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World Wrestling (WWE) Q1 Earnings Beat, Revenues Up Y/Y

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World Wrestling Entertainment, Inc. (WWE - Free Report) posted first-quarter 2022 results, wherein the top line missed the Zacks Consensus Estimate, but the bottom line beat the same. Impressively, both revenues and earnings grew sharply from the year-ago period. The quarterly performance gained from a return to full live events, including the staging of a large-scale international event, expanded brand reach and enhanced content value, as well as monetization of new original series.

Management reiterated its expectations to generate record revenues in 2022, backed by ticketed live events, including the staging of large-scale international events and increased monetization of content. The company cautioned against a spike in production, content-related, and other expenses.

During the quarter, the company expanded its original programming partnership with A&E in a multi-year deal that includes more than 130 new hours of premium WWE-themed series and specials. It entered into a broadcast partnership with MBC Group to air WWE premium live events, live episodes of Raw and SmackDown, as well as WWE Network’s vast library of content. It announced a long-term partnership with Fanatics to create a new, enhanced digital platform for e-commerce and licensed merchandise, as well as physical, digital, and non-fungible token trading cards.

Q1 Performance Insights

This Stamford, CT-based company reported first-quarter 2022 earnings of 77 cents a share that surpassed the Zacks Consensus Estimate of 68 cents. The quarterly earnings increased significantly from 51 cents a share reported in the prior-year quarter.

WWE’s revenues of $333.4 million missed the Zacks Consensus Estimate of $340.9 million. However, the top line surged 27% year over year, driven by the timing of a large-scale international event and higher ticket sales. These were partly offset by a decline in network revenues owing to the impact of upfront revenue recognition in the year-ago period related to the delivery of certain WWE Network intellectual property rights.

A Look Into Margins

WWE’s operating income of $92.4 million jumped 42% year on year, buoyed by higher revenues but partly offset by increased operating expenses due to the return to live event touring, including the timing of a large-scale international event. We note that operating income margin increased to 28% from 25% in the year-ago quarter.

Adjusted OIBDA came in at $111.7 million, up 33% year on year. Again, adjusted OIBDA margin expanded to 34% from 32% reported in the prior-year quarter.

Segmental Details

Media Division: Revenues in the Media division went up 15% to $278.1 million, mainly owing to the timing of a large-scale international event and a rise in domestic media rights fees related to the flagship programs and premium events. These were partly offset by the upfront revenue recognition in the year-ago period related to the delivery of certain WWE Network intellectual property rights.

Revenues from core content rights fees increased to $141.5 million from $139.7 million in the prior-year period. Network revenues were down to $56.3 million from $79.4 million reported in the year-ago quarter. Advertising and sponsorship revenues rose to $19.8 million from $15.6 million in the year-ago period. Other media revenues surged to $60.5 million from $7.3 million in the prior-year period.

Live Events: Revenues from Live Events came in at $23.1 million, up meaningfully from $0.5 million in the year-ago quarter. The upside can be attributed to higher ticket sales as the company returned to staging live ticketed events. It held 53 ticketed live events in the reported quarter, consisting of 52 events in North America and one event in the international markets. Average attendance at the North America events was roughly 5,700.

Consumer Products Division: The segment’s revenues of $32.2 million advanced 53% year on year. The rise in sales of the licensed video games, including the franchise game WWE 2K22, and increased venue merchandise sales owing to the return to ticketed live events contributed to the segment’s revenues. These were somewhat offset by lower e-commerce merchandise sales.

Other Financial Details

WWE ended the quarter with cash and cash equivalents of $105.6 million, net short-term investments of $342.2 million, long-term debt of $21.2 million and stockholders’ equity of $405.8 million.

Cash flow generated from operating activities during the quarter amounted to $95.5 million, while free cash flow was $74 million.

The company paid out $38.9 million to shareholders in the first quarter. This includes $30 million in share repurchases as well as $8.9 million in dividends paid. As of Mar 31, 2022, the company had approximately $221 million remaining under its share repurchase authorization of $500 million.

Outlook

For 2022, WWE reaffirmed its adjusted OIBDA projection of $360-$375 million. Management guided second-quarter adjusted OIBDA in the range of $80 million to $90 million, which indicates 17-32% year-over-year growth. The upbeat guidance suggests stellar revenue performance owing to the return to live event touring and the contractual escalation of domestic media rights fees for the flagship programs and premium events. Management expects higher operating expenses in the second quarter.

This Zacks Rank #2 (Buy) stock has risen 13.2% in the past three months against the industry’s decline of 15.4%.

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