WWE delivers another ‘smackdown’ with solid Q3 financials. Last week WWE [NYSE: WWE] delivered another strong quarter, reporting total revenue of $186.4 million, a 14 percent increase year-over-year. The company attributes its success largely to the performance of its media, licensing and event businesses. WWE reports net income of $21.8 million for the third quarter, or $0.28 per diluted share, compared to $11.1 million, or $0.14 per diluted share, for the same period last year. The company also increased total paid subscribers for the quarter to 1.58 million, compared to 1.49 million as of September 30, 2016.

‘We are pleased with our continued success in growing and engaging a large, global audience across multiple platforms,’ said Vince McMahon, WWE chairman and CEO, in a press release. ‘The increased production of original content, our focus on localization and the further development of a diverse talent base contributed to that important achievement, reinforcing the significant scale and power of our brands.’

Other financial highlights for the quarter include:

• Operating income was $33.9 million, compared to $18.3 million for the same period last year.
• Adjusted and reported OIBDA was $40.4 million, an all-time record quarter, up from $24.5 million for the same period last year.
• Corporate and other expenses totaled $44.7 million for Q3, compared to $44.8 million for the same period last year.

Third quarter operational highlights include:

• WWE Network, the company’s over-the-top streaming TV subscription service which offers live pay-per-view, scheduled programming and an on-demand library, had 1.52 million average paid subscribers, a 4 percent increase. By comparison, as of September 30, 2016, the company reported average paid subscribers of 1.46 million. As of December 31, 2016, the company had average paid subscribers of 1.41 million.
• The company launched WWE Network in China via PPTV, featuring major live events, original series, documentaries and classic matches.
• Local weekly TV programs in Mexico and Central America.
• Through the first nine months of the year, video views were up 23 percent to 14.2 billion. Social media engagement was up 5 percent to 912 million, year-over-year. WWE said engagement was driver by the company’s SummerSlam event, pay-per-view programming, originally programming, NXT Takeover.
• WWE added more than 600 hours of archived content, giving them more than 8,900 hours of content in their on-demand library.
• WWE programming reaches more than 650 million homes worldwide in 20 languages.

As a result of third quarter results, WWE is increasing its guidance for 2017 and 2018:

• The company is increasing guidance for 2017 Adjusted OIBDA which is estimated to range between $108 million and $112 million. The previous target was $100 million.
• For 2018, the company anticipates continued subscriber growth, record revenue and Adjusted OIBDA of at least $115 million, which would be an all-time record.
• License agreements for Raw and SmackDown in the U.S. will expire on September 30, 2019, and in the U.K. and India on December 31, 2019. The company anticipates announcing its plans for U.S. distribution between May and September of next year, for the U.K. by the end of 2018, and for India during the first half of 2019.

George Barrios, WWE chief strategy and financial officer, explained the reason for updated guidance:

‘We achieved a 14% increase in revenue from the monetization of video content and generated results that exceeded the range of our guidance. As we continue to drive WWE’s digital and direct-to-consumer transformation, we have increased our 2017 guidance, which calls for record revenue, record Adjusted OIBDA results, and record subscriber levels,’ Barrios said.

Barrios also said their wide range of content across multiple platforms will continue strengthen engagement with a broad audience.

‘We believe these efforts will enable us to achieve record results in the coming year and to maximize the value of our long-form content,’ Barrios added.

North America continues to be WWE’s largest audience. Net revenue by region, reported in millions, is broken out as follows:

WWE said the increase in total revenue was driven by the monetization of the company’s video content. This includes the North American segment, whose revenue grew $22.2 million, or 19 percent, due in part to subscription revenue from the WWE Network and an increase in the number of live events.

Total revenue from the company’s Media division was $125.2 million, a 13 percent increase, primarily due to growth of WWE subscription revenue, increases in TV rights fees and the impact of reality series Total Bellas.

As expected, investors reacted favorably to the company’s strong Q3 results. On October 26, 2017, the day financials were released, stock closed at $24.40 per share. As of 4:35 PM Eastern on November 1, 2017, WWE stock was valued at $26.50 per share, an increase of $2.10 per share.

Insider Take:

As one of the earlier players in the over-the-top streaming TV revolution, WWE Network has gotten it right. WWE knows its audience, they know what content that audience wants to see, and they are constantly adjusting their products and services to meet that demand. Since launch, they’ve added more original programming, have expanded into new markets, continue to add their video archives, and they are adding more live events. All of these strategies are translating into continued growth in terms of subscribers and revenue. WWE seems to have the formula down in their niche market.