World Wrestling Entertainment CEO Discusses Q3 2010 Results – Earnings Call Transcript
World Wrestling Entertainment, Inc. (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 11:00 am ET
Executives
Michael Weitz – SVP, IR
Donna Goldsmith – COO
George Barrios – CFO
Analysts
Richard Ingrassia – Roth Capital
Michael Kupinski – Noble Financials
Marla Backer – Hudson Square
Presentation
Operator
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World Wrestling Entertainment Inc. Q3 2009 Earnings Call Transcript
Good morning. My name is Kasey and I will be your conference operator today. At this time, I would like to welcome everyone to the World Wrestling Entertainment Third Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)
Thank you. I would now like to turn the call over to your host, Mr. Michael Weitz, SVP of Investor Relations. Sir, you may begin.
Michael Weitz
Thank you Kasey and good morning everyone. Joining me for today's discussion are Donna Goldsmith, our COO and George Barrios, our CFO.
We issued our earnings release earlier this morning and we'll be referencing a presentation as part of our discussion. To clarify our performance and shed light on trends in the business, these and other materials, such as a quarterly, financial and metrics schedules are available on our corporate website at corporate.wwe.com.
We will be making several forward-looking statements today as part of our discussion. These statements are based on management estimates. Actual results may differ due to numerous factors. These factors are described in our presentation and in our filings with the SEC. Reconciliation's for non-GAAP financial information discussed on this call can be found in our earnings release or on our website.
Today, we will review our financial results for the third quarter and will follow this review with a Q&A session.
At this time, it's my privilege to turn the call over to Donna.
Donna Goldsmith
Thank you, Michael and good morning everyone. And thank you for joining us today. Vince is unable to join us, but he did ask that I step in to provide a top line overview of the quarter for you. So let me give you some perspective on the quarter.
We managed a 12% increase in adjusted EBITDA despite some challenges. Difficult trends continue to reflect the changing, talent based and overall economic weakness. On the large event front, we had a 10% decline in average attendance in North America.
Pay-per-view had a 16% decline in buys for comparable Q3 events from last year or prior year. Home video had significant increase in returns at lower prices at the retail level. However, earnings growth demonstrated our continued focus on managing the business smarter. And so let's talk about some of our areas of strength.
Our global relationship with our master toy partner Mattel continues to be profitable and sales are strong. Toy revenue outpaced last year by 172%. Our international team continues to develop new and emerging markets and we held our first live event in China at the Shanghai World Expo in August. We were voted best show by the local Shanghai newspaper, Xinmin Evening Newspaper. And all three tickets that we distributed for our event went in less than one hour.
On the international licensing front, revenue rose 62% led by toys in Mexico. And we reduced SG&A expenses 23% or $8 billion. So I mentioned there were challenges and issues that we faced. Talent transition and overall economic weakness are both important factors in the Q3 revenue decline.
In Q3, we had several top talents out. On the retirement front, Shawn Michaels and Dave Batista both left us after WrestleMania. Undertaker has been in and out of the ring with injuries. C.M. Punk was recently injured. HHH has been out of the ring and Chris Jericho was temporarily out of the ring. These absences have affected many areas of our business like the rent, pay and pay-per-view to mean too.
On WWE film front, we have losses in the quarter from marketing expenses to support Legendary. Legendary DVD however is tracking to plan and we expect higher returns and profitability then in our prior business model fulfillment. We are now done with seven films or will be done by the end of year and our on-aid production highlight is through at least for the first quarter of 2011. And it's interesting to note as well that our films that we will make in 2011 will be at a lower expenditure. But we do continue to believe that the film business makes sense. It builds on our core competency. It grows our audience for us and generates returns.
So let me conclude by saying our management team is working to address these creative challenges. We're working on developing new talents like Wade Barrett, Alberto del Rio and Nexus. And we remain confident we can achieve financial objective and deliver meaningful growth for you – our shareholders.
And now I would like to turn the call over to our CFO, George Barrios.
George Barrios
Thanks, Donna. I would like to start by providing you with some additional perspective on our third-quarter results. For the quarter, we managed a 40% increase in operating income with a slight decline in revenue from the prior-year quarter. Our earnings for the third quarter of both 2010 and 2009 however included tax credit, which we believe impact the comparability of our results.
Specifically, the third quarter 2010 included $6.1 million of tax credits related to our television and digital video production, which were recognized as a reduction of expense in these areas. To clarify trends in our business, I'll discuss that performance on an adjusted basis excluding the impact of these tax credits. For further discussions, please refer to this website presentation or our earnings release, both of which includes supplementary schedule outlined in these tax credits and their impact on our financial results.
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