WWE Earnings Cheat Sheet: Disappointing Financial Performance

World Wrestling Entertainment, Inc. (NASDAQ:WWE) reported its results for the first quarter. World Wrestling Entertainment, Inc. is engaged in the development, production and marketing of television and pay-per-view event programming and live events and the licensing and sale of consumer products featuring its World Wrestling Entertainment brands.

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World Wrestling Entertainment Earnings Cheat Sheet for the First Quarter

Results: Net income for World Wrestling Entertainment, Inc. fell to $8.6 million (11 cents/share) vs. $24.7 million (33 cents/share) a year earlier. A decline of 65.2% from the year earlier quarter.

Revenue: Fell 13.6% to $119.9 million YoY.

Actual vs. Wall St. Expectations: WWE reported adjusted net income of of 15 cents/share. By that measure, the company beat the mean estimate of 14 cents/share. Estimates ranged from 12 cents per share to 16 cents per share.

Quoting Management: “Our first quarter adjusted EBITDA declined 20% reflecting mixed performance from our business lines, including the impact of the ongoing transition in our talent base, and an increase in SG&A expenses. While we understand the lead time required to develop new characters with broad appeal, we were disappointed with our financial performance and our management team is working on addressing these challenges,” stated Vince McMahon, Chairman and Chief Executive Officer. “Looking ahead, we are optimistic about our longer-term opportunities to leverage our strength as the ‘New WWE’. We are pleased with the strong performance of WrestleMania, which is expected to deliver a 30% increase in domestic pay-per-view buys and reach more than one million buys globally. Further, the successful launch of our new program, Tough Enough showcases the power of our branded programming. We believe the recent adjustment in our dividend will enhance our flexibility to create and monetize new content, to distribute that content on a variety of existing and emerging media platforms and to execute our ‘New WWE’ initiative.”

Key Stats: Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell eight percentage points to 38.9% from the year earlier quarter. Over that time, margins have contracted on average 4.5 percentage points per quarter on a year-over-year basis.

The company has now seen net income fall in each of the last two quarters. In the fourth quarter of the last fiscal year, net income fell 27.2% from the year earlier quarter.

Over the last five quarters, revenue has fallen an average of 1% year over year. The biggest drop came in the second quarter of the last fiscal year, when revenue fell 23% from the year earlier quarter.

Competitors to Watch: CKX Inc. (NASDAQ:CKXE), CBS Corporation (NYSE:CBS), Time Warner Inc. (NYSE:TWX), Lions Gate Entertainment Corp. (NYSE:LGF), News Corporation (NASDAQ:NWSA), Live Nation Entertainment, Inc. (NYSE:LYV), DreamWorks Animation SKG, Inc. (NASDAQ:DWA), Madison Square Garden, Inc. (NASDAQ:MSG), Global Entertainment Corp. (GNTP), and Cinedigm Digital Cinema Corp. (NASDAQ:CIDM)

Stock Performance: Shares of WWE are trading at $10.67 as of May 5, 2011 at 10:58 AM ET, down a tad from the previous closing price of $10.69.


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