Warner Music Group Posts Solid Quarter, With Revenue Rising to $1.38 Billion

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Warner Music Group showed solid results for the 2022 quarter that ended on March 31, with revenue up 10.1% (13.2% in constant currency).

Citing the success of such Warner label and publishing artists as Silk Sonic, Ed Sheeran, Jack Harlow, Dua Lipa, Megan Thee Stallion, Rauw Alejandro, Chris Stapleton, Dave, Anitta, the Red Hot Chili Peppers, Kodak Black and Gayle, CEO Steve Cooper said, “Warner Music Group’s unique combination of scale and agility gives us, our artists, and our songwriters an edge in music’s ever-expanding universe of opportunity. We continue to build our unparalleled artist development expertise, our differentiated approach to global expansion, and our ground-breaking commitment to innovation at the intersection of music, gaming, social and fitness. We’re equally excited about the amazing new releases we have lined up for the rest of the year, and the possibilities on the horizon,” he added, pointing to forthcoming releases from Lizzo, Ava Max, Cardi B, and such rising artists as Pink Pantheress and Bella Porch.

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This was despite digital revenue growth of just 8.3% (or 10.8% in constant currency) across recorded music and music publishing. Streaming was up just 9% year over year (11.6% in constant currency), as opposed to last quarter’s 16.9% (18% in constant currency), due to “the impact of a new deal with one of our [unspecified] digital partners affecting recorded music streaming revenue,” as noted in the announcement. During the earnings call, CFO Eric Levin noted that without that impact, it would have been up 15%. “We fully expect to see a normalization in streaming revenue in the first quarter of 2023,” he added.

Adjusted for this item, total revenue was up 12.9% (or 16.1% in constant currency). Total streaming revenue increased 10% (or 11.6% in constant currency) driven by growth across recorded music and music publishing, including revenue from emerging streaming platforms.

Digital revenue represented 67.7% of total revenue in the quarter, compared to 68.8% in the prior-year quarter. The decrease in digital revenue as a percentage of total revenue is due to the partial recovery of artist services and expanded-rights revenue, which was impacted by Covid in the prior-year quarter and increased 19.5% (or 24.8% in constant currency) in the quarter.

Recorded music revenue was up 8.3% to $1.15 billion, streaming revenue grew 7.5%. Powered by the ongoing demand for vinyl, pphysical revenue grew 3.4% to $122 million. Artist services and expanded rights revenue rose 19.5% to $141 million on improved merchandise and concert promotion business. Licensing revenue was up 19.4% to $80 million.
Warner Chappell publishing’s revenue was up 19.8% to $230 million. Streaming grew 19.6% and brought up digital revenue grow 22.1% to $127 million. Mechanical royalties grew from $12 million to $13 million as physical sales growth offset declines in digital download sales. Synchronization revenues climbed 31.6% to $50 million due to higher commercial licensing activity.

Operating income was $166 million compared to $151 million in the prior-year quarter. OIBDA was $255 million, an increase from $228 million in the prior-year quarter, and OIBDA margin increased 0.3 percentage points to 18.5% from 18.2% in the prior-year quarter. The increases in operating income and OIBDA were primarily due to increased revenue. The increase in OIBDA margin was primarily due to strong operating performance and lower non-cash stock-based compensation and other related expenses as a result of equity awards becoming fully vested, partially offset by growth of lower-margin revenue streams, according to the announcement.

Adjusted OIBDA increased 7.5% from $255 million to $274 million and Adjusted OIBDA margin decreased 0.5 percentage points to 19.9% from 20.4% in the prior-year quarter. The increase in Adjusted OIBDA was primarily due to increased revenue and strong operating performance. The decrease in Adjusted OIBDA margin was primarily due to revenue mix and growth of lower-margin revenue streams. Adjusted operating income increased 3.9% from $178 million to $185 million due to the same factors affecting Adjusted OIBDA, partially offset by higher depreciation and amortization expenses due to recent acquisitions and capital spending.

Adjusted EBITDA increased 5.2% from $268 million to $282 million with margins decreasing 0.9 percentage points from 21.4% to 20.5% largely due to the same factors affecting Adjusted OIBDA.

Net income was $92 million compared to $117 million in the prior-year quarter. Adjusted net income was $111 million compared to $144 million in the prior-year quarter. The decrease in net income and Adjusted net income was primarily due to aggregate realized and unrealized losses on the mark-to-market of certain investments, partially offset by higher operating income and lower income tax expense due to lower pre-tax income, according to the announcement.

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