WWE Q1 2021 Earnings Report Estimate and Preview

WWE releases its first quarter 2021 earnings today. Financial details will be disclosed covering the period of January 1 to March 31.

An earnings report and other documents are expected to be released soon after the market closes at 4pm ET. A conference call will be streamed live at 5pm ET on WWE’s corporate website with comments from CEO Vince McMahon, president and chief revenue officer Nick Khan, chief financial officer Kristina Salen, and chief brand officer Stephanie McMahon.

At 8pm ET tonight I’ll do a livestream review of the WWE earnings report exclusively for patrons at patreon.com/wrestlenomics. Video and audio will also be available for patrons on-demand afterward.

Keep in mind Wrestlemania happened in April, so details related to those events may be limited. The two-day event generated $6.2 million in ticket revenue, according to records we obtained through the Tampa Sports Authority. Information related to ticket or merchandise sales for Wrestlemania would be included in reporting for Q2 (April 1 to June 30). Earnings for that period will come out in the next quarterly report, in July or August.

The average stock analyst covering WWE estimates the company will report an earnings per share ratio of $0.22 for Q1, according to Seeking Alpha. That implies an expectation of about $18 million in net income. The consensus revenue estimate is $257.5 million. The market will be closed for trading for the day, but WWE’s stock price might move accordingly if WWE reports figures lower or higher than those estimates.

For the quarter, my estimates are $231.5 million in revenue, an EPS of $0.20, operating income of $31.2 million, and net income of $16.9 million.

Cells shaded in green for Q4 assume there is a major event held in Saudi Arabia during that period. Categories shaded in pink are profit metrics.

Here are a few subjects and questions that might be addressed in the earnings report or that stock analysts might ask about in the Q&A session on the conference call.

Revenue structure of the Peacock deal

On the last earnings call, in February, CFO Kristina Salen indicated 2021 would be the biggest revenue year in the five-year lifetime of the new Peacock deal. Salen said:

2021 will be the biggest year in the deal from an incremental revenue and adjusted OIBDA perspective, because upon delivery of the deal, so to speak, upon the onset, we have to value the subscribers that we’re transferring over and we have to value any IP that we’re transferring over. And that will be all recognized in 2021. And then in 2022, you’ll have the regular revenue recognition of the ongoing deal.

Details reported or other new guidance related to the WWE Network segment might shed some light on how the company was compensated by NBCUniversal for the Network content in Q1. It’s important to remember Peacock launched WWE Network content on March 18, with just under two weeks remaining in the reporting period, so Peacock payments might be prorated into only a small fraction of the quarter. The Network segment might also be affected by cancellations of U.S. subscriptions for the final days of domestic version of the Network.

Measuring WWE Network success going forward

How do investors measure success for WWE on Peacock? Nick Khan said in a recent interview (before Wrestlemania) that the Fastlane pay-per-view, the first monthly peak event on Peacock was a success, but that NBCUniversal had asked WWE not to disclose numbers. I would be mildly surprised if WWE is able to quantify any information related to the performance of WWE content on Peacock going forward. That said, WWE might still continue to disclose subscriber counts for its international markets, as it has in the past. If so, that will be a way to track engagement in Network content

In that case, how did international subs perform in Q1? Do we get any news on what the international sub count was immediately after Wrestlemania?

Growth opportunities in licensing

The Other media segment (when it doesn’t contain Saudi event revenue), which contains WWE Studios, is increasingly driven by licensed content, including from A&E programs, E! reality series. There’s a Netflix document on Vince McMahon announced. What other licensing opportunities does WWE think are possible there?

What other areas of growth is WWE going to focus on? With perhaps a return to live events and normal life in the foreseeable future, is there an opportunity to license WWE content to a major theme park? Universal Studios seems like an obvious candidate, since NBCUniversal is by far WWE’s biggest customer. Perhaps the lesson learned early in the pandemic about how much money can be saved by producing Raw and Smackdown at a fixed location could be adopted in short-terms as part of a theme park agreement.

What did WWE learn from its release of its first NFTs (featuring The Undertaker) earlier this month? Does the company feel this is a product its fan base will continue to have interest in? Are there more NFT sales on the horizon? Is this yet another licensing opportunity?

International strategy

Nick Khan made clear he sees Latin America and specifically Mexico as a region where WWE could grow revenues. Does WWE see that region as a destination for a performance center and an NXT brand. Given how different the wrestling culture is in Mexico compared to the U.S. and western environment where WWE dominates, what’s the company doing to ensure it’s ready to execute effectively in that market? 

Is EVP Paul Levesque “global localization” strategy still a vision the company intends on executing in the way Levesque presented it at the WWE Business Partner Summit in 2018? What other regions, possibly including India and Japan, does WWE see opportunities for expansion?

The Thunderdome is expensive

Media operating expenses should reveal another round of hints about expenses related to the Thunderdome and Capital Wrestling Center, although it’s been made pretty clear at this point by executives’ comments and company filings that the current production setting, with fans watching remotely on screens, is more expensive than a live touring model would be.

Stock buyback program

Is WWE resuming its stock repurchase program that it put on hold at the beginning of the pandemic? The company ended 2020 with more cash on hand than at any time in at least the last 15 years by a 2x multiple, so can likely afford to buyback shares again as a way to return value to investors. If WWE is not resuming the program, what’s the argument to shareholders for doing so given the cash-rich state of WWE’s finances and guaranteed nature of much of the company’s revenues?

Reporting methods

This is the first quarter for the new year and with a new CFO in place. Will WWE’s reporting methods change? Is the current segment detail structure (seen in the table above) the way Salen and WWE want to report going forward?