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ouarmy2012 (70.03)

Can you Smmmeeelll what WWE is cookn'?

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July 02, 2013 – Comments (8) | RELATED TICKERS: WWE

 

        Yeah...probably not actually because they aren't cooking much. But they still have a cult following of viewers that were born in the 70's, 80's, and 90's. We were encapsulated by the characters that the WWE gave us like...IT DOESN'T MATTER WHAT THEIR NAMES ARE! (just look up The Rock "it doesn't matter" quotes online for that reference) jk it does, "Macho Man" Randy Savage, Hulk Hogan, Andre The Giant, Stone Cold Steve Austin, Triple H, The Undertaker, John Cena, and The Rock. Several of these stars have actually went on to have lucrative and not so lucrative action film careers and to actually be a pretty good actor like The Rock aka Dwayne Johnson. But sadly most of these stars are completely retired from the WWE. So what does that mean for the WWE and how will they grow their viewing audience past their cult following? So before I get into what I think their industry growth ideas should look like lets go over their financials and their surprisingly talented management team.

Financials

#1- Totally revenue has very little change in the past 4 years with a 1% increase from 2010-11.

 

This isn't that surprising when you take into consideration that WWE's golden years are more or less dead, but not buried yet. But keeping this revenue stream is somewhat impressive with the prevalence of other shows and pay per view events like UFC.

 

#2- Net income v. Revenue is quite low with only 6% of revenue turning into actual income.

 

Compared to big brother Time Warner Cable (TWC) at about 10% it isn't that bad. Programming companies like WWE generally have to deal with a bit more overhead than other businesses. This area also has very little growth showing that they haven't really increased their profit margins.

 

#3- Debt is actually pretty low at 86.66 mil and can be easily covered with their cash on hand and a quarter or two of income.

 

I really enjoy seeing companies that do not take on much debt and are able to pay it off if need be. It shows great responsibility in financial management to use their own money to finance business projects.

 

#4- Dividend growth has gone down by 17% over a 5 yr period.

 

The dividend they use to have was a very attractive part of the company for investors. However this might be due to them wanting to save money for investments in their company. The dividend was cut from .36 to .12 per quarter in early 2011.

 

#5- EPS is also on average decreasing as well at 14% on the 5 yr period.

 

This past year (2012) the posted EPS was .43 compared to TWC EPS of 6.99, WWE's performance isn't so hot. Is it fair to use Time Warner as a comparison? No, probably not but there aren't many publicly traded companies to compare WWE to.

 

#6-  Stock has increased 30% YTD.

 

This is about one of the only great parts of this stock financially, why has it gone up? Not really quite sure, possibly their ramped up public service love affair. They have raised money for or partnered with disaster relief, Susan G Komen, Make a wish, Special Olympics, Anti-Bullying, and the list goes on. Not to mention they are also trying to take a more family friendly look on their programming. I guess the days of beer cracking Stone Colds and scantily clad divas are over.

 

Management

 

            WWE's management team, surprisingly qualified. First is first...

 

Vincent K. McMahon- He is the man that took the company global, held indoor event attendance records,  and helped bring pay per view television to fruition with main events like wrestlemania. Mr. McMahon has made this company what it is today, but he doesn't do it without help.

 

George Barrios- Mr. Barrios is the CFO for WWE and has been since 2008. Before WWE he worked at New York Times as the Treasurer, New England Media Group as CFO, COO of Netsilicon, Praxair, and Time Warner Cable. He also holds a BA and MBA from the University of Connecticut. While Mr. Barrios has worked in other fields he has been drawn back to media and has been doing a fantastic job at WWE.

 

Kevin Dunn- To not overdue Mr. McMahon's ridiculous amount of experience in the Television industry, Mr. Dunn was more or less born on a WWE TV set. His father Dennis was a producer for Mr. McMahon's father back in the early days of wrestling. Mr. Dunn has been a full time worker at WWE since 1984, that's 29 years! I literally haven't even been alive longer than the time he has worked at WWE. Oh and he was integral in creating Wrestlemania. Mr. Dunn is now an executive vice president and head of television production.

 

Paul Levesque- Did I mention that WWE has a ridiculous amount of experience? Well Paul Levesque use to be a Star for WWE you may know him better as "Triple H", but now he is finding the stars, or in corporate terms the Head of Live Events and Talent. What a better person to find talent than one of the most talented there ever was? Oh and he is also the national spokesman for a campaign for Muscular Dystrophy.

 

Michael Luisi- President of WWE Studios, while you may think that this is an odd position for a Media Lawyer that graduated from NYU with a Bachelors in Fine Arts and a Juris Doctorate. His extensive media law experience greatly compliments his media management experience especially with Miramax films before he came to WWE. He is also a adjunct professor at NYU.

 

Stephanie McMahon- Miss McMahon the daughter of Vincent McMahon is about the only part of the management team that I am not really excited about. But just like the others in management she is not lacking in WWE experience, she has managed many different WWE lines like Smackdown and Raw. She also has made many appearances as a wrestler in the WWE. She is currently the head of creativity for WWE which basically means she comes up with new ideas for their programming. She is married to Paul Levesque and has a Bachelors in communication from Boston University. I almost forgot she is WWE's spokeswoman for their anti-bullying campaign.

 

Michelle Wilson- Last but definitely  not least and actually probably the best. Miss Wilson is the Chief Marketing Officer for WWE and has done quite the job so far. But before her success at WWE she was very successful at the United States Tennis Association. If you are like me you might think watching tennis is a bit boring but somehow Miss Wilson made the U.S. open the most attended sporting event in the world. She joined WWE in 2009 and then became CMO in 2011 she has forged partnerships with businesses like GM, Nestle, and 7-eleven; continued their relationship with make-a-wish foundation, built one with Susan G. Komen for Cure which raised 1 million dollars during October 2012. She has been integral in expanding WWE's main events into weekend long shows that generate large amounts of revenue for the company and business for cities that hold them. Miss Wilson is a Cum Laude graduate for the University of Pennsylvania and received an MBA from Harvard.

 

Growth

 

            You may  not equate the WWE with the word "growth" at least not recently. In the past they have done relatively well and are now globally aired in at least 145 countries. But with touching about every market they can already like toys, video games, social media, pay-per-view, and regular TV how do you grow a company that has such a niche market?

            WWE has taken a recent turn in creating a new cult following with the millennial generation. While they may lose a few followers from the old generation that were such fans of the more violent "attitude era" I think that most of the cult followers will stay on for the new umm "well behaved era?" To do so they have downgraded most of the programming to a TV rating of TV-PG and a Saturday morning program to TV-G. Quite a surprise coming from a wrestling company that use to drive Budweiser trucks down to the stage , choke slam wrestlers through tables, and have "cage" matches. Well WWE didn't stop at TV ratings, they have expanded into Public Service as well, forging partnerships with Susan G. Komen for the Cure, starting their own anti-bullying campaign, increasing their wishes made with make-a-wish foundation (John Cena leading the way of all wish makers out there), working with "Nothing but Nets" program that provides mosquito nets to prevent bites form malaria carrying insects, and announcing a sponsorship of the USA special Olympic games in 2014. You can thank WWE for making that sentence way too long.

            So what does this mean for their growth? With an increasingly public service conscious consumer and parents that may now care a lot more about their children watching less violent TV, WWE might be onto something. But it is still too early to tell and their revenue has not increased much yet. There has also been news of the WWE opening up their own TV channel, can they produce enough new programming for a 24 hour channel? We shall see.

           

            Bottom line, I do not see WWE going out bankrupt anytime soon and with a very strong management team that actually has a sizeable amount of investment in their own company I can see them at a  normal growth rate over the next 5 years. If you have a bit of money around and like investing in progressive public service oriented companies then maybe you should consider adding WWE to your portfolio.

            

8 Comments – Post Your Own

#1) On July 02, 2013 at 2:01 PM, L0RDZ (82.15) wrote:

Bad idea...  horrible investment.

About as horrible as  their  direct  to dvd  movies they seem to constantly  produce  using  their  wrestling talent  as  actors.

Story lines  stink  as  do  their live events.   One  ppv per month and gimmicks  seem to  have made them ordinary and as bad as their  free daily programming.

Look how they have  handled  the  Chris Benoit situation,  rather than  induct him  in  the wrestling hall of  fame,  they  basically  have erased him  from the  books,  you  try to look up who won the royal rumble and the year he won and or was champion,  there seems to be  a  void and erasure.

Much like how  Germans would like to erase from their  history books what happened during the world wars and the genocide they are  responsible for.

 

 

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#2) On July 02, 2013 at 8:58 PM, ouarmy2012 (70.03) wrote:

Haha sounds like you harbor some dislike for WWE? Yes, tragic what happened but usually companies try to distance themself from issues like that. They are definitely trying to cut ties from the old WWE though.

I am taking it from a completely unbiased perspective. Do i think it is a very good investment no. Horrible? not quite. Less than good, yes. Which is why i said what i said at the end. 

 

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#3) On July 03, 2013 at 8:55 AM, RallyCry (< 20) wrote:

This is a good write up. If the market dynamics were a bit more in WWE's favor, and if industry experience was paramount, this is the management team you would look for to invest alongside.  But it appears insiders only hold 1.75% of the company. I would like to see higher levels of insider ownership from people with such vast experience. This may be say a lot about the future of the company. 

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#4) On July 03, 2013 at 10:34 AM, L0RDZ (82.15) wrote:

Wow only  1.75%  you'd think with  all  the  constant  free issue of  stock to  the friends  and  family of the  McMahons   they'd  hold  a  larger percentage,   h3ll   even   that  suit  menswarehouse guy who recently  got  canned out of  the company he  build  had like  6% ownership of  the mens warehouse.

The management is a  joke,  come  on  triple  H  as  some suit...  if you have  half a  brain  you'd  know  why  or how he  got  that job.

The only one with any sense,  left the safe habours  of  the family  to seek  fortunes and  fame  in  foreign  cable and internet.  WHat  was his name ? Shane ?

More like  shame  as  he used his  family name ,  much like the rest to make  a  farce in  the  ring.

His theme song...  money money money..

His dads  song...  no  chance...

Brother  in  law   time to play the game...

 Well if  you  had held  onto  wwe  stock   you'd  swear  your  head off...  given how badly  it tanked  and   had  its  dividend  dropped...

A few years back  I   had such  an  article on fool  warning people about  WWE...  of course it got removed..

 

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#5) On July 03, 2013 at 12:26 PM, ouarmy2012 (70.03) wrote:

I read otherwhere that it's corporate ownership was higher but i dug a bit deeper and yes it's not really that high. 

And to defend their choice of Triple H as a "suit", i ask you this, would you rather higher an actual suit that has zero experience in live WWE events or searching for top notch professional wrestlers? No. It's not like he heads up the financial portion of the business, then maybe the selection wouldn't be so good. 

  

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#6) On July 03, 2013 at 12:45 PM, Schmacko (55.25) wrote:

Unless its changed in the last year or so WWE has two classes of shares.  The second class has much higher voting writes and is not publically traded.  Insiders might only have 2% of the WWE common stock (I haven't looked into that), but the McMahon family has something like 65-70% of the voting power in the company.

The main problem with the company is that its still paying out more in dividends than the company is taking in in earnings, even after the cut twoish years ago.  This means they are probably financing the dividends through debt.  They can do this for a while but they very well might decide to cut the dividend again in the future.

There also just doesn't seem to be lots of avenues for growth.  They can't do more PPVs, their movies generally don't do well, and I think they're already getting about as good as they're going to get from licensing.  Growth would need to be international, but I don't know how well that's really working out for them.

Also I really wouldn't consider UFC too much of a direct competitor.  There is some bleed over in the male 18-30+ demographic, but most of my friends who watch UFC stopped watching pro-wrestling decades ago.  On the flip side WWE has a much bigger brand awareness amongst youth.  I got nephews (10 and under) that can't name a single UFC fighter but they all know who John Cena is.

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#7) On July 03, 2013 at 1:28 PM, L0RDZ (82.15) wrote:

Oh yeah I  forgot about  that dual  class stock  ownership structure ...   I  had to  laugh when they said  they  weren't  going  to  increase the  families  dividend  for  their  special  class  of  shares  reserved only  for  the family so that  they can  have  their cake and  eat  it as well.

What kind of fool  would invest where they  can never get enough voting  power  despite paying   or  acquiring  the majority of  stock,  as  under dual  structures they rig it  so that  they never lose control.

I noticed the  dividend being higher  and being  financed by  borrowings   many many years back,  its probably  going  to ger cut further.

Triple H  ~   steroided up  makes a  far better  in ring  entertainer than  any  idiotic behind  the scenes   Jerry Brisco wanna be. forgot what his  side kick name  was is.

Funny how  Paul never got  tested for roids  that or  they just lied and  said   he's  clean...   funny  I  hear  his old  flame has a  larger wee wee than him.

 

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#8) On July 03, 2013 at 4:04 PM, ouarmy2012 (70.03) wrote:

I was not aware of the two stock types for WWE. Thanks for that info schmacko, it's nice to get some constructive input.

As far as the growth i have heard about the starting of a TV station, but i haven't dug much into that. 

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