Consumer Products Division
Revenues from Consumer Products businesses were $18.5 million as compared to $12.6 million in the prior year quarter, primarily due to the increases in the Company’s licensing and e-commerce businesses as described below.
* Licensing revenues were $10.0 million as compared to $5.7 million in the prior year quarter, primarily driven by a higher effective royalty rate for the Company’s franchise video game.
* Venue Merchandise revenues increased 5% to $4.2 million from $4.0 million in the prior year quarter primarily due to an increase in total attendance at the Company’s North American events.
* WWEShop revenues increased 48% to $4.3 million from $2.9 million in the prior year quarter driven by a 50% increase in the volume of online merchandise orders to more than 89,900 orders globally. Orders increased primarily due to mobile shop optimization and a new distribution model utilizing Amazon U.K. The average revenue per order declined 3% to $47.59 from the prior year quarter.
WWE Studios
WWE Studios revenue increased to $1.9 million from $1.8 million in the prior year quarter, reflecting the timing of results from the Company’s portfolio of movies. Revenue recognized in the current year quarter was primarily associated with the 2013 slate of film releases. WWE Studios’ movie portfolio generated a loss of $0.4 million in the quarter compared to a loss of $7.4 million in the prior year quarter, which included $7.0 million in film impairment charges. Movies released in 2014, such as Scooby Doo! WrestleMania Mystery (direct-to-DVD) and Oculus (theatrical), have shown performances that are in-line with expectations.
Corporate and Other
Corporate and Other expenses increased $7.6 million to $36.4 million from the prior year quarter. As defined, these expenses include corporate G&A expenses as well as sales, marketing, and talent development costs, which cannot be allocated to specific segments. The increase in Corporate and Other expense during the quarter included $2.1 million in severance and related restructuring charges. Excluding the impact of restructuring, the $5.5 million increase in expenses supported the expansion of the Company’s international infrastructure, talent development and brand marketing.
Operating Income Before Depreciation and Amortization (OIBDA)
OIBDA results declined to $2.7 million from $9.7 million in the prior year quarter. Excluding the impact of restructuring and film impairment charges, Adjusted OIBDA declined $11.6 million predominantly due to the ramp up of WWE Network and investment across WWE to support key content and brand initiatives. The ramp up of WWE Network resulted in a $5.1 million reduction in OIBDA as the growth in subscribers and subscription revenue was more than offset by the loss of pay-per-view revenue and increased programming, marketing, and customer service costs. Investment in WWE’s content and brand initiatives resulted in a $5.5 million increase in Corporate and Other expenses (as described above). Based on the increased investment, the Company’s Adjusted OIBDA margin was 4% in the current year quarter as compared to 15% in the prior year quarter.
Depreciation and Amortization
Depreciation and amortization expense totaled $7.7 million for the current year quarter as compared to $6.5 million in the prior year quarter. Depreciation and amortization expense in both the current and prior year periods derived from investment in assets to support the Company’s content initiatives, including efforts to launch WWE Network. The current year quarter includes a charge of $1.8 million to write down certain assets associated with the Company’s gamification initiative.
Investment Income, Interest and Other Expense, Net
Investment income, interest and other expense, net yielded expense of $5.5 million compared to income of $0.1 million in the prior year quarter. The current year quarter included a $4.0 million impairment of an equity investment and changes in realized foreign exchange losses of $0.9 million.
Effective tax rate
In the current year quarter, the effective tax rate was 44% as compared to 27% in the prior year quarter. The recognition of FIN48 releases resulted in tax benefits that increased the effective tax rate in the current year quarter and decreased the effective tax rate in the prior year quarter. The current year includes a tax benefit associated with the Company’s operating loss for the quarter; the prior year was a tax provision as the Company had pre-tax income. The Company believes it will be able to utilize these benefits in future periods.
Summary Results for the Nine Months Ended September 30, 2014
Total revenues for the nine months ended September 30, 2014 were $402.1 million as compared to $389.6 million in the prior year period. Operating loss for the current year period was $39.7 million as compared to income of $18.1 million in the prior year period. Net loss was $28.5 million, or $0.38 per share, as compared to Net income of $10.7 million, or $0.14 per share, in the prior year period. OIBDA was a loss of $19.1 million for the current nine month period as compared to income of $35.9 million in the prior year period.
Excluding items that impacted comparability on a year-over-year basis, Adjusted Operating loss was $33.9 million compared to income of $26.4 million in the prior year period, and Adjusted Net loss was $22.2 million, or $0.30 per share, compared to Net income of $16.1 million, or $0.21 per share, in the prior year period. Adjusted OIBDA was a loss of $16.7 million as compared to income of $44.2 million in the prior year period.
Nine Months Ended September 30, 2014 – Results by Region and Business Segment
Revenues increased 3% to $402.1 million primarily due to growth in North America. Revenues from North America increased 5%, or $14.7 million, driven by the growth of the Company’s Network segment. The ramp up of WWE Network subscribers and subscription revenue significantly exceeded the loss of pay-per-view revenue as pay-per-view events became available on WWE Network. Increased revenue from television distribution and higher online merchandise sales through WWEShop were more than offset by lower revenue from the licensing of the Company’s franchise video game and digital advertising. Revenues from outside North America declined 3% primarily due to the impact of staging ten fewer live events in international markets, which offset increased revenue from television distribution in international markets. There was no significant impact from changes in foreign exchange rates in the current year period.
Nick was born and raised in Detroit, Michigan, and lived there until the age of 18, when he decided to pack his flack jacket and move to New York City.
