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OFFON

WORLD WRESTLING ENTERTAINMENT, INC.

(WWE)
  Report
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World Wrestling Entertainment : ENTERTAINMENTINC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/31/2020 | 06:18am EDT

You should read the following discussion in conjunction with the consolidated financial statements and related notes included elsewhere in this report.

Our operations are organized around the following principal activities:

Media:

?The Media segment reflects the production and monetization of long-form and short-form video content across various platforms, including WWE Network, pay television, digital and social media, as well as filmed entertainment. Across these platforms, revenues principally consist of content rights fees associated with the distribution of our programming content, subscriptions to WWE Network, and advertising and sponsorships.

Live Events:

?Live events provide ongoing content for our media platforms. Live Event segment revenues consist primarily of ticket sales, including primary and secondary distribution, revenues from events for which we receive a fixed fee, as well as the sale of travel packages associated with the Company's global live events.

Consumer Products:

?The Consumer Products segment engages in the merchandising of WWE branded products, such as video games, toys and apparel, through licensing arrangements and direct-to-consumer sales. Revenues principally consist of royalties and licensee fees related to WWE branded products, and sales of merchandise distributed at our live events and through eCommerce platforms.

Results of Operation

The Company presents Adjusted OIBDA as the primary measure of segment profit (loss). The Company defines Adjusted OIBDA as operating income before depreciation and amortization, excluding stock-based compensation, certain impairment charges and other non-recurring material items. Adjusted OIBDA includes depreciation and amortization expenses directly related to supporting the operations of our segments, including content production asset amortization, depreciation and amortization of costs related to content delivery and technology assets utilized for our WWE Network, as well as amortization of right-of-use assets related to finance leases of equipment used to produce and broadcast our live events. The Company believes the presentation of Adjusted OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate segment performance and make decisions about allocating resources. Additionally, we believe that Adjusted OIBDA is a primary measure used by media investors, analysts and peers for comparative purposes.

Adjusted OIBDA is a non-GAAP financial measure and may be different than similarly titled non-GAAP financial measures used by other companies. A limitation of Adjusted OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in our business. Additionally, Adjusted OIBDA excludes stock-based compensation, a non-cash expense that may vary between periods with limited correlation to underlying operating performance, as well as other non-recurring material items. Adjusted OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA. See Note 3, Segment Information, in the accompanying consolidated financial statements for a reconciliation of Adjusted OIBDA to operating income for the periods presented.

Unallocated corporate general and administrative expenses largely relate to corporate functions such as finance, legal, human resources, facilities and information technology. These unallocated corporate general and administrative expenses will be shown, as applicable, as a reconciling item in tables where segment and consolidated results are both shown.


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Summary

In December 2019, an outbreak of a new strain of coronavirus ("COVID-19") began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. COVID-19 has resulted in restrictions, postponements and cancellations of various events, such as the relocation of WrestleMania 36 and the cancellation of ticketed events due to public health concerns. The impact of COVID-19 to our 2020 results had a greater impact on our live events and consumer products segments, which are highly dependent on ticket sales and purchases of merchandise by consumers at our live events. Our Media segment was impacted to a lesser extent since a large portion of these revenues are derived from contractual rights fees from our domestic and international distribution arrangements. We continue to deliver the weekly wrestling content associated with these arrangements (e.g. RAW, SmackDown and NXT) without ticketed audiences. We will monitor the developments of COVID-19 and actively manage our business to respond to the potential impacts. Additionally, please refer to Part II, Item 1A, Risk Factors, which provides a discussion of risk factors related to COVID-19.

Three Months Ended June 30, 2020 compared to Three Months Ended June 30, 2019

(dollars in millions)


The following tables present our consolidated results followed by our Adjusted
OIBDA results:

                                              Three Months Ended
                                                   June 30,            Increase
                                             2020             2019    (decrease)
Net revenues
Media                                     $     200.1        $ 197.0          2 %
Live Events                                       1.0           48.8       (98) %
Consumer Products                                22.3           23.1        (3) %
Total net revenues (1)                          223.4          268.9       (17) %
Operating expenses
Media                                            99.2          149.0       (33) %
Live Events                                       4.6           32.1       (86) %
Consumer Products                                13.6           16.3       (17) %
Total operating expenses (2)                    117.4          197.4       (41) %
Marketing and selling expenses
Media                                            15.6           18.9       (17) %
Live Events                                       0.9            4.3       (79) %
Consumer Products                                 1.0            1.7       (41) %
Total marketing and selling expenses (3)         17.5           24.9       (30) %
General and administrative expenses              22.0           23.6        (7) %
Depreciation and amortization                    10.8            5.9         83 %
Operating income                                 55.7           17.1        226 %
Interest expense                                  9.1            4.0        128 %
Other income, net                                 8.5            0.8        963 %
Income before income taxes                       55.1           13.9        296 %
Provision for income taxes                       11.3            3.5        223 %
Net income                                $      43.8        $  10.4        321 %

(1)Our consolidated net revenues decreased by $45.5 million, or 17%, in the current year quarter as compared to the prior year quarter. This decrease was driven by $50.2 million of lower ticket and merchandise sales from our live events due to the cancellation of ticketed events due to public health concerns as a result of COVID-19, coupled with the timing of our large-scale international event, Super ShowDown. These declines were partially offset by $63.9 million in incremental revenues primarily associated with the October 2019 renewal of our key domestic distribution agreements of our flagship programs, RAW and SmackDown. For further analysis, refer to Management's Discussion and Analysis of our business segments.

(2)Our consolidated operating expenses decreased by $80.0 million, or 41%, in the current year quarter as compared to the prior year quarter. This decrease was primarily driven by $34.9 million of lower content creation and event related costs due to the cancellation of ticketed events resulting from COVID-19 and the production of content from our training facility at a lower cost, coupled with the timing of our large-scale international event, Super ShowDown. The current year quarter also includes $6.7 million of lower management incentive and stock compensation costs, as well as the impact of various short-term cost reductions that were implemented as a result of COVID-19. For further analysis, refer to Management's Discussion and Analysis of our business segments.

(3)Our consolidated marketing and selling expenses decreased by $7.4 million, or 30%, in the current year quarter as compared to the prior year quarter. This decrease was primarily driven by $3.9 million of lower advertising and promotional costs due to the cancellation of ticketed events resulting from COVID-19, coupled with a decline of $1.5 million of management incentive and stock compensation costs. For further analysis, refer to Management's Discussion and Analysis of our business segments.


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                                                               Three Months Ended
                                                                    June 30,
                                                          2020                    2019
Reconciliation of Operating Income to Adjusted
OIBDA                                                         % of Rev                % of Rev
Operating income                                 $    55.7       25 %     $   17.1        6 %
Depreciation and amortization                         10.8        5 %          5.9        2 %
Stock-based compensation                               7.0        3 %         11.6        4 %
Other adjustments                                        -        - %            -        - %
Adjusted OIBDA                                   $    73.5       33 %     $   34.6       13 %


                         Three Months Ended
                              June 30,            Increase
                         2020            2019    (decrease)
Adjusted OIBDA
Media                 $      90.5      $   37.5        141 %
Live Events                 (4.2)          13.3      (132) %
Consumer Products             8.1           6.2         31 %
Corporate                  (20.9)        (22.4)          7 %
Total Adjusted OIBDA  $      73.5      $   34.6        112 %


Media

The following tables present the performance results and key drivers for our Media segment (dollars in millions, except where noted):


                                                          Three Months Ended
                                                               June 30,              Increase
                                                          2020          2019        (decrease)
Net Revenues
Network (including pay-per-view)                       $      49.4   $      51.8         (5) %
Core content rights fees (1)                                 132.9          69.0          93 %
Advertising and sponsorship                                   13.3          18.9        (30) %
Other (2)                                                      4.5          57.3        (92) %
Total net revenues                                     $     200.1   $     197.0           2 %

Operating Metrics
Number of paid WWE Network subscribers at period end     1,690,000     1,597,000           6 %
Domestic                                                 1,229,500     1,167,100           5 %
International (3)                                          460,500       429,900           7 %
Number of average paid WWE Network subscribers           1,661,400     1,687,600         (2) %
Domestic                                                 1,207,300     1,236,600         (2) %
International (3)                                          454,100       451,000           1 %


(1)Core content rights fees consist primarily of licensing revenues earned from the distribution of our flagship programs, RAW and SmackDown, as well as our NXT programming, through global broadcast, pay television and digital platforms.

(2)Other revenues within our Media segment reflect revenues earned from the distribution of other WWE content, including, but not limited to, certain live in-ring programming content in international markets, scripted, reality and other programming, as well as theatrical and direct-to-home video releases.

(3)Metrics reflect subscribers who are direct customers of WWE Network and estimated subscribers under licensed partner agreements, which have different economic terms for WWE Network.


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                                                               Three Months Ended
                                                                    June 30,
                                                          2020                    2019
Reconciliation of Operating Income to Adjusted
OIBDA                                                         % of Rev                % of Rev
Operating income                                 $    81.6       41 %     $   26.9       14 %
Depreciation and amortization                          3.8        2 %          2.1        1 %
Stock-based compensation                               5.1        3 %          8.5        4 %
Other adjustments                                        -        - %            -        - %
Adjusted OIBDA                                   $    90.5       45 %     $   37.5       19 %

Media net revenues increased by $3.1 million, or 2%, in the current year quarter as compared to the prior year quarter. Our core content rights fees increased by $63.9 million, or 93%, driven primarily by the October 2019 renewal of our key domestic distribution agreements of our flagship programs, RAW and SmackDown. These increases were partially offset by a decline in Other revenues of $52.8 million, or 92%, and lower sales of advertising and sponsorships of $5.6 million, or 30%, primarily driven by the timing of our large-scale international event, Super ShowDown, which occurred in June 2019 with no comparable event during the current year quarter. Network revenues, which includes revenues generated by WWE Network subscriptions and pay-per-view, declined by $2.4 million, or 5%, primarily due to $1.8 million of lower revenues driven by a decline in pay-per-view buys and, to a lesser extent, a decline in average paid subscribers. The domestic subscription pricing of WWE Network at June 30, 2020 is $9.99 per month with no minimum commitment.

Media Adjusted OIBDA as a percentage of revenues increased in the current year quarter as compared to the prior year quarter. This increase was driven by increased revenues of $63.9 million due to the renewals of our key domestic distribution agreements, as discussed above, coupled with a $11.5 million reduction in content creation and production related costs due to the cancellation of ticketed events resulting from COVID-19 and the production of content from our training facility at a lower cost. The current year quarter also includes the impact of various short-term cost reductions that were implemented as a result of COVID-19. These increases were partially offset by the timing of our large-scale international event, Super ShowDown.

Live Events

The following tables present the performance results and key drivers for our Live Events segment (dollars in millions, except where noted):

                                                  Three Months Ended
                                                       June 30,            Increase
                                                 2020            2019     (decrease)
Net Revenues
North American ticket sales                    $      -        $    33.6      (100) %
International ticket sales                            -              9.5      (100) %
Advertising and sponsorship                         0.3              0.8       (63) %
Other (1)                                           0.7              4.9       (86) %
Total net revenues                             $    1.0        $    48.8       (98) %

Operating Metrics (2)
Total live event attendance                           -          421,400      (100) %
Number of North American events                       -               53      (100) %
Average North American attendance                     -            5,820      (100) %

Average North American ticket price (dollars) $ - $ 94.56 (100) % Number of international events

                        -               23        100 %
Average international attendance                      -            4,910          - %

Average international ticket price (dollars) $ - $ 83.34 - %

(1)Other revenues within our Live Events segment primarily consists of the sale of travel packages associated with the Company's global live events and commission earned through secondary ticketing, as well as revenues from events for which the Company receives a fixed fee.

(2)Metrics exclude the events for our domestic and United Kingdom NXT brands. These are our developmental brands that typically conduct their events in smaller venues with lower ticket prices. We did not conduct any ticketed NXT events in the current year quarter as a result of COVID-19. We conducted 51 events with paid attendance of 43,200 and average ticket prices of $54.50 in the prior year quarter.


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                                                              Three Months Ended
                                                                   June 30,
                                                         2020                   2019
Reconciliation of Operating (Loss) Income to
Adjusted OIBDA                                              % of Rev                % of Rev
Operating (loss) income                          $  (4.5)     (450) %   $   12.4       25 %
Depreciation and amortization                           -         - %          -        - %
Stock-based compensation                              0.3        30 %        0.9        2 %
Other adjustments                                       -         - %          -        - %
Adjusted OIBDA                                   $  (4.2)     (420) %   $   13.3       27 %

Live Events net revenues, which include revenues from ticket sales and travel packages, decreased by $47.8 million, or 98%, in the current year quarter as compared to the prior year quarter. Revenues from our North American ticket sales decreased by $33.6 million, or 100%, due to the impact of 53 fewer events during the current year quarter, primarily due to the cancellation of ticketed events as a result of public health concerns related to COVID-19. Revenues from our international ticket sales decreased by $9.5 million, or 100%, due to the impact of 23 fewer events during the current year quarter, primarily due to the cancellation of ticketed events as a result of COVID-19.

Live Events Adjusted OIBDA as a percentage of revenues decreased in the current year quarter as compared to the prior year quarter. This decrease was primarily driven by the $43.1 million reduction in ticket sales for our global events as discussed above, partially offset by a $26.1 million reduction in event related costs due to the impact of fewer events.

Consumer Products

The following tables present the performance results and key drivers for our Consumer Products segment (dollars in millions, except where noted):

                                                      Three Months Ended
                                                           June 30,             Increase
                                                       2020         2019       (decrease)
Net Revenues
Consumer product licensing                          $       9.7   $     9.4           3 %
eCommerce                                                  12.6         6.6          91 %
Venue merchandise                                             -         7.1       (100) %
Total net revenues                                  $      22.3   $    23.1         (3) %

Operating Metrics Average eCommerce revenue per order (dollars) $ 58.36 $ 47.64 23 % Number of eCommerce orders

                              215,500     138,100          56 %
Venue merchandise domestic per capita spending
(dollars)                                           $         -   $   12.62       (100) %


                                                                Three Months Ended
                                                                     June 30,
                                                           2020                      2019
Reconciliation of Operating Income to Adjusted
OIBDA                                                            % of Rev                % of Rev
Operating income                                 $     7.6          34 %     $    5.2       23 %
Depreciation and amortization                            -           - %            -        - %
Stock-based compensation                               0.5           2 %          1.0        4 %
Other adjustments                                        -           - %            -        - %
Adjusted OIBDA                                   $     8.1          36 %     $    6.2       27 %

Consumer Products net revenues decreased by $0.8 million, or 3%, in the current year quarter as compared to the prior year quarter. Venue merchandise revenues decreased by $7.1 million, or 100%, driven by the cancellation of ticketed events in the current year quarter due to public health concerns as a result of COVID-19. This decline was partially offset by increased eCommerce revenues of $6.0 million, or 91%, primarily due to a 56% increase in the volume of online merchandise orders, coupled with a 23% increase in average revenue per order, which was driven, in part, by the introduction and redesign of new title belts.


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Consumer Products Adjusted OIBDA as a percentage of revenues increased in the current year quarter as compared to the prior year quarter. This increase was primarily driven by the $1.1 million decline in event related costs due to the cancellation of ticketed events as a result of COVID-19.

Corporate

Unallocated corporate general and administrative expenses largely relate to corporate administrative functions, including finance, investor relations, community relations, corporate communications, information technology, legal, human resources and our Board of Directors. The Company does not allocate these general and administrative expenses to its business segments.


                                                                  Three Months Ended
                                                                       June 30,
                                                             2020                   2019
Reconciliation of Operating Loss to Adjusted OIBDA              % of Rev                % of Rev
Operating loss                                       $ (29.0)      (13) %   $ (27.4)      (10) %
Depreciation and amortization                             7.0         3 %        3.8         1 %
Stock-based compensation                                  1.1         0 %        1.2         0 %
Other adjustments                                           -         - %          -         - %
Adjusted OIBDA                                       $ (20.9)       (9) %   $ (22.4)       (8) %

Corporate Adjusted OIBDA as a percentage of total revenues was essentially unchanged in the current year quarter as compared to the prior year quarter.

Depreciation and Amortization

(dollars in millions)

                                    Three Months Ended
                                         June 30,              Increase
                                       2020            2019   (decrease)
Depreciation and amortization  $      10.8            $ 5.9        83 %


Depreciation and amortization expense increased by $4.9 million, or 83%, in the current year quarter as compared to the prior year quarter, primarily driven by additional expenses of $2.8 million associated with the Company's workspace strategy plan, which includes the amortization related to the right-of-use asset for the Company's new global headquarters lease, which commenced on July 1, 2019, and the impact of other prior year capital expenditures.

Interest Expense

(dollars in millions)

                        Three Months Ended
                             June 30,              Increase
                           2020            2019   (decrease)
Interest expense  $       9.1             $ 4.0        128 %

Interest expense increased by $5.1 million in the current year quarter as compared to the prior year quarter, primarily driven by expense of $4.2 million associated with the Company's new global headquarters lease, which commenced on July 1, 2019 and is accounted for as a finance lease. The remaining portion of interest expense relates primarily to interest and amortization associated with our convertible notes, the revolving credit facility, other finance leases, mortgage and aircraft financing.

Other Income, Net

(dollars in millions)

                         Three Months Ended
                              June 30,              Increase
                            2020            2019   (decrease)
Other income, net  $       8.5             $ 0.8        963 %

Other income, net is comprised of interest income, gains and losses recorded on our equity investments, realized translation gains and losses, and rental income. The increase of $7.7 million in the current year quarter is driven by the recognition of an unrealized holding gain of $7.9 million resulting from valuation adjustments in our marketable equity investments, primarily DraftKings.


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As the underlying stock prices of our marketable equity investments fluctuate,
the Company is exposed to future earnings volatility to the extent we continue
to hold these investments.

Income Taxes

(dollars in millions)

                                 Three Months Ended
                                      June 30,              Increase
                                2020               2019    (decrease)
Provision for income taxes  $     11.3            $ 3.5         223 %
Effective tax rate                  20 %             25 %

The decrease in the effective tax rate in the current year quarter as compared to the prior year quarter was primarily driven by increased deductions associated with foreign derived intangible income (FDII).


?

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Six Months Ended June 30, 2020 compared to Six Months Ended June 30, 2019

(dollars in millions)


The following tables present our consolidated results followed by our Adjusted
OIBDA results:

                                             Six Months Ended
                                                 June 30,           Increase
                                             2020          2019    (decrease)
Net revenues
Media                                     $    456.7      $ 332.4         37 %
Live Events                                     18.5         75.0       (75) %
Consumer Products                               39.2         43.9       (11) %
Total net revenues (1)                         514.4        451.3         14 %
Operating expenses
Media                                          243.6        247.5        (2) %
Live Events                                     22.6         54.7       (59) %
Consumer Products                               26.6         30.6       (13) %
Total operating expenses (2)                   292.8        332.8       (12) %
Marketing and selling expenses
Media                                           34.5         36.7        (6) %
Live Events                                      3.7          8.1       (54) %
Consumer Products                                2.0          3.2       (38) %

Total marketing and selling expenses (3) 40.2 48.0 (16) % General and administrative expenses

             50.7         47.9          6 %
Depreciation and amortization                   21.7         12.3         76 %
Operating income                               109.0         10.3        958 %
Interest expense                                17.3         10.3         68 %
Other income, net                              (1.9)          2.6      (173) %
Income before income taxes                      89.8          2.6      3,354 %
Provision for income taxes                      19.8          0.6      3,200 %
Net income                                $     70.0      $   2.0      3,400 %

(1)Our consolidated net revenues increased by $63.1 million, or 14%, in the current year period as compared to the prior year period. This increase was primarily driven by $129.0 million in incremental revenues primarily associated with the October 2019 renewal of our key domestic distribution agreements of our flagship programs, RAW and SmackDown. This increase was partially offset by a decline of $60.7 million of lower ticket and merchandise sales due to the staging of 124 fewer events, including the cancellation of ticketed events due to public health concerns as a result of COVID-19. For further analysis, refer to Management's Discussion and Analysis of our business segments.

(2)Our consolidated operating expenses decreased by $40.0 million, or 12%, in the current year period as compared to the prior year period. This decrease was primarily driven by $24.5 million of lower content creation and event related costs due to the cancellation of ticketed events resulting from COVID-19 and the production of content from our training facility at a lower cost. The current year period also includes $6.2 million of lower management incentive and stock compensation costs, as well as the impact of various short-term cost reductions that were implemented as a result of COVID-19. For further analysis, refer to Management's Discussion and Analysis of our business segments.

(3)Our consolidated marketing and selling expenses decreased by $7.8 million, or 16%, in the current year period as compared to the prior year period. This decrease was primarily driven by $3.7 million of lower advertising and promotional costs due the cancellation of ticketed events resulting from COVID-19, coupled with a decline of $2.9 million of management incentive and stock compensation costs. For further analysis, refer to Management's Discussion and Analysis of our business segments.


                                                              Six Months Ended
                                                                  June 30,
                                                        2020                    2019
Reconciliation of Operating Income to
Adjusted OIBDA                                              % of Rev                % of Rev
Operating income                                $  109.0       21 %     $   10.3        2 %
Depreciation and amortization                       21.7        4 %         12.3        3 %
Stock-based compensation                            20.1        4 %         24.4        5 %
Other adjustments                                      -        - %            -        - %
Adjusted OIBDA                                  $  150.8       29 %     $   47.0       10 %


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                        Six Months Ended
                            June 30,         Increase
                         2020       2019    (decrease)
Adjusted OIBDA
Media                 $    193.1  $   66.0        193 %
Live Events                (6.8)      14.1      (148) %
Consumer Products           11.9      12.2        (2) %
Corporate                 (47.4)    (45.3)        (5) %

Total Adjusted OIBDA $ 150.8 $ 47.0 221 %

Media

The following tables present the performance results and key drivers for our Media segment (dollars in millions, except where noted):


                                                           Six Months Ended
                                                               June 30,             Increase
                                                          2020          2019       (decrease)
Net Revenues
Network (including pay-per-view)                       $      92.9   $      98.8        (6) %
Core content rights fees (1)                                 266.1         137.1         94 %
Advertising and sponsorship                                   30.7          29.8          3 %
Other (2)                                                     67.0          66.7          0 %
Total net revenues                                     $     456.7   $     332.4         37 %

Operating Metrics Number of paid WWE Network subscribers at period end 1,690,000 1,597,000 6 % Domestic

                                                 1,229,500     1,167,100          5 %
International (3)                                          460,500       429,900          7 %
Number of average paid WWE Network subscribers           1,561,300     1,636,200        (5) %
Domestic                                                 1,130,400     1,197,000        (6) %
International (3)                                          430,900       439,200        (2) %


(1)Core content rights fees consist primarily of licensing revenues earned from the distribution of our flagship programs, RAW and SmackDown, as well as our NXT programming, through global broadcast, pay television and digital platforms.

(2)Other revenues within our Media segment reflect revenues earned from the distribution of other WWE content, including, but not limited to, certain live in-ring programming content in international markets, scripted, reality and other programming, as well as theatrical and direct-to-home video releases.

(3)Metrics reflect subscribers who are direct customers of WWE Network and estimated subscribers under licensed partner agreements, which have different economic terms for WWE Network.


                                                              Six Months Ended
                                                                  June 30,
                                                        2020                    2019
Reconciliation of Operating Income to
Adjusted OIBDA                                              % of Rev                % of Rev
Operating income                                $  170.9       37 %     $   43.2       13 %
Depreciation and amortization                        7.7        2 %          4.9        1 %
Stock-based compensation                            14.5        3 %         17.9        5 %
Other adjustments                                      -        - %            -        - %
Adjusted OIBDA                                  $  193.1       42 %     $   66.0       20 %

Media net revenues increased by $124.3 million, or 37%, in the current year period as compared to the prior year period. Our core content rights fees increased by $129.0 million, or 94%, driven primarily by the October 2019 renewal of our key domestic distribution agreements of our flagship programs, RAW and SmackDown. This increase was partially offset by a decline in Network revenues, which includes revenues generated by WWE Network subscriptions and pay-per-view, of $5.9 million, or 6%, primarily due to a decline in average paid subscribers. The domestic subscription pricing of WWE Network at June 30, 2020 is $9.99 per month with no minimum commitment.


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Media Adjusted OIBDA as a percentage of revenues increased in the current year period as compared to the prior year period. This increase was driven by increased revenues of $129.0 million due to the renewals of our key domestic distribution agreements, as discussed above.

Live Events

The following tables present the performance results and key drivers for our Live Events segment (dollars in millions, except where noted):

                                                 Six Months Ended
                                                     June 30,         Increase
                                                 2020       2019     (decrease)
Net Revenues
North American ticket sales                    $    15.2  $    57.7       (74) %
International ticket sales                           0.2        9.7       (98) %
Advertising and sponsorship                          0.4        1.2       (67) %
Other (1)                                            2.7        6.4       (58) %
Total net revenues                             $    18.5  $    75.0       (75) %

Operating Metrics (2)
Total live event attendance                      259,000    850,000       (70) %
Number of North American events                       41        143       (71) %
Average North American attendance                  6,320      5,150         23 %

Average North American ticket price (dollars) $ 53.46 $ 70.03 (24) % Number of international events

                         1         23       (96) %
Average international attendance                       -      4,910      (100) %

Average international ticket price (dollars) $ - $ 83.39 (100) %

(1)Other revenues within our Live Events segment primarily consists of the sale of travel packages associated with the Company's global live events and commission earned through secondary ticketing, as well as revenues from events for which the Company receives a fixed fee.

(2)Metrics exclude the events for our domestic and United Kingdom NXT brands. These are our developmental brands that typically conduct their events in smaller venues with lower ticket prices. We conducted 44 ticketed NXT events with paid attendance of 40,900 and average ticket prices of $37.36 in the current year period as compared to 106 events with paid attendance of 84,600 and average ticket prices of $45.09 in the prior year period.


                                                              Six Months Ended
                                                                  June 30,
                                                        2020                   2019
Reconciliation of Operating (Loss) Income to
Adjusted OIBDA                                             % of Rev                % of Rev
Operating (loss) income                         $  (7.7)      (42) %   $   12.2       16 %
Depreciation and amortization                          -         - %          -        - %
Stock-based compensation                             0.9         5 %        1.9        3 %
Other adjustments                                      -         - %          -        - %
Adjusted OIBDA                                  $  (6.8)      (37) %   $   14.1       19 %

Live Events net revenues, which include revenues from ticket sales and travel packages, decreased by $56.5 million, or 75%, in the current year period as compared to the prior year period. Revenues from our North American ticket sales decreased by $42.5 million, or 74%, due to the impact of 102 fewer events in the current year period, largely driven by the cancellation of ticketed events as a result of COVID-19. Revenues from our international ticket sales decreased by $9.5 million, or 98%, due to the impact of 22 fewer events in the current year period, largely driven by the cancellation of ticketed events as a result of COVID-19. The remaining reduction in the number of global live events resulted from the Company's ongoing efforts to optimize the profitability of our touring schedule.

Live Events Adjusted OIBDA as a percentage of revenues decreased in the current year period as compared to the prior year period. This decrease was primarily driven by the $52.0 million reduction in ticket sales for our global events, as discussed above, partially offset by a $29.6 million reduction in event related costs due to the cancellation of ticketed events resulting from COVID-19.


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Consumer Products

The following tables present the performance results and key drivers for our Consumer Products segment (dollars in millions, except where noted):

                                                      Six Months Ended
                                                          June 30,            Increase
                                                      2020        2019       (decrease)
Net Revenues
Consumer product licensing                          $    17.4   $    18.8         (7) %
eCommerce                                                18.6        13.2          41 %
Venue merchandise                                         3.2        11.9        (73) %
Total net revenues                                  $    39.2   $    43.9        (11) %

Operating Metrics Average eCommerce revenue per order (dollars) $ 55.18 $ 47.07 17 % Number of eCommerce orders

                            335,600     279,300          20 %
Venue merchandise domestic per capita spending
(dollars)                                           $   10.41   $   10.82         (4) %


                                                              Six Months Ended
                                                                  June 30,
                                                        2020                    2019
Reconciliation of Operating Income to
Adjusted OIBDA                                              % of Rev                % of Rev
Operating income                                $   10.5       27 %     $   10.2       23 %
Depreciation and amortization                          -        - %            -        - %
Stock-based compensation                             1.4        4 %          2.0        5 %
Other adjustments                                      -        - %            -        - %
Adjusted OIBDA                                  $   11.9       30 %     $   12.2       28 %

Consumer Products net revenues decreased by $4.7 million, or 11%, in the current year period as compared to the prior year period. Venue merchandise revenues decreased by $8.7 million, or 73%, primarily driven by the cancellation of ticketed events in the current year period due to public health concerns as a result of COVID-19. This decline was partially offset by increased eCommerce revenues of $5.4 million, or 41%, primarily due to a 20% increase in the volume of online merchandise orders, coupled with a 17% increase in average revenue per order.

Consumer Products Adjusted OIBDA as a percentage of revenues was essentially unchanged in the current year period as compared to the prior year period.

Corporate

Unallocated corporate general and administrative expenses largely relate to corporate administrative functions, including finance, investor relations, community relations, corporate communications, information technology, legal, human resources and our Board of Directors. The Company does not allocate these general and administrative expenses to its business segments.


                                                                   Six Months Ended
                                                                       June 30,
                                                             2020                   2019
Reconciliation of Operating Loss to Adjusted OIBDA              % of Rev                % of Rev
Operating loss                                       $ (64.7)      (13) %   $ (55.3)      (12) %
Depreciation and amortization                            14.0         3 %        7.4         2 %
Stock-based compensation                                  3.3         1 %        2.6         1 %
Other adjustments                                           -         - %          -         - %
Adjusted OIBDA                                       $ (47.4)       (9) %   $ (45.3)      (10) %

Corporate Adjusted OIBDA as a percentage of total revenues was essentially unchanged in the current year period as compared to the prior year period.


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Depreciation and Amortization

(dollars in millions)

                                    Six Months Ended
                                        June 30,            Increase
                                     2020          2019    (decrease)

Depreciation and amortization $ 21.7 $ 12.3 76 %

Depreciation and amortization expense increased by $9.4 million, or 76%, in the current year period as compared to the prior year period, primarily driven by additional expenses of $5.8 million associated with Company's workspace strategy plan, which includes the amortization related to the right-of-use asset for the Company's new global headquarters lease, which commenced on July 1, 2019, and the impact of other prior year capital expenditures.

Interest Expense

(dollars in millions)

                       Six Months Ended
                           June 30,            Increase
                        2020          2019    (decrease)
Interest expense  $     17.3         $ 10.3        68 %

Interest expense increased by $7.0 million in the current year period as compared to the prior year period, primarily driven by expense of $8.4 million associated with the Company's new global headquarters lease, which commenced on July 1, 2019 and is accounted for as a finance lease. The prior year period included additional nonrecurring interest expense of $1.4 million related to our convertible notes. The remaining portion of interest expense relates primarily to interest and amortization associated with our convertible notes, the revolving credit facility, other finance leases, mortgage and aircraft financing.

Other (Expense) Income, Net

(dollars in millions)

                                  Six Months Ended
                                      June 30,            Increase
                                    2020          2019   (decrease)

Other (expense) income, net $ (1.9) $ 2.6 (173) %

Other (expense) income, net is comprised of interest income, gains and losses recorded on our equity investments, realized translation gains and losses, and rental income. The decline of $4.5 million in the current year period as compared to the prior year period is primarily driven by impairment charges of $11.5 million on our investments in an apparel and lifestyle brand and a themed attraction touring company resulting from significant adverse changes in the economic and market conditions caused by COVID-19 combined with lower sales forecasts, partially offset by the recognition of a net unrealized holding gain of $7.7 million resulting from a valuation adjustment in our marketable equity investments, primarily DraftKings.


As the underlying stock prices of our marketable equity investments fluctuate,
the Company is exposed to future earnings volatility to the extent we continue
to hold these investments.

Income Taxes

(dollars in millions)

                                 Six Months Ended
                                     June 30,            Increase
                                2020            2019    (decrease)
Provision for income taxes  $    19.8          $ 0.6        3,200 %
Effective tax rate                 22 %           20 %

The effective tax rate in the current year period of 22% approximates the Company's currently projected annual effective tax rate for the year ended December 31, 2020, excluding the impact of any discrete, non-recurring tax items.


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Liquidity and Capital Resources

We had cash and cash equivalents and short-term investments of $547.9 million and $250.5 million as of June 30, 2020 and December 31, 2019, respectively. Our short-term investments consist primarily of U.S. Treasury securities, corporate bonds, municipal bonds, including pre-refunded municipal bonds, and government agency bonds. Our debt balance totaled $414.8 million and $214.4 million as of June 30, 2020 and December 31, 2019, respectively, and includes the carrying value of $191.6 million and $188.7 million related to our convertible senior notes due 2023 as of June 30, 2020 and December 31, 2019, respectively.

The COVID-19 pandemic has negatively impacted the global economy, disrupted business operations and created significant volatility and disruption to financial markets. Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy as a whole. The extent and duration of the pandemic could continue to disrupt global markets and may affect our ability to generate cash from operations. Additionally, please refer to Part II, Item 1A, Risk Factors, which provides a discussion of risk factors related to COVID-19.

In order to preserve sufficient liquidity during these uncertain times, the Company has delayed construction on its new headquarters office space. The Company did not make any repurchases of common stock under our approved $500.0 million share repurchase program, which was temporarily suspended in April 2020. We may resume repurchases under this program, with any such repurchases being executed opportunistically, i.e. when the purchase price is below the Company's intrinsic value as conservatively estimated by management, subject to the Company's business outlook and liquidity at such time as well as whether share repurchases compare favorably to other capital allocation alternatives. To further strengthen the Company's liquidity, as a precautionary measure, on April 16, 2020, the Company borrowed $200.0 million under its Revolving Credit Facility. We believe that this added liquidity combined with our existing cash and cash equivalents and short-term investment balances, along with cash generated from operations, will be sufficient to meet our ongoing operating requirements for at least the next twelve months, inclusive of dividend payments, debt service, content production activities, and planned capital expenditures.

As it relates to our Convertible Notes, which pursuant to the terms are currently convertible, we believe that if note holders elected to convert their notes within the next twelve months, the Company has sufficient means to settle the Convertible Notes using any combination of existing cash and cash equivalents and investment balances, cash generated from operations or through the issuance of shares.

Debt Summary and Borrowing Capacity

The Company has $215.0 million aggregate principal amount of 3.375% convertible senior notes (the "Convertible Notes") due December 15, 2023. See Note 13, Convertible Debt, and Note 5, Earnings Per Share, in the Notes to Consolidated Financial Statements for further information on the Convertible Notes, including the dilutive nature of the Convertible Notes.

On May 24, 2019, the Company entered into an amended and restated $200.0 million senior unsecured revolving credit facility with a syndicated group of banks, with JPMorgan Chase Bank, N.A. acting as Administrative Agent (the "Revolving Credit Facility"). The Revolving Credit Facility has a maturity date of May 24, 2024. On April 16, 2020, as a precautionary measure to further strengthen liquidity due to the impact of COVID-19, the Company borrowed $200.0 million under its Revolving Credit Facility. As of June 30, 2020, the Company was in compliance with the provisions of our Revolving Credit Facility and there was $200.0 million outstanding.

In September 2016, the Company acquired land and a building located in Stamford, Connecticut adjacent to our production facility. In connection with the acquisition, we assumed future obligations under a loan agreement, in the principal amount of $23.0 million, which loan is secured by a mortgage on the property. Pursuant to the loan agreement, the assets of WWE Real Estate, a subsidiary of the Company, represent collateral for the underlying mortgage, therefore these assets will not be available to satisfy debts and obligations due to any other creditors of the Company. As of June 30, 2020 and December 31, 2019, the amounts outstanding of the mortgage were $22.3 million and $22.5 million, respectively.

In 2013, the Company entered into a $31.6 million promissory note (the "Aircraft Note") with Citizens Asset Finance, Inc., for the purchase of a 2007 Bombardier Global 5000 aircraft and refurbishments. In August 2017, the Aircraft Note was assigned to Fifth Third Equipment Finance Company. The Aircraft Note is secured by a first priority perfected security interest in the purchased aircraft. As of June 30, 2020 and December 31, 2019, the amounts outstanding under the Aircraft Note were $0.8 million and $3.2 million, respectively.

Cash Flows from Operating Activities

Cash generated from operating activities was $140.7 million in the six months ended June 30, 2020, as compared to cash used in operating activities of $0.9 million for the corresponding period in the prior year. The $141.6 million increase in the current year period was primarily driven by improved operating performance, including the renewal of our key domestic distribution agreements of our flagship programs, RAW and SmackDown, coupled with changes in our working capital associated with the timing of collections of accounts receivable.


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In the current year period, we spent $14.7 million on content production activities, including Total Bellas Seasons 5 and 6, Miz & Mrs. Season 2, Rumble, and various programs for WWE Network, as compared to $15.7 million in the prior year period. We anticipate spending approximately $15 million to $25 million on content production activities during the remainder of the current year. We received content production incentives of $0.4 million in the current year period, as compared to $0.7 million received in the prior year period. We anticipate receiving approximately $15 million to $20 million of content production related incentives during the remainder of the year.

Our accounts receivable represents a significant portion of our current assets and relate principally to a limited number of distributors and licensees. At June 30, 2020, our largest receivable balance from customers was 51% of our gross accounts receivable. Changes in the financial condition or operations of our distributors, customers or licensees may result in increased delayed payments or non-payments which would adversely impact our cash flows from operating activities and/or our results of operations. We believe credit risk with respect to accounts receivable is limited due to the generally high credit quality of the Company's major customers.

Cash Flows from Investing Activities

Cash provided by investing activities was $21.2 million in the six months ended June 30, 2020, as compared to cash used of $42.5 million in the prior year period. During the current year period, we received proceeds from the maturities of our short-term investments of $67.7 million and purchased $31.0 million of new investments, as compared to proceeds of $58.8 million and purchases of $63.6 million in the prior year period. Capital expenditures decreased by $21.3 million in the current year period. The prior year period included additional spending to support the Company's workplace and technology related strategic initiatives. Due to the uncertainty created from the COVID-19 pandemic, we have temporarily delayed construction activity on the Company's new global headquarters space in Stamford, Connecticut. Capital expenditures for the remainder of the current year are estimated to range between $25 million and $35 million.

Cash Flows from Financing Activities

Cash provided by financing activities was $172.2 million for the six months ended June 30, 2020, as compared to cash used of $25.8 million for the prior year period. The Company received proceeds of $200.0 million from borrowings under the Revolving Credit Facility during the current year period. The Company made dividend payments of $18.6 million and $18.7 million during the six months ended June 30, 2020 and 2019, respectively. Additionally, the Company made employee payroll withholding tax payments of $2.6 million in the current year period related to the net settlement upon vesting of employee equity awards.

Contractual Obligations

Other than for obligations in the ordinary course of business, there have been no significant changes to our contractual obligations that were previously disclosed in our Report on Form 10-K for the fiscal year ended December 31, 2019.

Application of Critical Accounting Policies

Other than the revisions to our content production asset accounting policy, as disclosed in Note 9, Content Production Assets, Net, in the Notes to Consolidated Financial Statements, there have been no significant changes to our critical accounting policies that were previously disclosed in our Report on Form 10-K for our fiscal year ended December 31, 2019 or in the methodology used in formulating these significant judgments and estimates that affect the application of these policies.

Recent Accounting Pronouncements

The information set forth under Note 2 to the Consolidated Financial Statements under the caption "Recent Accounting Pronouncements" is incorporated herein by reference.


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Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain statements that are forward-looking and are not based on historical facts. When used in this Form 10-K and our other SEC filings, our press releases and comments made in earnings calls, investor presentations or otherwise to the public, the words "may," "will," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or the performance by us to be materially different from future results or performance expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Form 10-K and our other SEC filings, in press releases, earnings calls and other statements made by our authorized officers: (i) risks relating to the impact of the COVID-19 outbreak on our business, results of operations and financial condition; (ii) risks relating to entering, maintaining and renewing major distribution and event agreements; (iii) risks relating to a rapidly evolving media landscape; (iv) risks relating to WWE Network, including the risk that we are unable to attract, retain and renew subscribers; (v) our need to continue to develop creative and entertaining programs and events; (vi) our need to retain or continue to recruit key performers; (vii) the risk of a decline in the popularity of our brand of sports entertainment, including as a result of changes in the social and political climate; (viii) the possible unexpected loss of the services of Vincent K. McMahon; (ix) possible adverse changes in the regulatory atmosphere and related private sector initiatives; (x) the highly competitive, rapidly changing and increasingly fragmented nature of the markets in which we operate and/or our inability to compete effectively, especially against competitors with greater financial resources or marketplace presence; (xi) uncertainties associated with international markets including possible disruptions and reputational risks; (xii) our difficulty or inability to promote and conduct our live events and/or other businesses if we do not comply with applicable regulations; (xiii) our dependence on our intellectual property rights, our need to protect those rights, and the risks of our infringement of others' intellectual property rights; (xiv) risks relating to the complexity of our rights agreements across distribution mechanisms and geographical areas; (xv) the risk of substantial liability in the event of accidents or injuries occurring during our physically demanding events including, without limitation, claims alleging traumatic brain injury; (xvi) exposure to risks relating to large public events as well as travel to and from such events; (xvii) risks inherent in our feature film business; (xviii) a variety of risks as we expand into new or complementary businesses and/or make strategic investments and/or acquisitions; (xix) risks related to our computer systems and online operations; (xx) risks relating to privacy norms and regulations; (xxi) risks relating to a possible decline in general economic conditions and disruption in financial markets; (xxii) risks relating to our accounts receivable; (xxiii) risks relating to our indebtedness including our convertible notes; (xxiv) potential substantial liabilities if litigation is resolved unfavorably; (xxv) our potential failure to meet market expectations for our financial performance; (xxvi) through his beneficial ownership of a substantial majority of our Class B common stock, our controlling stockholder, Vincent K. McMahon, exercises control over our affairs, and his interests may conflict with the holders of our Class A common stock; (xxvii) a substantial number of shares are eligible for sale by Mr. McMahon and members of his family or trusts established for their benefit, and the sale, or the perception of possible sales, of those shares could lower our stock price; and (xxviii) risks related to the volatility of our Class A common stock. In addition, our dividend is dependent on a number of factors, including, among other things, our liquidity and historical and projected cash flow, strategic plan (including alternative uses of capital), our financial results and condition, contractual and legal restrictions on the payment of dividends (including under our revolving credit facility), general economic and competitive conditions and such other factors as our Board of Directors may consider relevant. Forward-looking statements made by the Company speak only as of the date made, are subject to change without any obligation on the part of the Company to update or revise them, and undue reliance should not be placed on these statements. For more information about risks and uncertainties associated with the Company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of this Form 10-Q and our other SEC filings, including, but not limited to, our annual report on Form 10-K.

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