Vince McMahon said it all in a single sentence:
"I think we did a pretty good job in the second quarter."
Major points from the conference call:
-Outdoor setup at Wrestlemania 24 cost millions. Wrestlemania 25 ended up being way more profitable. I wouldn't expect many outdoor shows in the future.
-Jakks Pacific is on the enemy list. Mattel will get the toy contract in 2010.
-12 Rounds was a "bit of a disappointment." They are still in the movie business with a new three-year plan.
Complete Report Follows
STAMFORD, Conn., Aug 06, 2009 (BUSINESS WIRE) -- World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its second quarter ended June 30, 2009. Revenues totaled $138.8 million as compared to $129.7 million in the prior year quarter. Operating income was $28.1 million as compared to $12.0 million in the prior year quarter. Net income was $19.9 million, or $0.27 per share, as compared to $7.0 million, or $0.10 per share, in the prior year quarter.
"WWE has performed relatively well so far this year, more than doubling operating income for the quarter and driving a 15% increase for the first half of the year" stated Linda McMahon, Chief Executive Officer. "Our work to improve operating efficiency resulted in a dramatic increase in profit margins that has more than offset the softness in revenues from a weak economy and adverse consumer trends. These efforts were exemplified by the performance of WrestleMania(R) XXV, where we also managed to more than double our profits from the prior year." "We expect continuing economic uncertainty in the back half of the year.
However, we believe that the strategic decisions we have made, and our ongoing commitment to manage operating costs, position us well to maximize the financial potential of our global brands." Comparability of Results The results for our premiere pay-per-view event, WrestleMania XXV, occurred in Q2 2009 as compared to Q1 2008 for WrestleMania XXIV. WrestleMania XXV contributed in aggregate approximately $32.2 million of revenues and $15.0 million of profit contribution ($9.7 million, net of tax) and $0.13 of EPS from across our various business lines. WrestleMania XXIV contributed approximately $31.3 million of revenues, $7.1 million of profit contribution ($4.6 million, net of tax) and $0.06 of EPS from across our various business lines in the first quarter of 2008.
Results by Business Segment The following charts reflect net revenues by segment and by geographical region for the three months ended June 30, 2009 and June 30, 2008. (Dollars in millions) Net Revenues by Segment Three Months Ended June 30, June 30, 2009 2008 Live and Televised Entertainment $109.2 $86.8 Consumer Products 20.9 32.4 Digital Media 7.9 7.9 WWE Studios 0.8 2.6 Total $138.8 $129.7 Net Revenues by Region Three Months Ended June 30, June 30, 2009 2008 North America $103.5 $86.4 Europe, Middle East & Africa (EMEA) 25.3 29.2 Asia Pacific (APAC) 6.4 12.7 Latin America 3.6 1.4 Total $138.8 $129.7 Live and Televised Entertainment Revenues from our Live and Televised Entertainment businesses were $109.2 million for the current quarter as compared to $86.8 million in the prior year quarter. The current quarter included revenue of $32.2 million related to WrestleMania as previously discussed. Excluding WrestleMania, Live and Televised Entertainment revenues declined 11% from the prior year quarter.
-- Live Event revenues were $34.4 million as compared to $35.3 million in the prior year quarter. WrestleMania XXV generated approximately $8.4 million in live event related revenue in the current quarter. Excluding WrestleMania, revenues declined 26% due to lower average ticket prices and lower average attendance at our international events.
-- There were 78 events, including 27 international events, during the current quarter as compared to 83 events, including 31 international events, in the prior year quarter.
-- North American events generated $20.6 million of revenues from 51 events as compared to $14.3 million from 52 events in the prior year quarter. North American average attendance increased 19% to approximately 8,200 from 6,900 in the prior year quarter. The average ticket price for North American events was $46.25 in the current quarter as compared to $40.13 in the prior year quarter.
Excluding the impact of WrestleMania XXV, revenues were $12.2 million, average attendance was 7,200 and average ticket prices were $34.47 for our North American events.
-- International events generated approximately $13.8 million of revenues as compared to $21.0 million in the prior year quarter. The quarter-over-quarter decline reflected an 11% decrease in average attendance to approximately 8,100 from 9,100 and a 35% reduction in average ticket prices to $62.77, in part due to changes in foreign exchange rates. Additionally, the current quarter had four fewer events.
-- Pay-Per-View revenues were $35.6 million as compared to $17.9 million in the prior year quarter. WrestleMania XXV generated 960,000 buys and $21.0 million in pay-per-view revenue in the current quarter. Excluding WrestleMania, revenue declined 18% reflecting a comparable decline in total pay-per-view buys. For the three pay-per-view events which occurred in both the current and prior year quarters, pay-per-view buys declined 4%. There were five pay-per-view events produced in the current year quarter as compared to four events in the prior year quarter.
The details for the number of buys (in 000s) are as follows: Events (in chronological order) Three Months Ended Three Months Ended June June 30, 2009 30, 2008 WrestleMania XXV 960 - Backlash(R) 182 200 Judgment Day(R) 228 252 Extreme Rules(TM) / One Night Stand(TM) 213 194 Night of Champions(TM) - 273 The Bash(TM) 178 - Prior events 58 144 Total 1,819 1,063 -- In Q1 2008, the Company reported approximately 1,058 buys for WrestleMania XXIV.
-- Venue Merchandise revenues were $6.3 million as compared to $5.2 million in the prior year quarter. WrestleMania XXV generated approximately $1.4 million in revenue in the current quarter. This resulted in higher per capita spending of $11.26 in the current quarter as compared to $10.85 in the prior year quarter.
Excluding the impact of WrestleMania XXV, revenues were $4.9 million and per capita spending declined to $9.29 in the current quarter.
-- Television Rights Fees revenues were $28.3 million as compared to $24.7 million in the prior year quarter. This increase was primarily due to fees received from our new WWE Superstars television show and contractual increases from our existing programs.
-- WWE Classics on Demand(TM) revenues were $1.5 million as compared to $1.8 million in the prior year quarter.
Consumer Products Revenues from our Consumer Products businesses were $20.9 million versus $32.4 million in the prior year quarter, representing a 35% decrease.
-- Home Video net revenues were $8.6 million as compared to $18.5 million in the prior year quarter. The decrease in Home Video revenues primarily reflects lower sales of new release and catalog titles in conjunction with a broader industry decline. In addition, there were two fewer titles released in the current quarter. DVD shipments declined 36% to approximately 833,000 units in the current quarter.
-- Licensing revenues were $9.0 million in both the current and prior year quarter. The current quarter launch of a new videogame title, Legends of WrestleMania, offset a decrease in revenue from toy products.
-- Magazine publishing net revenues were $3.0 million as compared to $4.3 million in the prior year quarter. The decrease primarily reflects a reduction in newsstand and subscription revenue as well as the publication of two fewer special issues in the current quarter.
Digital Media Revenues from our Digital Media related businesses were $7.9 million in both the current and prior year quarters.
-- WWE.com revenues were $4.5 million as compared to $4.0 million in the prior year quarter, reflecting increased sales of online advertising, partially offset by lower revenues from wireless content.
-- WWEShop revenues were $3.4 million as compared to $3.9 million in the prior year quarter. The number of orders declined by 13% to approximately 62,000 while the average revenue per order decreased to $51.97, as compared to $53.18 in the prior year quarter.
WWE Studios We recorded revenue of $0.8 million in the current quarter related to two of our theatrical releases, See No Evil, and The Condemned, as compared to $2.6 million in the prior year quarter. During the first quarter of 2009 we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia. 12 Rounds generated approximately $12.2 million in gross domestic box office receipts and was released on DVD on June 30, 2009. We participate in revenues generated under the distribution of the films through all media after the print and advertising and distribution costs incurred by our distributors have been recouped and the results have been reported to us. As such, no revenues have been recorded for 12 Rounds or Behind Enemy Lines: Colombia.
Profit Contribution (Net revenues less cost of revenues) Profit contribution increased to $63.0 million in the current quarter as compared to $53.3 million in the prior year quarter. WrestleMania XXV contributed approximately $15.0 million in profit in the current quarter and more than offset a lower contribution from Home Video. Excluding WrestleMania, profit declined 10%. Gross profit margins increased to 45% as compared to 41% in the prior year quarter, reflecting increased efficiencies in our Live and Televised Entertainment segment.
Selling, general and administrative expenses SG&A expenses were $31.3 million for the current quarter as compared to $37.6 million in the prior year quarter, reflecting decreases in advertising, legal and professional fees, partially offset by increased reserves for bad debt primarily due to international customers. In addition, the prior year quarter included McMahon's Million Dollar Mania(TM) advertising campaign, which resulted in a charge of approximately $3.5 million that was recorded in SG&A.
EBITDA EBITDA was approximately $31.7 million in the current quarter as compared to $15.7 million in the prior year quarter. Excluding the impact of WrestleMania, adjusted EBITDA was $16.7 million in the current year quarter.
Investment and Other Income (Expense) The decline in investment income of $0.3 million in the current quarter reflects lower interest rates. Other income of $1.5 million, as compared to other expense of $1.6 million in the prior year quarter, reflected changes in realized foreign exchange gains and losses and the revaluation of warrants held in certain licensees.
Effective tax rate In the current quarter the effective tax rate was 35% as compared to 40% in the prior year quarter. The prior year rate included the accrual of additional FIN 48 liabilities.
Summary Results for the Six Months Ended Total revenues through the six months ended June 30, 2009 were $246.6 million as compared to $292.3 million in the prior year period. Operating income for the current period was $44.8 million versus $39.1 million in the prior year period.
Net income was $30.2 million, or $0.41 per share, as compared to $26.6 million, or $0.36 per share, in the prior year period. EBITDA was $52.2 million for the current six month period as compared to $45.3 million in the prior year period.
The following charts reflect net revenues by segment and by geographical region for the six months ended June 30, 2009 and June 30, 2008. (Dollars in millions) Net Revenues by Segment Six Months Ended June 30, June 30, 2009 2008 Live and Televised Entertainment $173.3 $186.6 Consumer Products 54.0 75.8 Digital Media 14.8 16.0 WWE Studios 4.5 13.9 Total $246.6 $292.3 Net Revenues by Region Six Months Ended June 30, June 30, 2009 2008 North America $187.3 $215.1 Europe, Middle East & Africa (EMEA) 41.4 52.4 Asia Pacific (APAC) 12.6 21.6 Latin America 5.3 3.2 Total $246.6 $292.3 Live and Televised Entertainment Revenues from our Live and Televised Entertainment businesses were $173.3 million for the current period as compared to $186.6 million in the prior year, a decrease of 7%.
June 30, June 30, 2009 2008 Live Events $ 52.4 $ 59.9 Pay-Per-View $ 49.2 $ 59.1 Venue Merchandise $ 10.9 $ 10.8 Television Rights Fees $ 53.2 $ 48.7 Television Advertising $ 3.1 $ 3.3 WWE Classics on Demand $ 3.0 $ 3.4 Consumer Products Revenues from our Consumer Products businesses were $54.0 million versus $75.8 million in the prior year, a decrease of 29%.
June 30, June 30, 2009 2008 Home Video $ 17.8 $ 32.5 Licensing $ 28.8 $ 35.2 Magazine Publishing $ 6.5 $ 7.2 Digital Media Revenues from our Digital Media related businesses were $14.8 million as compared to $16.0 million in the prior year, a decrease of 8%.
June 30, June 30, 2009 2008 WWE.com $ 8.4 $ 8.5 WWEShop $ 6.4 $ 7.5 WWE Studios We recorded revenue of $4.5 million in the current period related to three of our theatrical releases, See No Evil, The Marine, and The Condemned, as compared to $13.9 million in the prior year period. During the first quarter of 2009 we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia. 12 Rounds generated approximately $12.2 million in gross domestic box office receipts and was released on DVD on June 30, 2009.
Profit Contribution (Net revenues less cost of revenues) Profit contribution decreased to $114.4 million in the current period as compared to $115.9 million in the prior year period, as improved efficiencies essentially offset the impact of revenue declines as discussed above. Total profit contribution margin increased to approximately 46% as compared to 40% in the prior year period, reflecting increased efficiencies in our Live and Televised Entertainment segment.
Selling, general and administrative expenses SG&A expenses were $62.2 million for the current period as compared to $70.6 million in the prior year period, reflecting decreases in advertising, legal and professional fees. Current period expenses include the impact of our corporate restructuring of approximately $2.2 million in severance costs while expenses in the prior year include $3.5 million associated with our McMahon's Million Dollar Mania brand awareness campaign.
EBITDA EBITDA for the current period was approximately $52.2 million, as compared to $45.3 million in the prior year period.
Investment and Other Income (Expense) The $1.4 million decline in investment income in the current period reflects lower average investment balances and interest rates. Other income of $0.1 million as compared to other expense of $2.3 million in the prior year period reflects changes in realized foreign exchange gains, and the revaluation of warrants held in certain licensees.
Effective tax rate The effective tax rate was 35% as compared to 33% in the prior year. The prior year rate reflects tax benefits related to previously unrecognized tax positions.
Cash Flows Net cash provided by operating activities was $75.0 million for the six months ended June 30, 2009 as compared to $3.1 million in the prior year period. The increase was driven by the timing of feature film investments, favorable changes in working capital and reduced capital expenditures. Capital expenditures were $2.9 million for the current period as compared to $15.5 million in the prior year period as the prior year reflected approximately $8.2 million in High Definition broadcasting equipment.