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World Wrestling (WWE) Q1 Earnings Top Estimates, Revenues Down

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World Wrestling Entertainment, Inc. WWE posted first-quarter 2021 results, with the top line declining year on year. Performance of this integrated media and entertainment company was impacted by the absence of live events due to public health concerns amid the coronavirus pandemic. Nevertheless, earnings increased year on year and surpassed the Zacks Consensus Estimate.

We note that the company has been undertaking necessary steps to adapt with the changing media environment. Management is particularly enthusiastic regarding the launch of WWE Network on NBCU’s Peacock streaming service.

Shares of the company rose 2.9% during the after-hours trading session on Apr 22. This Zacks Rank #2 (Buy) stock has gained 4.2% in the past three months against the industry’s decline of 1.9%.

Q1 Performance Insights

This Stamford, CT-based company reported first-quarter adjusted earnings of 51 cents a share that surpassed the Zacks Consensus Estimate of 23 cents. Markedly, this was the eighth straight beat. The quarterly earnings exhibited a rise of nearly 24.4% from 41 cents a share reported in the prior-year quarter.

WWE’s net revenues of $263.5 million declined 9% year over year. The downside was primarily caused by the pandemic-led cancellation of the company’s live events, including a large-scale international event as well as the associated loss of merchandise sales. These were partially offset by growth in network revenue.

A Look Into Margins

The company’s operating income came in at $65.1 million, up 22% year on year due to the upfront revenue recognition of certain WWE Network intellectual property rights. Contractual escalation of domestic core content rights fees and lower stock compensation expense were also upsides. Furthermore, the company’s operating income margin of 24.7% improved 640 basis points from 18.3% in the year-ago quarter.

Adjusted OIBDA (which excludes stock-based compensation) came in at $83.9 million, up 9% year on year. Factors driving this metric were similar to that of operating income. Additionally, adjusted OIBDA margin increased to 31.8% from 26.6% 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.

Segmental Details

Media Division: Revenues in the Media division fell 6% to $242 million owing to the absence of large-scale international event. The downsides were partially compensated by growth in network revenue, driven by upfront revenue recognition of certain WWE Network intellectual property rights, content license fees associated with new WWE Network content as well as the contractual escalation of domestic core content rights fees for the company’s flagship programs, Raw and SmackDown.

Digital video views during the quarter were down 2% to 9.4 billion, while hours consumed were up 7% to 367 million across digital and social platforms.

Notably, revenues from core content rights fees increased 4.9% to $139.7 million. Network revenues (including pay-per-view) were up 82.5% to reach $79.4 million. However, advertising and sponsorship revenues fell 10.3% to $15.6 million. Also, other media revenues plunged to $7.3 million during the quarter from $62.5 million in the year-ago quarter.

Live Events: Revenues from Live Events came in at $0.5 million down 97% year on year, owing to decline in ticket sales, mainly in context of absence of live events in the North America, where nearly 41 events were held in the year-ago quarter.

Consumer Products Division: The segment’s revenues were $21 million, up 24% year on year. The segment gained from an increase in e-commerce merchandise sales and higher video game royalties. Markedly, strong e-commerce sales more than offset the absence of venue merchandise sales stemming from the lack of ticketed events in the quarter.

Other Financial Details

WWE ended the quarter with cash and cash equivalents of $300.4 million, short-term investments of $160.7 million, long-term debt of $21.6 million and stockholders’ equity of $357.3 million. Moreover, cash flow generated from operating activities during the quarter amounted to $59.9 million, while free cash flow stood at $53.8 million.

The company paid out $84.2 million to shareholders during first-quarter 2021, which includes $75 million in share repurchases as well as $9.2 million in dividends paid. The company has approximately $342 million worth shares remaining under its existing share repurchase program.

Other Updates

Management highlighted that the WWE Network was launched on NBCU’s Peacock streaming service in the United Stated, in March. This is likely to help the company reach a larger audience for its premium content and achieve greater economic returns. Additionally, the company transitioned Raw and SmackDown to the Yuengling Center in Tampa Bay in April, and continued to deliver impressive interactive experience for its fans through WWE ThunderDome. Also, the company announced a multi-year extension with USA Network for NXT.

Management informed that WrestleMania was held at Tampa Bay in April, at the Raymond James Stadium. The event witnessed two consecutive sold-out nights with 51,350 fans. Markedly, WrestleMania was the first live event of the company with ticketed audience, since the breakout of the coronavirus last year.

Moreover, WrestleMania Week viewership reached 1.1 billion video views across digital and social platforms, up 14% from the prior-year’s levels. Almost 32 million hours of content was consumed during the week, up 9% from prior-year’s tally.

2021 Outlook

The company continues to envision 2021 adjusted OIBDA in the range of $270-$305 million. Adjusted OIBDA is likely to be driven by growth in revenues, courtesy of the Peacock transaction, gradual improvements in live ticketed events including large-scale international events as well as the escalation of core content rights fees. These are likely to be offset by rise in personnel and production expenses. The company highlighted that it is not making any changes to it’s previously issues guidance, owing to the uncertainty surrounding the staging of live-events due to COVID-19 restrictions.

Check These Stocks

News Corporation NWSA, which carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 123.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TEGNA Inc. TGNA, with a Zacks Rank #2, has a long-term earnings growth rate of 10%.

The E.W. Scripps Company SSP, which carries a Zacks Rank #2, has a trailing four-quarter earnings surprise of 80.2%, on average.

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