WWE Q2 2020 Earnings Results: News, Notes As Investors Grill Vince McMahon About Ratings

WWE held its Q2-2020 earnings presentation Thursday evening as the company touted strong second quarter results on the strength of cost-cutting measures and “sustained cost savings.” Questions continued to pile up about WWE’s ratings decline, and the promotion’s plans to turn them around.

In welcoming the investors, Vince McMahon talked up WrestleMania’s success, noting viewership on the WWE Network was up 20%, making it the most-viewed WWE show in history with over one billion viewers across two nights.

McMahon handed things off to Interim Chief Financial Officer Frank Riddick, who talked up WWE’s financial figures and highlights.

  • Revenues were $223.4 million as compared to $268.9 million in the prior year quarter reflecting the timing of the Company’s large-scale event in Saudi Arabia; Revenues reached a record $514.4 million year-to-date, representing 14% growth from the prior year period
  • Operating income was $55.7 million as compared to $17.1 million in the prior year quarter
  • Adj. OIBDA1 increased to $73.5 million from $34.6 million in the prior year quarter • Free Version of WWE Network was announced on June 1, unlocking a portion of WWE’s content library to expand reach and engagement of its direct-to-consumer streaming service for all fans
  • WWE Network average paid subscribers2 declined 1.5% to 1.66 million while ending paid subscribers increased 6% to 1.69 million
  • Digital video views increased 10% to a record 9.9 billion and hours consumed increased 15% to a record 374 million across digital and social media platforms3
  • eCommerce revenues nearly doubled to $12.6 million, substantially offsetting the loss of venue merchandise sales with 76 fewer events in the quarter

WWE Addresses Impact of COVID-19

In its earnings report, WWE addressed COVID-19’s impact on its business and the effectiveness of WWE’s business model in responding to these challenges:

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“Due to COVID-19 and related government-mandated impacts on WWE, the Company continued its various short-term cost reductions and cash flow improvement actions. (See first quarter 2020 earnings release). These actions contributed to WWE’s enhanced liquidity, which reached $548 million in cash and short-term investments as of June 30, 2020,” read the opening paragraph.

“Our second quarter financial performance was strong and demonstrated our ability to respond to the challenges posed by COVID-19,” said Vince McMahon, WWE Chairman & CEO. “We continue to adapt our business to the changing environment, focusing on the development of new content for global distribution platforms and increasing audience engagement to drive growth and value for our shareholders.”

Investors Grill WWE About Ratings

In addition to questions on cost-cutting measures and potential growth, WWE received quite a few pressing questions about its ongoing ratings decline. Investors are finally beginning to smarten up and see through WWE’s hollow excuses amid ongoing unrest that has resulted in class action lawsuits.

McMahon’s new strategy appears to blame the year-over-year ratings decline on COVID-19, and WWE’s lack of an audience. Despite the fact that WWE’s viewership woes precede this global pandemic by several years, McMahon pivoted to WWE’s lack of an audience when posed with uncharacteristically tough questions about ratings from shareholders.

Curry Baker with Guggenheim Partners asked about why ratings have been soft recently, and how concerned WWE was about the ratings. “What insight do you have and what do you believe is behind the softness? What’s the strategy to turn the ratings around in the near term, and longer term?” asked Baker.

Vince McMahon noted that more than any other sport, WWE’s audience is part of the program. McMahon noted it’s the audience interaction that is always the plus, and talks up “the origination of this genre: “The yays and the boos.”

“The audience is integral to the success of our programming,” said McMahon before admitting that WWE could have “more compelling characters, compelling storylines and more content to focus on personalities and content outside of the ring.”

The call took a slightly more dramatic turn when Brandon Ross of LightShed Partners, who recently penned a report blistering WWE’s business practices, asked why AEW and NXT have bounced back (ratings-wise) better than Raw and SmackDown. Ross went on to ask if WWE abandoned its youth movement by firing Heyman, and questioning the firing itself. Given Triple H’s success with NXT, can he be elevated on Raw and SmackDown.

McMahon attributed AEW and NXT’s resurgence to the fact that they’re new. In regards to Heyman, McMahon said Heyman did a good job, creatively, before pivoting to explaining why WWE needs to build new stars.

Throughout the call, McMahon continued to note that WWE’s lack of an audience was the culprit behind record low viewership.

WWE addressed the impact COVID-19 has had on the company in addition to publishing its financial highlights in the 16-page earnings report.

WWE’s stock closed at $45.43, up 1.98% ahead of the evening earnings presentation.

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