WWE CEO Nick Khan said Wednesday the company isn’t imapcted by the WGA strike that started yesterday.
“Our writers are not members of the guild, so there is no effect on us whatsoever. Of course we are supportive of the writers who are members of the guild and their efforts, and we are hopeful a deal can be reached between them and the other side in short order,” he said on a call after quarterly results that focused on key rights renewals and WWE’s upcoming merger with Endeavor/UFC.
It’s earnings season and as numbers for the March quarter have been trickling out, World Wrestling Entertainment is the first to report after the latest contract between writers and producers expired at midnight Monday without a new deal. In a walkout that is already having ripples across media and entertainment, writers began picketing in New York and LA yesterday.
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As Paramount Global reports earnings tomorrow morning, and Warner Bros. Discovery on Friday, investors will be on high alert for strike-related commentary from CEOs.
WWE saw revenue and net profit dip in the March quarter but topped estimates as it prepares to merge with UFC parent Endeavor later this year. “We’re trying to close the deal as quickly as we can,” said CFO Frank Riddick on the call. Execs , shouting out surging growth in ratings for Raw and SmackDown, record attendance in live events and robust sponsorships.
With the transaction set to close in the second half, CEO Nick Khan said WWE focused now on domestic media rights renewals with Fox and NBCUniversal and thinks ts well positioned. Ratings for Raw and SmackDown have surged. Execs noted record attendance for live events and robust sponsorships.
Khan wouldn’t put a timeframe on talks but said conversations are “productive.” The current partners have a one-month exclusive negotiating window. “During the process, you can control a lot of things, but not when you’ll get to an agreement. But we are bullish,” he said.
Internationally, WWE is also taking its show to London for the first time and is “open for business” for its content and international network.
Sales fell by 11% to $297.6 million due largely to the timing shift of a large-scale international event (in Saudi Arabia) which hit in the first quarter of 2022 but was moved to the second quarter this year. Revenue from the contractual escalation of media rights fees for Raw and SmackDown, and higher North American ticket sales, partly offset that.
Operating expenses reflected a decrease in production costs related to live event timing, but also costs related to WWE’s strategic review that led to the deal with Endeavor. WWE, controlled by Vince McMahon, and Endeavor announced announced their merger last month. Endeavor will hold a 51% and existing WWE shareholders will hold 49% of a new publicly traded compan. The deal values UFC at an enterprise value of $12.1 billion and WWE at an enterprise value of $9.3 billion.
WWE said operating income margin decreased to 18% from 28% and net income of $36.7 million, or $0.43 per diluted share, fell from $66.1 million, or $0.77. The company had negative free cash flow of $20.6 million vs an inflow of $69.7 million the year before on higher capex, included $29.6 million for a new headquarters. (Excluding that, free cash flow for the three months was positive $9 million.)
“We are off to a strong start in 2023. Operationally, we continue to effectively execute our strategy, including staging the most successful WrestleMania of all time in early April. WrestleMania, as well as our other successful premium live events such as Royal Rumble and Elimination Chamber, and strong viewership for our weekly flagship programs, Raw and SmackDown, further expanded the reach of our brands and enhanced the value of our content,” Khan said.
CFO Frank Riddick said the Endeavor deal will “form a global sports and entertainment business that has the potential to unlock vast growth opportunities for both businesses. We believe that bringing these two iconic and highly complementary brands together will allow us to increasingly capitalize on the rapidly expanding, global appetite for live sports events and premium entertainment content, with the goal being to maximize value for our shareholders.”
In April, WWE and Endeavor announced a deal to WWE and UFC to form a new, publicly traded company. Endeavor will hold a 51% controlling interest and existing WWE shareholders will hold 49% after the transaction, which values UFC at an enterprise value of $12.1 billion and WWE at an enterprise value of $9.3 billion.
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