World Wrestling Entertainment Inc.’s (NYSE: WWE) performance under Vince McMahon’s last quarter as CEO and chairman of the board beat analyst expectations for revenue and earnings despite an ongoing misconduct investigation of the recently retired executive.
The company reported net income of $49 million, an increase from $29.2 million in the second quarter of 2021, primarily reflecting higher operating performance. Last quarter, WWE’s net income was $66.1 million, an increase from $43.8 million in the first quarter of 2021 following the return of live events.
WWE’s revenue increased 24% to $328.2 million in the second quarter of 2022. "Our revenue increased primarily due to the return of a full schedule of live events," Frank A. Riddick, chief financial and administrative officer of WWE, said during the earnings call.
As revenue and earnings increased, WWE's operating income increased by 50% to $69.3 million. This increase, Riddick said, was primarily driven by higher event-related costs associated with the "resumption of live event touring as well as increased production costs associated with the creation of the annual WrestleMania." WWE's operating income margin increased to 21% from 17%.
During the earnings call Riddick addressed the ongoing investigation of the alleged misconduct by McMahon. "A special committee consisting of the independent members of the board of directors has been conducting the investigation into alleged misconduct by Vince McMahon," Riddick said. "The revised financial statements reflect unrecorded expenses for payments made personally by Vince McMahon, totaling $19.6 million from 2006 to 2022."
Riddick said while these payments had no cash impact on WWE business, they were recorded because they were paid by a principal shareholder and were deemed to have provided a benefit to the company. Riddick said the $1.7 million expense associated with certain costs the company has incurred related to the investigation will be paid by McMahon.
The earnings report came at a critical moment for the 42-year-old company as it is expecting to renew its U.S. media rights for Raw and SmackDown, two of its most popular shows.
"As everyone knows, the marketplace has become even more crowded with buyers," Nick Khan, the co-CEO of WWE, said during the call. "Interest from deep-pocketed tech companies has never been higher. We believe Netflix's appetite for live broadcast increased after the introduction of their ad tier." Khan said he expects to get into streaming, following the path of Formula One, NFL and MLS.
McMahon's 40-year run as CEO and chairman of WWE ended abruptly after reports of him paying $15 million in hush money to four female employees. The 76-year-old CEO stepped back from his role as CEO at the end of July. McMahon remains WWE's largest shareholder, retaining 38.6% ownership of the company's outstanding stock and 81.1% of the voting power.
The company’s stock price has risen about 9% since the investigation started, attributed to a speculation that WWE might be up for sale.