WWE 2013 First Quarter Results: Vince McMahon Comments

WWE sent out the following today…

WWE (NYSE:WWE) today announced financial results for its first quarter ended March 31, 2013. Revenues totaled $124.0 million as compared to $123.1 million in the prior year quarter. Operating income was $6.1 million as compared to $16.0 million in the prior year quarter. Net income was $3.0 million, or $0.04 per share, as compared to $15.3 million, or $0.20 per share, in the prior year quarter. Excluding items that impacted comparability on a year-over-year basis, Adjusted Operating income was $7.4 million as compared to $16.8 million in the prior year quarter, and Adjusted Net income was $3.9 million, or $0.05 per share, as compared to $11.7 million, or $0.16 per share, in the prior year quarter. On an “As Reported” basis, the performance of a recent movie release resulted in increased film impairment charges, which were a significant component of the decline in first quarter earnings. Excluding the impact of these charges and a net positive impact from the transition to a new video game licensee, the decline in Adjusted Operating income reflected investments in content production, including talent and staff costs, lower profits from Home Entertainment and lower sales of licensed products. The investments support the company’s long-term growth objectives. “Adjusted” earnings also declined due to an increase in the effective tax-rate.

Vince McMahon had the following to say…

“In the first quarter, our performance reflected investments to enhance our brand strength, which we view as a critical determinant of our long-term growth. Operating metrics such as pay-per-view buys and live event attendance, which are key leading indicators, continued to show improvement. Demonstrating the ongoing demand for WWE content, we successfully staged WrestleMania in April, which attracted more than 80,000 fans and is expected to deliver more than one million pay-per-view buys globally, ranking the event as the highest grossing and most profitable pay-per-view event in our history. Looking ahead, we are confident that we can leverage this demand to transform our business.”

The company’s net revenue, which was slightly up, is considered flat. Here is the breakdown…

Three Months Ended March 31, 2013 – Results by Region and Business Segment

Revenues of $124.0 million were essentially flat to the prior year quarter as growth from North America was offset by declines across WWE’s international markets. Revenues from North America increased 5% from the prior year quarter predominantly due to the licensing of new television programs and digital content, the strong performance of our Pay-Per-View operations, and an increase in the number of domestic live events, which more than offset lower revenues from our movie business. Revenues from outside North America declined 13% primarily due to an anticipated reduction in the number of live events, lower revenue from home entertainment, as well as weaker sales of licensed products.

The good news is that both the Royal Rumble and Elimination Chamber PPVs were up in buys, and for the quarter the company was up about 65,000 buys combined…

Pay-Per-View revenues increased 12% to $15.1 million as compared to $13.5 million in the prior year quarter reflecting the performance of our Royal Rumble and Elimination Chamber pay-per-views. Buys for these events increased 17% from the prior year quarter, demonstrating their creative strength and audience appeal. Additionally, the average revenue per buy increased 5% from the prior year quarter due, in part, to an increased proportion of buys to view our events in high definition, which generally attracts higher retail prices. Increases in the number of buys and revenue per buy, however, were partially offset by lower buys for events in prior periods.

WWE’s digital media saw a growth of 27% for the quarter…

Digital Media
Revenues from our Digital Media related businesses were $9.0 million as compared to $7.1 million in the prior year quarter, representing a 27% increase.

WWE.com revenues increased 41% to $5.5 million in the quarter due to higher sales of online advertising, including integrated cross-platform sales, as well as increased rights fees associated with the licensing of certain WWE content to Hulu Plus. The related programming agreement with Hulu commenced in September 2012.

WWEShop revenues increased 9% to $3.5 million in the quarter, primarily due to an 11% increase in the number of online merchandise sales to approximately 73,200 orders. The average revenue per order of $47.97 was essentially unchanged from the prior year quarter

In a shocking twist, WWE studios had another down quarter…

WWE Studios
WWE Studios recognized revenue of $1.9 million as compared to $4.8 million in the prior year quarter, reflecting differences in revenue recognition between the various distribution models of our movies. Although there were three feature films released in the current quarter (Dead Man Down, The Call and The Marine 3: Homefront), revenues for these movies will be recognized on a net basis as participation statements are received rather than upon release as was the case with our self-distributed movie, Bending the Rules, in the prior year quarter. In addition, the decline reflected the timing of results generated by our overall portfolio of movies. During the quarter, Dead Man Down generated lower domestic box office receipts than anticipated, resulting in a revised ultimate profit projection for that movie and a $4.7 million impairment charge. As a result, WWE Studios generated a loss of $5.0 million compared to a loss of $1.3 million in the prior year quarter, which included a $0.8 million film impairment charge. Excluding the impact of film impairment charges, the WWE Studios’ movie portfolio generated a loss of $0.3 million compared to an adjusted loss of $0.5 million in the prior year quarter.

WZR