WWE Q1 Financial Report

WWE issued the following:

WWE® Reports First Quarter 2017 Results

First Quarter 2017 Highlights

* Revenue increased 10% to $188.4 from $171.1 million in the prior year quarter

* Operating income was $4.0 million and Adjusted OIBDA1 was $18.6 million

* WWE Network averaged 1.49 million paid subscribers over the first quarter 2017, which represented a 16% increase from the first quarter 2016

* WWE Network continued to super-serve its global fans with live, in-ring content by producing new episodes of its cruiserweight series, 205 Live, and holding a U.K. Championship Tournament, featuring local talent

* Announced partnership with HBO Sports and the Bill Simmons Media Group to produce Andre the Giant, a documentary film examining the life of the WWE Legend

* Completed multi-year agreement naming StubHub as the Company’s exclusive ticket resale marketplace for fans in the United States and Canada

Selected WrestleMania Highlights

* WrestleMania (April 2, 2017) broke the attendance record for the Orlando Citrus Bowl, attracting 75,245 fans

* Over WrestleMania Week, WWE had an unprecedented five consecutive nights of sellouts at the Citrus Bowl and Amway Center

* WrestleMania reached a record 1.95 million global households on WWE Network alone, making it the most-watched WrestleMania in history

* During WrestleMania Week, WWE Network subscribers watched 22.5 million hours of content (or an average of approximately 13 hours per subscriber), representing a 4% year-over-year increase

* WrestleMania was the most social event in WWE history with 5.19 million interactions on Facebook and Twitter during the broadcast alone and 2.8 million tweets about WrestleMania throughout the day

* WrestleMania accounted for nearly 30% of all social TV interactions on April 2nd, surpassing the Country Music Awards (13%), The Walking Dead Season Finale (10%) and MLB Opening Day on ESPN (10%)

* WrestleMania was made available live in China for the first time on PPTV Sports via pay-per-view with a choice of Mandarin or English commentary

* Launched WWE e-commerce site in India (WWEShop.in) for the first time ever, beginning Monday, April 3, concurrent with the broadcast of WrestleMania in that country

STAMFORD, Conn.–(BUSINESS WIRE)–WWE (NYSE:WWE) today announced financial results for its first quarter ended March 31, 2017. For the quarter, the Company reported Net income of $0.9 million, or $0.01 per share, as compared to $13.9 million, or $0.18 per share, in the prior year quarter. Operating income was $4.0 million as compared to $22.0 million in the prior year quarter. Excluding items affecting comparability, Adjusted OIBDA1 was $18.6 million as compared to $27.6 million in the prior year quarter.

“We are pleased with the continued growth of WWE Network, which is a critical building block of our content strategy,” said WWE Chairman & CEO Vince McMahon. “The recent production of WrestleMania set records for network viewership as well as digital and social engagement. As we leverage continuing innovation to extend our reach in India, China and around the world, we are confident that the enduring and increasing global power of our brands will provide a solid foundation for long-term growth.”

George Barrios, Chief Strategy & Financial Officer, added, “During the first quarter, increases in key operating metrics, including event attendance, network subscribers and global content consumption, supported strong 10% growth in revenue. As anticipated, our earnings reflected the timing of certain expenses, a significant portion of which are expected to reverse over the coming months. As we continue to focus on producing engaging content across all platforms, we remain on track to achieve our 2017 financial objectives with record revenue, record Adjusted OIBDA results, and record subscriber levels.”

Q2 2017 Business Outlook

Based on the performance of subscribers following WrestleMania, the Company is raising the low end of its projected range of subscribers for the second quarter. For the second quarter 2017, the Company projects average paid subscribers of at least 1.63 million. The Company also estimates second quarter 2017 Adjusted OIBDA of approximately $13 million to $17 million.2

WWE is unable to provide a reconciliation of second quarter guidance to GAAP measures as, at this time, WWE cannot accurately determine all of the adjustments that would be required.

2017 Perspective

The range of financial performance projected for the second quarter would result in Adjusted OIBDA for the first half of 2017 that is essentially flat to the prior year period. The Company anticipates significant year-over-year growth in Adjusted OIBDA over the second half of 2017.

WWE management continues to expect the Company to achieve another year of record revenue and has targeted Adjusted OIBDA of $100 million, which would be an all-time record (up approximately 25% from 2016 Adjusted OIBDA of $80.1 million).2

Comparability of Results

Our reported Operating income reflects several non-recurring items that impact comparability on a year-over-year basis. These included $5.6 million in expenses primarily related to certain legal matters and other contractual obligations and $2.1 million in film impairment charges. These items have been excluded from the Company’s Adjusted 2017 results. For the first quarter 2016, there were no such items that impacted year-over-year comparability.

A reconciliation of Q1 2017 Adjusted OIBDA to Operating income (GAAP) can be found in the supplemental schedules on pages 14-15 of this release.

Three Months Ended March 31, 2017 – Results by Region & Business Segment

Revenues increased 10% to $188.4 million from the prior year quarter with growth driven by the Company’s Live Events, Network and Television segments. North American revenues increased 12% ($16.2 million) primarily due to the performance of Live Events, particularly the staging of 19 additional events during the current quarter, growth of WWE Network subscribers and increased sales of branded merchandise. Higher rights fees in key content distribution agreements were offset by the impact of airing fewer episodes of the licensed reality series, Total Divas. Revenues from outside North America increased 3% ($1.1 million) primarily due to increased rights fees from television distribution agreements, particularly in the APAC region, and the growth of WWE Network subscribers. Revenues from the EMEA region declined on a year-over-year basis primarily due to lower sales of the Company’s franchise video game and the staging of fewer live events in the region. Changes in foreign exchange rates did not materially impact revenue or profit in the quarter.

Three Months Ended March 31, 2017 – Segment Performance Commentary

The year-over-year changes in the Company’s financial performance were driven by its Network, Television, Live Events, Licensing, and Corporate & Other business segments. A further discussion of key business segments is provided in the narrative below. Refer to our first quarter 2017 Form 10-Q for management’s discussion and analysis of financial condition and results of operations pertaining to all of our segments.

Media Division

Revenues from the Company’s Media division increased 8% to $118.6 million, primarily due to the growth of WWE Network and the contractual escalation of television rights fees, which were partially offset by the impact of airing fewer episodes of the licensed reality series, Total Divas (as described below).

Network revenues, which include revenue generated by WWE Network and pay-per-view, increased 15% to $46.5 million. WWE Network subscription revenue increased 14% to $43.7 million from $38.2 million in the prior year quarter based on a 16% year-over-year increase in average paid subscribers to 1.49 million.3

Network segment Operating income decreased to $12.7 million from $15.8 million in the prior year quarter reflecting a decline in segment OIBDA and an increase in depreciation and amortization. Network segment OIBDA decreased to $14.3 million from $15.8 million as growth in WWE Network subscription revenue was offset by the timing of higher expenses within the quarter to produce the Company’s live, in-ring and reality content, namely The U.K. Championship Tournament and Holy Foley!, respectively.

The Company continued to increase the global subscriber base of WWE Network, which had 1.57 million total paid subscribers (1.16 million U.S. paid subscribers and 0.41 million international paid subscribers) at the end of the first quarter, which represented a 16% increase from March 31, 2016.

WWE Network content, including pay-per-views, original series, NXT Takeover, and specials continued to drive viewer engagement. During the quarter, the Company introduced compelling new content for WWE Network, including live in-ring programs, such as the aforementioned UK Championship Tournament and NXT Takeover: San Antonio as well as new episodes of the weekly series 205 Live and WWE 24. The Company added more than 75 hours of original content to WWE Network’s featured programming and more than 500 hours of archival content, which resulted in an on-demand library of over 7,500 hours at quarter-end.

Television revenues increased 5% to $64.0 million from $60.7 million in the prior year quarter primarily due to contractual increases in key distribution agreements. Growth was partially offset by the impact of WWE’s reality series, Total Divas, which aired four episodes in the current year quarter as compared to 11 episodes in the prior year quarter.

Live Events

Live Event revenues increased 27% to $32.1 million primarily due to the staging of 17 additional events and a 10% increase in the average effective ticket price for the Company’s events.

There were 95 total events (excluding NXT) in the current quarter, consisting of 91 events in North America and 4 events in international markets, as compared to 78 events in the prior year quarter, consisting of 72 events in North America and 6 in international markets.

North American live event revenues increased 34% to $30.6 million from $22.8 million primarily due to the staging of 19 additional events and a 7% increase in the average ticket price to $51.15. Average attendance was essentially unchanged from the prior year quarter.

International live event revenue was $1.5 million as compared to $2.5 million in the prior year quarter. The staging of two fewer events during the quarter and a 48% reduction in average attendance to 4,000 was somewhat offset by a 92% increase in the average effective ticket price to $86.53. The year-over-year changes in average attendance and ticket prices were due, in part, to changes in the mix of territories and venues.

Consumer Products Division

Revenues from our Consumer Products division increased 5% to $35.1 million primarily due to higher sales of merchandise at the Company’s live events and on its e-commerce sites. Licensing revenues declined slightly from the prior year quarter with lower sales of the Company’s franchise video game in international markets.

Venue Merchandise revenues increased 29% to $7.1 million from $5.5 million in the prior year quarter primarily due to an increase in total attendance at the Company’s North American events.

WWE Shop revenues increased 16% to $7.9 million based on an 11% increase in the number of orders to approximately 173,000 and a 4% increase in revenue per order, reflecting effective promotion and enhanced product assortment.

Corporate and Other

Corporate and Other expenses increased to $58.9 million from $42.1 million in the prior year quarter. As defined, these expenses include corporate G&A expenses as well as Business Support costs, such as sales, marketing, and talent development costs, which are not allocated to specific segments. For the first quarter 2017, Corporate and Other included non-recurring expenses of $5.6 million primarily related to certain legal matters and other contractual obligations. Excluding these costs, Corporate and Other expenses increased $11.2 million primarily due to increases in stock compensation ($2.2 million) that derived from a rise in the Company’s stock price and increases in other expenses ($9.0 million) that reflected the timing of key strategic initiatives. For the remainder of the year, the Company expects lower Corporate and Other expenses than in the comparable 2016 period, excluding the potential impact of increased incentive compensation due to company over-performance or stock price appreciation.

Operating Income

Operating income decreased to $4.0 million from $22.0 million in the prior year quarter, reflecting a $9.0 million decrease in Adjusted OIBDA (as described below), $7.7 millionrelated to items that impacted the comparability of results on a year-over-year basis (as described on page 2 of this release), and a $1.3 million increase in depreciation and amortization. The Company’s Operating income margin was 2% as compared to 13% in the prior year quarter.

Adjusted Operating Income Before Depreciation and Amortization (Adjusted OIBDA)5

Adjusted OIBDA was $18.6 million as compared to $27.6 million in the prior year quarter. The $9.0 million decline was primarily due to the increase in Corporate & Other expense, which derived predominately from timing (as described above). Increased profits from the performance of Live Events and the monetization of video content partially offset the decline. Live Event profits rose $2.0 million with an increase in the number of events and corresponding strong growth in ticket revenue. Television and Network profits, on a combined basis, increased $1.0 million as the contractual escalation of key distribution agreements and growth in WWE Network subscriptions were partially offset by the timing of higher programming costs associated with the production of reality and live, in-ring content during the quarter. The Company’s Adjusted OIBDA margin decreased to 10% from 16% in the prior year quarter.

Cash Flows & Liquidity

Cash flows generated by operating activities were $3.0 million in the current year quarter as compared to $1.5 million in the prior year quarter as favorable changes in working capital more than offset the impact of lower operating performance.

Free Cash Flow increased $3.9 million from the prior year quarter reflecting the change in operating cash and a $2.4 million decrease in capital expenditures.

As of March 31, 2017, the Company held $270.7 million in cash and cash equivalents and short-term investments that reflected proceeds of the Company’s convertible note financing, and estimates debt capacity under its revolving line of credit of approximately $100 million.

About WWE

WWE, a publicly traded company (NYSE: WWE), is an integrated media organization and recognized leader in global entertainment. The Company consists of a portfolio of businesses that create and deliver original content 52 weeks a year to a global audience. WWE is committed to family friendly entertainment on its television programming, pay-per-view, digital media and publishing platforms. WWE programming reaches more than 650 million homes worldwide in 20 languages. WWE Network, the first-ever 24/7 over-the-top premium network that includes all live pay-per-views, scheduled programming and a massive video-on-demand library, is now available in almost all international markets other than the People’s Republic of China and embargoed countries. The Company is headquartered in Stamford, Conn., with offices in New York, Los Angeles, London, Mexico City, Mumbai, Shanghai, Singapore, Dubai, Munich and Tokyo.

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