Warner Music Group Corp. today announced its fourth-quarter and
full-year financial results for the periods ended
September 30, 2022.
Steve Cooper, CEO, Warner Music Group, said, “Our strong fourth
quarter and full year results were driven by our talented artists,
songwriters, and teams, across a wide range of genres, geographies,
and generations. Against the backdrop of a challenging macro
environment, we once again proved music's resilience, with new
commercial opportunities emerging all the time. We're very well
positioned for long-term creative success, and continued top and
bottom line growth. We’re excited to have Robert Kyncl joining next
year as WMG's new CEO, as we enter the next dynamic phase of our
evolution.”
Eric Levin, CFO, Warner Music Group, said, “We've delivered
double-digit revenue growth on a constant currency basis and robust
cash flow, driven by excellent operating performance across the
company. The momentum in our business is strong, underpinned by
global subscriber growth, subscription price increases, and the
expansion of emerging platforms. As we look ahead, we're excited to
share amazing releases from the world’s hottest artists, as well as
innovative tech collaborations that will strengthen our position at
the intersection of music, film, TV, social media, fitness, and
gaming.”
Total WMG
Total WMG
Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(audited) |
|
(audited) |
|
|
Revenue |
$ |
1,497 |
|
$ |
1,376 |
|
9 |
% |
|
$ |
5,919 |
|
$ |
5,301 |
|
12 |
% |
Recorded Music revenue |
|
1,244 |
|
|
1,172 |
|
6 |
% |
|
|
4,966 |
|
|
4,544 |
|
9 |
% |
Music Publishing revenue |
|
254 |
|
|
205 |
|
24 |
% |
|
|
958 |
|
|
761 |
|
26 |
% |
Digital revenue |
|
989 |
|
|
926 |
|
7 |
% |
|
|
3,866 |
|
|
3,539 |
|
9 |
% |
Operating income |
|
163 |
|
|
100 |
|
63 |
% |
|
|
714 |
|
|
609 |
|
17 |
% |
Adjusted operating
income(1) |
|
183 |
|
|
139 |
|
32 |
% |
|
|
810 |
|
|
712 |
|
14 |
% |
OIBDA(1) |
|
245 |
|
|
179 |
|
37 |
% |
|
|
1,053 |
|
|
915 |
|
15 |
% |
Adjusted OIBDA(1) |
|
265 |
|
|
218 |
|
22 |
% |
|
|
1,149 |
|
|
1,018 |
|
13 |
% |
Net income |
|
150 |
|
|
30 |
|
— |
% |
|
|
555 |
|
|
307 |
|
81 |
% |
Adjusted net income(1) |
|
170 |
|
|
69 |
|
— |
% |
|
|
651 |
|
|
410 |
|
59 |
% |
Net cash provided by operating
activities |
|
406 |
|
|
228 |
|
78 |
% |
|
|
742 |
|
|
638 |
|
16 |
% |
Free Cash Flow |
|
368 |
|
|
193 |
|
91 |
% |
|
|
607 |
|
|
545 |
|
11 |
% |
Adjusted EBITDA(1) |
|
276 |
|
|
237 |
|
16 |
% |
|
|
1,196 |
|
|
1,090 |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
"Supplemental Disclosures Regarding Non-GAAP Financial Measures" at
the end of this release for details regarding these measures. |
|
Fourth-Quarter Results
Revenue was up 8.8% (or 16.0% in constant currency). Consistent
with the prior quarter, growth in the quarter was unfavorably
impacted by foreign currency exchange rates as the U.S. dollar
strengthened. The revenue increase in the quarter was driven by
digital revenue growth of 6.8% (or 12.3% in constant currency)
across Recorded Music and Music Publishing, which includes $38
million in downloads and other digital revenue from the settlement
of certain copyright infringement cases (the “Copyright
Settlement”). Consistent with the prior three quarters, the quarter
included the impact of a new deal with one of the Company’s digital
partners affecting Recorded Music streaming revenue. Total
streaming revenue increased 3.5% (or 8.9% in constant currency)
primarily driven by growth in Music Publishing streaming revenue of
29.8% (or 37.0% in constant currency). Recorded Music streaming
revenue decreased by 0.4% (or increased by 4.7% in constant
currency) as a result of the continued growth in subscription
revenue, offset by a market-related slowdown in ad-supported
revenue, the impact of exchange rates and the impact of a new deal
with one of the Company’s digital partners. Digital revenue
represented 66.1% of total revenue in the quarter, compared to
67.3% in the prior-year quarter. The decrease in digital revenue as
a percentage of total revenue is due to the double-digit growth of
Recorded Music artist services and expanded-rights and licensing
revenue, as well as Music Publishing performance revenue. Music
Publishing synchronization and mechanical revenue remained flat on
an as-reported basis, but increased in constant currency. Recorded
Music physical revenue decreased on an as-reported basis, but
increased in constant currency. Excluding the Copyright Settlement
and the impact of a new deal with one of the Company’s digital
partners, revenue increased 9.0% (or 16.4% in constant
currency).
Operating income was $163 million compared to $100 million in
the prior-year quarter. OIBDA was $245 million, compared to $179
million in the prior-year quarter, an increase of 36.9% (or 52.2%
in constant currency), and OIBDA margin increased 3.4 percentage
points to 16.4% from 13.0% in the prior-year quarter (or increased
3.9 percentage points to 16.4% from 12.5% in constant currency).
The increases in operating income, OIBDA and OIBDA margin were
primarily due to the same factors affecting Adjusted OIBDA
discussed below and a decrease in expenses related to restructuring
and other transformation initiatives and non-cash stock-based
compensation and other related expenses.
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. In the prior-year quarter, COVID-related expenses are also
excluded. Adjusted EBITDA excludes these 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 21.6% from $218 million to $265 million
(or 32.5% in constant currency) and Adjusted OIBDA margin increased
1.9 percentage points to 17.7% from 15.8% in the prior-year quarter
(or increased 2.2 percentage points to 17.7% from 15.5% in constant
currency). The increase in Adjusted OIBDA and Adjusted OIBDA margin
was primarily due to strong operating performance and $29 million
from the Copyright Settlement, partially offset by revenue mix due
to the growth of lower-margin artist services and expanded-rights
revenue and the impact of exchange rates. Excluding the Copyright
Settlement and the impact of a new deal with one of the Company’s
digital partners, Adjusted OIBDA increased 20.4% (or 32.6% in
constant currency) and Adjusted OIBDA margin increased 1.6
percentage points to 16.2% from 14.6% in the prior-year quarter (or
increased 2.0 percentage points to 16.2% from 14.2% in constant
currency). Adjusted operating income increased 31.7% from $139
million to $183 million due to the same factors affecting Adjusted
OIBDA, partially offset by higher amortization expenses due to
recent acquisitions and capital spending.
Adjusted EBITDA increased 16.5% from $237 million to $276
million with Adjusted EBITDA margins increasing 1.2 percentage
points from 17.2% to 18.4% largely due to the same factors
affecting Adjusted OIBDA, partially offset by reducing the pro
forma impact of certain specified transactions, as the impact is
realized, and lower pro forma savings from certain cost-savings
initiatives, primarily driven by the shift in the timing of the
financial transformation initiative.
Net income was $150 million compared to $30 million in the
prior-year quarter. Adjusted net income was $170 million compared
to $69 million in the prior-year quarter. The increase in net
income and Adjusted net income was primarily due to higher
operating income, the impact of exchange rates on the Company’s
Euro-denominated debt and intercompany loans, lower loss on
mark-to-market adjustment of equity investments and a loss on
extinguishment of debt in the prior-year quarter, partially offset
by an increase in income tax expense due to higher pre-tax
income.
Basic and Diluted earnings per share was $0.28 for both the
Class A and Class B shareholders due to the net income attributable
to the Company in the quarter of $150 million.
As of September 30, 2022, the Company reported a cash
balance of $584 million, total debt of $3.732 billion and net debt
(defined as total debt, net of deferred financing costs, premiums
and discounts, minus cash and equivalents) of $3.148 billion.
Cash provided by operating activities increased 78% to $406
million from $228 million in the prior-year quarter. The increase
was largely a result of strong operating performance, timing of
A&R investments, higher recoupments in the quarter and timing
of digital deal renewals, partially offset by other movements
within working capital. Capital expenditures increased 9% to $38
million from $35 million in the prior-year quarter, mainly due to
investments in IT infrastructure, partially offset by lower
facilities investments. Free Cash Flow, as defined below, increased
91% to $368 million from $193 million in the prior-year
quarter.
Full-Year Results
Total revenue increased 11.7% (or 16.0% in constant currency)
driven by digital revenue growth of 9.2% (or 12.6% in constant
currency) across Recorded Music and Music Publishing, which
includes $38 million in downloads and other digital revenue from
the Copyright Settlement. The year included an additional week,
primarily reflected in Recorded Music streaming revenue.
Additionally, the year included the impact of a new deal with one
of the Company’s digital partners affecting Recorded Music
streaming revenue. Total streaming revenue increased 9.1% (or 12.4%
in constant currency) driven by growth across Recorded Music and
Music Publishing. Recorded Music streaming revenue increased by
6.3% (or 9.5% in constant currency) due to continued growth in
streaming services, which was affected by a market-related slowdown
in ad-supported revenue and the benefit of an additional week,
partially offset by the impact of a new deal with one of the
Company’s digital partners, an $11 million catch-up payment from
one of the Company’s digital partners (the “Catch-Up Payment”) and
a $10 million true-up payment in ad-supported revenue, all of which
benefited the prior year. Music Publishing streaming revenue
increased by 28.9% (or 32.8% in constant currency), which includes
a benefit of $20 million resulting from the July 1, 2022 remand
ruling by the Copyright Royalty Board in Phonorecords III upholding
higher percentage of revenue U.S. mechanical royalty rates for 2018
to 2022 and reflects amounts expected to be paid (the “CRB Rate
Benefit”). Digital revenue represented 65.3% of total revenue,
compared to 66.8% in the prior year. The decrease in digital
revenue as a percentage of total revenue is primarily due to the
growth of artist services and expanded-rights revenue. Revenue
increases in the year were also driven by growth in Recorded Music
licensing and physical revenue and Music Publishing performance,
synchronization and mechanical revenue. Excluding the Copyright
Settlement, the benefit of an additional week, the impact of a new
deal with one of the Company’s digital partners, the Catch-Up
Payment, the true-up payment in ad-supported revenue and the CRB
Rate Benefit, revenue increased 12.4% (or 16.9% in constant
currency).
Operating income was $714 million compared to $609 million in
the prior year. OIBDA was $1,053 million, compared to $915 million
in the prior year, an increase of 15.1% (or 20.9% in constant
currency), and OIBDA margin increased 0.5 percentage points to
17.8% from 17.3% in the prior year (or increased 0.7 percentage
points to 17.8% from 17.1% in constant currency). The increases in
operating income, OIBDA and OIBDA margin were primarily due to
strong operating performance, partially offset by the impact of
exchange rates.
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 year and the prior year. In
the prior year, COVID-related expenses are also excluded. Adjusted
EBITDA excludes these 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 12.9% from $1,018 million to $1,149
million (or 18.0% in constant currency) and Adjusted OIBDA margin
increased 0.2 percentage points to 19.4% from 19.2% in the prior
year (or increased 0.3 percentage points to 19.4% from 19.1% in
constant currency). The increase in Adjusted OIBDA and Adjusted
OIBDA margin was primarily due to the same factors affecting OIBDA.
Excluding the Copyright Settlement, the benefit of an additional
week, the impact of a new deal with one of the Company’s digital
partners, the Catch-Up Payment, the true-up payment in ad-supported
revenue and the CRB Rate Benefit, Adjusted OIBDA increased 15.8%
(or 21.6% in constant currency) and Adjusted OIBDA margin increased
0.6 percentage points to 18.6% from 18.0% in the prior year (or
increased 0.7 percentage points to 18.6% from 17.9% in constant
currency). Adjusted operating income increased 13.8% from $712
million to $810 million due to the same factors affecting Adjusted
OIBDA, partially offset by higher amortization expenses due to
recent acquisitions and capital spending.
Adjusted EBITDA increased 9.7% from $1,090 million to $1,196
million with Adjusted EBITDA margins decreasing 0.4 percentage
points from 20.6% to 20.2% largely due to the same factors
affecting Adjusted OIBDA, offset by lower pro forma impact of
certain specified transactions and lower pro forma savings from
certain cost-savings initiatives, primarily driven by the shift in
timing of the financial transformation initiative, and the impact
of the mark-to-market adjustment of an earn-out liability related
to an acquisition, which is excluded from Adjusted EBITDA.
Net income was $555 million compared to $307 million in the
prior year. Adjusted net income was $651 million compared to $410
million in the prior year. The increase in net income and Adjusted
net income was primarily due to higher operating income, the impact
of exchange rates on the Company’s Euro-denominated debt and
intercompany loans and a loss on extinguishment of debt in the
prior year, partially offset by aggregate realized and unrealized
losses related to certain investments and an increase in income tax
expense due to higher pre-tax income.
Basic and Diluted earnings per share was $1.06 for both the
Class A and Class B shareholders due to the net income attributable
to the Company in the year of $555 million.
Net debt (defined as total debt, net of deferred financing
costs, premiums and discounts, minus cash and equivalents) at the
end of the year was $3.148 billion compared to $2.847 billion at
the end of the prior year.
Cash provided by operating activities increased 16% to $742
million from $638 million in the prior year. The change was largely
a result of strong operating performance. Capital expenditures
increased 45% to $135 million from $93 million in the prior year,
mainly due to investments in IT infrastructure and facilities,
including the EMP fulfillment center expansion. Free Cash Flow, as
defined below, increased 11% to $607 million from $545 million in
the prior year.
Recorded Music
Recorded
Music Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
1,244 |
|
$ |
1,172 |
|
6 |
% |
|
$ |
4,966 |
|
$ |
4,544 |
|
9 |
% |
Digital revenue |
|
830 |
|
|
807 |
|
3 |
% |
|
|
3,305 |
|
|
3,105 |
|
6 |
% |
Operating income |
|
165 |
|
|
129 |
|
28 |
% |
|
|
796 |
|
|
733 |
|
9 |
% |
Adjusted operating
income(1) |
|
172 |
|
|
151 |
|
14 |
% |
|
|
819 |
|
|
772 |
|
6 |
% |
OIBDA(1) |
|
219 |
|
|
182 |
|
20 |
% |
|
|
1,023 |
|
|
936 |
|
9 |
% |
Adjusted OIBDA(1) |
|
226 |
|
|
204 |
|
11 |
% |
|
|
1,046 |
|
|
975 |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
For the Three Months Ended September 30, 2021 |
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
For the Twelve Months Ended September 30,
2021 |
|
As reported |
|
As reported |
|
Constant |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Digital |
$ |
830 |
|
$ |
807 |
|
$ |
768 |
|
$ |
3,305 |
|
$ |
3,105 |
|
$ |
3,013 |
Physical |
|
123 |
|
|
127 |
|
|
116 |
|
|
563 |
|
|
549 |
|
|
521 |
Total Digital and Physical |
|
953 |
|
|
934 |
|
|
884 |
|
|
3,868 |
|
|
3,654 |
|
|
3,534 |
Artist services and
expanded-rights |
|
204 |
|
|
168 |
|
|
153 |
|
|
767 |
|
|
599 |
|
|
562 |
Licensing |
|
87 |
|
|
70 |
|
|
63 |
|
|
331 |
|
|
291 |
|
|
276 |
Total Recorded
Music |
$ |
1,244 |
|
$ |
1,172 |
|
$ |
1,100 |
|
$ |
4,966 |
|
$ |
4,544 |
|
$ |
4,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth-Quarter Results
Recorded Music revenue was up 6.1% (or 13.1% in constant
currency) due to artist services and expanded-rights revenue growth
of 21.4% (or 33.3% in constant currency), reflecting an increase in
merchandising and concert promotion revenue. Digital revenue was up
2.9% (or 8.1% in constant currency), which includes $31 million in
downloads and other digital revenue from the Copyright Settlement.
Streaming revenue was down 0.4% (or up 4.7% in constant currency).
Adjusted for the impact of a new deal with one of the Company’s
digital partners, Recorded Music streaming revenue was up 4.7% (or
10.4% in constant currency). Streaming revenue reflects continued
growth in subscription revenue, which was affected by a
market-related slowdown in ad-supported revenue. Digital revenue
represented 66.7% of total Recorded Music revenue versus 68.9% in
the prior-year quarter. The decrease in digital revenue as a
percentage of total Recorded Music revenue is due to the growth of
artist services and expanded-rights and licensing revenue.
Licensing revenue increased 24.3% (or 38.1% in constant currency),
mainly due to higher broadcast fees, synchronization and other
activity, partially offset by the impact of exchange rates.
Physical revenue was down 3.1% (or up 6.0% in constant currency)
primarily due to the impact of exchange rates, which offset higher
vinyl sales and strong performance in Japan. Excluding the
Copyright Settlement and the impact of a new deal with one of the
Company’s digital partners, revenue increased 7.0% (or 14.2% in
constant currency). Major sellers included Ed Sheeran, Jack Harlow,
Dua Lipa and Lizzo.
Recorded Music operating income was $165 million, up from $129
million in the prior-year quarter and operating margin was up 2.3
percentage points to 13.3% versus 11.0% in the prior-year quarter.
OIBDA increased 20.3% to $219 million from $182 million (or 31.1%
in constant currency) in the prior-year quarter and OIBDA margin
increased 2.1 percentage points to 17.6% from 15.5% in the
prior-year quarter (or increased 2.4 percentage points to 17.6%
from 15.2% in constant currency). Adjusted OIBDA increased 10.8%
from $204 million to $226 million (or 19.6% in constant currency)
with Adjusted OIBDA margin up 0.8 percentage points to 18.2% from
17.4% in the prior-year quarter (or up 1.0 percentage points to
18.2% from 17.2% in constant currency). The increases in operating
income, OIBDA, operating margin and OIBDA margin were primarily due
to the same factors affecting Adjusted OIBDA discussed below and a
decrease in expenses related to restructuring and other
transformation initiatives and non-cash stock-based compensation
and other related expenses. The increase in Adjusted OIBDA and
Adjusted OIBDA margin was primarily due to strong operating
performance and $15 million from the Copyright Settlement,
partially offset by revenue mix resulting from the growth of
lower-margin artist services and expanded-rights revenue and the
impact of exchange rates. Excluding the Copyright Settlement and
the impact of a new deal with one of the Company’s digital
partners, Adjusted OIBDA increased 15.9% (or 26.3% in constant
currency) and Adjusted OIBDA margin increased 1.4 percentage points
to 17.4% from 16.0% in the prior-year quarter (or increased 1.7
percentage points to 17.4% from 15.7% in constant currency).
Full-Year Results
Recorded Music revenue was up 9.3% (or 13.6% in constant
currency) due to growth across all revenue lines, including
increases in digital revenue, which reflect the continued growth in
streaming, the Company’s largest source of revenue. Digital revenue
was up 6.4% (or 9.7% in constant currency), which includes $31
million in downloads and other digital revenue from the Copyright
Settlement. Streaming revenue was up 6.3% (or 9.5% in constant
currency). Adjusted for the benefit of an additional week, the
impact of a new deal with one of the Company’s digital partners,
the Catch-Up Payment and the true-up payment in ad-supported
revenue, Recorded Music streaming revenue was up 9.9% (or 13.5% in
constant currency). Streaming revenue reflects continued growth,
which was affected by a market-related slowdown in ad-supported
revenue and the strength of new and carryover releases. Digital
revenue represented 66.6% of total Recorded Music revenue versus
68.3% in the prior year. The decrease in digital revenue as a
percentage of total Recorded Music revenue is due to the continued
growth of artist services and expanded-rights revenue. Artist
services and expanded-rights revenue was up 28.0% (or 36.5% in
constant currency), reflecting an increase in concert promotion,
which was disrupted by COVID in the prior year, and merchandising
revenue. Licensing revenue increased 13.7% (or 19.9% in constant
currency), mainly due to higher synchronization and other activity.
Physical revenue was up 2.6% (or 8.1% in constant currency)
primarily from higher sales due to the success of new releases and
an increased demand for vinyl products. Excluding the Copyright
Settlement, the benefit of an additional week, the impact of a new
deal with one of the Company’s digital partners, the Catch-Up
Payment and the true-up payment in ad-supported revenue, revenue
increased 10.7% (or 15.2% in constant currency). Major sellers
included Ed Sheeran, Dua Lipa, Silk Sonic and Coldplay.
Recorded Music operating income was $796 million, up from $733
million in the prior year and operating margin was down 0.1
percentage point to 16.0% versus 16.1% in the prior year. OIBDA
increased 9.3% to $1,023 million from $936 million (or 14.0% in
constant currency) in the prior year and OIBDA margin remained flat
at 20.6% (or increased 0.1 percentage point to 20.6% from 20.5% in
constant currency). Adjusted OIBDA increased 7.3% from $975 million
to $1,046 million (or 11.8% in constant currency) with Adjusted
OIBDA margin down 0.4 percentage points to 21.1% from 21.5% in the
prior year (or down 0.3 percentage points to 21.1% from 21.4% in
constant currency). The increases in operating income, OIBDA and
Adjusted OIBDA were primarily driven by increased revenue. The
decreases in operating margin and Adjusted OIBDA margin were
primarily due to strong operating performance, which was offset by
revenue mix resulting from the growth of lower-margin artist
services and expanded-rights revenue and the impact of exchange
rates. Excluding the Copyright Settlement, the benefit of an
additional week, the impact of a new deal with one of the Company’s
digital partners, the Catch-Up Payment and the true-up payment in
ad-supported revenue, Adjusted OIBDA increased 12.0% (or 17.1% in
constant currency) and Adjusted OIBDA margin increased 0.2
percentage points to 20.4% from 20.2% in the prior year (or
increased 0.3 percentage points to 20.4% from 20.1% in constant
currency).
Music Publishing
Music
Publishing Summary Results |
|
|
|
|
|
|
|
|
|
|
(dollars
in millions) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
254 |
|
$ |
205 |
|
24 |
% |
|
$ |
958 |
|
$ |
761 |
|
26 |
% |
Digital revenue |
|
159 |
|
|
120 |
|
33 |
% |
|
|
563 |
|
|
436 |
|
29 |
% |
Operating income |
|
36 |
|
|
28 |
|
29 |
% |
|
|
139 |
|
|
89 |
|
56 |
% |
Adjusted operating
income(1) |
|
37 |
|
|
28 |
|
32 |
% |
|
|
141 |
|
|
94 |
|
50 |
% |
OIBDA(1) |
|
59 |
|
|
49 |
|
20 |
% |
|
|
231 |
|
|
174 |
|
33 |
% |
Adjusted OIBDA(1) |
|
60 |
|
|
49 |
|
22 |
% |
|
|
233 |
|
|
179 |
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
For the Three Months Ended September 30, 2021 |
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
For the Twelve Months Ended September 30,
2021 |
|
As reported |
|
As reported |
|
Constant |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Performance |
$ |
40 |
|
$ |
30 |
|
$ |
27 |
|
$ |
159 |
|
$ |
122 |
|
$ |
115 |
Digital |
|
159 |
|
|
120 |
|
|
114 |
|
|
563 |
|
|
436 |
|
|
423 |
Mechanical |
|
13 |
|
|
13 |
|
|
12 |
|
|
50 |
|
|
49 |
|
|
46 |
Synchronization |
|
39 |
|
|
39 |
|
|
36 |
|
|
172 |
|
|
144 |
|
|
141 |
Other |
|
3 |
|
|
3 |
|
|
3 |
|
|
14 |
|
|
10 |
|
|
10 |
Total Music
Publishing |
$ |
254 |
|
$ |
205 |
|
$ |
192 |
|
$ |
958 |
|
$ |
761 |
|
$ |
735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth-Quarter Results
Music Publishing revenue increased 23.9% (or 32.3% in constant
currency). The revenue increase was driven by growth in digital and
performance revenue. Digital revenue increased 32.5% (or 39.5% in
constant currency), which includes $7 million in downloads and
other digital revenue from the Copyright Settlement. Streaming
revenue increased 29.8% (or 37.0% in constant currency), reflecting
the continued growth in streaming services and timing of new
digital deals. Digital revenue represented 62.6% of total Music
Publishing revenue versus 58.5% in the prior-year quarter.
Performance revenue increased due to continued growth from bars,
restaurants, concerts and live events. Synchronization and
mechanical revenue remained constant on an as-reported basis, but
increased in constant currency. Excluding the Copyright Settlement,
revenue increased 20.5% (or 28.6% in constant currency).
Music Publishing operating income was $36 million compared to
$28 million in the prior-year quarter and operating margin
increased 0.5 percentage points to 14.2%. Music Publishing OIBDA
increased 20.4% to $59 million (or 31.1% in constant currency) and
OIBDA margin decreased 0.7 percentage points to 23.2% from 23.9% in
the prior-year quarter (or decreased 0.2 percentage points to 23.2%
from 23.4% in constant currency). Adjusted OIBDA increased 22.4% to
$60 million (or 33.3% in constant currency) and Adjusted OIBDA
margin decreased 0.3 percentage points to 23.6% from 23.9% in the
prior-year quarter (or increased 0.2 percentage points to 23.6%
from 23.4% in constant currency). The increase in operating income,
OIBDA and Adjusted OIBDA were primarily driven by increased
revenue. The decrease in OIBDA margin and Adjusted OIBDA margin
were primarily due to strong operating performance, which was
offset by the impact of exchange rates. Excluding the Copyright
Settlement, Adjusted OIBDA increased 20.4% (or 31.1% in constant
currency) and Adjusted OIBDA margin remained flat at 23.9% (or
increased 0.5 percentage points to 23.9% from 23.4% in constant
currency).
Full-Year Results
Music Publishing revenue increased 25.9% (or 30.3% in constant
currency). The revenue increase was driven by growth in digital,
performance, synchronization and mechanical revenue. Digital
revenue increased 29.1% (or 33.1% in constant currency), which
includes $7 million in downloads and other digital revenue from the
Copyright Settlement. Streaming revenue increased 28.9% (or 32.8%
in constant currency), reflecting the continued growth in streaming
services, the CRB Rate Benefit and timing of new digital deals.
Adjusted for the CRB Rate Benefit of $20 million, streaming revenue
increased 24.2% (or 27.8% in constant currency). Digital revenue
represented 58.8% of total Music Publishing revenue versus 57.3% in
the prior year. Performance revenue increased as bars, restaurants,
concerts and live events continued to recover from COVID
disruption. Synchronization revenue increased due to higher
television and commercial licensing activity. The increase in
mechanical revenue was partially offset by the impact of exchange
rates. Excluding the Copyright Settlement and the CRB Rate Benefit,
revenue increased 22.3% (or 26.7% in constant currency).
Music Publishing operating income was $139 million compared to
$89 million in the prior year and operating margin increased 2.8
percentage points to 14.5%. Music Publishing OIBDA increased 32.8%
to $231 million (or 38.3% in constant currency) and OIBDA margin
increased 1.2 percentage points to 24.1% from 22.9% in the prior
year (or increased 1.4 percentage points to 24.1% from 22.7% in
constant currency). Adjusted OIBDA increased 30.2% to $233 million
(or 35.5% in constant currency) and Adjusted OIBDA margin increased
0.8 percentage points to 24.3% from 23.5% in the prior year (or
increased 0.9 percentage points to 24.3% from 23.4% in constant
currency). The increase in operating income, OIBDA and Adjusted
OIBDA were primarily due to strong operating performance, partially
offset by the impact of exchange rates. Excluding the Copyright
Settlement and the CRB Rate Benefit, Adjusted OIBDA increased 26.8%
(or 32.0% in constant currency) and Adjusted OIBDA margin increased
0.9% percentage points to 24.4% from 23.5% in the prior year (or
increased 1.0 percentage points to 24.4% from 23.4% in constant
currency).
This morning, management will be hosting a conference call to
discuss the results at 8:30 A.M. ET. 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
For the periods presented in this release, 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
includes 53 weeks, and the fiscal year ended September 30, 2021
included 52 weeks. The additional week in fiscal year 2022 fell in
the fiscal quarter ended December 31, 2021. All references to
September 30, 2022 and September 30, 2021 relate to the
periods ended September 30, 2022 and September 24, 2021,
respectively. For convenience purposes, the Company dates its
financial statements as of September 30 for these periods.
Figure 1.
Warner Music Group Corp. - Consolidated Statements of Operations,
Three and Twelve Months Ended September 30, 2022 versus September
30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Revenue |
$ |
1,497 |
|
|
$ |
1,376 |
|
|
9 |
% |
Cost and
expenses: |
|
|
|
|
|
Cost of revenue |
|
(799 |
) |
|
|
(752 |
) |
|
6 |
% |
Selling, general and
administrative expenses |
|
(470 |
) |
|
|
(465 |
) |
|
1 |
% |
Amortization expense |
|
(65 |
) |
|
|
(59 |
) |
|
10 |
% |
Total costs and
expenses |
$ |
(1,334 |
) |
|
$ |
(1,276 |
) |
|
5 |
% |
Operating
income |
$ |
163 |
|
|
$ |
100 |
|
|
63 |
% |
Loss on extinguishment of
debt |
|
— |
|
|
|
(10 |
) |
|
-100 |
% |
Interest expense, net |
|
(31 |
) |
|
|
(29 |
) |
|
7 |
% |
Other income (expense),
net |
|
55 |
|
|
|
(9 |
) |
|
— |
% |
Income before income
taxes |
$ |
187 |
|
|
$ |
52 |
|
|
— |
% |
Income tax expense |
|
(37 |
) |
|
|
(22 |
) |
|
68 |
% |
Net
income |
$ |
150 |
|
|
$ |
30 |
|
|
— |
% |
Less: Income attributable to
noncontrolling interest |
|
(2 |
) |
|
|
(2 |
) |
|
— |
% |
Net income
attributable to Warner Music Group Corp. |
$ |
148 |
|
|
$ |
28 |
|
|
— |
% |
|
|
|
|
|
|
Net income per share
attributable to common stockholders: |
|
|
|
|
|
Class A – Basic and Diluted |
$ |
0.28 |
|
|
$ |
0.05 |
|
|
|
Class B – Basic and Diluted |
$ |
0.28 |
|
|
$ |
0.05 |
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(audited) |
|
|
Revenue |
$ |
5,919 |
|
|
$ |
5,301 |
|
|
12 |
% |
Cost and
expenses: |
|
|
|
|
|
Cost of revenue |
|
(3,080 |
) |
|
|
(2,742 |
) |
|
12 |
% |
Selling, general and
administrative expenses |
|
(1,862 |
) |
|
|
(1,721 |
) |
|
8 |
% |
Amortization expense |
|
(263 |
) |
|
|
(229 |
) |
|
15 |
% |
Total costs and
expenses |
$ |
(5,205 |
) |
|
$ |
(4,692 |
) |
|
11 |
% |
Operating
income |
$ |
714 |
|
|
$ |
609 |
|
|
17 |
% |
Loss on extinguishment of
debt |
|
— |
|
|
|
(22 |
) |
|
-100 |
% |
Interest expense, net |
|
(125 |
) |
|
|
(122 |
) |
|
2 |
% |
Other income (expense),
net |
|
151 |
|
|
|
(9 |
) |
|
— |
% |
Income before income
taxes |
$ |
740 |
|
|
$ |
456 |
|
|
62 |
% |
Income tax expense |
|
(185 |
) |
|
|
(149 |
) |
|
24 |
% |
Net
income |
$ |
555 |
|
|
$ |
307 |
|
|
81 |
% |
Less: Income attributable to
noncontrolling interest |
|
(4 |
) |
|
|
(3 |
) |
|
33 |
% |
Net income
attributable to Warner Music Group Corp. |
$ |
551 |
|
|
$ |
304 |
|
|
81 |
% |
|
|
|
|
|
|
Net income per share
attributable to common stockholders: |
|
|
|
|
|
Class A – Basic and Diluted |
$ |
1.06 |
|
|
$ |
0.58 |
|
|
|
Class B – Basic and Diluted |
$ |
1.06 |
|
|
$ |
0.58 |
|
|
|
Figure 2.
Warner Music Group Corp. - Consolidated Balance Sheets at September
30, 2022 versus September 30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
September 30, 2021 |
|
% Change |
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and equivalents |
$ |
584 |
|
|
$ |
499 |
|
|
17 |
% |
Accounts receivable, net |
|
984 |
|
|
|
839 |
|
|
17 |
% |
Inventories |
|
108 |
|
|
|
99 |
|
|
9 |
% |
Royalty advances expected to be recouped within one year |
|
372 |
|
|
|
373 |
|
|
— |
% |
Prepaid and other current assets |
|
91 |
|
|
|
86 |
|
|
6 |
% |
Total current
assets |
$ |
2,139 |
|
|
$ |
1,896 |
|
|
13 |
% |
Royalty advances expected to
be recouped after one year |
|
503 |
|
|
|
457 |
|
|
10 |
% |
Property, plant and equipment,
net |
|
415 |
|
|
|
364 |
|
|
14 |
% |
Operating lease right-of-use
assets, net |
|
226 |
|
|
|
268 |
|
|
-16 |
% |
Goodwill |
|
1,920 |
|
|
|
1,830 |
|
|
5 |
% |
Intangible assets subject to
amortization, net |
|
2,239 |
|
|
|
2,017 |
|
|
11 |
% |
Intangible assets not subject
to amortization |
|
145 |
|
|
|
154 |
|
|
-6 |
% |
Deferred tax assets, net |
|
29 |
|
|
|
31 |
|
|
-6 |
% |
Other assets |
|
212 |
|
|
|
194 |
|
|
9 |
% |
Total
assets |
$ |
7,828 |
|
|
$ |
7,211 |
|
|
9 |
% |
Liabilities and
Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
268 |
|
|
$ |
302 |
|
|
-11 |
% |
Accrued royalties |
|
1,918 |
|
|
|
1,880 |
|
|
2 |
% |
Accrued liabilities |
|
457 |
|
|
|
461 |
|
|
-1 |
% |
Accrued interest |
|
17 |
|
|
|
14 |
|
|
21 |
% |
Operating lease liabilities, current |
|
40 |
|
|
|
43 |
|
|
-7 |
% |
Deferred revenue |
|
423 |
|
|
|
348 |
|
|
22 |
% |
Other current liabilities |
|
245 |
|
|
|
102 |
|
|
— |
% |
Total current
liabilities |
$ |
3,368 |
|
|
$ |
3,150 |
|
|
7 |
% |
Long-term debt |
|
3,732 |
|
|
|
3,346 |
|
|
12 |
% |
Operating lease liabilities,
noncurrent |
|
241 |
|
|
|
287 |
|
|
-16 |
% |
Deferred tax liabilities,
net |
|
220 |
|
|
|
207 |
|
|
6 |
% |
Other noncurrent
liabilities |
|
99 |
|
|
|
175 |
|
|
-43 |
% |
Total
liabilities |
$ |
7,660 |
|
|
$ |
7,165 |
|
|
7 |
% |
Equity: |
|
|
|
|
|
Class A common stock |
$ |
— |
|
|
$ |
— |
|
|
— |
% |
Class B common stock |
|
1 |
|
|
|
1 |
|
|
— |
% |
Additional paid-in
capital |
|
1,975 |
|
|
|
1,942 |
|
|
2 |
% |
Accumulated deficit |
|
(1,477 |
) |
|
|
(1,710 |
) |
|
-14 |
% |
Accumulated other
comprehensive loss, net |
|
(347 |
) |
|
|
(202 |
) |
|
72 |
% |
Total Warner Music
Group Corp. equity |
$ |
152 |
|
|
$ |
31 |
|
|
— |
% |
Noncontrolling interest |
|
16 |
|
|
|
15 |
|
|
7 |
% |
Total
equity |
|
168 |
|
|
|
46 |
|
|
— |
% |
Total liabilities and
equity |
$ |
7,828 |
|
|
$ |
7,211 |
|
|
9 |
% |
Figure 3.
Warner Music Group Corp. - Summarized Statements of Cash Flows,
Three and Twelve Months Ended September 30, 2022 versus September
30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by operating activities |
$ |
406 |
|
|
$ |
228 |
|
Net cash used in investing
activities |
|
(61 |
) |
|
|
(72 |
) |
Net cash used in financing
activities |
|
(92 |
) |
|
|
(96 |
) |
Effect of foreign currency
exchange rates on cash and equivalents |
|
(14 |
) |
|
|
(3 |
) |
Net increase in cash and
equivalents |
$ |
239 |
|
|
$ |
57 |
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
(unaudited) |
|
(audited) |
Net cash provided by operating
activities |
$ |
742 |
|
|
$ |
638 |
|
Net cash used in investing
activities |
|
(824 |
) |
|
|
(638 |
) |
Net cash provided by (used in)
financing activities |
|
188 |
|
|
|
(61 |
) |
Effect of foreign currency
exchange rates on cash and equivalents |
|
(21 |
) |
|
|
7 |
|
Net increase (decrease) in
cash and equivalents |
$ |
85 |
|
|
$ |
(54 |
) |
Figure 4.
Warner Music Group Corp. - Digital Revenue Summary, Three and
Twelve Months Ended September 30, 2022 versus September 30,
2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Recorded
Music |
|
|
|
|
|
Streaming |
$ |
774 |
|
|
$ |
777 |
|
|
— |
% |
Downloads and Other Digital |
|
56 |
|
|
|
30 |
|
|
87 |
% |
Total Recorded Music
Digital Revenue |
$ |
830 |
|
|
$ |
807 |
|
|
3 |
% |
|
|
|
|
|
|
Music
Publishing |
|
|
|
|
|
Streaming |
$ |
148 |
|
|
$ |
114 |
|
|
30 |
% |
Downloads and Other Digital |
|
11 |
|
|
|
6 |
|
|
83 |
% |
Total Music Publishing
Digital Revenue |
$ |
159 |
|
|
$ |
120 |
|
|
33 |
% |
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
Streaming |
$ |
922 |
|
|
$ |
891 |
|
|
3 |
% |
Downloads and Other Digital |
|
67 |
|
|
|
36 |
|
|
86 |
% |
Intersegment Eliminations |
|
— |
|
|
|
(1 |
) |
|
-100 |
% |
Total Digital
Revenue |
$ |
989 |
|
|
$ |
926 |
|
|
7 |
% |
|
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Recorded
Music |
|
|
|
|
|
Streaming |
$ |
3,159 |
|
|
$ |
2,972 |
|
|
6 |
% |
Downloads and Other Digital |
|
146 |
|
|
|
133 |
|
|
10 |
% |
Total Recorded Music
Digital Revenue |
$ |
3,305 |
|
|
$ |
3,105 |
|
|
6 |
% |
|
|
|
|
|
|
Music
Publishing |
|
|
|
|
|
Streaming |
$ |
539 |
|
|
$ |
418 |
|
|
29 |
% |
Downloads and Other Digital |
|
24 |
|
|
|
18 |
|
|
33 |
% |
Total Music Publishing
Digital Revenue |
$ |
563 |
|
|
$ |
436 |
|
|
29 |
% |
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
Streaming |
$ |
3,698 |
|
|
$ |
3,390 |
|
|
9 |
% |
Downloads and Other Digital |
|
170 |
|
|
|
151 |
|
|
13 |
% |
Intersegment Eliminations |
|
(2 |
) |
|
|
(2 |
) |
|
— |
% |
Total Digital
Revenue |
$ |
3,866 |
|
|
$ |
3,539 |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
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 Twelve Months Ended September 30, 2022 versus September
30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Net income attributable to Warner Music Group
Corp. |
$ |
148 |
|
|
$ |
28 |
|
|
— |
% |
Income attributable to
noncontrolling interest |
|
2 |
|
|
|
2 |
|
|
— |
% |
Net
income |
$ |
150 |
|
|
$ |
30 |
|
|
— |
% |
Income tax expense |
|
37 |
|
|
|
22 |
|
|
68 |
% |
Income including
income taxes |
$ |
187 |
|
|
$ |
52 |
|
|
— |
% |
Other (income) expense,
net |
|
(55 |
) |
|
|
9 |
|
|
— |
% |
Interest expense, net |
|
31 |
|
|
|
29 |
|
|
7 |
% |
Loss on extinguishment of
debt |
|
— |
|
|
|
10 |
|
|
-100 |
% |
Operating
income |
$ |
163 |
|
|
$ |
100 |
|
|
63 |
% |
Amortization expense |
|
65 |
|
|
|
59 |
|
|
10 |
% |
Depreciation expense |
|
17 |
|
|
|
20 |
|
|
-15 |
% |
OIBDA |
$ |
245 |
|
|
$ |
179 |
|
|
37 |
% |
Operating income
margin |
|
10.9 |
% |
|
|
7.3 |
% |
|
|
OIBDA
margin |
|
16.4 |
% |
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Net income
attributable to Warner Music Group Corp. |
$ |
551 |
|
|
$ |
304 |
|
|
81 |
% |
Income attributable to
noncontrolling interest |
|
4 |
|
|
|
3 |
|
|
33 |
% |
Net
income |
$ |
555 |
|
|
$ |
307 |
|
|
81 |
% |
Income tax expense |
|
185 |
|
|
|
149 |
|
|
24 |
% |
Income including
income taxes |
$ |
740 |
|
|
$ |
456 |
|
|
62 |
% |
Other (income) expense,
net |
|
(151 |
) |
|
|
9 |
|
|
— |
% |
Interest expense, net |
|
125 |
|
|
|
122 |
|
|
2 |
% |
Loss on extinguishment of
debt |
|
— |
|
|
|
22 |
|
|
-100 |
% |
Operating
income |
$ |
714 |
|
|
$ |
609 |
|
|
17 |
% |
Amortization expense |
|
263 |
|
|
|
229 |
|
|
15 |
% |
Depreciation expense |
|
76 |
|
|
|
77 |
|
|
-1 |
% |
OIBDA |
$ |
1,053 |
|
|
$ |
915 |
|
|
15 |
% |
Operating income
margin |
|
12.1 |
% |
|
|
11.5 |
% |
|
|
OIBDA
margin |
|
17.8 |
% |
|
|
17.3 |
% |
|
|
Figure 6.
Warner Music Group Corp. - Reconciliation of Segment Operating
Income to OIBDA, Three and Twelve Months Ended September 30, 2022
versus September 30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Total WMG operating income – GAAP |
$ |
163 |
|
|
$ |
100 |
|
|
63 |
% |
Depreciation and amortization
expense |
|
(82 |
) |
|
|
(79 |
) |
|
4 |
% |
Total WMG
OIBDA |
$ |
245 |
|
|
$ |
179 |
|
|
37 |
% |
Operating income
margin |
|
10.9 |
% |
|
|
7.3 |
% |
|
|
OIBDA
margin |
|
16.4 |
% |
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
Recorded Music
operating income – GAAP |
$ |
165 |
|
|
$ |
129 |
|
|
28 |
% |
Depreciation and amortization
expense |
|
(54 |
) |
|
|
(53 |
) |
|
2 |
% |
Recorded Music
OIBDA |
$ |
219 |
|
|
$ |
182 |
|
|
20 |
% |
Recorded Music
operating income margin |
|
13.3 |
% |
|
|
11.0 |
% |
|
|
Recorded Music OIBDA
margin |
|
17.6 |
% |
|
|
15.5 |
% |
|
|
|
|
|
|
|
|
Music Publishing
operating income – GAAP |
$ |
36 |
|
|
$ |
28 |
|
|
29 |
% |
Depreciation and amortization
expense |
|
(23 |
) |
|
|
(21 |
) |
|
10 |
% |
Music Publishing
OIBDA |
$ |
59 |
|
|
$ |
49 |
|
|
20 |
% |
Music Publishing
operating income margin |
|
14.2 |
% |
|
|
13.7 |
% |
|
|
Music Publishing OIBDA
margin |
|
23.2 |
% |
|
|
23.9 |
% |
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
% Change |
|
(unaudited) |
|
(unaudited) |
|
|
Total WMG operating
income – GAAP |
$ |
714 |
|
|
$ |
609 |
|
|
17 |
% |
Depreciation and amortization
expense |
|
(339 |
) |
|
|
(306 |
) |
|
11 |
% |
Total WMG
OIBDA |
$ |
1,053 |
|
|
$ |
915 |
|
|
15 |
% |
Operating income
margin |
|
12.1 |
% |
|
|
11.5 |
% |
|
|
OIBDA
margin |
|
17.8 |
% |
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
Recorded Music
operating income – GAAP |
$ |
796 |
|
|
$ |
733 |
|
|
9 |
% |
Depreciation and amortization
expense |
|
(227 |
) |
|
|
(203 |
) |
|
12 |
% |
Recorded Music
OIBDA |
$ |
1,023 |
|
|
$ |
936 |
|
|
9 |
% |
Recorded Music
operating income margin |
|
16.0 |
% |
|
|
16.1 |
% |
|
|
Recorded Music OIBDA
margin |
|
20.6 |
% |
|
|
20.6 |
% |
|
|
|
|
|
|
|
|
Music Publishing
operating income – GAAP |
$ |
139 |
|
|
$ |
89 |
|
|
56 |
% |
Depreciation and amortization
expense |
|
(92 |
) |
|
|
(85 |
) |
|
8 |
% |
Music Publishing
OIBDA |
$ |
231 |
|
|
$ |
174 |
|
|
33 |
% |
Music Publishing
operating income margin |
|
14.5 |
% |
|
|
11.7 |
% |
|
|
Music Publishing OIBDA
margin |
|
24.1 |
% |
|
|
22.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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 Twelve Months Ended September 30, 2022 versus
September 30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 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 |
$ |
163 |
|
|
$ |
165 |
|
|
$ |
36 |
|
|
$ |
245 |
|
|
$ |
219 |
|
|
$ |
59 |
|
|
$ |
150 |
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
15 |
|
|
|
4 |
|
|
|
— |
|
|
|
15 |
|
|
|
4 |
|
|
|
— |
|
|
|
15 |
Non-Cash Stock-Based Compensation and Other Related Costs |
|
5 |
|
|
|
3 |
|
|
|
1 |
|
|
|
5 |
|
|
|
3 |
|
|
|
1 |
|
|
|
5 |
Adjusted Results |
$ |
183 |
|
|
$ |
172 |
|
|
$ |
37 |
|
|
$ |
265 |
|
|
$ |
226 |
|
|
$ |
60 |
|
|
$ |
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
12.2 |
% |
|
|
13.8 |
% |
|
|
14.6 |
% |
|
|
17.7 |
% |
|
|
18.2 |
% |
|
|
23.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
$ |
100 |
|
|
$ |
129 |
|
|
$ |
28 |
|
|
$ |
179 |
|
|
$ |
182 |
|
|
$ |
49 |
|
|
$ |
30 |
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
26 |
|
|
|
15 |
|
|
|
— |
|
|
|
26 |
|
|
|
15 |
|
|
|
— |
|
|
|
26 |
COVID-19 Related Costs |
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
Non-Cash Stock-Based Compensation and Other Related Costs |
|
12 |
|
|
|
6 |
|
|
|
— |
|
|
|
12 |
|
|
|
6 |
|
|
|
— |
|
|
|
12 |
Adjusted Results |
$ |
139 |
|
|
$ |
151 |
|
|
$ |
28 |
|
|
$ |
218 |
|
|
$ |
204 |
|
|
$ |
49 |
|
|
$ |
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
10.1 |
% |
|
|
12.9 |
% |
|
|
13.7 |
% |
|
|
15.8 |
% |
|
|
17.4 |
% |
|
|
23.9 |
% |
|
|
For the Twelve Months Ended September 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 |
$ |
714 |
|
|
$ |
796 |
|
|
$ |
139 |
|
|
$ |
1,053 |
|
|
$ |
1,023 |
|
|
$ |
231 |
|
|
$ |
555 |
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
54 |
|
|
|
8 |
|
|
|
— |
|
|
|
54 |
|
|
|
8 |
|
|
|
— |
|
|
|
54 |
Non-Cash Stock-Based Compensation and Other Related Costs |
|
42 |
|
|
|
15 |
|
|
|
2 |
|
|
|
42 |
|
|
|
15 |
|
|
|
2 |
|
|
|
42 |
Adjusted Results |
$ |
810 |
|
|
$ |
819 |
|
|
$ |
141 |
|
|
$ |
1,149 |
|
|
$ |
1,046 |
|
|
$ |
233 |
|
|
$ |
651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
13.7 |
% |
|
|
16.5 |
% |
|
|
14.7 |
% |
|
|
19.4 |
% |
|
|
21.1 |
% |
|
|
24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
$ |
609 |
|
|
$ |
733 |
|
|
$ |
89 |
|
|
$ |
915 |
|
|
$ |
936 |
|
|
$ |
174 |
|
|
$ |
307 |
Factors Affecting
Comparability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Other Transformation Related Costs |
|
54 |
|
|
|
15 |
|
|
|
3 |
|
|
|
54 |
|
|
|
15 |
|
|
|
3 |
|
|
|
54 |
COVID-19 Related Costs |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
Non-Cash Stock-Based Compensation and Other Related Costs |
|
48 |
|
|
|
24 |
|
|
|
2 |
|
|
|
48 |
|
|
|
24 |
|
|
|
2 |
|
|
|
48 |
Adjusted Results |
$ |
712 |
|
|
$ |
772 |
|
|
$ |
94 |
|
|
$ |
1,018 |
|
|
$ |
975 |
|
|
$ |
179 |
|
|
$ |
410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Margin |
|
13.4 |
% |
|
|
17.0 |
% |
|
|
12.4 |
% |
|
|
19.2 |
% |
|
|
21.5 |
% |
|
|
23.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency
Because exchange rates are an important factor in understanding
period-to-period comparisons, we believe the presentation of
revenue and OIBDA on a constant-currency basis in addition to
reported revenue and OIBDA 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 and OIBDA.
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 Twelve Months Ended September 30, 2022 versus September 30,
2021 As Reported and Constant Currency |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
For the Three Months Ended September 30, 2021 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
U.S. revenue |
|
|
|
|
|
Recorded Music |
$ |
590 |
|
|
$ |
531 |
|
|
$ |
531 |
|
Music Publishing |
|
144 |
|
|
|
101 |
|
|
|
101 |
|
International revenue |
|
|
|
|
|
Recorded Music |
|
654 |
|
|
|
641 |
|
|
|
569 |
|
Music Publishing |
|
110 |
|
|
|
104 |
|
|
|
91 |
|
Intersegment eliminations |
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Total
Revenue |
$ |
1,497 |
|
|
$ |
1,376 |
|
|
$ |
1,291 |
|
|
|
|
|
|
|
Revenue by
Segment: |
|
|
|
|
|
Recorded Music |
|
|
|
|
|
Digital |
$ |
830 |
|
|
$ |
807 |
|
|
$ |
768 |
|
Physical |
|
123 |
|
|
|
127 |
|
|
|
116 |
|
Total Digital and Physical |
|
953 |
|
|
|
934 |
|
|
|
884 |
|
Artist services and expanded-rights |
|
204 |
|
|
|
168 |
|
|
|
153 |
|
Licensing |
|
87 |
|
|
|
70 |
|
|
|
63 |
|
Total Recorded
Music |
|
1,244 |
|
|
|
1,172 |
|
|
|
1,100 |
|
Music Publishing |
|
|
|
|
|
Performance |
|
40 |
|
|
|
30 |
|
|
|
27 |
|
Digital |
|
159 |
|
|
|
120 |
|
|
|
114 |
|
Mechanical |
|
13 |
|
|
|
13 |
|
|
|
12 |
|
Synchronization |
|
39 |
|
|
|
39 |
|
|
|
36 |
|
Other |
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Total Music
Publishing |
|
254 |
|
|
|
205 |
|
|
|
192 |
|
Intersegment eliminations |
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Total
Revenue |
$ |
1,497 |
|
|
$ |
1,376 |
|
|
$ |
1,291 |
|
|
|
|
|
|
|
Total Digital
Revenue |
$ |
989 |
|
|
$ |
926 |
|
|
$ |
881 |
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
For the Twelve Months Ended September 30,
2021 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
U.S. revenue |
|
|
|
|
|
Recorded Music |
$ |
2,231 |
|
|
$ |
1,985 |
|
|
$ |
1,985 |
|
Music Publishing |
|
513 |
|
|
|
378 |
|
|
|
378 |
|
International revenue |
|
|
|
|
|
Recorded Music |
|
2,735 |
|
|
|
2,559 |
|
|
|
2,387 |
|
Music Publishing |
|
445 |
|
|
|
383 |
|
|
|
357 |
|
Intersegment eliminations |
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Total
Revenue |
$ |
5,919 |
|
|
$ |
5,301 |
|
|
$ |
5,103 |
|
|
|
|
|
|
|
Revenue by
Segment: |
|
|
|
|
|
Recorded Music |
|
|
|
|
|
Digital |
$ |
3,305 |
|
|
$ |
3,105 |
|
|
$ |
3,013 |
|
Physical |
|
563 |
|
|
|
549 |
|
|
|
521 |
|
Total Digital and Physical |
|
3,868 |
|
|
|
3,654 |
|
|
|
3,534 |
|
Artist services and expanded-rights |
|
767 |
|
|
|
599 |
|
|
|
562 |
|
Licensing |
|
331 |
|
|
|
291 |
|
|
|
276 |
|
Total Recorded
Music |
|
4,966 |
|
|
|
4,544 |
|
|
|
4,372 |
|
Music Publishing |
|
|
|
|
|
Performance |
|
159 |
|
|
|
122 |
|
|
|
115 |
|
Digital |
|
563 |
|
|
|
436 |
|
|
|
423 |
|
Mechanical |
|
50 |
|
|
|
49 |
|
|
|
46 |
|
Synchronization |
|
172 |
|
|
|
144 |
|
|
|
141 |
|
Other |
|
14 |
|
|
|
10 |
|
|
|
10 |
|
Total Music
Publishing |
|
958 |
|
|
|
761 |
|
|
|
735 |
|
Intersegment eliminations |
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Total
Revenue |
$ |
5,919 |
|
|
$ |
5,301 |
|
|
$ |
5,103 |
|
|
|
|
|
|
|
Total Digital
Revenue |
$ |
3,866 |
|
|
$ |
3,539 |
|
|
$ |
3,434 |
|
Figure 9.
Warner Music Group Corp. - OIBDA and Adjusted OIBDA by Segment,
Three and Twelve Months Ended September 30, 2022 versus September
30, 2021 As Reported and Constant Currency |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
For the Three Months Ended September 30, 2021 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Total WMG OIBDA |
$ |
245 |
|
|
$ |
179 |
|
|
$ |
161 |
|
OIBDA margin |
|
16.4 |
% |
|
|
13.0 |
% |
|
|
12.5 |
% |
Total WMG Adjusted OIBDA |
$ |
265 |
|
|
$ |
218 |
|
|
$ |
200 |
|
Adjusted OIBDA margin |
|
17.7 |
% |
|
|
15.8 |
% |
|
|
15.5 |
% |
|
|
|
|
|
|
Recorded Music OIBDA |
$ |
219 |
|
|
$ |
182 |
|
|
$ |
167 |
|
Recorded Music OIBDA
margin |
|
17.6 |
% |
|
|
15.5 |
% |
|
|
15.2 |
% |
Recorded Music Adjusted
OIBDA |
$ |
226 |
|
|
$ |
204 |
|
|
$ |
189 |
|
Recorded Music Adjusted OIBDA
margin |
|
18.2 |
% |
|
|
17.4 |
% |
|
|
17.2 |
% |
|
|
|
|
|
|
Music Publishing OIBDA |
$ |
59 |
|
|
$ |
49 |
|
|
$ |
45 |
|
Music Publishing OIBDA
margin |
|
23.2 |
% |
|
|
23.9 |
% |
|
|
23.4 |
% |
Music Publishing Adjusted
OIBDA |
$ |
60 |
|
|
$ |
49 |
|
|
$ |
45 |
|
Music Publishing Adjusted
OIBDA margin |
|
23.6 |
% |
|
|
23.9 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
For the Twelve Months Ended September 30,
2021 |
|
As reported |
|
As reported |
|
Constant |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Total WMG OIBDA |
$ |
1,053 |
|
|
$ |
915 |
|
|
$ |
871 |
|
OIBDA margin |
|
17.8 |
% |
|
|
17.3 |
% |
|
|
17.1 |
% |
Total WMG Adjusted OIBDA |
$ |
1,149 |
|
|
$ |
1,018 |
|
|
$ |
974 |
|
Adjusted OIBDA margin |
|
19.4 |
% |
|
|
19.2 |
% |
|
|
19.1 |
% |
|
|
|
|
|
|
Recorded Music OIBDA |
$ |
1,023 |
|
|
$ |
936 |
|
|
$ |
897 |
|
Recorded Music OIBDA
margin |
|
20.6 |
% |
|
|
20.6 |
% |
|
|
20.5 |
% |
Recorded Music Adjusted
OIBDA |
$ |
1,046 |
|
|
$ |
975 |
|
|
$ |
936 |
|
Recorded Music Adjusted OIBDA
margin |
|
21.1 |
% |
|
|
21.5 |
% |
|
|
21.4 |
% |
|
|
|
|
|
|
Music Publishing OIBDA |
$ |
231 |
|
|
$ |
174 |
|
|
$ |
167 |
|
Music Publishing OIBDA
margin |
|
24.1 |
% |
|
|
22.9 |
% |
|
|
22.7 |
% |
Music Publishing Adjusted
OIBDA |
$ |
233 |
|
|
$ |
179 |
|
|
$ |
172 |
|
Music Publishing Adjusted
OIBDA margin |
|
24.3 |
% |
|
|
23.5 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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
Twelve Months Ended September 30, 2022 versus September 30,
2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
For the Three Months Ended September 30, 2021 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by operating activities |
$ |
406 |
|
$ |
228 |
Less: Capital
expenditures |
|
38 |
|
|
35 |
|
|
|
|
Free Cash
Flow |
$ |
368 |
|
$ |
193 |
|
|
|
|
|
For the Twelve Months Ended September 30,
2022 |
|
For the Twelve Months Ended September 30,
2021 |
|
(unaudited) |
|
(unaudited) |
Net cash provided by
operating activities |
$ |
742 |
|
$ |
638 |
Less: Capital
expenditures |
|
135 |
|
|
93 |
|
|
|
|
Free Cash
Flow |
$ |
607 |
|
$ |
545 |
|
|
|
|
|
|
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) the amount of management,
monitoring, consulting and advisory fees paid to Access under the
Management Agreement or otherwise; (5) business optimization
expenses (including consolidation initiatives, severance costs and
other costs relating to initiatives aimed at profitability
improvement); (6) transaction expenses; (7) equity-based
compensation expense; and (8) 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 September 30, 2022
versus September 30, 2021 |
(dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months EndedSeptember 30,
2022 |
|
For the Three Months EndedSeptember 30,
2021 |
|
For the Twelve Months EndedSeptember 30,
2022 |
|
For the Twelve Months EndedSeptember 30,
2021 |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Net Income (Loss) |
$ |
150 |
|
|
$ |
30 |
|
|
$ |
555 |
|
|
$ |
307 |
|
Income tax expense |
|
37 |
|
|
|
22 |
|
|
|
185 |
|
|
|
149 |
|
Interest expense, net |
|
31 |
|
|
|
29 |
|
|
|
125 |
|
|
|
122 |
|
Depreciation and
amortization |
|
82 |
|
|
|
79 |
|
|
|
339 |
|
|
|
306 |
|
Loss on extinguishment of debt
(a) |
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
22 |
|
Net losses (gains) on
divestitures and sale of securities (b) |
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
(3 |
) |
Restructuring costs (c) |
|
11 |
|
|
|
18 |
|
|
|
22 |
|
|
|
29 |
|
Net hedging and foreign
exchange (gains) losses (d) |
|
(67 |
) |
|
|
(20 |
) |
|
|
(195 |
) |
|
|
11 |
|
Transaction costs (e) |
|
— |
|
|
|
5 |
|
|
|
8 |
|
|
|
10 |
|
Business optimization expenses
(f) |
|
11 |
|
|
|
12 |
|
|
|
54 |
|
|
|
42 |
|
Non-cash stock-based
compensation expense (g) |
|
5 |
|
|
|
12 |
|
|
|
39 |
|
|
|
45 |
|
Other non-cash charges
(h) |
|
11 |
|
|
|
30 |
|
|
|
23 |
|
|
|
5 |
|
Pro forma impact of cost
savings initiatives and specified transactions (i) |
|
5 |
|
|
|
10 |
|
|
|
32 |
|
|
|
45 |
|
Adjusted
EBITDA |
$ |
276 |
|
|
$ |
237 |
|
|
$ |
1,196 |
|
|
$ |
1,090 |
|
______________________________________ |
(a) |
|
Reflects loss on extinguishment of debt, primarily including tender
fees and unamortized deferred financing costs. |
(b) |
|
Reflects net losses (gains) on sale of securities and
divestitures. |
(c) |
|
Reflects severance costs and other restructuring related
expenses. |
(d) |
|
Reflects unrealized losses (gains) due to foreign exchange on our
Euro-denominated debt, losses (gains) from hedging activities 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 $9 million and $40
million related to our finance transformation and other related
costs for the three and twelve months ended September 30,
2022, respectively, as well as $10 million and $33 million for the
three and twelve months ended September 30, 2021,
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
and the pro forma impact of certain specified transactions for the
three and twelve months ended September 30, 2022. 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 $14 million decrease in
the twelve months ended September 30, 2022 Adjusted EBITDA,
primarily driven by the shift in the timing of the financial
transformation initiative. |
Media Contact: |
Investor Contact: |
James
Steven |
Kareem Chin |
(212)
275-2213 |
|
James.Steven@wmg.com |
Investor.Relations@wmg.com |
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