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Key takeaways from WWE's 2015 Q4, full '15 financial results

WWE Financials

By Chris Harrington for WrestlingObserver.com

WWE Financials

 

WWE Financials

Key WWE Financials

WWE reported their Q4 2015 results Thursday with a strong quarter with net revenue of $166.2 million (+18% year-over-year quarterly growth). Full year 2015 net revenue is record $658.8 million (+21% year-over-year annual growth). Both operating income and net income were the highest since 2013, but still below the profitability of the 2007-2010 traditional pay-per-view era.

WWE had a strong quarter for live events, television rights, WWEShop and WWE Network revenue.

Live events were up due to higher domestic ticket prices, higher international attendance and the NXT UK tour. Television rights continue to grow due to built-in contract escalators which ensure that key agreements pay more quarter-over-quarter regardless of any declines in ratings (timing for certain programs, such asTotal Divas, can cause some quarterly fluctuations).  WWEShop had a big Q4 2015 with $10 million earned from 214,000 thousand online merchandise sales (compared to 172,000 in Q4 2014). WWE Network averaged the highest number of paid subscribers over Q4 2015 (1,237,000 subscribers) which lead to a monster $37.2 million quarter.

Still, not everything is rosy in WWE-land. 

WWE stock tumbled as the day continued and seems to trading about 7% off for the day. The financials included a $7.1 million hit in order to write-off the value of costs related to stalled media center expansion project dating back several years. Operating income, which had finally turned in 2015 following after nasty string of five consecutive negative quarters from Q4 2013 and Q4 2014, returned to negative territory this quarter with a $1.5 million loss. Analysts challenged WWE’s business outlook for next quarter including why the company switched which WWE Network metric they would provide guidance on (“projected average paid subscribers” instead of the “period ending paid subscribers” number).

Domestic WWE Network subscribers as of December 31, 2015 had dropped by 50,000 compared to September 30, 2015. One analyst even questioned how the company could plug holes in the roster given the injuries to top talent. Vince’s response: “By being creative. We’ll have an awesome WrestleMania.”

The always interesting portion of the conference calls is the Q&A session.

CFO and Chief Strategy officer George Barrios fielded most of the questions, though CEO Vince McMahon did chime in a few times. For most detailed questions, Barrios flat-out refused to go into specifics.

As usual, there was a lot of talk about the WWE Network. When asked whether WWE would consider partnering with another over-the-top service (whether high-profile like Hulu or Amazon Prime or more niche like MLB), Barrios gave the stock answer, “We’re open to all ideas as long as they make sense for our audience and our shareholders.” WWE wouldn’t reveal about specific subscription numbers for the India marketplace (which launched in November but cannot show live pay-per-views due to the existing India television deal). WWE wouldn’t reveal how many the Network Subscribers that active at the end of 2015 had been subscribers dating back to WrestleMania. Nor would they reveal the top ten international markets for the WWE Network beyond simply noting, “U.K. was a terrific market and we’ve seen good subscription levels for Canada.”

Regarding the WWE Network in Japan, Barrios did note that while the country remained a great place from a talent perspective, WWE didn’t see Japan in the same group as a strategic focus such as India, China, the Middle East or Latin America. The remaining large markets not yet launched for the WWE Network are China, Thailand and the Philippines and Barrios noted that investors would probably hear about plans for at least one or two of those markets in 2016.

Analysts asked about how much revenue was being generated by the NXT brand and what plans there was for further monetization. Barrios said that he wasn’t going to talk about specific product lines (imagine that WWE doesn’t want to open the can-of-worms on whether developmental NXT costs being offset by limited touring revenue) but noting that NXT “has a great social presence and is able to trend globally on Twitter.” He also noted that in some international markets, NXT was on pay-TV whereas domestically it was only available on Hulu and the WWE Network.

There was some questions about WWE television ratings dropping throughout 2015. Vince responded that while their ratings were down, they were down as much as the networks they were on. And that it’s important to look at the “total ecosystem” which includes YouTube and Social Media. Vince McMahon concluded, “Our audience is consuming our product when they want to and how they to.” Asked whether the company had seen a correlation between diminishing television ratings and higher WWE network churn, Barrios basically said that it’s an “eco-system of content” (there’s that word again!) and that when everything is working, it works together. He noted that on a “granular level” one-week’s rating would not have an impact on that week’s subscriber churn.

Listen to today's call and check out the timeline of our Twitter feed today for some detailed analysis of the call and other fun facts