Item 2.02Results of Operations and Financial Condition.
Preliminary Financial Results for the Second Quarter 2022
Our financial statements for the quarter ended June 30, 2022 are not yet
complete. Accordingly, we are presenting preliminary estimates of certain
financial results that we expect to report for the quarter ended June 30, 2022.
The following information is based on our internal management accounts and
reporting for the quarter ended June 30, 2022, as compared to our unaudited
results for the quarter ended June 30, 2021. We have not completed our customary
quarterly financial closing and review procedures.
The preliminary financial results included in this Current Report on Form 8-K
(“Report”) have been prepared by, and are the responsibility of, the management
of World Wrestling Entertainment, Inc. (the “Company” or “WWE”). The preliminary
financial results are subject to revision as we prepare our financial statements
and disclosure for the quarter ended June 30, 2022, and such revisions may be
significant. At this time, the Company does not anticipate that the matters
described under Item 8.01 of this Report will have an impact on the financial
results for the quarter ended June 30, 2022. In connection with our quarterly
financial closing and review procedures for the quarter ended June 30, 2022, we
may identify items that would require us to make adjustments to the preliminary
financial results set forth below. Accordingly, the final financial results and
other disclosures for the quarter ended June 30, 2022 may differ from the
preliminary financial results. The preliminary financial results should not be
viewed as a substitute for financial statements prepared in accordance with
generally accepted accounting principles (“GAAP”).
Based on the foregoing, our total revenues are currently expected to be
approximately $328 million for the quarter ended June 30, 2022, compared to $266
million for the quarter ended June 30, 2021. Operating income is expected to be
approximately $70 million for the quarter ended June 30, 2022, compared to $46
million for the quarter ended June 30, 2021. Adjusted OIBDA is expected to be
approximately $92 million for the quarter ended June 30, 2022, compared to $68
million for the quarter ended June 30, 2021; this expectation is above the high
end of our guidance of $80 to $90 million for the second quarter 2022.
The reconciliation of Adjusted OIBDA to Operating Income, the most directly
comparable GAAP financial measure to Adjusted OIBDA, follows (in millions):
Three Months Ended June 30,
2022
?(Preliminary) 2021
Adjusted OIBDA $ 92.0 $ 68.1
Depreciation & amortization (9.5) (10.9)
Stock-based compensation (11.0) (2.8)
Other operating income items (1.7) (8.1)
Operating income (U.S. GAAP Basis) $ 69.8 $ 46.3
Non-GAAP Measures
The Company defines Adjusted OIBDA as operating income excluding depreciation
and amortization, stock-based compensation expense, certain impairment charges
and other non-recurring material items that otherwise would impact the
comparability of results between periods. Adjusted OIBDA includes amortization
and depreciation 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 the 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 them to view the Company’s segment performance in
the same manner as the primary method used by management to evaluate segment
performance and to make decisions regarding the allocation of resources.
Additionally, the Company believes that Adjusted OIBDA is a primary measure used
by media investors, analysts and peers for comparative purposes.
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Adjusted OIBDA is a non-GAAP financial measure and may be different from
similarly titled non-GAAP financial measures used by other companies. WWE views
operating income as the most directly comparable GAAP measure. Adjusted OIBDA
should not be considered in isolation from, or as a substitute for, operating
income or other GAAP measures as an indicator of operating performance or
liquidity.
The information in this Item 2.02 is being furnished and shall not be deemed to
be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject
to the liabilities of that section, nor shall it be deemed to be incorporated by
reference into any of the Company’s filings under the Securities Act of 1933, as
amended (the “Securities Act”), or the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), whether made before or after the date hereof and
regardless of any general incorporation language in such filings, except to the
extent expressly set forth by specific reference in such a filing.
Item 5.02Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On July 22, 2022, Vincent K. McMahon informed the Company and its Board of
Directors (the “Board”) of his resignation from his positions as Chief Executive
Officer, Chairman and director of the Company, effective immediately.
On July 22, 2022, the Board appointed Stephanie McMahon, Chief Brand Officer,
interim Chief Executive Officer, interim Chairwoman and a director of the
Company, and Nick Khan, President, Chief Revenue Officer and a director of the
Company, to serve as the Company’s Co-Chief Executive Officers. The Board has
also appointed Stephanie McMahon to serve as the Company’s Chairwoman. The
appointments were made effective as of July 22, 2022.
Biographical and other information regarding Stephanie McMahon and Nick Khan is
included in the Company’s definitive proxy statement for its 2022 annual meeting
of stockholders, filed with the Securities and Exchange Commission on April 8,
2022 (the “Proxy Statement”), which information is incorporated herein by
reference. Stephanie McMahon is the daughter of Vince McMahon and the wife of
Paul Levesque, EVP, Talent Relations and a director of the Company. There are no
arrangements or understandings with any person pursuant to which either
Stephanie McMahon or Nick Khan were selected as Chairwoman or Co-Chief Executive
Officers. Any transactions directly or indirectly involving Stephanie McMahon or
Nick Khan that would be required to be disclosed pursuant to Item 404(a) of
Regulation S-K under the Exchange Act, are disclosed in the Proxy Statement. The
Company’s Compensation & Human Capital Committee is evaluating the compensation
arrangements of Stephanie McMahon and Nick Khan. Any material changes will be
disclosed in a subsequent filing.
Item 7.01Regulation FD Disclosure.
On July 25, 2022, the Company issued a press release announcing its preliminary
results for its second quarter ended June 30, 2022 as well as the resignation of
Vince McMahon and the appointments of Stephanie McMahon and Nick Khan, a copy of
which is attached as Exhibit 99.1 hereto.
The information in this Item 7.01, including Exhibit 99.1, is being furnished
and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange
Act, or otherwise subject to the liabilities of that section, nor shall it be
deemed to be incorporated by reference into any of the Company’s filings under
the Securities Act or the Exchange Act, whether made before or after the date
hereof and regardless of any general incorporation language in such filings,
except to the extent expressly set forth by specific reference in such a filing.
Item 8.01Other Events.
The Company has made a preliminary determination that certain payments that
Vince McMahon agreed to make during the period from 2006 through 2022 (including
amounts paid and payable in the future), and that were not recorded in the WWE
consolidated financial statements, should have been recorded as expenses in the
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quarters in which those agreements were made (the “Unrecorded Expenses”). As of
the date hereof, the Company has identified Unrecorded Expenses totaling
approximately $14.6 million. All payments underlying the Unrecorded Expenses
were or will be paid by Vince McMahon personally. While the Company continues to
evaluate the impact on previously reported financial statements, the Company has
preliminarily determined that, while the amount of Unrecorded Expenses was not
material in any individual period in which the Unrecorded Expenses arose, the
aggregate amount of Unrecorded Expenses would be material if recorded entirely
in the second quarter of 2022. Accordingly, the Company currently anticipates
that it will revise its previously issued financial statements to record the
Unrecorded Expenses in the applicable periods for the years ended December 31,
2019, 2020 and 2021, as well as the first quarter of 2022, when it issues its
financial statements for the second quarter of 2022. The Company is working with
the goal of issuing such financial statements by August 9, 2022, but there is no
assurance that it will be able to meet this deadline. In light of the Unrecorded
Expenses and related facts, the Company expects to conclude that its internal
control over financial reporting was not effective as a result of one or more
material weaknesses. The Company continues to evaluate the appropriate
accounting treatment for the Unrecorded Expenses, as well as its internal
control over financial reporting, and its ultimate conclusions on these topics
may differ from what the Company currently anticipates.
As previously announced, a special committee of independent members of the Board
is conducting an investigation into alleged misconduct by Vince McMahon, which
investigation remains ongoing.
The Company has also received, and may receive in the future, regulatory,
investigative and enforcement inquiries, subpoenas or demands arising from,
related to, or in connection with these matters.
Forward-Looking Statements
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. Statements in this Current Report on Form 8-K, or in oral statements made
from time to time by our representatives, regarding the impact of the management
changes, including the departure of Vince McMahon from the Company and the
appointment of Stephanie McMahon and Nick Khan as Co-Chief Executive Officers;
our expected financial results for the quarter ended June 30, 2022, including
our conclusions regarding the appropriate accounting treatment for the
Unrecorded Expenses and our internal control over financial reporting; the
scope, duration and findings of the ongoing investigation of Vince McMahon’s
conduct by the special committee of independent members of the Board; and
regulatory, investigative or enforcement inquiries, subpoenas or demands arising
from, related to, or in connection with these matters, including the conduct of
Vince McMahon and the Company’s disclosures and internal control over financial
reporting. In addition, when used in this Current Report on Form 8-K or in oral
statements made from time to time by our representatives, the words “may,”
“will,” “could,” “anticipate,” “plan,” “continue,” “project,” “intend,”
“estimate,” “believe,” “expect,” “outlook,” “target,” “goal” 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 forward-looking statements in this press
release are subject to uncertainties relating to the management changes,
including the departure of Vince McMahon from the Company and the appointment of
Stephanie McMahon and Nick Khan as Co-Chief Executive Officers; our expected
financial results for the quarter ended June 30, 2022, including our conclusions
regarding the appropriate accounting treatment for the Unrecorded Expenses and
our internal control over financial reporting; the scope, duration and findings
of the ongoing investigation of Vince McMahon’s conduct by the special committee
of independent members of the Board; regulatory, investigative or enforcement
inquiries, subpoenas or demands arising from, related to, or in connection with
these matters, including the conduct of Vince McMahon and the Company’s
disclosures and internal control over financial reporting; and reputational harm
to the Company with its stockholders, customers, talent and partners, which may
have adverse financial and operational impacts, among other factors. The
following additional factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
Current Report on Form 8-K: (i) risks relating to the ongoing coronavirus
(COVID-19) pandemic may continue to negatively affect world economies as
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well as our industry, business and results of operations; (ii) risks relating to
entering, maintaining and renewing major distribution agreements; (iii) risks
relating to a rapidly evolving and highly competitive media landscape; (iv)
risks relating to WWE Network; (v) risks related to the computer systems,
content delivery and online operations of WWE and our business partners; (vi)
risks relating to privacy norms and regulations; (vii) our need to continue to
develop creative and entertaining programs and events; (viii) our need to retain
or continue to recruit key performers; (ix) 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; (x) risks related to the
resignation of Vince McMahon; (xi) possible adverse changes in the regulatory
atmosphere and related private sector initiatives; (xii) 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; (xiii)
uncertainties associated with international markets including possible
disruptions and reputational risks; (xiv) our difficulty or inability to promote
and conduct our live events and/or other businesses if we do not comply with
applicable regulations; (xv) our dependence on our intellectual property rights,
our need to protect those rights, and the risks of our infringement of others’
intellectual property rights; (xvi) risks relating to the complexity of our
rights agreements across distribution mechanisms and geographical areas; (xvii)
the risk of substantial liability in the event of accidents or injuries
occurring during our physically demanding events; (xviii) exposure to risks
relating to large public events as well as travel to and from such events; (xix)
a variety of risks as we expand into new or complementary businesses and/or make
strategic investments and/or acquisitions; (xx) risks relating to our accounts
receivable; (xxi) risks related to our new leased corporate headquarter and
media production facilities; (xxii) risks related to litigation and other
actions, investigations or proceedings; (xxiii) a change in tax laws in key
jurisdictions could materially increase our tax expense; (xxiv) risks inherent
in our feature film business; (xxv) risks relating to a possible decline in
general economic conditions and disruption in financial markets, including any
resulting from COVID-19; (xxvi) risks relating to our indebtedness, including
our convertible notes; (xxvii) our potential failure to meet market expectations
for our financial performance; (xxviii) through his beneficial ownership of a
substantial majority of our Class B common stock, our controlling stockholder,
Vince McMahon, exercises control over our affairs, and his interests may
conflict with the holders of our Class A common stock; (xxix) risks associated
with our share repurchase program; (xxx) a substantial number of shares are
eligible for sale by Vince 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 (xxxi) risks related to
the volatility of our Class A common stock. Forward-looking statements made by
WWE speak only as of the date made, are subject to change without any obligation
on the part of WWE to update or revise them, and undue reliance should not be
placed on these statements. For more information about risks and uncertainties
associated with WWE’s business, please refer to the “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and “Risk Factors”
sections of WWE’s SEC filings, including, but not limited to, our annual report
on Form 10-K and quarterly reports on Form 10-Q.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits
99.1 Press Release of World Wrestling Entertainment, Inc., dated July 25,
2022.
104Cover Page Interactive Data File (embedded within the Inline XBRL documents).
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