Universal Music Group today announced its financial results for the second quarter and half year ended June 30, 2024.

UMG´s Chairman and CEO Sir Lucian Grainge said, “Our continued strong revenue growth this quarter demonstrates that we are, by design, a multifaceted music entertainment company that places our artists at the center of everything we do. Our unique structure, which is both innovative and constantly evolving, enables us to support our recording artists and songwriters with an ever-expanding array of revenue sources, reinforced by new products and the exciting next phase of development of streaming services.”

“Our varied revenue streams, across both emerging and established businesses, allowed us to once again achieve high-single digit revenue growth and double-digit Adjusted EBITDA growth this quarter” said Boyd Muir, UMG’s EVP, CFO and President of Operations. “We continue to invest into the growth we see ahead of us as we execute against our long-term strategic plan.”

Q2 2024 Results

Revenue for the second quarter of 2024 was €2,932 million, an increase of 8.7% year-over-year, or 9.6% in constant currency, driven by growth in the Recorded Music, Music Publishing and Merchandising and Other segments, as discussed further below.

EBITDA for the quarter improved 14.9% year-over-year, or 17.4% in constant currency, to €580 million. EBITDA margin was 19.8%, compared to 18.7% in the second quarter of 2023. EBITDA and EBITDA margin were impacted by non-cash share-based compensation expenses of €69 million during the second quarter of 2024, compared to €85 million during the second quarter of 2023. Excluding non-cash share-based compensation expenses, Adjusted EBITDA for the quarter was €649 million, up 10.0% year-over-year, or 11.3% in constant currency, and Adjusted EBITDA margin improved to 22.1%, compared to 21.9% in the second quarter of 2023, as a result of revenue growth and cost savings from the previously announced strategic organizational redesign, partially offset by the unfavourable impact of revenue mix resulting from a greater proportion of merchandising and physical sales.

H1 2024 Results

In the half year ended June 30, 2024 (“H1 2024″), UMG’s revenue increased to €5,526 million, up by 7.3%, or 8.8% in constant currency, compared to the half year ended June 30, 2023 (“H1 2023”). This increase was driven by improvements across all segments, as discussed further below.

Cost of revenues, consisting of artist and product costs, increased by €302 million to €3,113 million in H1 2024, reflecting higher revenue. Cost of revenue as a percentage of revenue increased to 56.3% in H1 2024 from 54.6% in H1 2023 primarily driven by a greater proportion of Music Publishing and Merchandising and Other revenues, which have a higher cost of revenues compared to Recorded Music, and in particular by higher product costs. Artist costs increased by €199 million to €2,584 million in H1 2024 from €2,385 million in H1 2023 driven by the increase in sales. As a percentage of revenues, artists costs increased to 46.8% in H1 2024 from 46.3% in H1 2023 on higher relative costs from both Music Publishing and Merchandising and Other. Product costs increased by €103 million to €529 million in H1 2024 from €426 million in H1 2023 reflecting the growth in revenues. Product costs as a percentage of revenues increased to 9.6% from 8.3% driven primarily by the higher proportion of merchandising sales.

EBITDA of €1,069 million improved 39.4% year-over-year, or 43.5% in constant currency, and EBITDA margin was 19.3% compared to 14.9% in H1 2023. EBITDA and EBITDA margin were impacted by non-cash share-based compensation expenses of €171 million during H1 2024 and €345 million during H1 2023. Excluding these amounts, Adjusted EBITDA was €1,240 million, up 11.5% year-over-year, or 13.4% in constant currency, and Adjusted EBITDA margin expanded 0.8pp year-over-year to 22.4% driven by revenue growth and cost savings from the previously announced strategic organizational redesign, partially offset by the higher cost of revenues discussed above.

Operating profit improved 27.9% year-over-year, or 32.4% in constant currency, to €756 million due to the improved revenues and lower non-cash share-based compensation expenses in H1 2024 compared to H1 2023 as discussed above. This was partially offset by the increase in restructuring charges that were €113 million in H1 2024 compared to €15 million in H1 2023 as a result of the strategic organizational redesign.

Net profit attributable to equity holders of the parent in H1 2024 amounted to €914 million compared to €625 million in H1 2023, resulting in EPS of €0.50 in H1 2024, compared to €0.34 in H1 2023. The improvement in net profit attributable to equity holders of the parent was due to the improvement in operating profit and the variance in revaluation of investments in listed and other companies (including Spotify and Tencent Music Entertainment, among others) that was a net income in H1 2024 of €566 million compared to a net income in H1 2023 of €313 million. Adjusted net profit, which adjusts for the revaluation of investments, non-cash share-based compensation expense, amortization of catalogues, restructuring charges and other items, amounted to €809 million in H1 2024, compared to €765 million in H1 2023, resulting in Adjusted EPS of €0.44 in H1 2024, compared to €0.42 in H1 2023.

Net cash provided by operating activities before income tax paid decreased 38.0% to €436 million compared to €703 million in H1 2023 due predominately to the increase in royalty advance payments, net of recoupments, which was €315 million in H1 2024 compared to €95 million in H1 2023, due to the timing of certain major artist deal renewals and extensions, partially offset by the increase in recoupment.

Cash paid for catalogue acquisitions was €96 million in H1 2024 compared to €89 million in H1 2023 and included the completion of a catalogue acquisition for which the cash had been previously paid into escrow. In addition, the Company continued to strategically invest in the long-term growth of the business, with the previously disclosed investments in Chord Music Partners, NTWRK and Mavin Global during H1 2024. As a result, Free cash flow decreased to a €460 million outflow in H1 2024 compared to a €13 million outflow in H1 2023.

In line with UMG’s dividend policy to pay a dividend of at least 50% of adjusted net profit, UMG’s Board of Directors declared an interim dividend for H1 2024 of €439 million, or €0.24 per share. The ex-dividend date will be on October 2, 2024, the record date will be on October 3, 2024 and the payment date will be on October 25, 2024.

Net debt at the end of H1 2024 was €2,612 million compared to €1,689 million at the end of 2023. The increase in net debt was primarily used to fund investing activities and dividends partially offset by cash generated by operating activities.

Recorded Music revenue for the second quarter of 2024 was €2,200 million, up 5.8% compared to the second quarter of 2023, or 6.8% in constant currency. Subscription revenue grew 6.5% year-over-year, or 6.9% in constant currency, driven primarily by the growth in global subscribers as well as the impact of certain price increases. Streaming revenue declined 4.2% year-over-year, or 3.9% in constant currency, due to a deceleration in growth at key advertising-based platform partners as well as shortfalls on certain platforms related to the timing of deal renewals. Physical revenue increased by 9.5% year-over-year, or 14.4% in constant currency, due to a favorable release schedule driving vinyl sales in the U.S. and Europe, which more than offset a difficult comparison against last year’s strong CD sales in Japan. Downloads and other digital revenue declined 21.3% year-over-year, or 18.6% in constant currency, as download sales continued their industry-wide decline. License and other revenue improved 18.0% year-over-year on both a reported and constant currency basis, as a result of improvements in synchronization income, greater live and audiovisual production income and increased direct-to-consumer related activities. Top sellers for the quarter included releases from Taylor Swift, Billie Eilish, SEVENTEEN, Morgan Wallen and Ae! group, while top sellers in the prior-year quarter included King & Prince, Morgan Wallen, SEVENTEEN, Taylor Swift and Stray Kids.

Music Publishing revenue in the second quarter of 2024 was €511 million, up 10.1% year-over-year, or 10.4% in constant currency. Digital revenue improved 17.8% year-over-year, or 17.4% in constant currency due to the growth in streaming and subscription revenue and the timing of deals. Performance revenue grew 3.1% year-over-year, or 4.2% in constant currency and Synchronization revenue improved 1.7% year-over-year on both a reported and constant currency basis. Mechanical revenue declined 10.3% both year-over-year and in constant currency as a result of the industry’s continued shift towards digital formats.

Merchandising and Other revenue in the second quarter of 2024 was €227 million, up 44.6% year-over-year, or 43.7% in constant currency, driven by growth in direct-to-consumer sales and higher touring merchandise sales as a result of strong touring activity in the period.