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In-depth look at WWE's latest quarterly statement


Kam

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-WWE stock, the day of a bad financial statement for fiscal Q2, dropped from $12.50 per share at the start of the day to as low as $11.40, but has since rebounded a bit to 11.91 as of mid-afternoon. It closed yesterday at $13.40, so it's down $1.50 overall at this point. The 52-week low for the stock is $10.88 per share and the 52-week high is $15.44, so its on the low end of its past year.

 

-The reason for the drop in stock price in part is because PPV revenue is down and TV ad revenue is down. WWE has been propping up a decreasing business trend in areas that most determine its popularity by cutting expenses, producing more PPVs, and doing more events overseas. That masked the big picture drop in popularity in the U.S., and WWE has run out of ways to counter that in its quarterly statements.

 

-The revenues for Q2 this year are at $83.9 million, down from $94.4 million the prior year, an 11 percent drop. About 20 percent of that drop can be attributed to there being one fewer PPV in the latest quarter compared to last year's Q2. The major hits to revenue were $6.2 drop in PPV revenues, $3.4 million drop in lower ad sales due to lower ratings, $1.4 million drop due to a change in the UPN deal, a $0.9 million drop in their distribution contract in Canada, and $0.8 drop in licensing. Home video sales were up $0.4 million and international live attendance was up $4.4 million.

 

-WWE is stating that while revenues are down, they are planning to "continues to work on cost containment" (i.e. more layoffs, paycuts, etc.), "new programming initiatives to drive ratings development." and "focus on strategic initiatives: international growth, exploitation of library and film production."

 

-Average attendance in North America in this year's fiscal Q2 were 3,800, down 16 percent from 4,500 last year. That's a big drop despite WWE cancelling many shows that were going to draw low attendance in part to save money and prop up the attendance average. In their presentation, they quickly noted that WrestleMania sold out, as if that offsets a 16 percent overall drop in attendance for all events.

 

-Overseas live events saved WWE this quarter from disaster as they held 15 events this Q2 versus 7 events last year's Q2, with average attendance this year at 9,500, down from 11,900 last year's Q2. International live events accounted for 50 percent of live event revenue in Q2 this year. Overall average attendance taking into account North America and overseas events was 4,800, down from 5,100 last year's Q2. The number of events was basically the same overall, 83 this year, 84 last year.

 

-In the PPV category, Taboo Tuesday was listed as having drawn 174,000 buys, alarmingly low, but they justifiably do mention it went up against game six of the Yankees-Red Sox series. It made a different, but how much will never be known, and it hardly cut buys in half. If it reflected the drop in Raw ratings from game five the night before that went into extra innings throughout Raw, the buyrate still would have been below 200,000 without baseball that night.

 

-In the TV events category, Raw ratings averaged 3.5, down from 3.8 the prior year's Q2. Smackdown averaged 3.1, down from prior year's 3.3. WWE touts that "programming investments to drive ratings" included the Diva Search, Tough Enough, International TV production, and Raw interactive on WWE.com. (They failed to mention the continued hiring of TV writers with no background in pro wrestling or its history or the continued push of Triple H and JBL as champions, which ought to be bragging points for them since they seem so committed to both.) Then, later in their Q2 fiscal documentation, they blame the high expenses associated with the Diva Search, Tough Enough, and running events overseas as part of the reason profit contribution was $31.4, down $10.8 million from prior year Q2. So while they argue those "initiatives" helped stave off further eroding of TV ratings, they attempt to "blame" the initiatives for lower profits.

 

-What's most alarming about this, and shows how screwed up the stock market system can be in rewarding a leader during down times, the WWE board of directors voted to increase the per-share dividend from 6 cents per share to 12 cents per share. With Vince McMahon being the majority stock holder, he will now receive $5.7 million in dividends each quarter no matter how well or poorly business is doing since it's a "per share" bonus.

 

-Virtually buried in the financial statement is that during the first six months of this fiscal year, WWE has spent $7.8 million on feature film production. That's roughly the equivalent of 25 percent of PPV revenue or 25 percent of live event revenue for the same time period.

 

-They still have $266.5 million in cash and short-term investments, which represents a strong cash reserve and is what likely justifies the increase in dividends paid out mainly to Vince McMahon since the dividends of $20 million-plus paid to McMahon this year won't take a big enough chunk out of cash reserves to make that a weak point in WWE's overall financial state.

Source: PWTorch
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Ok, just a couple of points.

 

I may have missed somthing but if the stock closed at $13.40, and was $12.50 pre the Q2 results, surely its up by just under a dollar, not down by $1.50. Also, that would put it in the middle of its 2 month YTD range, not at the lower end.

 

Diveidends are paid out of profit - legally they cannot be paid from a loss. A company will state in its accounts what is to be 'retained profit' and what will be paid as a dividend. In order for a dividend to be paid, the company must make a profit albeit they can use the retained profit reserve form a previous year to fund a dividend in a loss making year. The cash was put there by previous highly profitable years, and no-one would have batted an eyelid had he taken the dividend then. He is simply taking his dividend late. You must also take into account that every shareholder gets the 12 cents per share dividend. Vince wont get 12 cents per share every quarter guaranteed, they may have to change it if profits begin to fall.

 

Also, I must dispute the $5.7m Vince will recieve. By dividing 5.7m by 0.12 (the dividend), you reach 47,500,000 shares. This is what Vince must hold of dividend bearing shares (i'm usure of the structure) in order to recieve this dividend. Having looked on the WWE corporate website, they made a $3.0m net income, which they state to equal 4 cents per share. By dividing the two, you end up with 75,000,000 shares in existance. This means that vince is being credited with owning nearly two thirds of the shares. Do you not mean the family will recieve $5.7m?

 

My last point is to discuss your statement below

 

"So while they argue those "initiatives" helped stave off further eroding of TV ratings, they attempt to "blame" the initiatives for lower profits"

 

This can be true. To stave off eroding TV ratings, translates to initiatives to keep revenue at similar levels. The initiatives did this, possibly not as successful as they wanted. However, they do contribut to a fall in profits, as the WWE are spending on initiatives they didnt before, in order to keep revenues the same. Same Revenue, higher cost = lower profit. However, the situation would have been worse had they not done these initiatives. In this statement, they are simply justifying why there Contribution on these initiatives are lower than in previous years.

 

Take the International shows fr example. House's are down, yet revenue is up. Some of that may e due to an increase ticket price, but most is due to the fact that they did more shows. This has a cost attached to it. The key is - does the increased revenue cover the variable cost, i.e they are already over here so there no additional flying cost, if they do a raw and smackdown on the same night in different venues, there is no increased travel/hotel as they are utilising the same time frame, all there would be would be additional building cost. If the revenue for the second show, is more than the additional variabl cost, then it makes a positive contribution to the fixed cost (the cost whether they put 1 or 10 shows on). It is the theory of Contribution Costing.

 

Sorry if i've ranted on a bit, but i felt that vince was being treated harsh (and i may have some figures wrong, as i am not up to date with the WWE Inc'c structure) , especially given the rising share price/rising salary/rising dividend of some loss making companies.

 

We should accept, that the economy is on a down turn, and that Vince has done well to ensure his company turns a profit at all.

 

Remember if the first post was correct, and vince owns 60% personally, he could shut up shop, sell the assets, take 60% of the lot leaving us with nothing to watch! He would walk away with consideraly more than $5.7m doing that.

 

Cheers all, and feel free to correct any errors i have made, as I have said i'm not up to date with the companies make up.

 

Daz

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Ok, just a couple of points.

 

I may have missed somthing but if the stock closed at $13.40, and was $12.50 pre the Q2 results, surely its up by just under a dollar, not down by $1.50. Also, that would put it in the middle of its 2 month YTD range, not at the lower end.

 

 

$13.40 was the cost of a share the day before the report came out at the close of trading, at the time the article was written the share price was $11.91, so is $1.49 down in reality, the lowest share price is $10.88, so it is definatly in the lower end.

 

The article pretty much says what we all know, that the wwe is still managing to make a profit by laying off staff members and touring more internationally, but as has been stated, there is only so many cuts they can make and only so much international touring they can do before they start losing money. The fact that even international attendances are down is also a worrying sign, the wwe's last area of making major money (50% of live attendance revenue!) is also dwindling.

 

To quote an old member; "The death continues".

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$13.40 was the cost of a share the day before the report came out at the close of trading' date=' at the time the article was written the share price was $11.91, so is $1.49 down in reality, the lowest share price is $10.88, so it is definatly in the lower end.[/quote']

 

 

Ah, i've just read it again. I read the first part as it was the day they were released, then read 'yesterday' to mean literally yesterday.

 

What can I say, I was writing at work and was rushing a bit, so sorry for mis-undestanding. Thanks for the quick correction.

 

Daz

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yeah interestin to see it laid out like that but it's really nothing we don't already know.

 

WWE figures are all dropping.

WWE has a large ammount of money and assets so they can support a loss.

WWE is still makin profit by making cuts and decreasin expenditure.

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The fact that even international attendances are down is also a worrying sign, the wwe's last area of making major money (50% of live attendance revenue!) is also dwindling.

 

 

The international attendances was just an average, I think most of the overseas shows were near enough sold out, but if they choose to use smaller arenas then the average will be down (or vice versa if they did a particularly large show last year that would have inflated the comparatives).

I don't think they were using smaller arenas necessarily because they had to becuase they couldn't fill larger ones, but because they recognise that not everyone lives in the capital and are willing to go around the country to let everyone have a chance at going to shows, which is something that personally I believe means the WWE are due a lot of praise and is something I wish a lot more people did.

For example, building a new Wembley so that all big football matches will be held in London, touring bands only doing one UK date in London etc even though the fans for these type of events are all around the country and they would sell out venues just as well in Birmingham, Glasgow, Manchester etc.

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