Expectations were high going into World Wrestling Entertainment's (WWE) second-quarter financial report. The company had recently announced landmark deals for its two flagship broadcast programs, driving its stock to dizzying heights -- up over 167% so far this year.
On Thursday, WWE reported the highest quarterly revenue in its history, blasting past expectations and prompting the company to raise its full-year guidance. This sent the stock climbing to new all-time highs.
Image source: WWE.
The raw numbers
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$281.6 million |
$214.6 million |
31% |
|
Operating income |
$21.2 million |
$10.7 million |
98% |
|
Adjusted OIBDA |
$43.5 million |
$24.3 million |
79% |
|
Diluted earnings per share |
$0.11 |
$0.06 |
83% |
|
Average paid subscribers |
1.80 million |
1.63 million |
10% |
Data source: WWE Second-Quarter Financial Release. Chart by author.
WWE reported second-quarter revenue of $281.6 million, up 31% year over year, blasting past the 11.6% increase expected by analysts. Adjusted operating income before depreciation and amortization (OIBDA) of $43.5 million increased 79% year over year, vastly exceeding the high end of WWE's guidance. Earnings per share of $0.11 increased 83% over the prior-year quarter, but came in lower than the $0.16 anticipated by analysts.
The big show
The vast majority of WWE's revenue growth came from the company's media segment, driven by distribution of content to international markets. Live-events revenue was essentially unchanged, as increases in ticket prices were offset by lower attendance. Demand for consumer products resulted in higher royalties.
|
Business segment |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Media |
$202.6 million |
$137.2 million |
48% |
|
Live events |
$52.3 million |
$52.8 million |
(1%) |
|
Consumer products |
$26.7 million |
$24.6 million |
9% |
Data source: WWE Second-Quarter Financial Release. Chart by author.
The big news that occurred during the quarter was reaching agreements with Twenty-First Century Fox and Comcast. WWE signed what it called "landmark" five-year broadcast deals for SmackDown Live with Fox and Monday Night Raw with Comcast-owned USA Network. While the terms of the deals were not released, the agreements were estimated to be worth north of $1 billion each. Both programs continue to be the highest-rated programs on USA Network.
"'We're pleased with our continued success in increasing the monetization of WWE content globally,' said Vince McMahon, WWE Chairman and Chief Executive Officer. 'This success is evidenced by the completion of our new U.S. distribution agreements with USA Network and Fox Sports.'"
Looking ahead
WWE expects its adjusted OIBDA for the third quarter to be in a range of $30 million to $34 million. The company is raising its adjusted OIBDA forecast for the year to a range of $160 million to $170 million, up from the $150 million it previously expected. For the third quarter, it anticipates average paid subscribers of 1.67 million, up 10% year over year.
For their part, analysts currently expect (on average) revenue of $201.33 million this quarter -- a 7.8% increase year over year -- and earnings per share of $0.23, a decline of 18% compared to the prior-year quarter.
It's important to note that the new deals for WWE's flagship broadcast programs won't hit the company's financial results until 2019, so there's still more growth to come. The company said these agreements will increase the average annual value of WWE's U.S distribution to 3.6 times that of the prior deal. Couple that with the international expansion that's just beginning to pay off, and it spells good news for WWE investors.
