World Wrestling (WWE) Q4 Earnings Miss, Revenues Rise Y/Y
World Wrestling Entertainment, Inc. WWE posted fourth-quarter 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. Markedly, total revenues increased year over year due to higher revenue contributions from Media and Live Events, partially offset by lower revenues from the Consumer Products segment. The net income declined year over year.
Undoubtedly, WWE has been expanding its reach across platforms such as Peacock and establishing new partnerships. The company’s diversified distribution approach helps it attain solid viewership.
In the earnings release, management highlighted that Crown Jewel was the most viewed international event in its history. Domestic unique viewership on Peacock soared 70% over the prior-year event. WWE also announced a multi-year extension of its partnership with MultiChoice to expand the distribution of the content in Sub-Saharan Africa.
Nick Khan, WWE’s chief executive officer, said, “In 2023, we’re focused on continuing to execute on our key operational initiatives, such as the domestic licensing of our flagship programs, Raw and SmackDown, as well as the international licensing of our content in key markets. At the same time, we’re focused on the review of strategic alternatives that we announced earlier this year, with the goal of maximizing value for all shareholders.”
World Wrestling Entertainment, Inc. Price, Consensus and EPS Surprise
World Wrestling Entertainment, Inc. price-consensus-eps-surprise-chart | World Wrestling Entertainment, Inc. Quote
Q4 Performance Insight
This Stamford, CT-based company reported fourth-quarter 2022 adjusted earnings of 52 cents a share, which fell short of the Zacks Consensus Estimate of 60 cents. The quarterly earnings decreased significantly from the 67 cents a share reported in the prior-year quarter.
WWE’s revenues of $325.3 million missed the consensus mark of $340 million but grew 5% from the year-ago period. This can be attributed to a rise in network revenues due to the timing of premium live events, as well as the higher monetization of third-party original programming. These were partly offset by a decrease in consumer product licensing and e-commerce revenues.
Management foresees first-quarter 2023 revenues to be down year over year. WWE hinted that higher media rights fees for the flagship weekly programming, Raw and SmackDown, are likely to be offset by the absence of the large-scale international event.
However, WWE anticipates generating record revenues in 2023. This suggests a likely increase in media rights fees for the flagship weekly programming and premium live events, as well as a full live event touring schedule, and higher advertising and sponsorship revenues.
A Look at Margins
WWE’s operating income of $62.7 million declined 22% year over year due to higher operating expenses on account of costs associated with the creation of content and expenses related to the Special Committee investigation. We note that the operating income margin contracted to 19% from 26% in the year-ago quarter. The adjusted operating income came in at $72.4 million, down from $80.6 million in the prior-year quarter.
Adjusted OIBDA came in at $90.2 million, down 4% year over year. The adjusted OIBDA margin contracted to 28% from 30%.
Management expects first-quarter 2023 adjusted OIBDA between $65 million and $75 million compared with the $111.7 million reported in the year-ago period. The guidance indicates a shift in the timing of the staging of a large-scale international event. WWE projected adjusted OIBDA in the range of $395-$410 million for the full year.
Segment Details
Media Division: Revenues in the Media division went up 9% to $279.7 million. The year-over-year increase can be attributed to a jump in network revenues related to the timing of premium live events. The increase was also related to the delivery of third-party original programming and the staging of a large-scale international event.
Core content rights fees increased to $155.2 million from $150.5 million in the prior-year period. Network revenues came in at $47.1 million, up from the $33.9 million reported in the year-ago quarter.
Meanwhile, advertising and sponsorship revenues declined to $15.7 million from $21.1 million in the year-ago period. Other media revenues jumped to $61.7 million from $52.1 million in the prior-year period.
Live Events: Revenues from Live Events came in at $23.8 million, up from $20.1 million in the year-ago quarter. The upside can be attributed to an increase in North American ticket sales due to a higher number of live events.
The company held 61 ticketed live events in the reported quarter consisting of 54 events in North America and seven in international markets. The average attendance at the North American events was roughly 5,500. North American ticket sales increased to $19 million from $15.8 million in the year-ago period. International ticket sales declined to $1.9 million from $2.2 million in the prior-year quarter.
Consumer Products Division: The segment’s revenues of $21.8 million decreased 33% year over year. We note that consumer product licensing revenues came in at $12.3 million, down from $18.1 million in the year-ago period.
Meanwhile, e-commerce sales declined to $5 million from $11 million in the prior-year period. Venue merchandise sales jumped to $4.5 million from $3.5 million in the year-ago quarter.
Other Financial Details
WWE ended the quarter with cash and cash equivalents of $220.2 million, net short-term investments of $258.5 million, long-term debt of $20.8 million and stockholders’ equity of $517.2 million. Cash flow generated from operating activities during the quarter amounted to $120.3 million, while free cash flow was $43 million. For 2023, management projected capital expenditures in the band of $150-$170 million.
The company paid out $8.9 million to shareholders in dividends in the fourth quarter. WWE did not repurchase any shares during the quarter. As of Dec 31, 2022, the company had approximately $211 million remaining under its share repurchase authorization of $500 million.
This Zacks Rank #3 (Hold) stock has surged 65% in the past year against the industry’s decline of 3.1%.
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