WWE (NYSE: WWE) scores another takedown with its second quarter 2016 financials with a 32 percent increase in revenue and a 25 percent increase in WWE Network subscriptions year-over-year. Other second quarter 2016 highlights include:
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– Revenue increased 32 percent to $199.0 million with WWE’s Live Event and Network segments at their highest quarterly revenue point in WWE history.
– Revenue in North America continues to be the largest segment at $149.8 million of $199.0 million in total revenue.
– OIBDA of $7.5 million
– WWE reported net income of $0.8 million, compared to $5.1 million year-over-year.
– WWE Network hit 1.52 million average paid subscribers, a 25 percent increase year-over-year.
– Total subscribers for WWE Network at the end of the quarter was 1.56 million.
– Average monthly churn dropped from 20 percent to 9.9 percent for the first six months of the year, compared to 12.3 percent year-over-year.
– WWE Network subscription revenue increased 25 percent to $45.9 million from $36.6 million.
– For the first six months of 2016, digital engagement rose with video views up over 100 percent to nearly 8 billion and social media engagements up 39 percent to 570 million year-over-year.
– WrestleMania 2016 had record-breaking attendance, ticket sales, viewership and social media activity.
- 101,673 fans attended the event.
- WWE Network hit 1.82 million subscribers following WrestleMania.
- During WrestleMania Week, WWE Network featured 19 hours of prime-time, premier programming and subscribers watched nearly 22 million hours of content, averaging 12 hours per subscriber.
- WrestleMania generated 2.5 million mentions on Twitter in one day and over 250 million video views across WWE digital and social platforms during WrestleMania Week.
WWE chairman and CEO Vince McMahon commented on the second quarter results:
“I continue to be pleased with the execution of our strategy to optimize the long-term value of our content. Progress on the objective is evidenced by the continued year-over-year growth of WWE Network, the transition of SmackDown to a live format every week and the completion of our first exclusive content agreement in China,” McMahon said.
“We achieved a 25 percent increase in average paid subscribers to WWE Network and generated earnings that were in line with our guidance. Over the past 12 months, we delivered record revenue of $703 million,” added George Barrios, WWE chief strategy and financial officer.
The results for the second quarter 2016 are exceptional compared to 2015, most likely because last year’s WrestleMania was held in March 2015, so results were included in the first quarter 2015 financials. Regardless, WWE said subscriber growth in both years has been significant because of WrestleMania.
Despite the stellar financials, WWE Stock is still down compared to this time last year, at $19.86 per share at the close of trading on August 5, but it is up from a low of $14.65 per share on February 12, 2016.
According to Bloomberg, WWE is undervalued by investors at $1.5 billion, and they believe the company could be ripe for a takeover, though it seems unlikely that the McMahon family, who owns about 70 percent of the company’s equity and 96 percent of the voting power, would sell. At the same time, expenses are on the rise as former wrestlers sue WWE for failure to warn its athletes of the potential for permanent brain damage, says Bloomberg. Expenses rose 17 percent to $49.4 million including legal expenses which contributed to the increase.
What’s next? WWE is anticipating a slight decline in subscriptions, dropping to 1.49 million subscribers but still representing a 27 percent increase compared to the same period last year. WWE leadership estimates that if average paid subscribers to WWE Network increase 20 to 25 percent per quarter, adjusted OIBDA in 2016 will range between $70 million and $85 million.
Based on current trends in subscriber acquisition and retention, the estimated OIBDA for 2016 will fall between $80 million and $85 million. WrestleMania continues to be a big money maker for WWE, including attracting and retaining subscribers.
WWE has come a long way with its WWE Network, an early entrant in the over-the-top (OTT) TV market. Despite a few rocky quarters and the ups and downs of its stock, WWE Network continues to post solid subscriber numbers with reduced churn year-over-year. This tells us that WWE is learning how to better hang onto subscribers who initially sign up to watch WrestleMania.
With the addition of new, original programming and a growing international audience, WWE Network will continue to be a money maker for WWE. As licensing fees and other costs increase, however, it will need to offset those with continued revenue growth and a sustainable subscriber base in the U.S. and abroad.