Warner Music Group Corp. today announced its fourth-quarter and full-year financial results for the periods ended September 30, 2024.

“Our performance this quarter and this year demonstrated our strength and adaptability in a thriving, fast-moving market,” said Robert Kyncl, CEO, Warner Music Group. “We continue to evolve WMG, based on the principle that simplicity and focus drive higher intensity and global impact. This is enhancing our ability to attract original artists and songwriters at all stages of their careers, helping them realize their musical visions, and grow passionate, loyal fanbases.”

“Our results underscore the diversity and resilience of our business,” said Bryan Castellani, CFO of Warner Music Group. “Our strong streaming performance, underpinned by positive industry trends, and combined with our cost discipline, resulted in robust cash flow generation. We are excited by the opportunities ahead, and look forward to delivering more culture-shaping music in 2025 and beyond.”

Financial Highlights

• Full-Year Results Reflect Healthy Performance Across Recorded Music and Music Publishing
• Continued Strong Growth in Subscription Streaming Underpinned by Healthy Macro Trends
• Music Publishing Achieves its Fourth Consecutive Year of Double-Digit Revenue Growth
• Delivered Operating Cash Flow Conversion of 53% in line with Guidance

For the three months ended September 30, 2024

• Total revenue increased 3% (the same in constant currency)
• Digital revenue was flat compared to prior-year quarter
• Net income was $48 million versus $154 million in prior-year quarter
• Adjusted OIBDA increased 11% to $353 million versus $317 million in prior-year quarter (the same in constant currency)
• Cash provided by operating activities decreased 10% to $304 million from $338 million in prior-year quarter

For the twelve months ended September 30, 2024

• Total revenue increased 6%, or 7% in constant currency
• Digital revenue increased 7%, or 8% in constant currency
• Net income was $478 million versus $439 million in prior year
• Adjusted OIBDA increased 16% to $1,432 million versus $1,235 million in prior year (the same in constant currency)
• Cash provided by operating activities increased 10% to $754 million from $687 million in prior year

Fourth-Quarter Results

Revenue was up 2.8% (or 2.9% in constant currency). Recorded Music digital revenue growth was unfavorably impacted by the termination of the distribution agreement with BMG (the “BMG Termination”), which resulted in $25 million less revenue compared to the prior-year quarter, and a renewal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in a $4 million unfavorable impact within Recorded Music streaming revenue compared to the prior-year quarter. Music Publishing digital revenue growth was unfavorably impacted by a ruling by the Copyright Royalty Board in Phonorecords III upholding higher percentage of revenue U.S. mechanical royalty rates (the “CRB Rate Benefit”), which resulted in a $17 million benefit in the prior-year quarter. Excluding the BMG Termination, the Digital License Renewal and the CRB Rate Benefit, total revenue was up 5.8% (or 6.0% in constant currency).

Digital revenue decreased 0.2% (or increased 0.2% in constant currency) and streaming revenue increased 1.0% (or 1.3% in constant currency). Recorded Music streaming revenue increased 2.1% (or 2.5% in constant currency); however, adjusted for the impact of the BMG Termination of $24 million and the Digital License Renewal of $4 million, Recorded Music streaming revenue was up 5.6% (or 6.0% in constant currency). Music Publishing streaming revenue decreased 4.2% (the same in constant currency); however, adjusted for the impact of the CRB Rate Benefit of $17 million, Music Publishing streaming revenue was up 5.2% (the same in constant currency). Revenue increases in the quarter were driven by growth in Recorded Music licensing, physical and artist services and expanded-rights revenue and Music Publishing synchronization revenue, partially offset by lower Music Publishing mechanical revenue. Music Publishing performance revenue was flat compared to the prior-year quarter on an as-reported basis (or decreased 2.3% in constant currency).

Operating income decreased to $143 million compared to $212 million in the prior-year quarter. The decrease in operating income was driven by the factors affecting Adjusted OIBDA discussed below, as well as an increase in restructuring charges of $82 million compared to the prior-year quarter in connection with the Company’s restructuring plan announced in February 2024 (the “Strategic Restructuring Plan”), higher non-cash stock-based compensation expense of $18 million, and $6 million of incremental expenses related to transformation initiatives.

Adjusted OIBDA increased 11.4% from $317 million to $353 million (the same in constant currency) and Adjusted OIBDA margin increased 1.7 percentage points to 21.7% from 20.0% in the prior-year quarter (the same in constant currency).

The increases in Adjusted OIBDA and Adjusted OIBDA margin were driven primarily by strong operating performance and savings from the Company’s restructuring plans, of which a majority has been reinvested in the Company’s business.

Net income decreased by $106 million to $48 million from $154 million in the prior-year quarter. The decrease was primarily due to the factors described above, as well as higher interest expense, net, primarily due to increased costs of the Company’s variable rate debt, and the impact of exchange rates on the Company’s Euro-denominated debt resulting in a loss of $35 million in the quarter compared to a gain of $25 million in the prior-year quarter, partially offset by a decrease in income tax expense of $55 million driven by the impact of lower pre-tax income, lower U.S. state and local taxes and a decrease in unrecognized tax benefits.

Basic and Diluted earnings per share were $0.08 for both the Class A and Class B shareholders due to the net income attributable to the Company in the quarter of $48 million.

As of September 30, 2024, the Company reported a cash balance of $694 million, total debt of $4.014 billion and net debt (defined as total debt, net of deferred financing costs, premiums and discounts, minus cash and equivalents) of $3.320 billion, compared to $3.323 billion at the end of the prior year.

Cash provided by operating activities decreased 10% to $304 million from $338 million in the prior-year quarter. The decrease was largely the result of timing of working capital, partially offset by the timing of severance payments related to the Company’s restructuring plans. Capital expenditures decreased to $33 million, from $38 million in the prior-year quarter. Free Cash Flow, as defined below, decreased 10% to $271 million from $300 million in the prior-year quarter.

Last week, the Company’s board of directors authorized a new $100 million share repurchase program.

Recorded Music revenue was up 3.6% (or 3.9% in constant currency), driven by growth across licensing, digital, physical and artist services and expanded-rights revenue. Excluding the impact from the BMG Termination and the Digital License Renewal, Recorded Music revenue increased 6.0% (or 6.3% in constant currency). Digital revenue was up 0.5% (or 0.8% in constant currency), and streaming revenue was up 2.1% (or 2.5% in constant currency). Adjusted for the impact from the BMG Termination of $24 million and the Digital License Renewal of $4 million, Recorded Music streaming revenue was up 5.6% (or 6.0% in constant currency). Streaming revenue reflects growth in subscription revenue of 4.9% (or 5.7% in constant currency), partially offset by a decline in ad-supported revenue of 5.2% (or 6.0% in constant currency). Subscription revenue, adjusted by $23 million for the BMG Termination and by $4 million for the Digital License Renewal, increased 9.7% (or 10.6% in constant currency). Ad-supported revenue, adjusted by $1 million for the BMG Termination, was down 4.7% (or 5.6% in constant currency), driven by the revenue impact of Meta’s discontinued use of premium music videos and the TikTok deal renewal in the prior year. Recorded Music licensing revenue increased 34.7% (or 33.3% in constant currency), driven by an increase in copyright infringement settlements primarily in the United States and growth in broadcast fees and other licensing. Physical revenue was up 3.1% (or 4.7% in constant currency), primarily driven by strong releases in Japan and the United States. Artist services and expanded-rights revenue increased 3.2% (or 2.6% in constant currency) primarily due to higher concert promotion revenue in Japan, partially offset by lower merchandising revenue and a decrease in revenue related to the exit of the Company’s owned and operated media properties announced as part of the Strategic Restructuring Plan. Major sellers in the quarter included Benson Boone, Charli XCX, Zach Bryan and Teddy Swims.

Recorded Music operating income was $178 million, down from $234 million in the prior-year quarter and operating margin was down 4.8 percentage points to 13.3% versus 18.1% in the prior-year quarter. The decrease in operating income and operating income margin was driven by the factors affecting Adjusted OIBDA discussed below, as well as restructuring charges of $77 million in the quarter in connection with the Strategic Restructuring Plan, higher non-cash stock-based compensation expenses and other related costs of $16 million and a $1 million increase in depreciation expense, partially offset by $3 million in lower amortization expenses due to certain intangible assets becoming fully amortized.

Adjusted OIBDA increased 12.8% from $281 million to $317 million (or 13.2% in constant currency) with Adjusted OIBDA margin up 1.9 percentage points to 23.7% from 21.8% in the prior-year quarter (or 2.0 percentage points to 23.7% from 21.7% in constant currency). The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily driven by strong operating performance and savings from the Company’s restructuring programs, the majority of which was reinvested into the Company’s business.

Music Publishing revenue decreased 1.0% (the same in constant currency), driven by lower digital and mechanical revenue, partially offset by an increase in synchronization revenue. Excluding the impact from the CRB Rate Benefit of $17 million in the prior-year quarter, Music Publishing revenue increased 5.0% (the same in constant currency). Digital revenue decreased 3.1% (the same in constant currency) and streaming revenue decreased 4.2% (the same in constant currency). Excluding the impact from the CRB Rate Benefit of $17 million in the prior-year quarter, digital revenue was up 6.3% (the same in constant currency), and streaming revenue was up 5.2% (the same in constant currency), which reflects continued market and catalog growth, and timing of payments. Synchronization revenue was up 12.2% (or 15.0% in constant currency), driven by an increase in copyright infringement settlements primarily in the United States, partially offset by a decrease in mechanical revenue of 11.8% (the same in constant currency) due to lower physical sales and timing of distributions. Performance revenue was flat compared to the prior-year quarter (or was down 2.3% in constant currency), driven by lower overall activity in the United States in the quarter compared to the prior-year quarter.

Music Publishing operating income increased to $53 million compared to $49 million in the prior-year quarter and operating margin increased 1.6 percentage points to 18.0% versus 16.4% in the prior-year quarter. The increase in operating income was primarily driven by the same factors affecting Adjusted OIBDA discussed below.

Adjusted OIBDA increased 12.2% to $83 million from $74 million (or 10.7% in constant currency) and Adjusted OIBDA margin increased 3.3 percentage points to 28.1% from 24.8% in the prior-year quarter (or 2.9 percentage points to 28.1% from 25.2% in constant currency). The increases in Adjusted OIBDA and Adjusted OIBDA margin include the unfavorable impact from the CRB Rate Benefit in the prior-year quarter of $4 million. Excluding the impact of the CRB Rate Benefit in the prior-year quarter, Adjusted OIBDA increased 18.6% (or 16.9% in constant currency) and Adjusted OIBDA margin increased 3.2 percentage points to 28.1% from 24.9% in the prior-year quarter (or 2.8 percentage points to 28.1% from 25.3% in constant currency) primarily driven by strong operating performance.