The Peacock deal has already made a large impact on WWE’s bottom line

WWE has released its financial results for the first quarter (Q1) of 2021, which covers the beginning of the year through March 31. Their net income of $43.8 million more than doubled analyst expectations, which estimated their net income to be more like $18 million. So they beat expectations by about $26 million.

Here is a summary statement from their press release about their Q1 performance. Keep in mind that Adjusted OIBDA is WWE’s preferred metric for profit.

“During the first quarter, we continued to effectively execute our strategy,demonstrating our ability to adapt to a challenging live event environment and to expand the reach and monetization of our content in a changing media landscape,” said Vince McMahon, WWE Chairman & CEO. “The launch of WWE Network on NBCU’s streaming service, Peacock, the multi-year extension to distribute NXT on USA Network and the successful staging of WrestleMania illustrate the enduring and increasing value of the WWE brand as the foundation for long-term growth.”

Kristina Salen, WWE Chief Financial Officer, added “In the quarter, Adjusted OIBDA results were driven by the recognition of revenue from our Peacock agreement. Although Adjusted OIBDA increased in the quarter, we are not adjusting our previous full year Adjusted OIBDA guidance of $270 million to $305 million at this time, given the uncertainty regarding the timing and pace of return for ticketed audiences and our ability to stage international large-scale events due to COVID-19 restrictions.”

With live events no longer a thing due to the global pandemic, and the WWE Network subscriber counts no longer relevant thanks to the Peacock deal, many of WWE’s revenue streams are contractually fixed and straightforward to forecast. So why did their overall net income exceed expectations by so much? It appears that the first year of the Peacock deal is front-loaded. This additional money wasn’t anticipated by analysts because the deal didn’t go into effect until close to the end of Q1.

Due to the front-loaded nature of the Peacock deal, WWE is not changing their overall outlook for the full year:

“The Company is not changing full year guidance at this time. While first quarter 2021 results were up on a year-over-year basis, they were largely driven by the impact of the WWE Network-Peacock licensing agreement, including the upfront revenue recognition related to the delivery of certain WWE Network intellectual property rights, and therefore should not extend into future quarters.”

The revenue increase due to Peacock can be seen in the red circle in this table as part of their “Network” revenue in their Media segment. The number hovered in the $40 to $50 million range each quarter for the last couple years, before jumping up to $79.4 million in Q1 2021:

This is a simplistic way of looking at it, but that increase of about $25 million (due to Peacock) in the Network segment accounts for much of WWE’s $26 million over performance in net income compared to analyst expectations.

Despite the extra Peacock money, revenue in Q1 2021 was down compared to Q1 2020. That’s because Q1 2020 included a Saudi Arabia event, while Q1 2021 did not. This can be seen in the “Other” column” in the above table ($62.5 million in 2020 vs. $7.3 million in 2021):

“Revenue was $242.0 million, a decrease of 6% or $14.6 million, primarily driven by the absence of the Company’s large-scale international event as reflected in Other media revenue. The decline in media revenue was partially offset by an increase in network revenue, driven by the upfront revenue recognition related to the delivery of certain WWE Network intellectual property rights, and, to a lesser extent, content license fees associated with the delivery of new WWE Network content as well as the contractual escalation of domestic core content rights fees for the Company’s flagship programs, Raw and SmackDown.”

Even though WWE’s total net revenue was down this quarter compared to Q1 2020, that was already built into analyst expectations. Q1 2020 mostly occurred pre-pandemic, and included the Saudi Arabia deal, so its advantages were already well known. It’s the front-loaded Peacock money for Q1 2021 that puts WWE’s profits ahead of where they were expected to land this quarter.

So the WWE machine keeps chugging along generating a ton of revenue. The main financial uncertainty for the remainder of 2021 centers around the return of live events in the second half of the year and how that will affect their bottom line.