Earnings & Controversies, But Mostly Earnings

Have you been thinking about investing in WWE stock? If you grew up as a fan of pro wrestling, then you’ve probably thought about it — even if it’s nothing more than curiosity. The WWE is certainly a place where loyalty counts, and that loyalty is starting to pay off again.

WWE is a company with global business deals and guaranteed revenue streams, and a new leadership team with a long and proven history.

This media and entertainment company is attempting to capitalize on a market that’s hungry for premium live content on streaming platforms and live events worldwide. Since streaming platforms are always looking for a competitive edge and folks are looking to return to live entertainment, you can’t ignore a company with a loyal fanbase.

Let’s take a look at the WWE stock.

WWE Earnings Recap

The most recent earnings report from August 16, 2022 covered the period of April 1 to June 30. WWE brought in $328.2 million in revenue from media, live events, and consumer products, with a profit of $49.0 million for the quarter.

Here are some of the interesting numbers from the earnings report that we wanted to highlight:

• Live events brought in $41.0 million in revenue. This includes North American events, international events, and sponsorships. The profit margin was $13.2 million.
• Consumer products brought in $44.1 million in revenue. This includes product licensing and venue merchandise. Consumer product licensing increased to $22.6 million from $11.3 million in the same quarter last year, mainly due to strong sales of the WWE 2K22 video game. Trading cards and various collectibles also played a role.
• Media revenue brought in $243.1 million from streaming services (more on this later), television rights, and sponsorships.
• WWE announced quarterly earnings per share at $0.59, beating the estimate of $0.56 per share. This figure was up from the earnings of $0.42 per share a year ago.

Q2 included Wrestlemania, which is like the Superbowl of pro wrestling. It’s a significant event that brings fans from around the world and contributes to the local economy with additional venues, from autograph signings to smaller shows. In 2022, Wrestlemania brought in more revenue than in the last few years because of the easing of COVID-19 restrictions. The company also ran two nights of Wrestlemania, where they offered travel packages.

It should be noted that the release of the earnings report was delayed due to controversy surrounding the now former CEO of the company, Vincent K. McMahon. On that note…

The Dramatic Fall of Vince McMahon

How did the Chairman and CEO of WWE end up stepping down from his position? While McMahon announced that he was retiring on July 22, 2022, he formally resigned from his position as CEO and Chairman of the company. It was once thought in the sports entertainment industry that McMahon would never retire due to his passion for the business unless his health deteriorated. McMahon had no choice but to leave his position due to allegations of misconduct and a failure to report company expenses in financial statements.

A series of articles with serious allegations were released by the Wall Street Journal, where it was ultimately uncovered that McMahon had agreed to pay $14.6 million to settle claims of sexual misconduct and infidelity. The board of directors originally discovered this information because they had conducted an internal probe regarding an NDA that was signed with a former company employee. This person allegedly had an affair with the CEO, which resulted in a secret $3 million settlement.

Where things get murky is that the internal investigation also found that about $20 million in expenses weren’t recorded in the company’s financial statements. In addition, it was noted in an SEC filing that McMahon did not record two additional payments to the charity of Donald J. Trump in 2007 and 2009, for a total of $5 million. These two payments are unrelated to the investigation regarding the alleged misconduct.

With a total of $19.6 million in unrecorded expenses, it seemed that the Chairman had no choice but to step down. An investigation into the matter is still underway, even though WWE management noted on the last earnings call that the probe was substantially complete. Furthermore, McMahon himself has mentioned that he will be covering the costs of the investigation, which could bring the integrity of the findings into question.

According to the earnings report document, the company had to revise previously issued year-end financial statements for 2019, 2020, and 2021, as well as the first quarter of 2022.

Vincent K. McMahon resigned from all positions held with WWE on July 22, 2022, but he remains a stockholder with a controlling interest.

A Look at the New Leadership at WWE

Many investors felt that Vince McMahon was needed at the helm for the business to run smoothly. However, due to lucrative television rights contracts and diverse revenue streams, it’s evident that the company can thrive without his leadership.

What does the new team look like at WWE?

Two people will now fill this position and share the title. The board of directors announced in a press release on July 25, 2022, that Nick Khan and Stephanie McMahon (daughter of Vince McMahon) are the new co-CEOs.

Stephanie McMahon is married to Paul Levesque, the Executive Vice President of Talent Relations. She held the position of Chief Brand Officer, where she focused on the strength of the company’s global brand before assuming this new role.

Nick Khan entered the company in 2020 as a President & Chief Revenue Officer. With his experience as a media executive and top agent for CAA, he represented the company in previous negotiations before coming over.

WWE Business Lines

Over the past 69 years, the company went from a regional pro wrestling company based out of the Northeast to an international conglomerate with offices and business deals worldwide. So how exactly does WWE generate revenue in 2022?

Let’s break down the various current revenue streams of WWE.

Live events

WWE produces television from a different location 52 weeks a year as an international touring company. The flagship shows (Monday Night Raw and Friday Night Smackdown) are touring events broadcast worldwide. In addition, the company runs multiple live weekend events that aren’t televised. WWE also has extensive international tours throughout the year with stopovers on every corner of the planet.

The live events generate revenue through ticket and merchandise sales while creating premium content for streaming services and television rights. The live event revenue is split up in the quarterly earnings report. Still, it’s important to note that the live event merchandise increased to $8.6 million from $1.3 million due to the added number of live events WWE held after the loosening up of COVID-19 restrictions. As a result, total live event revenue was $41.0 million for the quarter.

During the recent earnings call, Nick Khan mentioned that the city of Cardiff, Wales is paying a subsidy for WWE to run a show there. WWE will get a site fee as well as the ticket revenue from the show. Khan wants to repeat this with major shows moving forward so that cities will bid against each other for WWE live events. This already happens with Wrestlemania every year. The Cardiff activation will also be a testing ground for new programming formats.

Television Rights/Media

WWE brings in guaranteed revenue from television rights for three live shows they run during the week: Raw on Mondays, NXT on Wednesdays, and Smackdown on Fridays.

While most of the premium live content is on the Peacock streaming service, the WWE still generates revenue worldwide from the WWE Network and PPV (pay-per-view) for premium shows. Between the WWE Network, PPV, and Peacock, the revenue for this category grew from $61.5 million to $63.7 million.

Television rights fees worldwide went up to $151.8 million from $141.8 million.

WWE has deals with Comcast (NBCU) and Fox that expire at the end of September 2024. It’s expected that there will be significant increases in television rights due to the demand for live content.

WWE Network/Peacock Streaming Deal

WWE has had an exclusive streaming deal with Peacock (the service offered by NBCUniversal) since the spring of 2020. Before this, the WWE owned its network and produced everything in-house. They sold the rights to exclusive new content and the extensive backlog of content to NBCUniversal, and the rollout of over 17,000 hours of content from the WWE Network began on March 18, 2021.

While the full financials were never disclosed at the time, it was believed to be a five-year deal worth $1 billion, based on industry sources.

It has become evident that streaming companies are attempting to seek out premium live streaming content and any kind of content with a loyal fan base.

The in-house WWE Network is still operational worldwide since many countries don’t have Peacock.

Consumer Products

WWE has a huge variety of consumer products, ranging from action figures of wrestling superstars to video games to collectibles. This is one area where WWE’s attempts to maximize revenue with a diverse catalog of products, and that offering is constantly evolving. For example, many superstars will get multiple shirts made and other merchandise to sell to fans. Sometimes there will even be custom shirts for the individual cities they tour in. The loyal fanbase is known for purchasing video games, trading cards, merchandise, and other collectibles.

Other business

In the earnings report, it looks like WWE is attempting to monetize with other business ventures that haven’t come to fruition yet. For example, WWE is working with Fox’s Blockchain Creative Labs to sell NFTs on its own official marketplace, known as Moonsault.

WWE Dividend History

What’s the history of the dividends that WWE pays? The current annual dividend yield for WWE stock is 0.70% (or $0.48) with a payout ratio of 16.5%. WWE has been paying dividends continuously for 19 years. However, since 2012, the dividend has dropped from $1.44 to $0.48.

It should be noted that the company bought back roughly 170,000 shares of stock at the price of $58.70 for a total of $10 million.

Bottom Line on WWE Stock

While we believe it’s important to make investment decisions based on the available information, sometimes you have to look at speculation and rumblings so that you’re not blindsided by major developments. With an expected increase in television rights and streaming revenue, WWE could generate substantially more revenue in the future.

WWE stock closed at $68.85 on August 24, 2022. The one-year target estimate on Yahoo Finance is currently at $74.82.

Considering WWE’s solid dividend history and guaranteed revenue streams, it’s a stock worth investing in, and it’s certainly worth holding if you’re already an experienced investor.

If you’re unsure about investing in sports entertainment, you may want to consider one of our investment kits. Check out Q.ai’s Global Trends Kit if you’re looking to diversify in a more complete and effective way.

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