S&P upgrades business outlook for Zuffa

November 19, 2015

MMA Junkie reports that Zuffa’s Standard and Poor’s business outlook has been elevated from “negative” to “stable” based on its success in its Pay Per View business in 2015.  The company’s corporate credit rating remains the same at BB negative which is below investment grade.

Standard & Poor’s Financial Services publishes financial research and analysis on stocks and bonds as well as being one of the Big Three credit-rating agencies.  It issues credit ratings for the debt of public and private companies.  S&P serves as a resource to investors for a key measure of its success.

In October 2014, S&P downgraded Zuffa, LLC from BB to BB-as a result of “greater EBITDA volatility.”  It had maintained a “BB rating” since December 2010.  It was previously downgraded in November 2007 from BB to BB-.  A couple weeks later, it downgraded the business outlook from “stable” to “negative.”

In October 2014, it identified Zuffa as having $535 million in credit with $60 million in “senior secured revolving credit facility due in 2018 and a $475 million senior secured term loan due 2020” per that S&P report.

Payout Perspective:

Monday’s news is a good sign that the company is recovering from its dip in 2014.  While a lot of the numbers are kept under wraps and we’re forced to cobble together how much the company makes, the PPV buys have rebounded from the past couple years on the strength of the first three PPVs of 2015 as well as July’s UFC 189 and Ronda Rousey’s fights at UFC 190 and 193.  Also, the international expansion and the assumed proliferation of UFC Fight Pass have provided additional revenue streams for the company.  Obviously, you have to offset these gains with its expenses which include the new anti-doping policy implemented with the help of USADA and three big legal battles it is currently involved in (the UFC antitrust lawsuit in Nevada, the appeal of the November 2011 lawsuit against New York and the new lawsuit against the state of New York filed this past September seeking a preliminary injunction to hold an event in New York in April).

Also, on the same day that this news came out, Bloody Elbow unveiled its third installment of its deep dive into UFC finances.

WWE reports Q3 results

October 29, 2015

The WWE announced its earnings for Q3 2015 on Thursday.  The company reported net income of $10.4 million ($0.14 per share) compared to a loss of $5.9 million ($0.08 loss per share) in Q3 last year.  The results bested most analyst expectations although the stock for the day dropped almost 13% as a result of profit taking.

Total revenue generated for the quarter ending September 30, 2015 were $492.6 million, up from $402.1 million the prior year period.  North America revenue were $373.6 million, up from $318.9 million from September 30, 2014.

The net revenues were $166.2 million at the end of the 3rd quarter as opposed to $120.2 million at the same time last year.

As for the WWE Network, it has about 1.3 million subscribers at the end of the quarter which is better than last year’s 515,000.  WWE CFO George Barrios indicated that the average for the WWE Network was 1,173,000.  At the end of Q3, the WWE Network had 1.233 million paid subscribers and 73,000 free subscribers as a result of the WWE’s rolling “free” months for new customers.  It’s up from the 1.15 million at the end of Q2 but down from 1.33 million at the end of Q1.  The Network revenues are up to $118.6 million.  Last year, at the end of Q3, they were $87.8 million.

The WWE plans to launch the network in Germany and Japan in January.  It also will be available on the Indian subcontinent on November 2.

According to the WWE press release, it has secured 37 new advertisers from the NBC Universal Upfront.

Vince McMahon touted the success of the reported earnings to the value from the WWE’s content.  He also emphasized the television rights deal and network revenue in attributing the international growth which was reported at 43% through the first 9 months of 2015.

Other notes from the earnings call:

Live events revenue increased 20% to $26.1 million from $21.8 million which related to 6 additional events and higher average ticket prices in North America.

Consumer products increased 21% to $22.4 million from $18.5 million in the prior year quarter.  WWE Shop showed an increase over last year’s third quarter as it was up to $6 million from $4.3 million in revenue.

Per Chris Harrington, the WWE barely touched on the ongoing concussion lawsuits only that there have been “increased legal expenses.”

The WWE introduced a 3 month subscription card at Walmart providing a “no credit card required” payment option.

There were 360,000 PPV buys equating to $4.5 million revenue for three events in Q3.  Thus, on average, despite the network about 120,000 households per event still purchase PPVs.

Payout Perspective:

The key takeaway might be that the WWE expects its WWE television rights fees and the growth of WWE Network subscribers will be the key drivers of WWE’s future revenue growth.  The WWE’s move to produce more live, original content for its Network is evidence that the company is investing heavy into its OTT platform as key for the future.  It’s interesting to note that the WWE did not address the reason for its “increased legal expenses.”  Then again, it’s likely that it did not want to make any comment on ongoing litigation.   Overall, the earnings report reflects a healthy company with earnings growth.

WWE Q1 2015 results

April 30, 2015

The WWE announced its results for the first quarter of 2015.  In a release from the company, it stated that revenues increased 40% to $176.2 million which is the highest quarterly revenue in WWE history.  The results exceeded analyst expectations for the company.

After five consecutive quarters in the red, it’s the first quarter where the WWE has shown a positive operating income.  As for the WWE Network, it reached 1.3 million total subscribers, a benchmark it announced the day after Wrestlemania.  The WWE reports that its average of network subscribers is at 927,000 at the end of the first quarter.  Again, the network’s free promotion, which was February this quarter, contributed to the Network’s growth as 154,000 subscribers converted from free to paid subscribers.

For its quarter ending March 31, 2015, it reported net income of $9.8 million ($0.13 per share) as compared to a net loss of $8.0 million ($0.11 per share) in the first quarter last year.

According to Chief Strategy & Financial Officer George Barrios the positive financial results were “driven primarily by the escalation of our [WWE] television rights fees and the expansion of the WWE Network subscribers.”

The WWE indicated that it will implement a five-part strategy the rest of 2015 for the Network.  This includes 1) creating new content; 2) implementing high impact customer acquisition and retention programs; 3) introducing new features; 4) expanding distribution platforms, and 5) entering new geographies.

As for the rest of WWE business, each division, except WWE Studios ($1.5M vs. $4.3M) is up over this quarter last year.  The total net revenues for this quarter were $176.2 as compared to $125.6 at the end of the quarter for 2014.  The Network segment, which includes revenue generated from Network and PPV increased $19.2 million from the prior year quarter.  The Network alone generated $28.6 million in revenue based on an average of 927,000 paid subscribers.

At the time of this writing, WWE stock is down slightly at $14.16 per share.

Payout Perspective:

A good quarter for the WWE.  Beating the analyst expectations is a good achievement by the company.  Wrestlemania was the likely key driver here especially when you look at the number of converted free to paid subscribers going into March, which was Wrestlemania month.  Of course, we do not know how many dropped the network in April.  We will see if the WWE can continue its positive momentum and see if its strategy for the network continues to net subscribers.

14 for 14: No. 4 Zuffa downgraded by Standard and Poor’s

December 31, 2014

This fall Standard & Poor’s downgraded Zuffa’s credit rating and then its business outlook over a month later.

The downgrade in credit rating from “BB” to “BB–” was due to “greater EBITDA volatility.”

S&P issues credit ratings for the debt of public and private companies and is one of several credit agencies that is designated as a nationally recognized statistical rating organization by the Securities and Exchange Commission.

From our write-up in October:

In its overview, S&P concluded that Zuffa “will experience a 30% decline in EBITDA (Earnings Before Income Tax, Depreciation and Amortization) in 2014 and greater EBITDA volatility over time than we previously had anticipated.”  Despite the gloomy outlook, it stated that Zuffa’s outlook is stable and 2015 will be a recovery year for the company.  This is based on the belief that injured fighters return and PPV buys and ticket prices increase.

The report identifies Zuffa having $535 million in credit with $60 million in “senior secured revolving credit facility due 2018 and a $475 million senior secured term loan due 2020.”

Zuffa’s credit rating had maintained a “BB rating” since December 2010.  It was previously downgraded in November 2007 from BB to BB-.

Just over a month later, S&P revised its outlook on Zuffa from “stable” to “negative” with the forecast that Zuffa’s earnings would decline “approximately 40%”

Via S&P press release:

“The negative outlook revision reflects our updated forecast for 2014 EBITDA to decline approximately 40% (compared to a decline of 30% previously), primarily due to a change to a marquee fight card in the fourth quarter of 2014 as a result of another fighter injury causing anticipated pay per view (PPV)  buys and event ticket prices to decline further, as well as higher remarketing expenses for the event, and additional costs related to the company’s international expansion,” said Standard & Poor’s credit analyst Stephen Pagano.

Payout Perspective:

When we see the UFC using the hashtag #thetimeisnow, you can almost interpret it for the UFC business as well as the impending fights happening in the first quarter of 2015.  Since S&P’ handed down the news to Zuffa, we’ve seen an increase in business activity.  It has forged a deal with Reebok making it the exclusive clothier of the UFC, the signings of CM Punk and Rampage Jackson and the potential sponsor signing of Monster Energy Drink.  Add these business happenings with three big PPVs to start off the first quarter and the hope is that business is picking up.  If this were to happen, Zuffa may stave off another bad review by S&P in the first quarter of 2015.

Standard & Poor’s revises Zuffa outlook to negative

November 20, 2014

The Standard & Poor’s Ratings Service has revised Zuffa, LLC’s financial outlook to negative from stable on weaker operating performance.  It has indicated that it anticipates a 40% decline in EBITDA in 2014 and credit measures will weaken due to the decline.

In a press release disseminated by S&P, it stated that the negative rating reflects its “belief that Zuffa’s operating performance will deteriorate significantly in 2014, resulting in very weak leverage in the high-5x area.”

In addition to the change to the negative outlook it is affirming its “BB-“corporate credit rating.  The “BB-“ credit rating was assessed last month.  The concern for Zuffa is that a negative outlook may mean that S&P may lower Zuffa’s “BB-“ rating.

More from the press release:

“The negative outlook revision reflects our updated forecast for 2014 EBITDA to decline approximately 40% (compared to a decline of 30% previously), primarily due to a change to a marquee fight card in the fourth quarter of 2014 as a result of another fighter injury causing anticipated pay per view (PPV)  buys and event ticket prices to decline further, as well as higher remarketing expenses for the event, and additional costs related to the company’s international expansion,” said Standard & Poor’s credit analyst Stephen Pagano.

S&P now expects Zuffa’s cash flow/debt leverage to increase to the “high-5x area at the end of 2014.”  In its October 2014 report, it had predicted Zuffa to be in the 3 range.  The cash flow/leverage is based on a scale of 1-6 with 1 being minimally leveraged to 6 being highly leveraged.  Zuffa is now pegged as 5 whereas S&P had forecasted it being a 3.

Payout Perspective:

Obvious bad news for Zuffa as the change in outlook is based on Cain Velasquez’s injury forcing him to drop out of UFC 180.  It ties in directly to the assumption that the PPV buy rate will be low once again – an issue that Dana White recently acknowledged.  What the change in outlook to negative means is that it will increase the cost of borrowing by Zuffa.  As the company falls deeper into debt, its ability to obtain credit will get harder.  The forecast painted by S&P reflects the fact that it no longer believes that the company will be able to turn it around this year or next to address its debt obligations.

With the new lower, negative outlook on its debt, Zuffa will have a lot of pressure to forge new television pacts overseas and push the profitability of Fight Pass.  We may also see initiatives like a formal drug testing policy put off if costs are too high.  We will also see if Zuffa attempts to address the issue of fighter injuries which causes the instability and uncertainty of events.

MMA Payout will keep you posted.

Wrestlemania XXX generates $142M for New Orleans per study

November 13, 2014

The WWE and New Orleans Mayor Mitch Landrieu announced on Wednesday that Wrestlemania XXX generated an economic impact for the region of $142.2 million for the New Orleans region.  The $142.2 million is a record for Wrestlemanias and is the third straight year the destination event has generated more than $100 million for the host city.

Via WWE press release:

Over the past seven years, WrestleMania has generated more than half a billion dollars in cumulative economic impact for the cities that have hosted the event. WrestleMania 30 also generated approximately $24.3 million in federal, state and local taxes.

The WWE commissioned the study by Enigma Research Corporation to determine the economic impact.

More info from the press release:

-$142.2 million in direct, indirect and induced impact derived from spending by visitors to New Orleans for WrestleMania 30.
– 79% of fans that attended WrestleMania were from outside the greater New Orleans region and stayed an average of 3.7 nights.
– $22.5 million was spent on hotels and accommodations within the New Orleans region.
– The economic impact derived from WrestleMania Week was equal to the creation of 1,662 full-time jobs for the area.
– $10.7 million was spent by visitors to New Orleans at area restaurants.

Last year, it was reported that Wrestlemania 29 in New York/NewJersey drew $101.2 million in economic impact and $102.7 million for Wrestlemania 28 in Miami. In 2011, Wrestlemania 27 in Atlanta gave the region a $62 million economic boost.

Payout Take:  Even if we are to look at this cynically and conclude that the economic impact is inflated because the study was commissioned by the WWE and the release does not define “indirect and induced impact” the $142 million would peak the interest of future cities to solicit the WWE to hold the event.  Wrestlemania has become a destination event where WWE fans from all over the world come to the city that hosts the event.  So, to see the city’s tourism industry see a dramatic spike in revenue would not be unheard of.  For municipalities that are hurting economically, Wrestlemania would be a economic boost for the region.

WWE announces 731K total WWEN subs for 3rd Quarter

October 30, 2014

The WWE announced its 3rd Quarter ratings on Thursday as it reported a net loss of $5.9 million ($0.08 a share) compared to net income of $2.4 million ($0.03 a share) from the third quarter in 2013.  The big news is that the WWE Network has not picked up subscribers as projected and now a new strategy has been implemented.

First, the WWE Network subscription number which one may conclude has been disappointing so far.  This past quarter, it had just picked up a total of 31,000 subscribers total (including international subscribers). Eric Fisher of the Sports Business Journal (via twitter) indicated that it had a gross subscriber add of 286,000 to end up with the 31,000 number. As Fisher points out, lots of “churn” from people subscribing then dropping the network.  In its first quarter of offering the Network in Canada, it added just 28,000 subscribers.

Average Paid Subscribers (numbers from WWE Investor Relations)


Q1 – N/A

Q2 – 665,000

Q3 – 723,000


Q1 – N/A

Q2 – 406,000

Q3 – 515,000

Perhaps as a direct result of this poor number, the WWE announced in an email to its subscribers that it will no longer require a 6 month commitment for those paying $9.99 per month as of the December billing period.

In addition, it now will be offering the Network for free to new subscribers for the entire month of November. You will see the new catchphrase/hashtag #FreeFreeFree everywhere.

In other segments of the business, from data from the WWE, the WWE is off of its 2013 earnings in domestic attendance, home entertainment ($718,000 vs. $429,000) and of course, PPV buys ($761,000 vs. $285,000 – which is due to Network).  Online merchandise was up and the International attendance average for this quarter has gone up in comparison to last year.

On the brighter side, the WWE stated in a press release that revenue from its “seven new key television agreements is expected to increase from approximately $130 million in 2014 to approximately $235 million in 2018, providing over $100 million of revenue growth subject to counterparty risks.”

Overall, the WWEN is up 68% from the prior year but the financial investment of $5.1 million due to lost PPV revenue and additional costs have impacted the initial gain.  The WWE hopes that availability in the UK will continue to grow the network but so far it does not seem to show growth with it overseas.

Payout Perspective:

At the time of this writing, WWE stock is down 6% to $12.48 in early morning trading.   This is before its earnings call scheduled for 8amPT/11amET.

The new strategies offered by WWE with its Network (no commitment/free to new subs in November) infer strong concern as it is way off its projections at this point.  Earlier this month, it announced that it would be adding “limited advertising” to the network which may reflect a pressing need to find some financial gains in lieu of subscribers.

It’s interesting to see the divergent paths UFC Fight Pass and the WWE Network have taken since both started.  While many thought that the WWE had the better platform at the beginning, it appears (from all reports) that the UFC Fight Pass is flourishing while the WWE news is discouraging.  Obviously, WWE is the only one that has to publicly report its numbers so we really don’t know the whole story for the UFC.  Still, this has been a rough year for the WWE.

TV deals aid UFC financials in PPV decline

October 13, 2014

MMA Fighting reports that the UFC’s television deals are why the UFC has withstood down PPV numbers.  As previously reported by the Sports Business Journal and reflected in its latest S&P report, a combination of the television contracts and expansion overseas are seen as positive revenue drivers for the company.

In Dave Meltzer’s piece, he reports that a big PPV show that garners 1 million buys could generate between $22 million to $27 million for the company in one night.  Thus, the reason to keep PPV around.  Meltzer points out that Fox paid the UFC $2.2 million for UFC on Fox 11 this past April which he compares to a PPV with 85,000 buys.

It’s no surprise that television deals are the reason why there are more events on television.  One of the hopes is that these shows will reveal new stars.  As the SBJ article had questioned, there is a need for new UFC stars to carry the company on PPV.  The overall UFC PPV history which was listed in the SBJ article did not name a current UFC star until Lyoto Machida at number 7 on the list.  Similarly, the S&P report cites fighter injuries and juggling of matches as key reasons for the downgrade in the company’s credit rating.  It also noted a need for the company to develop fighters that appeal to its core demo.

Payout Perspective:

The inference from the information from the Meltzer article, the SBJ article and the S&P report is that the company could be at a turning point in its business model.  But, it has and still is a PPV driven company.  One need only look at how much the company can net with a big event as a primary reason why PPV will still be a part of the company’s business.  While the S&P report concludes that international expansion and television deals are stable revenue streams for the company, its PPV business is still a mainstay in its business model.  In fact, 2013 saw its PPV/live event revenue increase from 2012 per the S&P report.

It’s clear the UFC has mapped out a business model that currently works despite porous PPV numbers.  There are obvious concerns on the horizon as its television deals eventually plateau and/or the need to re-up with new deals.

WWE reports 2014 Q1 Earnings

May 2, 2014

On Thursday, the WWE announced its First Quarter earnings for 2014.  Despite a loss of $8 million ($0.11 per share) due to the WWE Network, it beat analyst expectations by 0.05.

This quarter in 2013, the WWE saw net income of $3.0 million or $0.04 per share.

The most notable news was the lack of news on a new domestic rights TV deal which was initially thought to be completed by late-April or early May.  Yet, there was no word on the status.

The WWE reported that despite the $4.4 million of network subscription revenue (based on 495,000 subscribers at quarter’s end), it was partially offset by $1.3 million decline in pay-per-view revenue.  Notably, Wrestlemania XXX was not factored into these numbers.  Here, we see the obvious cannibalization of its product. The announcements by DirecTV and Dish Network that it would not carry this Sunday’s PPV are a looming threat to the PPV revenue.  The concerns would be whether purchasers of the WWE PPVs could transfer to the WWE Network to view the PPVs and how much more PPV revenue could it lose if big distributors refuse to air its PPVs.

It reiterated its belief that it would have 1 million subscribers by the end of the year.  It also believed its expansion of the network to more platforms (e.g. Xbox One) and international markets will provide long-term growth over time.

WWE stock finished up 4% slightly over $20 for Thursday but is off 7% as of this writing on Friday.

Payout Perspective:

There was nothing earth-shattering about the losses as most knew that the WWE would be reporting this due to the Network expenses.  The lack of news of a new domestic rights TV deal is hard to read.  It could be good news or bad news.  Based on the stock price, it appears that investors are taking this as bad news. The Network remains the big news this quarter.  While Wrestlemania viewership on the Network and PPV did over 1 million viewers, we may not see these types of combined numbers again.  The news that distributors are beginning to backlash against the WWE for its Network is something to keep an eye on the rest of this year.

The Wrestling Post: WWE Earnings for Q2

August 5, 2013

Welcome to another edition of The Wrestling Post.  This time we take a look at the WWE earnings call for its second quarter.

The WWE did not meet Wall Street’s forecasts but delivered a profit.  For the quarter ending June 30, 2013, total revenues for the WWE increased $10.7 million up 8% from this time last year.  The increased production and licensing of television content along with the ticket revenue from Wrestlemania 29 contributed to this year’s quarter increase. Moreover, the third hour of Monday Night Raw, Main Event and Saturday Morning Slam contributed to the revenues this quarter.

Conversely, operating income declined in the quarter as a result of “talent expenses” (i.e., paying for The Rock and Brock Lesnar).  In addition, the WWE’s new strategic initiatives contributed to the cut in the profits as the big ticket item this quarter was the opening of a state of the art training facility in Orlando, Florida. The 26,000 square-foot training center cost the WWE $3.5 million.

PPV business was down which the WWE attributed to one less PPV during Q2. It should be  noted that estimates for Wrestlemania 29 have been trending lower than expected. In fact, it was recalibrated to 1,039,000 PPV buys which is lower than the 1.2 million PPV buys from Wrestlemania 28. According to the presentation, the PPV profits were down $9.7 million from last year. So, while the attendance and gate were records, the PPV business did not live up to its expectations.

WWE Studios actually accounted for $1.5 million to its overall revenue.  The much maligned division made $2.1 million in revenue as opposed to $0.6 million in 2012.

Also, still no word on when the WWE Network may launch.

Payout Perspective:

This quarter’s earnings showed the company’s strength is its television shows.  It also showed that it is willing to spend money to make money.  The WWE Network is still out there and the company continues to spend money toward its launch someday.  The building of a state of the art training facility reflects a big investment in training a next generation of sports entertainers. The question is whether these investments will see a return and when.

The Wrestlemania PPV buys are disappointing considering the amount of money it spent on talent and production.  We should note that this was the first time the WWE raised its PPV price point to $70 for HD.

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