Second-Quarter Revenues Up For Warner Music Group, Led By Digital
S&P Lowers Warner Music Group Rating
May 10, 2011 at 6:09 AM (PT)
WARNER MUSIC GROUP has announced its second-quarter financial results for the period ended MARCH 31st, 2011. The highlights include:
* Total revenue of $682 million grew 2% from the prior-year quarter on both an as reported and constant-currency basis.
* Digital revenue was $220 million, or 32% of total revenue, up 9% from $202 million in the prior-year quarter, and up 8% on a constant-currency basis. Digital revenue grew 18% sequentially from the first quarter of fiscal 2011, or 17% on a constant-currency basis.
* Operating income was $16 million compared to operating income of $24 million in the prior-year quarter. Operating income included $7 million of severance charges ($3 million in Recorded Music and $4 million in Music Publishing) compared to $6 million of severance charges in the prior-year quarter ($5 million in Recorded Music and $1 million in Corporate).
* Operating income before depreciation and amortization (OIBDA) of $82 million was down 6% from the prior-year quarter. OIBDA for the current- and prior-year quarters included the Severance Charges.
* Net loss was $0.25 per diluted share compared to a net loss of $0.17 per diluted share in the prior-year quarter. The Severance Charges had a $0.05 per diluted share impact in the current quarter and a $0.04 per diluted share impact in the prior-year quarter.
"Our focus on disciplined A&R investments, successful revenue diversification and innovative digital strategies has helped us to grow both our Recorded Music and Music Publishing revenue," said Chairman/CEO EDGAR BRONFMAN, JR. "We are excited to see our digital revenue approach the 50% milestone for U.S. Recorded Music and to see 60% of our active global artist roster signed to expanded-rights deals."
WMG reported revenue from the company's Recorded Music business" grew 2.2% from the prior-year quarter to $550 million, or 1.1% on a constant-currency basis. The increase reflected strength in FRANCE, CANADA, ITALY and certain ASIA-PACIFIC countries, partially offset by declines in JAPAN, the U.K. and other parts of EUROPE."
Domestic Recorded Music revenue grew 0.4% from the prior-year quarter to $254 million, while international Recorded Music revenue was up 3.9%, or 1.7% on a constantcurrency basis, to $296 million. The company’s Recorded Music business "experienced growth in international physical revenue, U.S. licensing revenue and global digital and other revenue, which more than offset contracting demand for physical product in the U.S." The top sellers in the quarter included BRUNO MARS, R.E.M., WIZ KHALIFA, CEE LO GREEN and LUPE FIASCO.
Recorded Music digital revenue of $205 million grew 6.8% over the prior-year quarter, or 5.7% on a constant-currency basis, and represented 37.3% of total Recorded Music revenue, compared with 35.7% in the prior-year quarter. Domestic Recorded Music digital revenue grew 1.7% to $122 million, or 48.0% of total domestic Recorded Music revenue, compared with 47.4% in the prior-year quarter. International Recorded Music digital revenue grew 15.3%, or 12.2% on a constant-currency basis, to $83 million, and represented 28.0% of total international Recorded Music revenue, compared with 25.3% in the prior-year quarter. "Growth in digital revenue was driven by strength in global digital downloads and streaming, partially offset by declines in global mobile revenue."
Recorded Music operating income improved to $10 million from $6 million in the prior year quarter, resulting in an operating margin of 1.8%, up 0.7 percentage points from 1.1% in the prior-year quarter. Recorded Music OIBDA rose 10.2% to $54 million for the quarter and Recorded Music OIBDA margin expanded 0.7 percentage points from the prior-year quarter to 9.8%. "The increase in operating income and OIBDA was a result of higher revenue and ongoing cost-management efforts."
Music Publishing revenue was up 2.2% from the prior-year quarter on both an asreported and constant-currency basis to $137 million. Domestic Music Publishing revenue rose 13.0% from the prior-year quarter to $61 million, while international Music Publishing revenue fell 5.0% on both an as-reported and constant-currency basis.
Digital revenue from Music Publishing grew to $17 million from $13 million, up 30.8% on both an as-reported and a constant-currency basis, and represented 12.4% of total Music Publishing revenue. Synchronization revenue improved 29.2%, while performance revenue declined 9.1% and mechanical revenue decreased 15.0%. On a constantcurrency basis, synchronization revenue grew 34.8%, performance revenue declined 7.4% and mechanical revenue fell 12.8%.
S&P Lowers Warner Music Group Rating
STANDARD & POOR'S Ratings Services has placed its 'B+' corporate credit rating, as well as its senior secured and senior unsecured debt ratings, on WARNER MUSIC GROUP. REUTERS reports, "The CREDITWATCH listing follows WMG's announcement of a definitive merger agreement under which it will be acquired by ACCESS INDUSTRIES for $3.3 billion, or $8.25 per share." (NET NEWS 5/6).
"In resolving the CREDITWATCH listing, we will meet with WMG management and review the pro forma capital structure, financial policy, and business outlook of the new entity given long-term industry trends," said STANDARD & POOR'S credit analyst MICHAEL ALTBERG. "Key rating factors will include pro forma debt leverage as well as the company's acquisition strategy over the intermediate term," ALTBERG told REUTERS.