Universal Music Group N.V. today announced its financial results for the third quarter and nine months ended September 30, 2023.

“Our performance this quarter was marked not only by continued growth across our businesses but also by strong progress on our long-term strategy,” said UMG’s Chairman and CEO Sir Lucian Grainge. “We remain laser-focused on driving sustainable value creation for the company and its stakeholders: identifying and capitalizing on new revenue streams for UMG and our artists, responsibly advancing new technology, and expanding our global footprint.”

Boyd Muir, UMG’s EVP, CFO and President of Operations said, “For the ninth consecutive quarter as a stand-alone public company, we once again reported strong growth in revenue and Adjusted EBITDA. Even as we deliver current results, we continue to execute on the growth prospects that lie ahead for UMG.”

UMG Results

Q3 2023 Results

Revenue for the third quarter of 2023 was €2,752 million, an increase of 3.3% year-over-year, or 9.9% in constant currency, driven by healthy constant currency growth in all segments. Revenue in the third quarter of 2023 included a €53 million benefit in Music Publishing from the accrual for a catch-up payment from certain DSPs related to the Copyright Royalty Board Phonorecords III ruling in 2023 (the “CRB Phonorecords III Accrual”) . Revenue in the third quarter of 2022 included a previously disclosed €71 million benefit in Recorded Music from the settlement of a copyright infringement lawsuit with an internet service provider (the “Legal Settlement”). Excluding both of these items, revenue grew 4.1% year-over-year, or 10.6% in constant currency.

UMG’s Recorded Music, Music Publishing and Merchandising and Other segments all contributed to the revenue growth in the quarter, as discussed further below.

EBITDA for the quarter declined 11.3% year-over-year, or 5.9% in constant currency, to €478 million. EBITDA margin was 17.4%, compared to 20.2% in the third quarter of 2022. EBITDA and EBITDA margin were impacted by non-cash share-based compensation expenses of €103 million during the third quarter of 2023, compared to €14 million during the third quarter of 2022. Excluding non-cash share-based compensation expenses, Adjusted EBITDA for the quarter was €581 million, up 5.1% year-over-year, or 11.3% in constant currency, driven by the revenue growth and cash compensation savings of €21 million associated with the equity plan rollout. Adjusted EBITDA margin was 21.1%, compared to 20.8% in the third quarter of 2022.

EBITDA and Adjusted EBITDA in the third quarter of 2023 included a €11 million benefit in Music Publishing from the CRB Phonorecords III Accrual. EBITDA and Adjusted EBITDA in the third quarter of 2022 included a €52 million benefit from the Legal Settlement. Excluding these items, Adjusted EBITDA was up 13.8% year-over-year, or 20.0% in constant currency, and Adjusted EBITDA margin improved 1.8 percentage points to 21.1%, compared to 19.3% in the third quarter of 2022.

EBITDA and Adjusted EBITDA were also impacted by revenue mix, as revenues in the third quarter of 2023 were more heavily weighted towards Merchandising and Other revenues, which carry a lower EBITDA margin than the Company’s Recorded Music and Music Publishing revenues, and towards physical sales, which carry a lower EBITDA margin than digital sales. This impact was partially offset by the timing of certain A&R expenses, which were elevated in the third quarter of 2022.

YTD 2023 Results

In the nine months ended September 30, 2023, UMG’s revenues of €7,901 million increased by 6.8% year-over-year, or 9.4% in constant currency, compared to the nine months ended September 30, 2022. This increase was driven by strong improvements across all segments, as discussed further below.

Revenue for the nine months ended September 30, 2023 included the €53 million benefit in Music Publishing from the CRB Phonorecords III Accrual and revenue for the nine months ended September 30, 2022 included the €71 million benefit from the Legal Settlement discussed above. Revenue for the nine months ended September 30, 2022 also included a €98 million benefit from the Change in Society Accounting previously defined and detailed in UMG’s earnings press release for the second quarter and half year ended June 30, 2023. Excluding these items, revenue increased 8.6% year-over-year, or 11.1% in constant currency.

For the nine months ended September 30, 2023, EBITDA of €1,244 million declined 17.0% year-over-year, or 15.0% in constant currency, and EBITDA margin was 15.7% compared to 20.3% in the prior year period. EBITDA and EBITDA margin were impacted by non-cash share-based compensation expenses of €448 million during the first nine months of 2023, compared to €16 million during the first nine months of 2022. Excluding these amounts, Adjusted EBITDA for the first nine months of 2023 was €1,692 million, up 11.7% compared to the first nine months of 2022, and up 14.4% in constant currency, driven by the revenue growth and cash compensation savings of €55 million associated with the equity plan rollout. Adjusted EBITDA margin increased 0.9 percentage points year-over-year to 21.4%.

EBITDA and Adjusted EBITDA for the nine months ended September 30, 2023 included the €11 million benefit from the CRB Phonorecords III Accrual in Music Publishing. EBITDA and Adjusted EBITDA for the nine months ended September 30, 2022 included the €52 million benefit from the Legal Settlement and a €17 million benefit from the Change in Society Accounting.  Excluding these items, Adjusted EBITDA grew 16.3% year-over-year, or 18.8% in constant currency, and Adjusted EBITDA margin improved to 1.4 percentage points to 21.4%, compared to 20.0% for the nine months ended September 30, 2022.

Recorded Music

Q3 2023

Recorded Music revenues for the third quarter of 2023 were €2,037 million, down 1.1% compared to the third quarter of 2022, but up 5.2% in constant currency. Excluding the Legal Settlement in 2022, revenues grew by 2.5% year-over-year, or 8.9% in constant currency. Subscription revenue grew 6.7% year-over-year, or 13.0% in constant currency, driven primarily by the growth in global subscribers. Streaming revenue declined 1.4% year-over-year, but grew 5.0% in constant currency, as the broader advertising industry continued to slowly recover. Physical revenue increased 11.4% year-over-year, or 20.0% in constant currency, driven by strong vinyl sales, particularly in the US and Europe, as well as multi-format physical growth in Japan. Downloads and other digital revenue declined 56.9% year-over-year, or 53.2% in constant currency, attributable to the benefit from the Legal Settlement in the third quarter of 2022 as well as the continued format shift away from downloads. License and other revenue declined 11.8% year-over-year, or 6.9% in constant currency, due to a difficult comparison, as the third quarter of 2022 benefitted from the strong recovery in live touring, where the Company participates with a limited number of artists in certain markets. Top sellers for the quarter included Taylor Swift, SEVENTEEN, Morgan Wallen, Olivia Rodrigo and King & Prince, while top sellers in the prior-year quarter included BTS, BLACKPINK, Ado, INI and Morgan Wallen.

YTD 2023 Results

In the nine months ended September 30, 2023, Recorded Music revenues were €6,040 million, up 5.9% year-over-year, or 8.5% in constant currency. Excluding the Legal Settlement in 2022, revenues grew by 7.2% year-over-year, or 9.8% in constant currency.

Subscription revenue of €3,139 million grew 9.9% year-over-year, or 12.1% in constant currency driven primarily by the growth in global subscribers. Streaming revenue of €1,030 million grew 1.0% year-over-year, or 2.9% in constant currency as the broader advertising market has seen mixed performance this year. Physical revenue grew 16.2% year-over-year, or 20.5% in constant currency as vinyl and CD sales both grew. Downloads and other digital revenue decreased 36.7% year-over-year, or 33.8% in constant currency, attributable to the benefit from the Legal Settlement in the third quarter of 2022 as well as the continued format shift away from downloads. License and other revenue improved 2.0% year-over-year, or 5.1% in constant currency. Top sellers included King & Prince, Taylor Swift, Morgan Wallen, Karol G and Metro Boomin, while top sellers in the prior year included BTS, the Encanto soundtrack, Olivia Rodrigo, Morgan Wallen and The Weeknd.

Music Publishing

Q3 2023

Music Publishing revenue amounted to €491 million in the third quarter of 2023, up 17.5% year-over-year, or 24.6% in constant currency. Music Publishing revenue in the third quarter of 2023 included the €53 million benefit from the CRB Phonorecords III Accrual. Excluding this item, Music Publishing revenue was up 4.8% year-over-year, or 11.2% in constant currency.

Within Music Publishing, digital revenue grew 25.6% year-over-year, or 33.6% in constant currency, reflecting the CRB Phonorecords III Accrual and continued growth of streaming and subscription. Performance revenue grew 15.2% year-over-year, or 21.8% in constant currency. Synchronisation revenue declined 3.5% year-over-year, but grew 3.8% in constant currency. Mechanical revenue was stable year-over-year.

YTD 2023 Results

In the nine months ended September 30, 2023, Music Publishing revenue amounted to €1,380 million, up 8.7% year-over-year, or 11.1% in constant currency. Music Publishing revenue in the nine months ended September 30, 2023 included the €53 million benefit from the CRB Phonorecords III Accrual while revenue in the nine months ended September 30, 2022 included the €98 million benefit from the Change in Society Accounting. Excluding these items, Music Publishing revenue grew 13.3% year-over-year, or 16.0% in constant currency, as a result of continued growth in streaming and subscription revenue and improvements in mechanical, sychronization and performance revenue.

Within Music Publishing, digital revenue grew 2.3% year-over-year, or 4.5% in constant currency, driven by growth in streaming and subscription revenue. Digital revenue benefitted from the CRB Phonorecords III Accrual in the first nine months of 2023 and from a portion of the Change in Society Accounting in the first nine months of 2022. Performance revenue grew 33.8% year-over-year, or 37.6% in constant currency, reflecting better than expected receipts following the COVID recovery and due to the Change in Society Accounting which had a negative impact on the prior year performance revenue. Synchronisation revenue grew 3.4% year-over-year, or 5.2% in constant currency.  Mechanical revenue grew 8.5% year-over-year, or 10.0% in constant currency, as a result of improvements in physical sales.

Merchandising and Other

Q3 2023

Merchandising and other revenue in the third quarter of 2023 was €227 million, an increase of 20.1% year-over-year, or 27.5% in constant currency, driven by growth in direct-to-consumer sales and higher touring merchandise sales.

YTD 2023 Results

Merchandising and other revenue of €491 million was up 12.4% year-over-year, or 14.7% in constant currency, driven by the growth in direct-to-consumer sales, partially offset by lower retail sales.

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This press release is published by Universal Music Group N.V. and contains inside information within the meaning of article 7(1) of Regulation (EU) No 596/2014 (Market Abuse Regulation).