• Total Revenue: Declined 4%, grew 4% on an adjusted basis.
• Adjusted OIBDA: Decreased 18%, increased 1% on an adjusted basis; margin of 21.8%, decreased 80 basis points adjusted.
• Recorded Music Revenue: Decreased 6%, grew 4% on an adjusted basis.
• Subscription Streaming Revenue: Grew 7%.
• Ad-Supported Streaming Revenue: Declined 7%.
• Physical Revenue: Increased 8%, would have grown 21% adjusting for BMG impact.
• Music Publishing Revenue: Increased 7%.
• Digital Revenue: Increased 6%.
• Streaming Revenue: Increased 7%.
• Performance Revenue: Grew 12%.
• Operating Cash Flow: Increased 13% to $332 million.
• Free Cash Flow: Increased 12% to $296 million.
• Cash Balance: $802 million as of December 31.
• Total Debt: $4 billion.
• Net Debt: $3.2 billion.
• Weighted Average Cost of Debt: 4.2%.

• Warning! GuruFocus has detected 3 Warning Signs with WMG.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Warner Music Group Corp (NASDAQ:WMG) reported a 4% growth in total company revenue and a 1% increase in adjusted OIBDA, showcasing resilience despite macroeconomic challenges.
• Recorded Music revenue grew by 4%, with subscription streaming increasing by 7%, indicating strong performance in digital music consumption.
• Music Publishing revenue saw a 7% increase, driven by continued market and catalog growth.
• The company successfully renewed its deal with Spotify, which is expected to provide additional benefits and drive growth in the music ecosystem.
• Warner Music Group Corp (NASDAQ:WMG) announced the acquisition of a controlling interest in Tempo Music, which is expected to be accretive and provide robust margins and cash flow generation.

Negative Points

• The company faced significant foreign exchange headwinds, with a 200 basis points impact on adjusted OIBDA margin due to the strengthening of the dollar.
• Ad-supported streaming revenue declined by 7%, affected by the timing of deal renewals and content delivery with emerging streaming platforms.
• Licensing revenue decreased by 39% compared to the prior year quarter, impacting overall revenue growth.
• The company experienced ongoing weakness in its e-commerce business, EMP, contributing to a 3% decrease in artist services and expanded rights revenue.
• Warner Music Group Corp (NASDAQ:WMG) was unable to reaffirm its margin expansion target for the fiscal year due to persistent foreign exchange headwinds.

Q & A Highlights

Q: Can you comment on the new Spotify deal and how it may have evolved your revenue model? A: Robert Kyncl, CEO: We are focusing on increasing our market share and the overall pie. The new deal with Spotify is a step in the right direction, aligning with our strategy to grow the music ecosystem collaboratively with our partners.

Q: Could you explain the impact of currency fluctuations on your financials? A: Bryan Castellani, CFO: About 58% of our revenue is in non-dollar currencies, which affected our OIBDA due to the strengthening dollar. We have hedging programs, but they impact other income and expense below OIBDA.

Q: What are the implications of your increased ownership in Tempo Music? A: Robert Kyncl, CEO: Greater control over the catalog allows us to expand rights monetization strategies. As distribution agreements with other publishers expire, more titles will revert to us, making the deal accretive.

Q: How do you view the ad-supported streaming environment and potential TikTok ban impacts? A: Bryan Castellani, CFO: The ad-supported segment is macro-driven and expected to stabilize. Regarding TikTok, our exposure to a potential ban is muted, and we maintain a strong relationship with them.

Q: Can you discuss the potential for superfan monetization and its development? A: Robert Kyncl, CEO: Superfan monetization is an untapped area with high demand. We are exploring both homegrown strategies and partnerships to innovate in this space, although it hasn't been fully realized yet.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.