Despite a huge increase in profits over last year, a series of warning signs has led to WWE stock falling $2.43 per share to $74.94 after today's investment call. However, there was a feeling the larger drop was an overreaction and the stock is starting to rebound.
WWE took in $188.4 million in revenue in quarter three and ended with a $33.6 million profit. For a comparison, the first two quarters profit was a combined $21.8 million. Last year's third quarter had $186.4 million in revenue and $21.8 million in profits.
However, there were negative signs, in that the profit increase was due to a $15.6 million benefit provision from income taxes, so if you take that out, operating income fell from $31.1 million last year to $18.0 million this year.
It was that figure, along with Wall Street expecting $202 million in revenue and falling short, that caused the decline.
The major difference was an increase in spending which was not offset by the much smaller increase in revenue. In addition, while TV rights fees continue to increase, live events and consumer products were significantly down, to the point where the live events are barely breaking even, with just $120,000 in live event profits for the combined months of July through September.
Vince McMahon said that he has always considered live event attendance as the barometer of how well they are doing, that he knows what is wrong and said they are antiquated, that he knows how to fix it and that they will turn around.
They also said the long-term goal is to have Performance Centers all over the world in every major market and that they are working on major changes for the business. During the call, the company said that the show in Saudi Arabia was a sensitive subject and they would say nothing more than their statement earlier today.
The WWE Network had 1,615 subscribers on September 30, broken down as 1,186,000 in the U.S. and 429,000 outside the U.S. At this time last year, the numbers were 1,507,000 subscribers broken down as 1,106,000 in the U.S. and 401,000 outside the U.S.
However, that is misleading due to discount subscribers, as while during the quarter, the average for the quarter was nine percent more subscribers than last year (at the end that dropped to seven percent due to weaker performance at the very end of the three months and stronger performance in the earlier portion), the revenues were only up two percent, meaning far more people were paying lower rates.
The decline from WrestleMania was 193,000 through September 30 this year, as compared with 154,000 last year, so that was a negative.
Arena attendance, averaging 4,500 fans in quarter three in the North American market, was the lowest in many years.
Even with the declines in key indicators of overall popularity, the television rights fees will keep the company at record profit levels going forward.