WWE reports booming profit and sales after furloughing wrestlers and other employees

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Critics have body-slammed World Wrestling Entertainment Inc. for continuing to hold live events and furloughing employees during the COVID-19 pandemic, but investors rewarded the sports-entertainment company Thursday after it reported booming earnings and revenue.

WWE WWE, -1.03% shares initially jumped 12% in extended trading Thursday after it reported fiscal first-quarter net income of $26.2 million, or 31 cents a share, up from a loss of 11 cents a share in the year-ago quarter. Revenue improved 60% to a record $291 million from $182.4 million a year ago. Analysts surveyed by FactSet had expected earnings of 26 cents a share on sales of $272 million.

The company has taken an ax to expenses to combat a lack of live events and middling TV ratings. Earlier this month, it furloughed an unspecified number of wrestlers and other employees, and cut executive compensation. The company suspended its $500 million buyback program and said belt-tightening shaved $4 million in monthly costs, but paid out its quarterly dividend, which is expected to push more than $9 million to investors, with roughly a third of that going to Chief Executive Vince McMahon and his wife, Linda.

McMahon and interim Chief Financial Officer Frank Riddick III downplayed the impact of coronavirus in a conference call Thursday afternoon, saying a paucity of live sports events led to a record 967 million video views of its annual WrestleMania event on April 4-5.

“We’ve adapted our business model in new ways” and cut costs to offset the economic impact of COVID-19, McMahon said. “This is a challenging environment… and we need to think of doing things differently,” which could mean more movies, original programming on the WWE network and cable television, and thematic taped presentations of wrestling matches, he added.

The positive results were a brief respite for the controversial McMahon, who has been vilified for a series of corporate actions in recent weeks, including the abrupt shuttering of the XFL, which led its former commissioner to sue McMahon. Oliver Luck filed a wrongful-termination lawsuit in U.S. District Court in Connecticut on April 16 against McMahon, the football league’s controlling owner, alleging McMahon breached the terms of Luck’s contract one day before the XFL suspended operations and laid off its staff on April 10. The XFL filed for bankruptcy on April 13.

WWE continues to hold live events on television to fulfill exclusive TV rights contracts with Comcast Corp.’s CMCSA, +1.00% USA Network and Fox that pay WWE $470 million a year. Just 10 days after WWE concluded the two-day broadcast of Wrestlemania, its Super Bowl-like celebration that was taped in an empty training facility in Orlando, it announced it had shed employees including lower-tier wrestlers. The company added it had available cash and debt capacity of about $500 million.

“We have no debt. Cash is king,” McMahon said. “Maybe we are not taking any unnecessary risks.”

Media rights accounted for 88% of WWE’s quarterly revenue, or $256.6 million. Live events ($17.5 million) and consumer products ($16.9 million) declined 33% and 19%, respectively, from the year-ago quarter.

Florida’s Republican Gov. Ron DeSantis has taken considerable heat for designating the professional wrestling giant an “essential business” on April 9, the same day Linda McMahon, a former member of President Donald Trump’s Cabinet, pledged $18.5 million toward Republican re-election efforts in 2020 via her political action committee.

When asked during the conference call if WWE had alternative sites to stage events if Florida were to renege, McMahon claimed a number of states had expressed interest, but did not name them. “I think it will take consumers longer to come to live events” of 5,000 to 70,000, he said. “But if anyone can figure it out, it’s us. We’re going to adapt.”

WWE shares are down 54% in the past year. The broader S&P 500 index SPX, -0.05% is down 4% in the past year.