Warner Music Group revenues up 8% in fiscal Q1

Warner Music Group revenues up 8% in fiscal Q1

Warner Music Group Corp has reported an 8% rise in total revenues for its fiscal Q1, ended December 31 2016.

The firm’s total revenue increase of 8% equates to 10.6% in constant currency and a sum of $917 million.

Meanwhile, digital revenue grew significantly over the quarter – up 27.6% or 30.2% in constant currency. This represented 48.4% of total revenue, compared to 41.0% in the prior-year quarter.

Growth in recorded music digital and artist services, expanded-rights revenue, music publishing digital and synchronisation revenue was offset in part by declines in recorded music physical and licensing revenue, as well as music publishing mechanical and performance revenue.  

The company's recorded music revenue grew 8.1% (10.5% in constant currency) to $797 million, with credit given to Bruno Mars, Twenty One Pilots and Michael Buble.

Recorded music operating income was $123 million, up from $98 million in the prior-year quarter and operating margin was up 2.1% to 15.4% versus 13.3% in the prior-year quarter. Adjusted operating margin rose 2.5 percentage points to 15.8% from 13.3% in the prior-year quarter.  

As for its publishing operation, revenue was up 6.9% (or 10.7% in constant currency). Growth in digital and synchronisation revenue was partially offset by a decline in mechanical and a decline in performance revenue which was largely timing related. The company's music publishing operating loss was $2 million compared with a loss of $13 million in the prior-year quarter.

The Q1 report also showed that revenue was up in all regions, with operating income at $94m compared to $62m in the prior-year quarter.  

Net income was $24m compared to $28m in the prior-year quarter and adjusted net income was $28m - flat with the prior-year quarter.

As of December 31, 2016, the company reported a cash balance of $455 million, total debt of $2.755 billion and net debt (total long-term debt, [which is net of deferred financing costs of $35 million, minus cash) of $2.300 billion. There was no balance outstanding on the company’s revolver during the quarter.  

Cash provided by operating activities accounted for $156m compared to $61m in the same quarter of the previous year. Free Cash Flow was $144m compared to $43 million in the prior-year quarter, highlighting the improvement in cash provided by operating activities, and modestly lower music publishing rights acquisitions and capital expenditures.

“Our strong momentum continues with excellent first-quarter results including 11% constant-currency revenue growth on top of 11% growth in the prior-year quarter,” said Steve Cooper, Warner Music Group CEO.  “While streaming continues to drive industry growth, we are outperforming the market thanks to extraordinary music from our artists coupled with first-class execution from our operators around the world.”

“We had another great quarter and I am very pleased with our revenue, OIBDA and cash flow performance,” added Eric Levin, Warner Music Group EVP and CFO. “Our formula for sustainable growth is clearly working.”

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