942 62,426
Depreciation and amortization 2,596 3,004 8,072 8,975
Stock compensation costs 1,652 1,240 3,343 3,625
——— ——– ——— ———
Operating income 20,707 12,397 55,436 27,764
Investment income, net 2,213 1,341 5,482 3,607
Interest expense 146 160 448 489
Other income, net 1,024 1,632 814 1,567
——— ——– ——— ———
Income before income taxes 23,798 15,210 61,284 32,449
Provision for income taxes 10,205 4,222 24,836 10,699
——— ——– ——— ———
Income from continuing
operations 13,593 10,988 36,448 21,750
——— ——– ——— ———
Discontinued operations:
Income (loss) from
discontinued operations,
net of tax 6 (69) 34 1,264
——— ——– ——— ———
Net income $13,599 $10,919 $36,482 $23,014
========= ======== ========= =========
Earnings per share – Basic:
Continuing operations $0.20 $0.16 $0.53 $0.32
========= ======== ========= =========
Discontinued operations $0.00 $0.00 $0.00 $0.02
========= ======== ========= =========
Net income $0.20 $0.16 $0.53 $0.34
========= ======== ========= =========
Earnings per share – Diluted:
Continuing operations $0.19 $0.16 $0.52 $0.31
========= ======== ========= =========
Discontinued operations $0.00 $0.00 $0.00 $0.02
========= ======== ========= =========
Net income $0.19 $0.16 $0.52 $0.33
========= ======== ========= =========
Weighted average common shares
outstanding:
Basic 69,282 68,586 69,092 68,540
========= ======== ========= =========
Diluted 70,429 69,390 70,121 69,377
========= ======== ========= =========
World Wrestling Entertainment, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
January April
27, 30,
2006 2005
——————-
ASSETS
CURRENT ASSETS:
Cash and equivalents $121,907 $56,568
Short-term investments 156,099 201,487
Accounts receivable, net 66,848 61,901
Inventory, net 2,227 1,057
Prepaid expenses and other current assets 12,433 15,191
Assets of discontinued operations 445 544
——— ———
Total current assets 359,959 336,748
PROPERTY AND EQUIPMENT, NET 66,773 66,638
FEATURE FILM PRODUCTION ASSETS 34,282 28,771
INTANGIBLE ASSETS, NET 1,087 2,608
OTHER ASSETS 11,551 6,640
——— ———
TOTAL ASSETS $473,652 $441,405
========= =========
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $801 $756
Accounts payable 18,932 15,669
Accrued expenses and other liabilities 34,862 21,151
Deferred income 20,961 20,843
Liabilities of discontinued operations 294 254
——— ———
Total current liabilities 75,850 58,673
LONG-TERM DEBT 6,593 7,198
STOCKHOLDERS’ EQUITY:
Class A common stock 212 210
Class B common stock 487 479
Additional paid-in capital 266,481 254,716
Accumulated other comprehensive income (loss) 133 (908)
Retained earnings 123,896 121,037
——— ———
Total stockholders’ equity 391,209 375,534
——— ———
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $473,652 $441,405
========= =========
World Wrestling Entertainment, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
January January
27, 28,
2006 2005
——————
OPERATING ACTIVITIES:
Net income $36,482 $23,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from discontinued operations, net of
taxes (34) (1,264)
Revaluation of warrants (1,773) (835)
Depreciation and amortization 8,072 8,975
Realized loss on sale of investments 1,346 1,039
Amortization of investment income (1,207) (231)
Stock compensation costs 3,343 3,265
Provision for doubtful accounts 592 (20)
Provision for inventory obsolescence 956 911
Provision for deferred income taxes 724 1,086
Changes in assets and liabilities:
Accounts receivable (5,539) 18,085
Inventory (2,126) (989)
Prepaid expenses and other assets (5,174) (2,070)
Feature film production assets (5,511) (22,771)
Accounts payable 3,262 4,613
Accrued expenses and other liabilities 18,137 (15,737)
Deferred income 486 (1,387)
——— ——–
Net cash provided by continuing
operations 52,036 16,044
Net cash provided by (used in)
discontinued operations 173 (7,057)
——— ——–
Net cash provided by operating
activities 52,209 8,987
——— ——–
INVESTING ACTIVITIES:
Purchase of property and equipment (6,685) (3,858)
Purchase of other assets – (270)
Purchase of short-term investments (52,956) (35,460)
Proceeds from sales of maturities of short-term
investments, net 97,898 69,863
——— ——–
Net cash provided by continuing
operations 38,257 30,275
Net cash used in discontinued
operations – –
——— ——–
Net cash provided by investing
activities 38,257 30,275
——— ——–
FINANCING ACTIVITIES:
Repayments of long-term debt (560) (518)
Dividends paid (33,201) (16,454)
Issuance of stock, net 431 410
Proceeds from exercise of stock options 8,203 213
——— ——–
Net cash used in continuing
operations (25,127) (16,349)
Net cash used in discontinued operations
——— ——–
Net cash used in financing activities (25,127) (16,349)
——— ——–
NET INCREASE IN CASH AND CASH EQUIVALENTS 65,339 22,913
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 56,568 48,467
——— ——–
CASH AND CASH EQUIVALENTS, END OF PERIOD $121,907 $71,380
========= ========
World Wrestling Entertainment, Inc.
Supplemental Information – EBITDA
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
———————————–
Net income reported on GAAP basis $13,599 $10,919 $36,482 $23,014
(Income) loss from discontinued
operations, net of tax (6) 69 (34) (1,264)
Provision for income taxes 10,205 4,222 24,836 10,699
Interest and other, net (3,091) (2,813) (5,848) (4,685)
Depreciation and amortization 2,596 3,004 8,072 8,975
——– ——– ——– ——–
EBITDA $23,303 $15,401 $63,508 $36,739
======== ======== ======== ========
Non-GAAP Measure:
EBITDA is defined as earnings from continuing operations before interest, income taxes, depreciation and amortization. Although it is not a recognized measure of performance under U.S. GAAP, EBITDA is presented because it is a widely accepted financial indicator of a company’s performance. The Company uses EBITDA to measure its own performance and to set goals for operating managers. EBITDA should not be considered as an alternative to income from continuing operations, net income, cash flows from operations or any other indicator of World Wrestling Entertainment Inc.’s performance or liquidity, determined in accordance with U.S. GAAP.
World Wrestling Entertainment, Inc.
Supplemental Information- Free Cash Flow
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
————————————
Net cash provided by continuing
operations $10,358 $8,867 $52,036 $16,044
Less cash provided for capital
expenditures:
Purchase of property and
equipment (838) (980) (6,685) (3,858)
Purchase of other assets – (270) – (270)
———- ——- ——– ——–
Free Cash Flow $9,520 $7,617 $45,351 $11,916
========== ======= ======== ========
Non-GAAP Measure:
We define Free Cash Flow as net cash provided by continuing operations less cash used for capital expenditures. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash our continuing business is generating after capital expenditures, available for reinvesting in the business and for payment of dividends.
SOURCE: World Wrestling Entertainment, Inc.
World Wrestling Entertainment, Inc.
Media:
Gary Davis, 203-353-5066
or
Investors:
Michael Sileck, 203-352-1150
