Warner Music Group Corp. today announced its third-quarter
financial results for the period ended June 30, 2023.
“Our Q3 results were driven by a wide diversity of music, and
our strength came from many different territories, labels, and
revenue lines. We succeeded with artists and songwriters across the
spectrum of genres and generations, with both new releases and
catalog projects,” said Robert Kyncl, CEO, Warner Music Group. “We
expect our momentum to build, led by our extraordinary music and
inventive campaigns, as well as improving macro and industry
trends. We continue to invest in new creative talent, and evolve
our expertise and resources, while collaborating with partners
across the entertainment economy to drive long term success.”
“In the third quarter, we delivered solid growth across key
metrics which give us increased confidence in our full-year margin
and operating cash flow targets,” said Eric Levin, CFO, Warner
Music Group. “The market’s adoption of subscription price
increases, combined with the ongoing evolution of our key
partnerships, gives us tremendous optimism for the future of
streaming growth.”
Total WMG
Total WMG
Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
1,564 |
|
|
$ |
1,432 |
|
|
9 |
% |
|
$ |
4,451 |
|
|
$ |
4,422 |
|
|
1 |
% |
Recorded Music revenue |
|
1,282 |
|
|
|
1,189 |
|
|
8 |
% |
|
|
3,664 |
|
|
|
3,722 |
|
|
-2 |
% |
Music Publishing revenue |
|
283 |
|
|
|
245 |
|
|
16 |
% |
|
|
790 |
|
|
|
704 |
|
|
12 |
% |
Digital revenue |
|
1,027 |
|
|
|
944 |
|
|
9 |
% |
|
|
2,921 |
|
|
|
2,877 |
|
|
2 |
% |
Operating income |
|
189 |
|
|
|
146 |
|
|
29 |
% |
|
|
578 |
|
|
|
551 |
|
|
5 |
% |
Adjusted operating
income(1) |
|
211 |
|
|
|
168 |
|
|
26 |
% |
|
|
665 |
|
|
|
627 |
|
|
6 |
% |
OIBDA(1) |
|
275 |
|
|
|
233 |
|
|
18 |
% |
|
|
831 |
|
|
|
808 |
|
|
3 |
% |
Adjusted OIBDA(1) |
|
297 |
|
|
|
255 |
|
|
16 |
% |
|
|
918 |
|
|
|
884 |
|
|
4 |
% |
Net income |
|
124 |
|
|
|
125 |
|
|
-1 |
% |
|
|
285 |
|
|
|
405 |
|
|
-30 |
% |
Adjusted net income(1) |
|
146 |
|
|
|
147 |
|
|
-1 |
% |
|
|
372 |
|
|
|
481 |
|
|
-23 |
% |
Net cash provided by operating
activities |
|
146 |
|
|
|
163 |
|
|
-10 |
% |
|
|
349 |
|
|
|
336 |
|
|
4 |
% |
Free Cash Flow |
|
113 |
|
|
|
128 |
|
|
-12 |
% |
|
|
260 |
|
|
|
239 |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Supplemental Disclosures Regarding Non-GAAP Financial Measures" at
the end of this release for details regarding these measures. |
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
For the Twelve Months Ended June 30, 2023 |
|
For the Twelve Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Adjusted EBITDA(1) |
$ |
311 |
|
|
$ |
263 |
|
|
18 |
% |
|
$ |
1,260 |
|
|
$ |
1,184 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Supplemental Disclosures Regarding Non-GAAP Financial Measures" at
the end of this release for details regarding these measures. |
|
Revenue was up 9.2% (or 9.9% in constant currency). Digital
revenue increased 8.8% (or 9.8% in constant currency) and streaming
revenue increased 9.5% (or 10.5% in constant currency). Recorded
Music streaming revenue increased by 6.3% (or 7.3% in constant
currency). Growth in Recorded Music streaming revenue increased due
to a stronger release schedule and growth in ad-supported revenue
recovered due to moderation in a market-related slowdown. Music
Publishing streaming revenue increased by 27.1% (or 28.1% in
constant currency), which includes a benefit in the quarter and the
prior-year quarter of $7 million and $17 million, respectively,
resulting from a ruling by the Copyright Royalty Board in
Phonorecords III upholding higher percentage of revenue U.S.
mechanical royalty rates (the “CRB Rate Benefit”). Revenue
increases in the quarter were also driven by growth in Recorded
Music artist services and expanded-rights, licensing and physical
revenue and Music Publishing mechanical revenue. Music Publishing
synchronization revenue remained flat on an as-reported basis and
in constant currency. Music Publishing performance revenue was
lower on an as-reported basis and in constant currency.
Operating income was $189 million compared to $146 million in
the prior-year quarter. OIBDA was $275 million, compared to $233
million in the prior-year quarter, an increase of 18.0% (or 20.1%
in constant currency), and OIBDA margin increased 1.3 percentage
points to 17.6% from 16.3% in the prior-year quarter (or increased
1.5 percentage points to 17.6% from 16.1% in constant currency).
The increases in operating income, OIBDA and OIBDA margin were
primarily due to strong operating performance, lower variable
marketing spend, savings from the previously announced
restructuring plan (the “Restructuring Plan”) and the favorable
impact of exchange rates, partially offset by revenue mix,
incremental overhead in technology and the $10 million impact of
the mark-to-market adjustment of an earn-out liability in the
prior-year quarter related to an acquisition.
Adjusted operating income, Adjusted OIBDA and Adjusted net
income exclude expenses related to restructuring and other
transformation initiatives and non-cash stock-based compensation
and other related expenses in both the quarter and the prior-year
quarter. Adjusted EBITDA excludes the aforementioned items and
includes expected savings resulting from transformation initiatives
and the pro forma impact of certain specified transactions. See
below for calculations and reconciliations of Adjusted operating
income, Adjusted OIBDA, Adjusted net income and Adjusted
EBITDA.
Adjusted OIBDA increased 16.5% from $255 million to $297 million
(or 18.3% in constant currency) and Adjusted OIBDA margin increased
1.2 percentage points to 19.0% from 17.8% in the prior-year quarter
(or increased 1.4 percentage points to 19.0% from 17.6% in constant
currency) primarily due to the same factors affecting OIBDA.
Adjusted operating income increased 25.6% from $168 million to $211
million due to the same factors affecting Adjusted OIBDA, as well
as lower amortization expenses due to certain intangible assets
becoming fully amortized, partially offset by higher depreciation
expenses due to capital spending.
Net income was $124 million compared to $125 million in the
prior-year quarter. Adjusted net income was $146 million compared
to $147 million in the prior-year quarter. The changes in net
income and Adjusted net income were primarily due to the
unfavorable impact of exchange rates on the Company’s
Euro-denominated debt, loss on extinguishment of debt, an increase
in interest expense and income tax expense, partially offset by
higher operating income, currency exchange gains on the Company’s
intercompany loans and an increase in aggregate realized and
unrealized gains related to certain investments.
Basic and Diluted earnings per share was $0.23 for both the
Class A and Class B shareholders due to the net income attributable
to the Company in the quarter of $124 million.
As of June 30, 2023, the Company reported a cash balance of
$600 million, total debt of $3.988 billion and net debt (defined as
total debt, net of deferred financing costs, premiums and
discounts, minus cash and equivalents) of $3.388 billion.
Cash provided by operating activities decreased 10% to $146
million from $163 million in the prior-year quarter. The decrease
was largely the result of higher cash taxes due to lower available
foreign tax credits to shield U.S. taxable income coupled with
higher forecasted taxable income and higher cash interest due to an
increase in variable rate debt. Capital expenditures decreased 6%
to $33 million from $35 million in the prior-year quarter, mainly
due to lower expenditures on IT capabilities. Free Cash Flow, as
defined below, decreased to $113 million from $128 million in the
prior-year quarter.
Recorded Music
Recorded
Music Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
1,282 |
|
|
$ |
1,189 |
|
|
8 |
% |
|
$ |
3,664 |
|
|
$ |
3,722 |
|
|
-2 |
% |
Digital revenue |
|
846 |
|
|
|
801 |
|
|
6 |
% |
|
|
2,445 |
|
|
|
2,475 |
|
|
-1 |
% |
Operating income |
|
207 |
|
|
|
166 |
|
|
25 |
% |
|
|
641 |
|
|
|
631 |
|
|
2 |
% |
Adjusted operating
income(1) |
|
210 |
|
|
|
173 |
|
|
21 |
% |
|
|
652 |
|
|
|
647 |
|
|
1 |
% |
OIBDA(1) |
|
261 |
|
|
|
224 |
|
|
17 |
% |
|
|
801 |
|
|
|
804 |
|
|
— |
% |
Adjusted OIBDA(1) |
|
264 |
|
|
|
231 |
|
|
14 |
% |
|
|
812 |
|
|
|
820 |
|
|
-1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Supplemental Disclosures Regarding Non-GAAP Financial Measures" at
the end of this release for details regarding these measures. |
|
Recorded
Music Revenue |
|
|
|
|
|
|
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
For the Three Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Digital |
$ |
846 |
|
|
$ |
801 |
|
|
$ |
792 |
|
|
$ |
2,445 |
|
|
$ |
2,475 |
|
|
$ |
2,409 |
|
Physical |
|
126 |
|
|
|
123 |
|
|
|
123 |
|
|
|
377 |
|
|
|
440 |
|
|
|
421 |
|
Total Digital and Physical |
|
972 |
|
|
|
924 |
|
|
|
915 |
|
|
|
2,822 |
|
|
|
2,915 |
|
|
|
2,830 |
|
Artist services and
expanded-rights |
|
218 |
|
|
|
190 |
|
|
|
191 |
|
|
|
555 |
|
|
|
563 |
|
|
|
543 |
|
Licensing |
|
92 |
|
|
|
75 |
|
|
|
74 |
|
|
|
287 |
|
|
|
244 |
|
|
|
234 |
|
Total Recorded
Music |
$ |
1,282 |
|
|
$ |
1,189 |
|
|
$ |
1,180 |
|
|
$ |
3,664 |
|
|
$ |
3,722 |
|
|
$ |
3,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Music revenue was up 7.8% (or 8.6% in constant
currency). Digital revenue was up 5.6% (or 6.8% in constant
currency). Streaming revenue was up 6.3% (or 7.3% in constant
currency). Growth in streaming revenue increased due to a stronger
release schedule and growth in ad-supported revenue recovered due
to moderation in a market-related slowdown. Artist services and
expanded-rights revenue increased 14.7% (or 14.1% in constant
currency) primarily due to an increase in concert promotion and
merchandising revenue. Licensing revenue increased 22.7% (or 24.3%
in constant currency), with growth across synchronization,
broadcast fees and other licensing. Physical revenue was up 2.4%
(the same in constant currency) primarily due to stronger
performance in the US. The quarter included successful releases
from Ed Sheeran, Linkin Park and Melanie Martinez.
Recorded Music operating income was $207 million, up from $166
million in the prior-year quarter and operating margin was up 2.1
percentage points to 16.1% versus 14.0% in the prior-year quarter.
OIBDA increased 16.5% to $261 million from $224 million in the
prior-year quarter (or 18.1% in constant currency) and OIBDA margin
increased 1.6 percentage points to 20.4% from 18.8% in the
prior-year quarter (or increased 1.7 percentage points to 20.4%
from 18.7% in constant currency). Adjusted OIBDA increased 14.3%
from $231 million to $264 million (or 15.8% in constant currency)
with Adjusted OIBDA margin up 1.2 percentage points to 20.6% from
19.4% in the prior-year quarter (or increased 1.3 percentage points
to 20.6% from 19.3% in constant currency). The increases in OIBDA,
Adjusted OIBDA, OIBDA margin and Adjusted OIBDA margin were
primarily driven by strong operating performance, lower variable
marketing spend, savings from the Restructuring Plan and the
favorable impact of exchange rates, partially offset by revenue mix
and the $10 million impact of the mark-to-market adjustment of an
earn-out liability in the prior-year quarter related to an
acquisition.
Music Publishing
Music
Publishing Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
283 |
|
|
$ |
245 |
|
|
16 |
% |
|
$ |
790 |
|
|
$ |
704 |
|
|
12 |
% |
Digital revenue |
|
182 |
|
|
|
144 |
|
|
26 |
% |
|
|
477 |
|
|
|
404 |
|
|
18 |
% |
Operating income |
|
50 |
|
|
|
33 |
|
|
52 |
% |
|
|
151 |
|
|
|
103 |
|
|
47 |
% |
Adjusted operating
income(1) |
|
51 |
|
|
|
33 |
|
|
55 |
% |
|
|
153 |
|
|
|
104 |
|
|
47 |
% |
OIBDA(1) |
|
73 |
|
|
|
57 |
|
|
28 |
% |
|
|
220 |
|
|
|
172 |
|
|
28 |
% |
Adjusted OIBDA(1) |
|
74 |
|
|
|
57 |
|
|
30 |
% |
|
|
222 |
|
|
|
173 |
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Supplemental Disclosures Regarding Non-GAAP Financial Measures" at
the end of this release for details regarding these measures. |
|
Music
Publishing Revenue |
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
For the Three Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Performance |
$ |
40 |
|
|
$ |
45 |
|
|
$ |
44 |
|
|
$ |
130 |
|
|
$ |
119 |
|
|
$ |
114 |
|
Digital |
|
182 |
|
|
|
144 |
|
|
|
143 |
|
|
|
477 |
|
|
|
404 |
|
|
|
396 |
|
Mechanical |
|
16 |
|
|
|
10 |
|
|
|
11 |
|
|
|
46 |
|
|
|
37 |
|
|
|
36 |
|
Synchronization |
|
41 |
|
|
|
41 |
|
|
|
41 |
|
|
|
126 |
|
|
|
133 |
|
|
|
130 |
|
Other |
|
4 |
|
|
|
5 |
|
|
|
5 |
|
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
Total Music Publishing |
$ |
283 |
|
|
$ |
245 |
|
|
$ |
244 |
|
|
$ |
790 |
|
|
$ |
704 |
|
|
$ |
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Music Publishing revenue increased 15.5% (or 16.0% in constant
currency). The increase was driven by growth in digital and
mechanical revenue. Digital revenue increased 26.4% (or 27.3% in
constant currency) and streaming revenue increased 27.1% (or 28.1%
in constant currency), reflecting the continued growth in
streaming, the impact of digital deal renewals and a revenue
true-up of $9 million, partially offset by a $10 million
quarter-over-quarter decrease in the impact of the CRB Rate
Benefit. Mechanical revenue increased driven by a higher share of
physical sales and timing of distributions. Synchronization revenue
remained flat on an as-reported basis and in constant currency,
primarily due to lower commercial licensing activity, offset by
copyright infringement settlements. Performance revenue decreased
due to the timing of payments from collection societies.
Music Publishing operating income was $50 million compared to
$33 million in the prior-year quarter and operating margin
increased 4.2 percentage points to 17.7%. Music Publishing OIBDA
increased 28.1% to $73 million (or 30.4% in constant currency) and
OIBDA margin increased 2.5 percentage points to 25.8% from 23.3% in
the prior-year quarter (or increased 2.8 percentage points to 25.8%
from 23.0% in constant currency). Adjusted OIBDA increased 29.8% to
$74 million (or 32.1% in constant currency) and Adjusted OIBDA
margin increased 2.8 percentage points to 26.1% from 23.3% in the
prior-year quarter (or increased 3.1 percentage points to 26.1%
from 23.0% in constant currency). The increases in operating
income, OIBDA and Adjusted OIBDA were primarily due to strong
operating performance and the favorable impact of exchange rates,
partially offset by revenue mix.
Financial details for the quarter can be found in the Company’s
current Quarterly Report on Form 10-Q for the period ended
June 30, 2023, filed today with the Securities and Exchange
Commission.
This morning, management will be hosting a conference call to
discuss the results at 8:30 A.M. EST. The call will be webcast on
www.wmg.com.
About Warner Music Group
With a legacy extending back over 200 years, Warner Music Group
today is home to an unparalleled family of creative artists,
songwriters, and companies that are moving culture across the
globe. At the core of WMG’s Recorded Music division are four of the
most iconic companies in history: Atlantic, Elektra, Parlophone and
Warner Records. They are joined by renowned labels such as 300
Entertainment, Asylum, Big Beat, Canvasback, East West, Erato,
FFRR, Fueled by Ramen, Nonesuch, Reprise, Rhino, Roadrunner, Sire,
Spinnin’ Records, Warner Classics and Warner Music Nashville.
Warner Chappell Music - which traces its origins back to the
founding of Chappell & Company in 1811 - is one of the world's
leading music publishers, with a catalog of more than one million
copyrights spanning every musical genre from the standards of the
Great American Songbook to the biggest hits of the 21st
century.
"Safe Harbor" Statement under Private Securities
Litigation Reform Act of 1995
This communication includes forward-looking statements that
reflect the current views of Warner Music Group about future events
and financial performance. Words such as "estimates," "expects,"
"anticipates," "projects," "plans," "intends," "believes,"
"forecasts" and variations of such words or similar expressions
that predict or indicate future events or trends, or that do not
relate to historical matters, identify forward-looking statements.
All forward-looking statements are made as of today, and we
disclaim any duty to update such statements. Our expectations,
beliefs and projections are expressed in good faith, and we believe
there is a reasonable basis for them. However, we cannot assure you
that management's expectations, beliefs and projections will result
or be achieved. Investors should not rely on forward-looking
statements because they are subject to a variety of risks,
uncertainties, and other factors that could cause actual results to
differ materially from our expectations. Please refer to our Form
10-K, Form 10-Qs and our other filings with the U.S. Securities and
Exchange Commission concerning factors that could cause actual
results to differ materially from those described in our
forward-looking statements.
We maintain an Internet site at www.wmg.com. We use our website
as a channel of distribution for material company information.
Financial and other material information regarding Warner Music
Group is routinely posted on and accessible at
http://investors.wmg.com. In addition, you may automatically
receive email alerts and other information about Warner Music Group
by enrolling your email address through the “email alerts” section
at http://investors.wmg.com. Our website and the information posted
on it or connected to it shall not be deemed to be incorporated by
reference into this communication.
Basis of Presentation
Effective for the 2023 fiscal year, the Company’s fiscal year
was modified from a 52-53-week calendar, in which reporting periods
ended on the last Friday of the calendar quarter, to a reporting
calendar in which the reporting periods end on the last day of the
calendar quarter. The Company’s fiscal year will begin on October 1
and end on September 30 of each year. Prior to the start of the
2023 fiscal year, the Company maintained a 52-53 week fiscal year
ending on the last Friday in each reporting period. The fiscal year
ended September 30, 2022 included 53 weeks, with the additional
week falling in the fiscal quarter ended December 31, 2021.
Accordingly, the results of operations for the nine months ended
June 30, 2022 reflect 40 weeks, or 280 days, compared to 273 days
for the nine months ended June 30, 2023.
Figure
1. Warner Music Group Corp. - Condensed Consolidated Statements of
Operations, Three and Nine Months Ended June 30, 2023 versus June
30, 2022 |
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
1,564 |
|
|
$ |
1,432 |
|
|
9 |
% |
Costs and expenses: |
|
|
|
|
|
Cost of revenue |
|
(850 |
) |
|
|
(766 |
) |
|
11 |
% |
Selling, general and administrative expenses |
|
(461 |
) |
|
|
(451 |
) |
|
2 |
% |
Amortization expense |
|
(64 |
) |
|
|
(69 |
) |
|
-7 |
% |
Total costs and expenses |
$ |
(1,375 |
) |
|
$ |
(1,286 |
) |
|
7 |
% |
Operating income |
$ |
189 |
|
|
$ |
146 |
|
|
29 |
% |
Loss
on extinguishment of debt |
|
(4 |
) |
|
|
— |
|
|
— |
% |
Interest expense, net |
|
(38 |
) |
|
|
(32 |
) |
|
19 |
% |
Other
income, net |
|
20 |
|
|
|
50 |
|
|
-60 |
% |
Income before income taxes |
$ |
167 |
|
|
$ |
164 |
|
|
2 |
% |
Income tax expense |
|
(43 |
) |
|
|
(39 |
) |
|
10 |
% |
Net income |
$ |
124 |
|
|
$ |
125 |
|
|
-1 |
% |
Less:
Income attributable to noncontrolling interest |
|
(2 |
) |
|
|
(1 |
) |
|
100 |
% |
Net income attributable to Warner Music Group
Corp. |
$ |
122 |
|
|
$ |
124 |
|
|
-2 |
% |
|
|
|
|
|
|
Net income per share attributable to common
stockholders: |
|
|
|
|
|
Class A – Basic and Diluted |
$ |
0.23 |
|
|
$ |
0.24 |
|
|
|
Class B – Basic and Diluted |
$ |
0.23 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
4,451 |
|
|
$ |
4,422 |
|
|
1 |
% |
Costs and expenses: |
|
|
|
|
|
Cost of revenue |
|
(2,332 |
) |
|
|
(2,281 |
) |
|
2 |
% |
Selling, general and administrative expenses |
|
(1,353 |
) |
|
|
(1,392 |
) |
|
-3 |
% |
Restructuring |
|
(41 |
) |
|
|
— |
|
|
— |
% |
Amortization expense |
|
(188 |
) |
|
|
(198 |
) |
|
-5 |
% |
Total costs and expenses |
$ |
(3,914 |
) |
|
$ |
(3,871 |
) |
|
1 |
% |
Net
gain on divestiture |
|
41 |
|
|
|
— |
|
|
— |
% |
Operating income |
$ |
578 |
|
|
$ |
551 |
|
|
5 |
% |
Loss
on extinguishment of debt |
|
(4 |
) |
|
|
— |
|
|
— |
% |
Interest expense, net |
|
(105 |
) |
|
|
(94 |
) |
|
12 |
% |
Other
(expense) income, net |
|
(72 |
) |
|
|
96 |
|
|
— |
% |
Income before income taxes |
$ |
397 |
|
|
$ |
553 |
|
|
-28 |
% |
Income tax expense |
|
(112 |
) |
|
|
(148 |
) |
|
-24 |
% |
Net income |
$ |
285 |
|
|
$ |
405 |
|
|
-30 |
% |
Less:
Income attributable to noncontrolling interest |
|
(7 |
) |
|
|
(2 |
) |
|
— |
% |
Net income attributable to Warner Music Group
Corp. |
$ |
278 |
|
|
$ |
403 |
|
|
-31 |
% |
|
|
|
|
|
|
Net income per share attributable to common
stockholders: |
|
|
|
|
|
Class A – Basic and Diluted |
$ |
0.53 |
|
|
$ |
0.77 |
|
|
|
Class B – Basic and Diluted |
$ |
0.53 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Figure 2.
Warner Music Group Corp. - Condensed Consolidated Balance Sheets at
June 30, 2023 versus September 30, 2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2023 |
|
September 30, 2022 |
|
% Change |
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and equivalents |
$ |
600 |
|
|
$ |
584 |
|
|
3 |
% |
Accounts receivable, net |
|
1,113 |
|
|
|
984 |
|
|
13 |
% |
Inventories |
|
116 |
|
|
|
108 |
|
|
7 |
% |
Royalty advances expected to be recouped within one year |
|
390 |
|
|
|
372 |
|
|
5 |
% |
Prepaid and other current assets |
|
98 |
|
|
|
91 |
|
|
8 |
% |
Total current
assets |
$ |
2,317 |
|
|
$ |
2,139 |
|
|
8 |
% |
Royalty advances expected to
be recouped after one year |
|
584 |
|
|
|
503 |
|
|
16 |
% |
Property, plant and equipment,
net |
|
454 |
|
|
|
415 |
|
|
9 |
% |
Operating lease right-of-use
assets, net |
|
252 |
|
|
|
226 |
|
|
12 |
% |
Goodwill |
|
1,962 |
|
|
|
1,920 |
|
|
2 |
% |
Intangible assets subject to
amortization, net |
|
2,195 |
|
|
|
2,239 |
|
|
-2 |
% |
Intangible assets not subject
to amortization |
|
150 |
|
|
|
145 |
|
|
3 |
% |
Deferred tax assets, net |
|
27 |
|
|
|
29 |
|
|
-7 |
% |
Other assets |
|
209 |
|
|
|
212 |
|
|
-1 |
% |
Total
assets |
$ |
8,150 |
|
|
$ |
7,828 |
|
|
4 |
% |
Liabilities and
Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
249 |
|
|
$ |
268 |
|
|
-7 |
% |
Accrued royalties |
|
2,239 |
|
|
|
1,918 |
|
|
17 |
% |
Accrued liabilities |
|
422 |
|
|
|
457 |
|
|
-8 |
% |
Accrued interest |
|
29 |
|
|
|
17 |
|
|
71 |
% |
Operating lease liabilities, current |
|
41 |
|
|
|
40 |
|
|
3 |
% |
Deferred revenue |
|
226 |
|
|
|
423 |
|
|
-47 |
% |
Other current liabilities |
|
84 |
|
|
|
245 |
|
|
-66 |
% |
Total current
liabilities |
$ |
3,290 |
|
|
$ |
3,368 |
|
|
-2 |
% |
Long-term debt |
|
3,988 |
|
|
|
3,732 |
|
|
7 |
% |
Operating lease liabilities,
noncurrent |
|
264 |
|
|
|
241 |
|
|
10 |
% |
Deferred tax liabilities,
net |
|
205 |
|
|
|
220 |
|
|
-7 |
% |
Other noncurrent
liabilities |
|
104 |
|
|
|
99 |
|
|
5 |
% |
Total
liabilities |
$ |
7,851 |
|
|
$ |
7,660 |
|
|
2 |
% |
Equity: |
|
|
|
|
|
Class A common stock |
$ |
— |
|
|
$ |
— |
|
|
— |
% |
Class B common stock |
|
1 |
|
|
|
1 |
|
|
— |
% |
Additional paid-in
capital |
|
2,007 |
|
|
|
1,975 |
|
|
2 |
% |
Accumulated deficit |
|
(1,450 |
) |
|
|
(1,477 |
) |
|
-2 |
% |
Accumulated other
comprehensive loss, net |
|
(277 |
) |
|
|
(347 |
) |
|
-20 |
% |
Total Warner Music
Group Corp. equity |
$ |
281 |
|
|
$ |
152 |
|
|
85 |
% |
Noncontrolling interest |
|
18 |
|
|
|
16 |
|
|
13 |
% |
Total
equity |
|
299 |
|
|
|
168 |
|
|
78 |
% |
Total liabilities and
equity |
$ |
8,150 |
|
|
$ |
7,828 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Figure 3.
Warner Music Group Corp. - Summarized Statements of Cash Flows,
Three and Nine Months Ended June 30, 2023 versus June 30,
2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by operating activities |
$ |
146 |
|
|
$ |
163 |
|
Net cash used in investing
activities |
|
(53 |
) |
|
|
(114 |
) |
Net cash used in financing
activities |
|
(90 |
) |
|
|
(83 |
) |
Effect of foreign currency
exchange rates on cash and equivalents |
|
(4 |
) |
|
|
(6 |
) |
Net decrease in cash and
equivalents |
$ |
(1 |
) |
|
$ |
(40 |
) |
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by operating
activities |
$ |
349 |
|
|
$ |
336 |
|
Net cash used in investing
activities |
|
(104 |
) |
|
|
(763 |
) |
Net cash (used in) provided by
financing activities |
|
(233 |
) |
|
|
280 |
|
Effect of foreign currency
exchange rates on cash and equivalents |
|
4 |
|
|
|
(7 |
) |
Net increase (decrease) in
cash and equivalents |
$ |
16 |
|
|
$ |
(154 |
) |
|
|
|
|
|
|
|
|
Figure 4.
Warner Music Group Corp. - Digital Revenue Summary, Three and Nine
Months Ended June 30, 2023 versus June 30, 2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Recorded
Music |
|
|
|
|
|
Streaming |
$ |
822 |
|
|
$ |
773 |
|
|
6 |
% |
Downloads and Other Digital |
|
24 |
|
|
|
28 |
|
|
-14 |
% |
Total Recorded Music
Digital Revenue |
$ |
846 |
|
|
$ |
801 |
|
|
6 |
% |
|
|
|
|
|
|
Music
Publishing |
|
|
|
|
|
Streaming |
$ |
178 |
|
|
$ |
140 |
|
|
27 |
% |
Downloads and Other Digital |
|
4 |
|
|
|
4 |
|
|
— |
% |
Total Music Publishing
Digital Revenue |
$ |
182 |
|
|
$ |
144 |
|
|
26 |
% |
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
Streaming |
$ |
1,000 |
|
|
$ |
913 |
|
|
10 |
% |
Downloads and Other Digital |
|
28 |
|
|
|
32 |
|
|
-13 |
% |
Intersegment Eliminations |
|
(1 |
) |
|
|
(1 |
) |
|
— |
% |
Total Digital
Revenue |
$ |
1,027 |
|
|
$ |
944 |
|
|
9 |
% |
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Recorded
Music |
|
|
|
|
|
Streaming |
$ |
2,375 |
|
|
$ |
2,385 |
|
|
— |
% |
Downloads and Other
Digital |
|
70 |
|
|
|
90 |
|
|
-22 |
% |
Total Recorded Music
Digital Revenue |
$ |
2,445 |
|
|
$ |
2,475 |
|
|
-1 |
% |
|
|
|
|
|
|
Music
Publishing |
|
|
|
|
|
Streaming |
$ |
466 |
|
|
$ |
391 |
|
|
19 |
% |
Downloads and Other Digital |
|
11 |
|
|
|
13 |
|
|
-15 |
% |
Total Music Publishing
Digital Revenue |
$ |
477 |
|
|
$ |
404 |
|
|
18 |
% |
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
Streaming |
$ |
2,841 |
|
|
$ |
2,776 |
|
|
2 |
% |
Downloads and Other Digital |
|
81 |
|
|
|
103 |
|
|
-21 |
% |
Intersegment Eliminations |
|
(1 |
) |
|
|
(2 |
) |
|
-50 |
% |
Total Digital
Revenue |
$ |
2,921 |
|
|
$ |
2,877 |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures Regarding Non-GAAP Financial
Measures
We evaluate our operating performance based on several factors,
including the following non-GAAP financial measures:
OIBDA
OIBDA reflects our operating income before non-cash depreciation
of tangible assets and non-cash amortization of intangible assets.
We consider OIBDA to be an important indicator of the operational
strengths and performance of our businesses and believe the
presentation of OIBDA helps improve the ability to understand our
operating performance and evaluate our performance in comparison to
comparable periods. However, a limitation of the use of OIBDA as a
performance measure is that it does not reflect the periodic costs
of certain capitalized tangible and intangible assets used in
generating revenue in our businesses. Accordingly, OIBDA should be
considered in addition to, not as a substitute for, operating
income (loss), net income (loss) and other measures of financial
performance reported in accordance with U.S. GAAP. In addition,
OIBDA, as we calculate it, may not be comparable to similarly
titled measures employed by other companies.
Figure 5.
Warner Music Group Corp. - Reconciliation of Net Income to OIBDA,
Three and Nine Months Ended June 30, 2023 versus June 30,
2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Net income attributable to Warner Music Group
Corp. |
$ |
122 |
|
|
$ |
124 |
|
|
-2 |
% |
Income attributable to
noncontrolling interest |
|
2 |
|
|
|
1 |
|
|
100 |
% |
Net
income |
$ |
124 |
|
|
$ |
125 |
|
|
-1 |
% |
Income tax expense |
|
43 |
|
|
|
39 |
|
|
10 |
% |
Income including
income taxes |
$ |
167 |
|
|
$ |
164 |
|
|
2 |
% |
Other income, net |
|
(20 |
) |
|
|
(50 |
) |
|
-60 |
% |
Interest expense, net |
|
38 |
|
|
|
32 |
|
|
19 |
% |
Loss on extinguishment of
debt |
|
4 |
|
|
|
— |
|
|
— |
% |
Operating
income |
$ |
189 |
|
|
$ |
146 |
|
|
29 |
% |
Amortization expense |
|
64 |
|
|
|
69 |
|
|
-7 |
% |
Depreciation expense |
|
22 |
|
|
|
18 |
|
|
22 |
% |
OIBDA |
$ |
275 |
|
|
$ |
233 |
|
|
18 |
% |
Operating income
margin |
|
12.1 |
% |
|
|
10.2 |
% |
|
|
OIBDA
margin |
|
17.6 |
% |
|
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Net income
attributable to Warner Music Group Corp. |
$ |
278 |
|
|
$ |
403 |
|
|
-31 |
% |
Income attributable to
noncontrolling interest |
|
7 |
|
|
|
2 |
|
|
— |
% |
Net
income |
$ |
285 |
|
|
$ |
405 |
|
|
-30 |
% |
Income tax expense |
|
112 |
|
|
|
148 |
|
|
-24 |
% |
Income including
income taxes |
$ |
397 |
|
|
$ |
553 |
|
|
-28 |
% |
Other expense (income),
net |
|
72 |
|
|
|
(96 |
) |
|
— |
% |
Interest expense, net |
|
105 |
|
|
|
94 |
|
|
12 |
% |
Loss on extinguishment of
debt |
|
4 |
|
|
|
— |
|
|
— |
% |
Operating
income |
$ |
578 |
|
|
$ |
551 |
|
|
5 |
% |
Amortization expense |
|
188 |
|
|
|
198 |
|
|
-5 |
% |
Depreciation expense |
|
65 |
|
|
|
59 |
|
|
10 |
% |
OIBDA |
$ |
831 |
|
|
$ |
808 |
|
|
3 |
% |
Operating income
margin |
|
13.0 |
% |
|
|
12.5 |
% |
|
|
OIBDA
margin |
|
18.7 |
% |
|
|
18.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Figure 6.
Warner Music Group Corp. - Reconciliation of Segment Operating
Income to OIBDA, Three and Nine Months Ended June 30, 2023 versus
June 30, 2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Total WMG operating income – GAAP |
$ |
189 |
|
|
$ |
146 |
|
|
29 |
% |
Depreciation and amortization
expense |
|
(86 |
) |
|
|
(87 |
) |
|
-1 |
% |
Total WMG
OIBDA |
$ |
275 |
|
|
$ |
233 |
|
|
18 |
% |
Operating income
margin |
|
12.1 |
% |
|
|
10.2 |
% |
|
|
OIBDA
margin |
|
17.6 |
% |
|
|
16.3 |
% |
|
|
|
|
|
|
|
|
Recorded Music
operating income – GAAP |
$ |
207 |
|
|
$ |
166 |
|
|
25 |
% |
Depreciation and amortization
expense |
|
(54 |
) |
|
|
(58 |
) |
|
-7 |
% |
Recorded Music
OIBDA |
$ |
261 |
|
|
$ |
224 |
|
|
17 |
% |
Recorded Music
operating income margin |
|
16.1 |
% |
|
|
14.0 |
% |
|
|
Recorded Music OIBDA
margin |
|
20.4 |
% |
|
|
18.8 |
% |
|
|
|
|
|
|
|
|
Music Publishing
operating income – GAAP |
$ |
50 |
|
|
$ |
33 |
|
|
52 |
% |
Depreciation and amortization
expense |
|
(23 |
) |
|
|
(24 |
) |
|
-4 |
% |
Music Publishing
OIBDA |
$ |
73 |
|
|
$ |
57 |
|
|
28 |
% |
Music Publishing
operating income margin |
|
17.7 |
% |
|
|
13.5 |
% |
|
|
Music Publishing OIBDA
margin |
|
25.8 |
% |
|
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Total WMG operating
income – GAAP |
$ |
578 |
|
|
$ |
551 |
|
|
5 |
% |
Depreciation and amortization
expense |
|
(253 |
) |
|
|
(257 |
) |
|
-2 |
% |
Total WMG
OIBDA |
$ |
831 |
|
|
$ |
808 |
|
|
3 |
% |
Operating income
margin |
|
13.0 |
% |
|
|
12.5 |
% |
|
|
OIBDA
margin |
|
18.7 |
% |
|
|
18.3 |
% |
|
|
|
|
|
|
|
|
Recorded Music
operating income – GAAP |
$ |
641 |
|
|
$ |
631 |
|
|
2 |
% |
Depreciation and amortization
expense |
|
(160 |
) |
|
|
(173 |
) |
|
-8 |
% |
Recorded Music
OIBDA |
$ |
801 |
|
|
$ |
804 |
|
|
— |
% |
Recorded Music
operating income margin |
|
17.5 |
% |
|
|
17.0 |
% |
|
|
Recorded Music OIBDA
margin |
|
21.9 |
% |
|
|
21.6 |
% |
|
|
|
|
|
|
|
|
Music Publishing
operating income – GAAP |
$ |
151 |
|
|
$ |
103 |
|
|
47 |
% |
Depreciation and amortization
expense |
|
(69 |
) |
|
|
(69 |
) |
|
— |
% |
Music Publishing
OIBDA |
$ |
220 |
|
|
$ |
172 |
|
|
28 |
% |
Music Publishing
operating income margin |
|
19.1 |
% |
|
|
14.6 |
% |
|
|
Music Publishing OIBDA
margin |
|
27.8 |
% |
|
|
24.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income (Loss), Adjusted OIBDA and
Adjusted Net Income (Loss)
Adjusted operating income (loss), Adjusted OIBDA and Adjusted
net income (loss) is operating income (loss), OIBDA and net income
(loss), respectively, adjusted to exclude the impact of certain
items that affect comparability. Factors affecting period-to-period
comparability of the unadjusted measures in the quarter included
the items listed in Figure 7 below. We use Adjusted operating
income (loss), Adjusted OIBDA and Adjusted net income (loss) to
evaluate our actual operating performance. We believe that the
adjusted results provide relevant and useful information for
investors because they clarify our actual operating performance,
make it easier to compare our results with those of other companies
in our industry and allow investors to review performance in the
same way as our management. Since these are not measures of
performance calculated in accordance with U.S. GAAP, they should
not be considered in isolation of, or as a substitute for,
operating income (loss), OIBDA and net income (loss) as indicators
of operating performance, and they may not be comparable to
similarly titled measures employed by other companies.
Figure 7.
Warner Music Group Corp. - Reconciliation of Reported to Adjusted
Results, Three and Nine Months Ended June 30, 2023 versus June 30,
2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total WMG Operating Income |
|
Recorded Music Operating Income |
|
Music Publishing Operating Income |
|
Total WMG OIBDA |
|
Recorded Music OIBDA |
|
Music Publishing OIBDA |
|
Net Income |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Reported Results |
$ |
189 |
|
|
$ |
207 |
|
|
$ |
50 |
|
|
$ |
275 |
|
|
$ |
261 |
|
|
$ |
73 |
|
|
$ |
124 |
|
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
Executive Transition Costs |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Non-Cash Stock-Based Compensation and Other Related Costs |
|
8 |
|
|
|
3 |
|
|
|
1 |
|
|
|
8 |
|
|
|
3 |
|
|
|
1 |
|
|
|
8 |
|
Adjusted Results |
$ |
211 |
|
|
$ |
210 |
|
|
$ |
51 |
|
|
$ |
297 |
|
|
$ |
264 |
|
|
$ |
74 |
|
|
$ |
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
13.5 |
% |
|
|
16.4 |
% |
|
|
18.0 |
% |
|
|
19.0 |
% |
|
|
20.6 |
% |
|
|
26.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total WMG Operating Income |
|
Recorded Music Operating Income |
|
Music Publishing Operating Income |
|
Total WMG OIBDA |
|
Recorded Music OIBDA |
|
Music Publishing OIBDA |
|
Net Income |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Reported Results |
$ |
146 |
|
|
$ |
166 |
|
|
$ |
33 |
|
|
$ |
233 |
|
|
$ |
224 |
|
|
$ |
57 |
|
|
$ |
125 |
|
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
16 |
|
|
|
4 |
|
|
|
— |
|
|
|
16 |
|
|
|
4 |
|
|
|
— |
|
|
|
16 |
|
Non-Cash Stock-Based Compensation and Other Related Costs |
|
6 |
|
|
|
3 |
|
|
|
— |
|
|
|
6 |
|
|
|
3 |
|
|
|
— |
|
|
|
6 |
|
Adjusted Results |
$ |
168 |
|
|
$ |
173 |
|
|
$ |
33 |
|
|
$ |
255 |
|
|
$ |
231 |
|
|
$ |
57 |
|
|
$ |
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
11.7 |
% |
|
|
14.6 |
% |
|
|
13.5 |
% |
|
|
17.8 |
% |
|
|
19.4 |
% |
|
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total WMG Operating Income |
|
Recorded Music Operating Income |
|
Music Publishing Operating Income |
|
Total WMG OIBDA |
|
Recorded Music OIBDA |
|
Music Publishing OIBDA |
|
Net Income |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Reported Results |
$ |
578 |
|
|
$ |
641 |
|
|
$ |
151 |
|
|
$ |
831 |
|
|
$ |
801 |
|
|
$ |
220 |
|
|
$ |
285 |
|
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
80 |
|
|
|
41 |
|
|
|
— |
|
|
|
80 |
|
|
|
41 |
|
|
|
— |
|
|
|
80 |
|
Executive Transition Costs |
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Gain on Divestiture |
|
(41 |
) |
|
|
(41 |
) |
|
|
— |
|
|
|
(41 |
) |
|
|
(41 |
) |
|
|
— |
|
|
|
(41 |
) |
Non-Cash Stock-Based Compensation and Other Related Costs |
|
44 |
|
|
|
11 |
|
|
|
2 |
|
|
|
44 |
|
|
|
11 |
|
|
|
2 |
|
|
|
44 |
|
Adjusted Results |
$ |
665 |
|
|
$ |
652 |
|
|
$ |
153 |
|
|
$ |
918 |
|
|
$ |
812 |
|
|
$ |
222 |
|
|
$ |
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
14.9 |
% |
|
|
17.8 |
% |
|
|
19.4 |
% |
|
|
20.6 |
% |
|
|
22.2 |
% |
|
|
28.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total WMG Operating Income |
|
Recorded Music Operating Income |
|
Music Publishing Operating Income |
|
Total WMG OIBDA |
|
Recorded Music OIBDA |
|
Music Publishing OIBDA |
|
Net Income |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Reported Results |
$ |
551 |
|
|
$ |
631 |
|
|
$ |
103 |
|
|
$ |
808 |
|
|
$ |
804 |
|
|
$ |
172 |
|
|
$ |
405 |
|
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
39 |
|
|
|
4 |
|
|
|
— |
|
|
|
39 |
|
|
|
4 |
|
|
|
— |
|
|
|
39 |
|
Non-Cash Stock-Based Compensation and Other Related Costs |
|
37 |
|
|
|
12 |
|
|
|
1 |
|
|
|
37 |
|
|
|
12 |
|
|
|
1 |
|
|
|
37 |
|
Adjusted Results |
$ |
627 |
|
|
$ |
647 |
|
|
$ |
104 |
|
|
$ |
884 |
|
|
$ |
820 |
|
|
$ |
173 |
|
|
$ |
481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
14.2 |
% |
|
|
17.4 |
% |
|
|
14.8 |
% |
|
|
20.0 |
% |
|
|
22.0 |
% |
|
|
24.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency
Because exchange rates are an important factor in understanding
period-to-period comparisons, we believe the presentation of
revenue on a constant-currency basis in addition to reported
revenue helps improve the ability to understand our operating
results and evaluate our performance in comparison to prior
periods. Constant-currency information compares results between
periods as if exchange rates had remained constant period over
period. We use results on a constant-currency basis as one measure
to evaluate our performance. We calculate constant-currency results
by applying current-year foreign currency exchange rates to
prior-year results. However, a limitation of the use of the
constant-currency results as a performance measure is that it does
not reflect the impact of exchange rates on our revenue. These
results should be considered in addition to, not as a substitute
for, results reported in accordance with U.S. GAAP. Results on a
constant-currency basis, as we present them, may not be comparable
to similarly titled measures used by other companies and are not a
measure of performance presented in accordance with U.S. GAAP.
Figure 8.
Warner Music Group Corp. - Revenue by Geography and Segment, Three
and Nine Months Ended June 30, 2023 versus June 30, 2022 As
Reported and Constant Currency |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
For the Three Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
U.S. revenue |
|
|
|
|
|
Recorded Music |
$ |
557 |
|
|
$ |
515 |
|
|
$ |
515 |
|
Music Publishing |
|
147 |
|
|
|
137 |
|
|
|
137 |
|
International revenue |
|
|
|
|
|
Recorded Music |
|
725 |
|
|
|
674 |
|
|
|
665 |
|
Music Publishing |
|
136 |
|
|
|
108 |
|
|
|
107 |
|
Intersegment eliminations |
|
(1 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
Total
Revenue |
$ |
1,564 |
|
|
$ |
1,432 |
|
|
$ |
1,423 |
|
|
|
|
|
|
|
Revenue by
Segment: |
|
|
|
|
|
Recorded Music |
|
|
|
|
|
Digital |
$ |
846 |
|
|
$ |
801 |
|
|
$ |
792 |
|
Physical |
|
126 |
|
|
|
123 |
|
|
|
123 |
|
Total Digital and Physical |
|
972 |
|
|
|
924 |
|
|
|
915 |
|
Artist services and expanded-rights |
|
218 |
|
|
|
190 |
|
|
|
191 |
|
Licensing |
|
92 |
|
|
|
75 |
|
|
|
74 |
|
Total Recorded
Music |
|
1,282 |
|
|
|
1,189 |
|
|
|
1,180 |
|
Music Publishing |
|
|
|
|
|
Performance |
|
40 |
|
|
|
45 |
|
|
|
44 |
|
Digital |
|
182 |
|
|
|
144 |
|
|
|
143 |
|
Mechanical |
|
16 |
|
|
|
10 |
|
|
|
11 |
|
Synchronization |
|
41 |
|
|
|
41 |
|
|
|
41 |
|
Other |
|
4 |
|
|
|
5 |
|
|
|
5 |
|
Total Music
Publishing |
|
283 |
|
|
|
245 |
|
|
|
244 |
|
Intersegment eliminations |
|
(1 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
Total
Revenue |
$ |
1,564 |
|
|
$ |
1,432 |
|
|
$ |
1,423 |
|
|
|
|
|
|
|
Total Digital
Revenue |
$ |
1,027 |
|
|
$ |
944 |
|
|
$ |
935 |
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
U.S. revenue |
|
|
|
|
|
Recorded Music |
$ |
1,618 |
|
|
$ |
1,641 |
|
|
$ |
1,641 |
|
Music Publishing |
|
415 |
|
|
|
369 |
|
|
|
369 |
|
International revenue |
|
|
|
|
|
Recorded Music |
|
2,046 |
|
|
|
2,081 |
|
|
|
1,966 |
|
Music Publishing |
|
375 |
|
|
|
335 |
|
|
|
318 |
|
Intersegment eliminations |
|
(3 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
Total
Revenue |
$ |
4,451 |
|
|
$ |
4,422 |
|
|
$ |
4,291 |
|
|
|
|
|
|
|
Revenue by
Segment: |
|
|
|
|
|
Recorded Music |
|
|
|
|
|
Digital |
$ |
2,445 |
|
|
$ |
2,475 |
|
|
$ |
2,409 |
|
Physical |
|
377 |
|
|
|
440 |
|
|
|
421 |
|
Total Digital and Physical |
|
2,822 |
|
|
|
2,915 |
|
|
|
2,830 |
|
Artist services and expanded-rights |
|
555 |
|
|
|
563 |
|
|
|
543 |
|
Licensing |
|
287 |
|
|
|
244 |
|
|
|
234 |
|
Total Recorded
Music |
|
3,664 |
|
|
|
3,722 |
|
|
|
3,607 |
|
Music Publishing |
|
|
|
|
|
Performance |
|
130 |
|
|
|
119 |
|
|
|
114 |
|
Digital |
|
477 |
|
|
|
404 |
|
|
|
396 |
|
Mechanical |
|
46 |
|
|
|
37 |
|
|
|
36 |
|
Synchronization |
|
126 |
|
|
|
133 |
|
|
|
130 |
|
Other |
|
11 |
|
|
|
11 |
|
|
|
11 |
|
Total Music
Publishing |
|
790 |
|
|
|
704 |
|
|
|
687 |
|
Intersegment eliminations |
|
(3 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
Total
Revenue |
$ |
4,451 |
|
|
$ |
4,422 |
|
|
$ |
4,291 |
|
|
|
|
|
|
|
Total Digital
Revenue |
$ |
2,921 |
|
|
$ |
2,877 |
|
|
$ |
2,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Figure 9.
Warner Music Group Corp. - OIBDA and Adjusted OIBDA by Segment,
Three and Nine Months Ended June 30, 2023 versus June 30, 2022 As
Reported and Constant Currency |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
For the Three Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Total WMG OIBDA |
$ |
275 |
|
|
$ |
233 |
|
|
$ |
229 |
|
OIBDA margin |
|
17.6 |
% |
|
|
16.3 |
% |
|
|
16.1 |
% |
Total WMG Adjusted OIBDA |
$ |
297 |
|
|
$ |
255 |
|
|
$ |
251 |
|
Adjusted OIBDA margin |
|
19.0 |
% |
|
|
17.8 |
% |
|
|
17.6 |
% |
|
|
|
|
|
|
Recorded Music OIBDA |
$ |
261 |
|
|
$ |
224 |
|
|
$ |
221 |
|
Recorded Music OIBDA
margin |
|
20.4 |
% |
|
|
18.8 |
% |
|
|
18.7 |
% |
Recorded Music Adjusted
OIBDA |
$ |
264 |
|
|
$ |
231 |
|
|
$ |
228 |
|
Recorded Music Adjusted OIBDA
margin |
|
20.6 |
% |
|
|
19.4 |
% |
|
|
19.3 |
% |
|
|
|
|
|
|
Music Publishing OIBDA |
$ |
73 |
|
|
$ |
57 |
|
|
$ |
56 |
|
Music Publishing OIBDA
margin |
|
25.8 |
% |
|
|
23.3 |
% |
|
|
23.0 |
% |
Music Publishing Adjusted
OIBDA |
$ |
74 |
|
|
$ |
57 |
|
|
$ |
56 |
|
Music Publishing Adjusted
OIBDA margin |
|
26.1 |
% |
|
|
23.3 |
% |
|
|
23.0 |
% |
|
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
For the Nine Months Ended June 30, 2022 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Total WMG OIBDA |
$ |
831 |
|
|
$ |
808 |
|
|
$ |
775 |
|
OIBDA margin |
|
18.7 |
% |
|
|
18.3 |
% |
|
|
18.1 |
% |
Total WMG Adjusted OIBDA |
$ |
918 |
|
|
$ |
884 |
|
|
$ |
851 |
|
Adjusted OIBDA margin |
|
20.6 |
% |
|
|
20.0 |
% |
|
|
19.8 |
% |
|
|
|
|
|
|
Recorded Music OIBDA |
$ |
801 |
|
|
$ |
804 |
|
|
$ |
774 |
|
Recorded Music OIBDA
margin |
|
21.9 |
% |
|
|
21.6 |
% |
|
|
21.5 |
% |
Recorded Music Adjusted
OIBDA |
$ |
812 |
|
|
$ |
820 |
|
|
$ |
790 |
|
Recorded Music Adjusted OIBDA
margin |
|
22.2 |
% |
|
|
22.0 |
% |
|
|
21.9 |
% |
|
|
|
|
|
|
Music Publishing OIBDA |
$ |
220 |
|
|
$ |
172 |
|
|
$ |
169 |
|
Music Publishing OIBDA
margin |
|
27.8 |
% |
|
|
24.4 |
% |
|
|
24.6 |
% |
Music Publishing Adjusted
OIBDA |
$ |
222 |
|
|
$ |
173 |
|
|
$ |
170 |
|
Music Publishing Adjusted
OIBDA margin |
|
28.1 |
% |
|
|
24.6 |
% |
|
|
24.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
Our definition of Free Cash Flow is defined as cash flow
provided by operating activities less capital expenditures. We use
Free Cash Flow, among other measures, to evaluate our operating
performance. Management believes Free Cash Flow provides investors
with an important perspective on the cash available to fund our
debt service requirements, ongoing working capital requirements,
capital expenditure requirements, strategic acquisitions and
investments, and any dividends, prepayments of debt or repurchases
or retirement of our outstanding debt or notes in open market
purchases, privately negotiated purchases, any repurchases of our
common stock or otherwise. As a result, Free Cash Flow is a
significant measure of our ability to generate long-term value. It
is useful for investors to know whether this ability is being
enhanced or degraded as a result of our operating performance. We
believe the presentation of Free Cash Flow is relevant and useful
for investors because it allows investors to view performance in a
manner similar to the method management uses.
Free Cash Flow is not a measure of performance calculated in
accordance with U.S. GAAP and therefore it should not be considered
in isolation of, or as a substitute for, net income (loss) as an
indicator of operating performance or cash flow provided by
operating activities as a measure of liquidity. Free Cash Flow, as
we calculate it, may not be comparable to similarly titled measures
employed by other companies. In addition, Free Cash Flow does not
necessarily represent funds available for discretionary use and is
not necessarily a measure of our ability to fund our cash needs.
Because Free Cash Flow deducts capital expenditures from “net cash
provided by operating activities” (the most directly comparable
U.S. GAAP financial measure), users of this information should
consider the types of events and transactions that are not
reflected. We provide below a reconciliation of Free Cash Flow to
the most directly comparable amount reported under U.S. GAAP, which
is “net cash provided by operating activities.”
Figure 10.
Warner Music Group Corp. - Calculation of Free Cash Flow, Three and
Nine Months Ended June 30, 2023 versus June 30, 2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2023 |
|
For the Three Months Ended June 30, 2022 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by operating activities |
$ |
146 |
|
|
$ |
163 |
|
Less: Capital
expenditures |
|
33 |
|
|
|
35 |
|
|
|
|
|
Free Cash
Flow |
$ |
113 |
|
|
$ |
128 |
|
|
|
|
|
|
For the Nine Months Ended June 30, 2023 |
|
For the Nine Months Ended June 30, 2022 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by
operating activities |
$ |
349 |
|
|
$ |
336 |
|
Less: Capital
expenditures |
|
89 |
|
|
|
97 |
|
|
|
|
|
Free Cash
Flow |
$ |
260 |
|
|
$ |
239 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Adjusted EBITDA is equivalent to “EBITDA” as defined in our
Revolving Credit Facility and our 2020 indenture and substantially
similar to “EBITDA” as defined under our Senior Term Loan Facility,
respectively. Adjusted EBITDA differs from the term “EBITDA” as it
is commonly used. The definition of Adjusted EBITDA, in addition to
adjusting net income to exclude interest expense, income taxes, and
depreciation and amortization, also adjusts net income by excluding
items or expenses such as, among other items, (1) the amount of any
restructuring charges or reserves; (2) any non-cash charges
(including any impairment charges); (3) any net loss resulting from
hedging currency exchange risks; (4) business optimization expenses
(including consolidation initiatives, severance costs and other
costs relating to initiatives aimed at profitability improvement);
(5) transaction expenses; (6) equity-based compensation expense;
and (7) certain extraordinary, unusual or non-recurring items. The
definition of EBITDA under the Revolving Credit Facility also
includes adjustments for the pro forma impact of certain projected
cost savings, operating expense reductions and synergies and any
quality of earnings analysis prepared by independent certified
public accountants in connection with an acquisition, merger,
consolidation or other investment.
Adjusted EBITDA is a key measure used by our management to
understand and evaluate our operating performance, generate future
operating plans and make strategic decisions regarding the
allocation of capital. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as
a substitute for analysis of our results as reported under U.S.
GAAP. Some of those limitations include: (1) it does not reflect
the periodic costs of certain capitalized tangible and intangible
assets used in generating revenue for our business; (2) it does not
reflect the significant interest expense or cash requirements
necessary to service interest or principal payments on our
indebtedness; and (3) it does not reflect every cash expenditure,
future requirements for capital expenditures or contractual
commitments. In particular, this measure adds back certain
non-cash, extraordinary, unusual or non-recurring charges that are
deducted in calculating net income; however, these are expenses
that may recur, vary greatly and are difficult to predict. In
addition, Adjusted EBITDA is not the same as net income or cash
flow provided by operating activities as those terms are defined by
U.S. GAAP and does not necessarily indicate whether cash flows will
be sufficient to fund cash needs. Accordingly, Adjusted EBITDA
should be considered in addition to, not as a substitute for, net
income (loss) and other measures of financial performance reported
in accordance with U.S. GAAP.
Figure
11. Warner Music Group Corp. - Reconciliation of Net Income to
Adjusted EBITDA, Three and Twelve Months Ended June 30, 2023 versus
June 30, 2022 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months EndedJune 30,
2023 |
|
For the Three Months EndedJune 30,
2022 |
|
For the Twelve Months EndedJune 30,
2023 |
|
For the Twelve Months EndedJune 30,
2022 |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Net Income |
$ |
124 |
|
|
$ |
125 |
|
|
$ |
435 |
|
|
$ |
435 |
|
Income tax expense |
|
43 |
|
|
|
39 |
|
|
|
149 |
|
|
|
170 |
|
Interest expense, net |
|
38 |
|
|
|
32 |
|
|
|
136 |
|
|
|
123 |
|
Depreciation and
amortization |
|
86 |
|
|
|
87 |
|
|
|
335 |
|
|
|
336 |
|
Loss on extinguishment of debt
(a) |
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
10 |
|
Net (gains) losses on
divestitures and sale of securities (b) |
|
— |
|
|
|
— |
|
|
|
(42 |
) |
|
|
9 |
|
Restructuring costs (c) |
|
1 |
|
|
|
6 |
|
|
|
60 |
|
|
|
29 |
|
Net foreign exchange (gains)
losses (d) |
|
(12 |
) |
|
|
(55 |
) |
|
|
13 |
|
|
|
(148 |
) |
Transaction costs (e) |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
13 |
|
Business optimization expenses
(f) |
|
15 |
|
|
|
16 |
|
|
|
55 |
|
|
|
55 |
|
Non-cash stock-based
compensation expense (g) |
|
7 |
|
|
|
5 |
|
|
|
46 |
|
|
|
46 |
|
Other non-cash charges
(h) |
|
(5 |
) |
|
|
(4 |
) |
|
|
12 |
|
|
|
42 |
|
Pro forma impact of cost
savings initiatives and specified transactions (i) |
|
10 |
|
|
|
11 |
|
|
|
57 |
|
|
|
64 |
|
Adjusted
EBITDA |
$ |
311 |
|
|
$ |
263 |
|
|
$ |
1,260 |
|
|
$ |
1,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
______________________________________(a) Reflects loss on
extinguishment of debt, primarily including tender fees and
unamortized deferred financing costs.(b) Reflects net gains on sale
of securities and divestitures.(c) Reflects severance costs and
other restructuring related expenses, including those related to
the Restructuring Plan as well as the Executive Transition Costs in
the twelve months ended June 30, 2023.(d) Reflects unrealized
(gains) losses due to foreign exchange on our Euro-denominated
debt, losses (gains) from foreign currency forward exchange
contracts and intercompany transactions.(e) Reflects mainly
transaction related costs and mark-to-market adjustments of an
earn-out liability related to a transaction in 2021.(f) Reflects
costs associated with our transformation initiatives and IT system
updates, which includes costs of $12 million and $43 million
related to our finance transformation and other related costs for
the three and twelve months ended June 30, 2023, respectively,
as well as $11 million and $41 million for the three and twelve
months ended June 30, 2022, respectively.(g) Reflects non-cash
stock-based compensation expense related to the Omnibus Incentive
Plan and the Warner Music Group Corp. Senior Management Free Cash
Flow Plan.(h) Reflects non-cash activity, including the unrealized
losses (gains) on the mark-to-market adjustment of equity
investments, investment losses (gains), mark-to-market adjustments
of an earn-out liability in 2022 and other non-cash impairments.(i)
Reflects expected savings resulting from transformation
initiatives, including the Restructuring Plan, and the pro forma
impact of certain specified transactions for the three and twelve
months ended June 30, 2023. Certain of these cost savings
initiatives and transactions impacted quarters prior to the quarter
during which they were identified within the last twelve-month
period. The pro forma impact of these specified transactions and
initiatives resulted in a $15 million increase in the twelve months
ended June 30, 2023 Adjusted EBITDA.
Media Contact: |
Investor Contact: |
James
Steven |
Kareem Chin |
(212)
275-2213 |
|
James.Steven@wmg.com |
Investor.Relations@wmg.com |
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