Warner Music Group Reports Q4 Revenues Up 12.1%

Q4 Financials

WARNER MUSIC GROUP has released its fourth-quarter and full-year financial results for the period ended SEPTEMBER 30, 2016.  The highlights:

Fourth-Quarter revenue grew 12.1% (or 13.2% in constant currency).  Growth in Recorded Music digital revenue and artist services and expanded-rights revenue as well as growth in Music Publishing digital revenue and performance revenue were partially offset by declines in Recorded Music physical revenue and Music Publishing mechanical revenue which reflect a continuing shift to digital.  Recorded Music licensing revenue and Music Publishing synchronization revenue were flat.  Revenue grew in all regions.  Digital revenue grew 23.1% (or 24.6% in constant currency), and represented 48.8% of total revenue, compared to 44.4% in the prior-year quarter. 

Operating income was $55 million compared to $37 million in the prior-year quarter.  OIBDA increased 8.8% to $123 million from $113 million in the prior-year quarter and OIBDA margin declined 0.5 percentage points to 14.6% from 15.1% in the prior-year quarter.  The increase in operating income and OIBDA was the result of the increase in revenue.  The decline in OIBDA margin was due to higher variable compensation expense and revenue mix.  Adjusted OIBDA rose 2.5% and Adjusted OIBDA margin declined 1.4 percentage points to 14.7% from 16.1% as a result of the same factors which impacted OIBDA and OIBDA margin. 

Net loss was $3 million compared to a net loss of $23 million in the prior-year quarter and Adjusted net loss was $2 million compared to an Adjusted net loss of $15 million in the prior-year quarter.  The improvement was primarily attributable to an increase in OIBDA, a tax benefit related to the release of tax reserves and lower interest expense, which were partially offset by a loss on extinguishment of debt.

Adjusted operating income, Adjusted OIBDA and Adjusted net income (loss) exclude certain losses related to PLG-related divestitures in the current-year quarter and the impact of PLG-related costs and expenses related to cost-savings initiatives in the prior-year quarter.  See below for calculations and reconciliations of OIBDA, Adjusted operating income, Adjusted OIBDA and Adjusted net income (loss). 

“We’ve had another excellent year, in which we posted strong financial results and outperformed the industry,” said CEO STEVE COOPER. “This fiscal year marked our highest total revenue in eight years and our highest OIBDA in a decade.  We’re creating great momentum by investing in a flow of fantastic new music, expanding our presence around the globe and embracing new business models early.  Given our extraordinary roster of recording artists and songwriters and the strength of our operators around the world, we’re excited by the possibilities in 2017 and beyond.”

“Our formula for financial success is working,” added EVP/CFO ERIC LEVIN. “This year we generated strong cash flow which enabled us to further optimize our capital structure by paying down and refinancing our debt and we plan to continue along this path."

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