WWE has heavyweight biz plans
Reaffirms commitment to film sector; pumps its WrestleManiaWorld Wrestling Entertainment Inc. is gearing up for its annual WrestleMania extravaganza and its latest movie release in April with an eye toward setting the stage for a year of strong financial performance.
Indeed, CEO Linda McMahon said Tuesday that there are "overall positive trends developing across our businesses."
But in Tuesday's reporting of improved revenue and profit for an eight-month transition period driven by strong live-event, home video and digital-media trends, management also announced a strategic review to identify "sustainable, multiyear growth rates" — something Wall Street observers argue the sports-entertainment powerhouse has been lacking.
WWE shares have been stuck in a narrow trading range, with a 52-week low of $14.22 and a high of $18.54. Investors often cite as key concerns TV advertising revenue declines because of a deal with the USA Network that leaves the ad income to the channel, softer pay-per-view trends and film investments.
Susquehanna Financial Group analyst Michael Kelman said the stock has been getting "a mixed reaction" because of choppy earnings trends. "What people would like to see is longer-term visibility on growth in either direction," he said.
For now, WWE management said it will stop providing near-term financial guidance, saying only that for 2007 it has targeted operating-cash-flow gains of 12% for the payout of management bonuses with growth expected in all units.
But WWE will start making available key business metrics monthly and unveil its multiyear growth targets for revenue and profits "in the near term," said Michael Sileck, who last week was promoted from CFO to COO.
Analysts welcomed the chance to get more visibility on the firm's longer-term growth, but some were disappointed they received no immediate indication Tuesday. WWE closed down 2.1% to $16.05.
WWE also reaffirmed its commitment to the film sector, which some on the Street have seen as a risky and low-return business. "We are committed to the film business," Sileck said. "We take a thoughtful approach and are very pleased with the results."
For the May-December period, WWE Films reported $16.9 million in production costs for its third feature film, "The Condemned," starring "Stone Cold" Steve Austin and scheduled for an April 27 release. However, it reported no revenue or profit from its film business as its financial participation starts only once studios have recouped print and ad costs. Last year's releases from WWE Films were Lionsgate's "See No Evil," starring wrestling character Kane (pictured), and "The Marine," with WWE champion John Cena.
Asked about Street concerns about the cost and delayed returns from the film strategy, Sileck said: "We know that the investment community has at times frowned on (our film investments), but John Cena, for example, got tremendous amounts of promotional visits (on TV and elsewhere) to push not only his film 'The Marine' but also push the overall WWE brand."
WWE executives said it is key for their business to be on the minds of not only core fans but also casual fans. Sileck said that WrestleMania, whose 23rd edition is set for April 1 in Detroit, also expands the core audience.
"It's our big event, and we will really build to it over the next month and a half," he said. "We have key story lines in place and hope to get to a crescendo and hopefully cross over and attract and keep more casual fans, which sets us up for the rest of the year."
Stamford, Conn.-based WWE reported results for a May-December transition period as it recently decided to bring its fiscal year in line with the calendar year.
PPV revenue fell from $54.5 million to $53.4 million as the number of buys declined from about 3.8 million to nearly 3.3 million, but a $5 price hike partially offset that. Management cited the price increase and an increase in other PPV and entertainment options as key reasons, but Sileck said a focus on "strong talent, matches and story lines" should help the PPV business.
Live-events revenue rose from $43.7 million to $52.3 million as average attendance increased from 4,500 to 4,900. Home video revenue rose from $28.1 million to $35.5 million, and digital revenue rose 34% to $20.7 million thanks to improved e-commerce, online ad and wireless content momentum.
Alex Woodson contributed to this report.