Home Music Industry News Streaming Revenues Continue to Rise for Warner Music in Fiscal Second Quarter...

Streaming Revenues Continue to Rise for Warner Music in Fiscal Second Quarter Results

rfocus.org 

Warner Music Group Corp. Reports Results for Fiscal Second Quarter Ended March 31, 2017

  • •    Total revenue grew 10.7% or was up 12.7% in constant currency 
    •     revenue grew 21.9% or was up 23.3% in constant currency 
    •    Net income was $20 million versus $12 million in the prior-year quarter
    •     was $141 million versus $127 million in the prior-year quarter

    Warner Music Group Corp. today announced its second quarter financial results for the period ended March 31, 2017.  

    “We had another excellent quarter, with double-digit growth in both the current and prior-year quarters,” said Steve Cooper, Warner Music Group’s CEO.  “Our streaming revenue is now double that of physical and triple that of downloads.  An improved industry environment is helping, but we continue to outperform our competition due to fantastic new music and outstanding execution by our operators around the world.”

    “This was a very strong quarter, marking the 7th consecutive quarter of year-over-year revenue ,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO.  “Although tough comparisons could make for a more challenging second half, I’m confident we’ll have another great full fiscal year.”  

    Revenue grew 10.7% (or 12.7% in constant currency).  Growth in recorded music digital and artist services and expanded-rights revenue, and Music Publishing performance, digital and synchronization revenue was partially offset by declines in recorded music physical revenue.  recorded music licensing revenue was flat due to currency fluctuations.  Music Publishing mechanical revenue was flat.  Revenue grew in the U.S., Asia and Latin America, which was partially offset by currency-related declines in Europe.  Digital revenue grew 21.9% (or 23.3% in constant currency), and represented 53.2% of total revenue, compared to 48.3% in the prior-year quarter.  This is the first quarter where digital revenue exceeded 50% of the Company’s total revenue.  

    was $78 million, compared to $52 million in the prior-year quarter.  OIBDA increased 11.0% to $141 million from $127 million in the prior-year quarter and OIBDA margin rose 0.1 percentage point to 17.1% from 17.0% in the prior-year quarter.  The improvement in operating income and OIBDA was the result of increased revenue.  The increase in OIBDA margin was due to revenue mix, which was partially offset by higher variable compensation expense.  Adjusted OIBDA rose 13.2% and Adjusted OIBDA margin was up 0.4 percentage points to 17.7% as a result of the same factors that impacted OIBDA and OIBDA margin. 

    Net income was $20 million, compared to $12 million in the prior-year quarter, and Adjusted net income was $25 million, compared to $14 million in the prior-year quarter.  The increase was primarily attributable to higher OIBDA, lower interest expense and a tax benefit that primarily related to currency losses on an intercompany loan.  These factors were offset by higher other expenses related to losses on the Company’s Euro-denominated debt and derivative assets, as well as a loss on investment.  

    Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude certain losses in the second quarter related to PLG-related asset sales and costs associated with the Company’s shared service center move.  See below for calculations and reconciliations of OIBDA, Adjusted operating income, Adjusted OIBDA and Adjusted net income.
    As of March 31, 2017, the Company reported a cash balance of $476 million, total debt of $2.767 billion and net debt (total long-term debt, which is net of deferred financing costs of $34 million, minus cash) of $2.291 billion.  There was no balance outstanding on the Company’s revolver during the second quarter.   

    Cash provided by operating activities was $70 million, compared to $111 million in the prior-year quarter.  The change was largely a result of working capital use related to higher receivables at quarter-end due to improved operating results, which more than offset the increase in OIBDA.  Free Cash Flow, defined below, was $70 million compared to $134 million in the prior-year quarter, reflecting proceeds from PLG-related asset sales, the decline in cash provided by operating activities and the absence of proceeds from real estate sales which benefited the prior-year quarter.  

    recorded music revenue grew 10.5% (or 12.5% in constant currency).  Growth in digital and artist services and expanded-rights revenue was partially offset by a decline in physical revenue due to the continuing shift to streaming revenue.  Licensing revenue was flat due to currency fluctuations.  Digital growth reflects the continuing shift to streaming revenue.  The improvement in artist services and expanded-rights revenue was due primarily to higher merchandising revenue in the U.S.  recorded music revenue grew in the U.S., Asia and Latin America, offset by a currency-related decline in Europe.  Major sellers included Ed Sheeran, Bruno Mars, Kyosuke Himuro, twenty one pilots and the Hamilton original cast album.

    recorded music operating income was $69 million up from $38 million in the prior-year quarter, and operating margin was up 4.0 percentage points to 10.1% versus 6.1% in the prior-year quarter driven by revenue growth.  Adjusted operating margin rose 4.2 percentage points to 10.6% from 6.4% in the prior-year quarter.  OIBDA rose to $112 million from $93 million in the prior-year quarter driven by revenue growth.  OIBDA margin rose 1.3 percentage points to 16.3% driven by revenue growth.  Adjusted OIBDA was $116 million versus $95 million in the prior-year quarter with Adjusted OIBDA margin up 1.6 percentage points to 16.9%.  The improvement in Adjusted OIBDA and Adjusted OIBDA margin was driven by the same factors which impacted OIBDA and OIBDA margin.

    Music Publishing revenue rose 14.2% (or 16.0% in constant currency).  Revenue grew in performance, digital and synchronization.  Mechanical revenue was flat due primarily to timing.  

    Music Publishing operating income was $41 million, compared with $37 million in the prior-year quarter.  The improvement in operating income was due to revenue growth.  Operating margin declined 0.8 percentage points to 28.3% from 29.1% driven by revenue mix.  Music Publishing OIBDA rose by $4 million to $58 million, due to the same factors which impacted operating income. Music Publishing OIBDA margin declined by 2.5 percentage points to 40.0% from 42.5%, due to the same factors which impacted operating margin.  

    Financial details for the second quarter can be found in the Company’s current Quarterly Report on Form 10-Q for the period ended March 31, 2017, filed today with the Securities and Exchange Commission.
    This morning, management will host a conference call to discuss the results at 8:30 A.M. EST.  The call will be webcast on www.wmg.com.

     

Leave a Reply