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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-Q

____________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-16131

WORLD WRESTLING ENTERTAINMENT, INC.

(Exact name of Registrant as specified in its charter)

Delaware

04-2693383

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1241 East Main Street

Stamford, CT 06902

(203) 352-8600

(Address, including zip code, and telephone number, including area code,

of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

WWE

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x

Accelerated Filer  ¨

Non-Accelerated Filer  ¨

Smaller Reporting Company  ¨

Emerging Growth Company  ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No 

At May 3, 2022, the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 43,246,147 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 31,099,011.

TABLE OF CONTENTS

Page #

Part I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

2

Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021

2

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021

3

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

4

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021

5

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

6

Notes to Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures about Market Risk

34

Item 4. Controls and Procedures

34

Part II – OTHER INFORMATION

35

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6. Exhibits

36

Signatures

37

 

WORLD WRESTLING ENTERTAINMENT, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

March 31,

2022

2021

Net revenues

$

333,448

$

263,524

Operating expenses

180,685

142,154

Marketing and selling expenses

18,420

18,912

General and administrative expenses

32,227

26,560

Depreciation and amortization

9,707

10,842

Operating income

92,409

65,056

Interest expense

6,345

8,508

Other income, net

321

556

Income before income taxes

86,385

57,104

Provision for income taxes

20,344

13,272

Net income

$

66,041

$

43,832

Earnings per share: basic

$

0.88

$

0.57

Earnings per share: diluted

$

0.77

$

0.51

Weighted average common shares outstanding:

Basic

74,781

77,376

Diluted

87,575

85,686

Dividends declared per common share (Class A and B)

$

0.12

$

0.12


See accompanying notes to consolidated financial statements.

2


WORLD WRESTLING ENTERTAINMENT, INC.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2022

2021

Net income

$

66,041

$

43,832

Other comprehensive loss:

Foreign currency translation adjustments

(60)

(46)

Net unrealized holding losses on available-for-sale debt securities (net of tax benefit of $525 and $7, respectively)

(1,663)

(21)

Total other comprehensive loss

(1,723)

(67)

Comprehensive income

$

64,318

$

43,765


See accompanying notes to consolidated financial statements.

3


WORLD WRESTLING ENTERTAINMENT, INC.

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

As of

March 31,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

105,594

$

134,828

Short-term investments, net

342,219

280,957

Accounts receivable (net of allowance for doubtful accounts and returns
   of $5,157 and $5,155, respectively)

163,192

171,196

Inventory, net

9,200

8,033

Prepaid expenses and other current assets

30,716

32,242

Total current assets

650,921

627,256

Property and equipment, net

183,793

172,677

Finance lease right-of-use assets, net

308,549

313,360

Operating lease right-of-use assets, net

14,723

8,973

Content production assets, net

15,798

13,781

Investment securities

11,618

11,618

Deferred income tax assets, net

16,745

13,100

Other assets, net

43,201

43,302

Total assets

$

1,245,348

$

1,204,067

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$

435

$

430

Finance lease liabilities

12,465

12,190

Operating lease liabilities

3,783

4,755

Convertible debt

213,396

201,093

Accounts payable and accrued expenses

111,121

120,516

Deferred revenues

83,947

74,633

Total current liabilities

425,147

413,617

Long-term debt

21,173

21,284

Finance lease liabilities

370,948

374,681

Operating lease liabilities

11,547

5,063

Other non-current liabilities

10,689

8,162

Total liabilities

839,504

822,807

Commitments and contingencies

 

 

Stockholders' equity:

Class A common stock: ($0.01 par value; 180,000,000 shares authorized;
   43,242,334 and 43,732,977 shares issued and outstanding as of
   March 31, 2022 and December 31, 2021, respectively)

433

438

Class B convertible common stock: ($0.01 par value; 60,000,000 shares authorized;

   31,099,011 shares issued and outstanding)

311

311

Additional paid-in capital

386,562

409,884

Accumulated other comprehensive income

697

2,420

Retained earnings (accumulated deficit)

17,841

(31,793)

Total stockholders’ equity

405,844

381,260

Total liabilities and stockholders' equity

$

1,245,348

$

1,204,067


See accompanying notes to consolidated financial statements.

4


WORLD WRESTLING ENTERTAINMENT, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Three Months Ended March 31, 2022

Accumulated

Retained

Common Stock

Additional

Other

Earnings

Class A

Class B

Paid - in

Comprehensive

(Accumulated

Shares

Amount

Shares

Amount

Capital

Income

Deficit)

Total

Balance, December 31, 2021

43,733 

$

438 

31,099 

$

311 

$

409,884 

$

2,420 

$

(31,793)

$

381,260 

Cumulative effect of adopting ASU 2020-06

(26,383)

17,609 

(8,774)

Net income

66,041 

66,041 

Other comprehensive loss

(1,723)

(1,723)

Repurchases and retirements of common stock

(525)

(5)

(4,916)

(25,085)

(30,006)

Stock issuances, net

34 

1,239 

1,239 

Taxes paid related to net settlement upon vesting of equity awards

(32)

(32)

Cash dividends declared

(8,931)

(8,931)

Stock-based compensation

6,770 

6,770 

Balance, March 31, 2022

43,242 

$

433 

31,099 

$

311 

$

386,562 

$

697 

$

17,841 

$

405,844 

Three Months Ended March 31, 2021

Accumulated

Retained

Common Stock

Additional

Other

Earnings

Class A

Class B

Paid - in

Comprehensive

(Accumulated

Shares

Amount

Shares

Amount

Capital

Income

Deficit)

Total

Balance, December 31, 2020

46,695 

$

467 

31,099 

$

311 

$

424,758 

$

2,985 

$

(39,727)

$

388,794 

Net income

43,832 

43,832 

Other comprehensive loss

(67)

(67)

Repurchases and retirements of common stock

(1,498)

(15)

(13,625)

(61,360)

(75,000)

Stock issuances and other, net

60 

1 

1,962 

1,963 

Taxes paid related to net settlement upon vesting of equity awards

(629)

(629)

Cash dividends declared

(9,160)

(9,160)

Stock-based compensation

7,548 

7,548 

Balance, March 31, 2021

45,257 

$

453 

31,099 

$

311 

$

420,014 

$

2,918 

$

(66,415)

$

357,281 


See accompanying notes to consolidated financial statements.

5


WORLD WRESTLING ENTERTAINMENT, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2022

2021

OPERATING ACTIVITIES:

Net income

$

66,041

$

43,832

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization and impairments of content production assets

9,820

5,823

Depreciation and amortization

11,980

12,643

Other amortization

3,516

4,222

Stock-based compensation

9,618

7,980

Provision for (benefit from) deferred income taxes

297

(453)

Other non-cash adjustments

345

817

Cash provided by (used in) changes in operating assets and liabilities:

Accounts receivable

7,799

(32,864)

Inventory

(872)

282

Prepaid expenses and other assets

(1,388)

12,184

Content production assets

(11,714)

(5,771)

Accounts payable, accrued expenses and other liabilities

(9,278)

12,530

Deferred revenues

9,286

(1,319)

Net cash provided by operating activities

95,450

59,906

INVESTING ACTIVITIES:

Purchases of property and equipment and other assets

(21,487)

(6,167)

Purchases of short-term investments

(111,623)

(52,405)

Proceeds from sales and maturities of short-term investments

47,424

22,842

Purchase of investment securities

(210)

Net cash used in investing activities

(85,686)

(35,940)

FINANCING ACTIVITIES:

Repayment of long-term debt

(106)

(100,101)

Repayment of finance leases

(3,435)

(2,723)

Dividends paid

(8,931)

(9,160)

Proceeds from tenant improvement allowances

2,273

Taxes paid related to net settlement upon vesting of equity awards

(32)

(629)

Proceeds from issuance of stock and other

1,239

1,963

Repurchase and retirement of common stock

(30,006)

(75,000)

Net cash used in financing activities

(38,998)

(185,650)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(29,234)

(161,684)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

134,828

462,102

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

105,594

$

300,418

NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Purchases of property and equipment recorded in accounts payable
and accrued expenses (See Note 12)

$

21,352

$

2,696

 

See accompanying notes to consolidated financial statements.

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WORLD WRESTLING ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

(In thousands, except share data)

(Unaudited)

1. Basis of Presentation and Business Description

The accompanying consolidated financial statements include the accounts of WWE. “WWE” refers to World Wrestling Entertainment, Inc. and its subsidiaries, unless the context otherwise requires. References to “we,” “us,” “our” and the “Company” refer to WWE.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying consolidated financial statements are unaudited. All adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. All intercompany balances are eliminated in consolidation.

Certain information and note disclosures normally included in annual financial statements have been condensed or omitted from these interim financial statements; these financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2021.

We are an integrated media and entertainment company, principally engaged in the production and distribution of wrestling entertainment content through various channels, including our premium over-the-top network (“WWE Network”) monetized through license arrangements or through direct-to-consumer subscriptions, content rights agreements, premium live event programming, filmed entertainment, live events, licensing of various WWE themed products, and the sale of consumer products featuring our brands. 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, broadcast and pay television, digital and social media, as well as filmed entertainment. Across these platforms, revenues principally consist of content rights fees, subscriptions to WWE Network, and advertising and sponsorships. Effective March 18, 2021, the domestic monetization of WWE Network is generated from content license fees and certain shared sponsorship revenues from NBC Universal (“NBCU”). Media segment revenues for the three months ended March 31, 2021 include the upfront revenue recognition related to the delivery of certain intellectual property rights under this agreement.

Live Events:

Live events provide ongoing content for our media platforms. Live Event segment revenues consist primarily of ticket sales, 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. As a result of the global spread of the coronavirus pandemic (“COVID-19”), these revenues had been greatly limited from March 2020 through the first half of 2021. In July 2021, we resumed our domestic and international live event touring schedules.

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.

Note on the COVID-19 Pandemic

The global spread of COVID-19 and the various attempts to contain it resulted in restrictions, postponements and cancellations of various sports and other events and required us to cancel, postpone or relocate certain of our live events since March 2020. While restrictions have lessened and we have resumed our domestic and international live event touring schedules, COVID-19 and its variants continue to create significant uncertainty and the full extent of the impact will depend on numerous evolving factors that we can neither predict nor control, including the pandemic’s duration and severity and the governmental, business and individual responses to it. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business

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WORLD WRESTLING ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

(In thousands, except share data)

(Unaudited)

operations that are required by applicable governmental authorities and/or that we determine to be in the best interests of our employees, talent, customers, partners and stockholders. Any of the foregoing could have a material negative effect on our business and results of operations.

2. Significant Accounting Policies

Our significant accounting policies are detailed in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K for the year ended December 31, 2021. Except for the policies on the Company’s convertible debt, there have been no material changes to the Company’s significant accounting policies described in our Annual Report on Form 10-K. The Company’s policy on the accounting for its convertible debt was updated due to the Company’s adoption of Accounting Standards Update (“ASU”) No. 2020-06, as described below.

Operating Expenses

Operating expenses consist of our production costs associated with developing our content, venue rental and related costs associated with the staging of our live events, compensation costs for our talent, material and related costs associated with our consumer product merchandise sales, and costs associated with operating WWE Network. In addition, operating expenses include the operating costs associated with talent development, data analytics, data engineering, business strategy and real estate and facilities functions.

Included within Operating expenses are the following:

Three Months Ended

March 31,

2022

2021

Amortization and impairment of content production assets

$

9,820

$

5,823

Depreciation and amortization of WWE Network content delivery and technology assets

2,176

1,724

Amortization of right-of-use assets - finance leases of equipment

2,222

2,385

Depreciation on equipment used directly to support operations

166

147

Total depreciation and amortization included in operating expenses

$

14,384

$

10,079

Costs to produce our live event programming are expensed when the event is first broadcast, and are not included in the amortization table noted above. These costs include production-related costs, such as lighting, pyrotechnics and staging, associated with our weekly, in-ring televised programming as well as our premium live events, which are included as a component of our Media segment operating expenses. We also incur event-related costs, such as venue rental, security and travel, associated with our premium live events as well as our televised and non-televised events, which are included as a component of our Live Events segment operating expenses. Talent-related costs primarily associated with our premium live events and televised programming are included within our Media segment, while talent-related costs associated with our non-televised events are included within our Live Events segment.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). The new guidance eliminates two of the three models in ASC 470-20, Debt with Conversion and Other Options, that require separating embedded conversion features from convertible instruments. Specifically, the ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. The Company's existing 3.375% convertible senior notes due December 2023 ("Convertible Notes") are currently accounted for under the cash conversion feature model, which is one of the models being eliminated. As a result, after adopting the new guidance, the Company will no longer separately present in equity an embedded conversion feature of such debt. Instead, the Company will account for a convertible debt instrument wholly as debt unless (i) a convertible debt instrument contains features that require bifurcation as a derivative or (ii) a convertible debt instrument was issued at a substantial premium. Additionally, the ASU revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments (e.g., warrants) and embedded features (e.g., conversion features) that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. The new guidance also requires the use of the if-converted method when calculating diluted earnings per share (“EPS”) for convertible instruments and the treasury stock method should no longer be used. Under the new guidance, convertible instruments that may be settled in cash or shares (e.g., the Company’s Convertible Notes) are to be included in the calculation of diluted EPS if the effect is more dilutive, with no option for rebutting the presumption of share settlement based on stated policy or past experience. The ASU is effective for fiscal years beginning after December 15, 2021 (fiscal year 2022 for the Company) and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted the ASU effective January 1, 2022 under the modified retrospective approach. The cumulative effect of the change was recognized as an

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WORLD WRESTLING ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

(In thousands, except share data)

(Unaudited)

adjustment to the opening balance of retained earnings (accumulated deficit) at the date of adoption. The comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods. As a result of the adoption, the Company’s Convertible Notes are no longer bifurcated into a separate liability and equity component in the March 31, 2022 consolidated balance sheet. Rather, the Convertible Notes are presented as a single liability at amortized cost, net of unamortized debt issuance costs, on the March 31, 2022 consolidated balance sheet. Upon adoption of the ASU, the Company recorded a net increase of $12,068 to the Convertible Notes liability component, a $26,383 net decrease to the equity component (additional paid-in capital) and a net increase of $17,609 to retained earnings (accumulated deficit) for the cumulative effect of the adoption. The Company also recorded a net increase of $3,294 to deferred income tax assets. The adjustments were calculated based on the carrying amount of the Convertible Notes as if it had always been treated as a liability only. Furthermore, included in the above adjustments, are adjustments to the debt issuance costs contra-liability and equity (additional paid-in capital) components under the same premise (i.e., as if the total amount of debt issuance costs had always been treated as a contra-liability only). Lastly, the Company derecognized deferred income taxes associated with the Convertible Notes debt discount and adjusted deferred income taxes relative to unamortized debt issuance costs associated with the Convertible Notes. The Company also expects lower interest expense related to the Convertible Notes that will be recognized in future periods subsequent to adoption as a result of accounting for the Convertible Notes as a single liability measured at amortized cost. The following table summarizes the impact of the adoption of ASU 2020-06 on the Company’s opening consolidated balance sheet on January 1, 2022:

December 31, 2021

ASU 2020-06

January 1, 2022

As Reported

Adoption Impact

As Adjusted

Consolidated Balance Sheet line item:

Deferred income tax assets, net

$

13,100

$

3,294

$

16,394

Convertible debt (1)

$

201,093

$

12,068

$

213,161

Additional paid-in-capital (conversion feature, net of tax)

$

409,884

$

(26,383)

$

383,501

Accumulated deficit (cumulative effect adjustment, net of tax)

$

(31,793)

$

17,609

$

(14,184)

(1)Prior to adoption, the carrying value of the Convertible Debt represents the principal amount less the unamortized debt discount and unamortized debt issuance costs. After adoption, the carrying value of the Convertible Debt represents the principal amount less the unamortized debt issuance costs.

   

3. Segment Information

The Company currently classifies its operations into three reportable segments: Media, Live Events and Consumer Products. Segment information is prepared on the same basis that our chief operating decision maker manages the segments, evaluates financial results, and makes key operating decisions.

Unallocated corporate general and administrative expenses largely relate to corporate functions such as finance, investor relations, community relations, corporate communications, information technology, legal, facilities, human resources and our Board of Directors. 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.

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 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.

We do not disclose assets by segment information. We do not provide assets by segment information to our chief operating decision maker, as that information is not typically used in the determination of resource allocation and assessing business performance of each reportable segment.

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WORLD WRESTLING ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

(In thousands, except share data)

(Unaudited)

The following tables present summarized financial information for each of the Company’s reportable segments:

Three Months Ended

March 31,

2022

2021

Net revenues:

Media

$

278,119

$

242,027

Live Events

23,101

472

Consumer Products

32,228

21,025

Total net revenues

$

333,448

$

263,524

Adjusted OIBDA:

Media

$

128,217

$

106,599

Live Events

2,814

(4,308)

Consumer Products

11,873

6,670

Corporate

(31,170)

(25,083)

Total Adjusted OIBDA

$

111,734

$