World Wrestling (WWE) Q2 Earnings Top Estimates, Revenues Up
World Wrestling Entertainment, Inc. WWE posted second-quarter 2021 results, with the top line increasing year on year and the bottom line depicting a decline. Revenues missed the Zacks Consensus Estimate, while earnings surpassed the same.
The top-line performance of this integrated media and entertainment company gained from the return to live event touring and strong ticket demand, thanks to relaxation in pandemic-led restrictions. With the continuation of such trends, the company expects to boost consumption rates across platforms and maximize business opportunities. The company’s return to live events has been aiding merchandise sales. It is also gaining from increased monetization of content and higher digital views.
Although adjusted OIBDA declined in the reported quarter, key performance metrics demonstrated positive trends. The company incurred higher television production expenses to enhance the viewing experience of WWE’s fans. The company continues to realize better-than-expected television production efficiencies, stronger sponsorship sales as well as higher demand for live events. It is also focusing on driving fan engagement.
Q2 Performance Insights
This Stamford, CT-based company reported second-quarter adjusted earnings of 42 cents a share that surpassed the Zacks Consensus Estimate of 24 cents. The quarterly earnings exhibited a decline of nearly 6.7% from 45 cents a share reported in the prior-year quarter.
WWE’s net revenues of $265.6 million missed the Zacks Consensus Estimate of $266.3 million. The top line rose 19% year over year, mainly driven by rise in the Media segment revenue due to increased monetization of content. The top-line also gained from higher Live Event segment revenue reflecting ticket sales from WrestleMania, which was the company’s first ticketed live event since the first quarter of 2020.
A Look Into Margins
The company’s operating income came in at $46.3 million, down 17% year on year due to increase in television and event-related production expenses stemming from WWE ThunderDome and WrestleMania 37. Operating income was also dented by rise in personnel expenses, stemming from severance costs and higher compensation expenses as employees returned from furlough. The downsides were partly offset by rise in Media and Live Event segment revenues as well as reduction in stock compensation expenses. The company’s operating income margin of 17.4% fell 750 basis points from 24.9% in the year-ago quarter due to higher production and personnel expenses.
Adjusted OIBDA came in at $68.1 million, down 7% year on year. Adjusted OIBDA margin declined to 25.6% from 32.9% in the prior-year quarter. We note that the company measures adjusted OIBDA as operating income, which excludes depreciation and amortization, stock-based compensation, certain impairment charges and other non-recurring material items.
World Wrestling Entertainment, Inc. Price, Consensus and EPS Surprise
Media Division: Revenues in the Media division rose 17% to $233.9 million owing to higher monetization of content as well as higher sales of advertising and sponsorship across platforms. Rise in content monetization included higher content license fees related to the delivery of WWE Network content, the contractual escalation of core content rights fees from the distribution of the company’s flagship programs, Raw and SmackDown, as well as license fees from the distribution of original content.
Digital video views during the quarter were up 13% to 11.2 billion, while hours consumed were up 5% to 394 million across digital and social platforms.
Notably, revenues from core content rights fees increased 6.7% to $141.8 million. Network revenues (including pay-per-view) were up 24.5% to reach $61.4 million. Advertising and sponsorship revenues rose 40.6% to $18.7 million. Also, other media revenues improved to $11.9 million during the quarter from $4.5 million in the year-ago quarter.
Live Events: Revenues from Live Events came in at $9.2 million, up from $1 million in the year-ago quarter. The upside resulted from higher ticket sales as the company staged its marquee annual event, WrestleMania, over two-consecutive sold-out nights. WrestleMania was the company’s first ticketed-audience event held since the onset of the COVID-19 pandemic more than a year ago.
Consumer Products Division: The segment’s revenues were $22.5 million, up 1% year on year. The segment gained from higher toy royalties and venue merchandise sales resulting from WrestleMania. The upside was partly countered by reduced e-commerce merchandise sales due to tough year-on-year comparison, as e-commerce sales were higher in the prior year quarter.
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Other Financial Details
WWE ended the quarter with cash and cash equivalents of $322.6 million, net short-term investments of $120.2 million, long-term debt of $21.5 million and stockholders’ equity of $360.9 million. Moreover, cash flow generated from operating activities during the quarter amounted to $19.5 million, while free cash flow was $13.3 million. Management highlighted that it has no amounts outstanding under its revolving line of credit and estimates related to debt capacity of approximately $200 million.
The company paid out $27.9 million to shareholders during second-quarter 2021. This includes $18.8 million in share repurchases as well as $9.1 million in dividends paid. The company has approximately $323 million worth shares remaining under its existing share repurchase program.
WWE returned to live event touring earlier this month. It began selling tickets for live events beginning from Jul 16, 2021 through the end of September 2021. The five events that aired up until July 26 were nearly at or close to full capacity. Management expects the current demand for future events to remain at least on par with 2019. During the second quarter, the company combined WWE's television, digital and studio teams into one organization for a more unified content strategy and streamlined content production.
The company expects to incur spending associated with its new headquarters buildout, scheduled to start in the second-half of 2021. For 2021, the company anticipates total capital expenditures in the bracket of $85-$105 million.
Management is impressed with second-quarter performance. The company continues to envision 2021 adjusted OIBDA in the range of $270-$305 million. Management highlighted that it is not making any changes to its previously-issued guidance, owing to the uncertainty surrounding the COVID-19 pandemic and its impact on WWE’s business.
This Zacks Rank #3 (Hold) stock has gained 3.2% in a year compared with the industry’s rise of 38.4%.
Here are 3 Key Stocks for You
The E.W. Scripps Company SSP, flaunting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 197.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Conns, Inc. CONN, sporting a Zacks Rank #1, has a long-term earnings growth rate of 23%.
Warner Music Group Corp. WMG, which carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 37.1%, on average.
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