WWE Beats Q1 Estimates as Coronavirus Impact Lags

When WWE postponed its earnings call to a later time closer to the NFL draft, many were expecting the company to disclose more on the impact of the coronavirus pandemic or hear from CEO Vince McMahon about the now-defunct XFL.

Instead, WWE reported a limited impact from pandemic restrictions on first-quarter earnings, while acknowledging continued cuts to operating expenses in response to the outbreak.

The sports entertainment company claimed a 60% increase in year-over-year first quarter revenue to $291 million, led by gains from its new media rights deals with Fox and NBCUniversal. Net income also improved to $53.3 million, compared to a loss of $6.8 million in the year prior. Both results topped analysts’ estimates. 

“COVID-19 had a limited financial impact on us for two-to-three weeks in the quarter. It was negative, but we’ve adapted our business model to produce content in new ways and reduce costs as well,” McMahon said. 

WWE opted not to provide 2020 guidance at this time.

The company’s live event business revenue fell 33% in the period ending March 31. The decline is credited mainly to the staging of 49 fewer events and, to a lesser extent, the coronavirus, it said.

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A transition to producing live shows behind closed doors at its performance center in Florida has allowed WWE to cut production costs. WWE this month also released or furloughed parts of its roster, cut executive staff salary, and paused construction on its new headquarters. The moves will save the company $4 million per month, Chief Financial Officer Frank Riddick said. 

Ratings for Smackdown, broadcast on Fox, grew 16% in the quarter, while those for Monday Night Raw, which airs on USA Network, declined by the same figure. In the event WWE is no longer deemed an essential business in Florida, McMahon said there are a “number of states” that would welcome the company.

WWE will produce a number of mini-movies during the coronavirus pandemic for weekly programming, similar to WrestleMania 36. The two-night event set viewership records with more than 967 million video views across digital and social platforms.

The event additionally helped grow WWE Network subscribers to 2.1 million on April 5. Added subscribers were a mix of both paid users and consumers that signed up through the company’s limited free trial of its service last month. WWE Network finished the quarter with an average subscriber base of 1.46 million, down 8% year-over-year. 

“We continue to believe in the viability of alternative strategic options for WWE network,” Riddick said. “Our confidence is based on our discussions with multiple partners and consideration of broader industry factors, such as the evolution of new streaming services and increasing value of live sports content.”

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McMahon did not address the shutdown of the XFL, which was relaunched in 2020, on WWE’s earnings call Thursday. A Chapter 11 filing disclosed that WWE owned 23.5% Class B stock of the now-disbanded league. McMahon’s Alpha Entertainment owned the remainder of Class B stock, in addition to all Class A shares of the XFL.

WWE stock is down 40% through the end of trading on April 23. During the quarter, the company signed a new deal with Sony Pictures Networks to distribute its content in India. A similar deal was also struck with DAZN in Germany, Switzerland, and Austria for the sports entertainment company’s weekly programming.