Warner Music Group Corp. Reports Results for Fiscal Fourth Quarter and Full Year Ended September 30, 2020

Rhea-AI Summary

Warner Music Group reported Q4 and full-year results for the period ending September 30, 2020. Total revenue for Q4 rose by 0.2% to $1.126 billion, driven by a 15% increase in digital revenue, which now constitutes 65% of total revenue. However, the company faced a net loss of $470 million for the year compared to a net income of $258 million in the prior year. Operating income increased significantly by 203% year-over-year to $88 million in Q4. Adjusted OIBDA and EBITDA both saw notable growth, highlighting ongoing momentum in streaming despite challenges posed by COVID-19.

Positive

• Digital revenue grew 15% YoY in Q4, contributing 65% of total revenue.
• Adjusted OIBDA increased 35% in Q4, reaching $174 million.
• Operating income surged 203% YoY to $88 million in Q4.
• Free cash flow improved to $244 million compared to $24 million in the prior year.

Negative

• Full-year net loss of $470 million compared to a net income of $258 million in the previous year.
• Total revenue decreased by 0.3% YoY for the full year.
• OIBDA dropped 95% YoY to $32 million for the full year.

Financial Highlights:

• Continued Momentum in Streaming Highlighted by Sequential Improvement in Revenue Growth
• Delivered Double-Digit Digital Revenue Growth for the Quarter and Full Year with Digital Revenue Contribution Increasing to 65% of Total Revenue
• Executed Significant Deals with Key Digital Partners in 2020 and Increased Revenue Contribution from Emerging Platforms, Unlocking New Value-Creation Opportunities
• Achieved Strong Year-Over-Year Growth and Margin Expansion in Adjusted OIBDA and Adjusted EBITDA

For the three months ended September 30, 2020

• Total revenue was up 0.2% or down 1.1% in constant currency
• Net income was $1 million versus $91 million in the prior-year quarter
• OIBDA increased 63% to $155 million versus $95 million in the prior-year quarter
• Adjusted OIBDA increased 35% to $174 million versus $129 million in the prior-year quarter
• Adjusted EBITDA increased 33% to $177 million versus $133 million in the prior-year quarter
  

For the twelve months ended September 30, 2020

• Total revenue was down 0.3% or up 0.4% in constant currency
• Net loss was $470 million versus net income of $258 million in the prior year
• OIBDA was $32 million versus $625 million in the prior year
• Adjusted OIBDA increased 11% to $790 million versus $713 million in the prior year
• Adjusted EBITDA increased 14% to $837 million versus $737 million in the prior year
  

NEW YORK, Nov. 23, 2020 (GLOBE NEWSWIRE) -- Warner Music Group Corp. today announced its fourth-quarter and full-year financial results for the periods ended September 30, 2020.

“We’re proud of everything we’ve accomplished in the past year, despite the challenging conditions that the world has faced. We’re essentially flat against a record-breaking prior year and, during the quarter, we grew 11% on an as-reported basis, excluding the revenue streams most impacted by COVID,” said Steve Cooper, CEO, Warner Music Group. “We’ve had huge successes from global megastars and local hitmakers, breakout sensations and long-time legends. Our streaming growth has stayed strong, and we’ve also seen an acceleration in a whole spectrum of emerging revenue streams such as social media, gaming, and in-home fitness. In this increasingly complex environment, where music is woven into every aspect of our lives, our creative expertise and global reach are more valuable than ever.”

“Our results are underpinned by the continued momentum we are seeing in streaming and the operating leverage driven by our digital transformation and business optimization initiatives,” added Eric Levin, Executive Vice President and CFO, Warner Music Group. “As we look toward the future, we are confident in our long-term growth prospects, particularly as the areas of our business that have been most impacted by COVID return to normal.”

Total WMG

Total WMG Summary Results
(dollars in millions)
	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			% Change			For the Twelve Months Ended September 30, 2020				For the Twelve Months Ended September 30, 2019			% Change
	(unaudited)			(unaudited)						(audited)				(audited)
Revenue	$	1,126		$	1,124		—	%		$	4,463			$	4,475		—	%
Recorded Music revenue	958			953			1	%		3,810				3,840			-1	%
Music Publishing revenue	169			173			-2	%		657				643			2	%
Digital revenue	778			674			15	%		2,903				2,610			11	%
Operating income (loss)	88			29			—	%		(229		)		356			—	%
Adjusted operating income(1)	107			63			70	%		529				444			19	%
OIBDA(1)	155			95			63	%		32				625			-95	%
Adjusted OIBDA(1)	174			129			35	%		790				713			11	%
Net income (loss)	1			91			-99	%		(470		)		258			—	%
Adjusted net income(1)	20			125			-84	%		288				346			-17	%
Net cash provided by operating activities	176			151			17	%		463				400			16	%
Adjusted EBITDA(1)	177			133			33	%		837				737			14	%
(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.

Fourth-Quarter Results

Revenue was up 0.2% (or down 1.1% in constant currency). Robust digital revenue growth across Recorded Music and Music Publishing was partially offset by a decline in Recorded Music artist services and expanded-rights and licensing revenue and in Music Publishing performance, mechanical and synchronization revenue, which reflects the impact from COVID. Excluding artist services and expanded-rights revenue in Recorded Music and performance revenue in Music Publishing, the revenue segments most affected by COVID, total revenue would have increased 10.5% (or 9.4% in constant currency). Recorded Music physical revenue was flat, despite the impact from COVID, as a result of strong physical releases in the US and Japan. The slight increase in revenue was primarily due to growth in streaming revenue, the Company’s largest and fastest-growing source of revenue, and favorable impact from exchange rates, partially offset by COVID-related business disruption. Digital revenue grew 15.4% (or 14.6% in constant currency), and represented 69.1% of total revenue, compared to 60.0% in the prior-year quarter.

Operating income was $88 million compared to $29 million in the prior-year quarter. OIBDA was $155 million, an increase from $95 million in the prior-year quarter and OIBDA margin increased 5.3 percentage points to 13.8% from 8.5% in the prior-year quarter. The increase in operating income, OIBDA and OIBDA margin was primarily due to higher-margin streaming revenue constituting a larger proportion of total revenue, lower non-cash stock-based compensation expense of $14 million, lower variable compensation expense and cost-management efforts.

Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude one-time costs related to the Company’s IPO, non-cash stock-based compensation expense, COVID-related expenses, the Company's Los Angeles office consolidation and restructuring and other transformation initiatives in the current quarter and costs related to the Company's Los Angeles office consolidation, non-cash stock-based compensation expense and restructuring and other transformation initiatives in the prior-year quarter. Adjusted EBITDA excludes these items and includes expected savings resulting from transformation initiatives and pro forma impact of specified transactions closed in the current quarter. See below for calculations and reconciliations of Adjusted operating income, Adjusted OIBDA, Adjusted net income, and Adjusted EBITDA.

Adjusted OIBDA increased 34.9% from $129 million to $174 million and Adjusted OIBDA margin increased 4.0 percentage points to 15.5% from 11.5% due to margin improvement associated with higher streaming revenue, cost-management efforts and lower variable compensation expense. Adjusted operating income increased 69.8% from $63 million to $107 million due to the same factors affecting Adjusted OIBDA.

Adjusted EBITDA increased 33.1% from $133 million to $177 million with margins improving 3.9 percentage points from 11.8% to 15.7%. The increase was largely due to the same factors affecting Adjusted OIBDA in addition to higher pro forma savings expected to be realized from certain cost-savings initiatives and transactions.

Net income was $1 million compared to $91 million in the prior-year quarter. Adjusted net income was $20 million compared to $125 million in the prior-year quarter. The decrease in net income and Adjusted net income was due to the unfavorable impact of exchange rates on the Company’s external euro-denominated debt and intercompany loans, a loss on extinguishment of debt of $34 million due to recent refinancing activity and higher income tax benefit in the prior-year quarter due to the release of $59 million of the Company's U.S. deferred tax valuation allowance on foreign tax credit carryforwards, which was partially offset by higher operating income, lower interest expense due to refinancing activity and gains on investments.

Basic and Diluted earnings per share was $0.00 for both the Class A and Class B shareholders due to the net loss attributable to the Company in the current quarter of $1 million.

As of September 30, 2020, the Company reported a cash balance of $553 million, total debt of $3.104 billion and net debt (defined as total long-term debt, net of deferred financing costs, minus cash and equivalents) of $2.551 billion.

Cash provided by operating activities was $176 million compared to $151 million in the prior-year quarter. The change was largely a result of the timing of working capital primarily due to timing of payments from certain digital service providers. Free Cash Flow, as defined below, decreased to $44 million from $115 million in the prior-year quarter largely due to an increase in capital expenditures to support transformation initiatives and to increased investment activity, which was partially offset by an increase in operating cash flow.

Full-Year Results

Total revenue decreased 0.3% (or increased 0.4% in constant currency). Robust digital revenue growth in Recorded Music and Music Publishing was more than offset by declines in Recorded Music artist services and expanded-rights, physical and licensing revenue and in Music Publishing performance and mechanical revenue, which reflects the impact of COVID. Excluding artist services and expanded-rights revenue in Recorded Music and performance revenue in Music Publishing, the revenue segments most affected by COVID, total revenue would have increased 3.6% (or 4.4% in constant currency). Music Publishing synchronization revenue was flat, despite the impact from COVID, as a result of increased deal activity in China and the UK. US revenue declined by 1.1% and international revenue rose 0.2% (or 1.4% in constant currency). Prior to intersegment eliminations, US and international revenue represented 43.3% and 56.7% of total revenue, respectively, compared to 43.6% and 56.4% of total revenue, respectively, in the prior year. Digital revenue grew 11.2% (or 12.2% in constant currency), and represented 65.0% of total revenue, compared to 58.3% in the prior year.

Operating loss was $229 million, compared to operating income of $356 million in the prior year and operating margin was (5.1)% down from 8.0% in the prior year. OIBDA was $32 million, down 94.9% from $625 million in the prior year and OIBDA margin decreased 13.3 percentage points to 0.7% from 14.0% in the prior year. Net loss was $470 million compared to net income of $258 million in the prior year. The decrease in net income, operating income, OIBDA and OIBDA margin was primarily due to higher non-cash stock-based compensation expense of $559 million related to the Company’s long-term incentive plan reflecting changes in the value of the Company’s common stock, as well as $89 million in one-time costs associated with the Company’s IPO.

Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude one-time costs related to the Company’s IPO, non-cash stock-based compensation expense, COVID-related expenses, the Company's Los Angeles office consolidation and restructuring and other transformation initiatives in the current year and non-cash stock-based compensation expense, the Company's Los Angeles office consolidation and restructuring and other transformation initiatives, including relocation of the Company’s U.S. shared service center to Nashville in the prior year. Adjusted EBITDA excludes these items and includes expected savings resulting from transformation initiatives and pro forma impact of specified transactions closed in the current year. See below for calculations and reconciliations of Adjusted operating income, Adjusted OIBDA, Adjusted net income, and Adjusted EBITDA. 

Adjusted OIBDA increased 10.8% from $713 million to $790 million and Adjusted OIBDA margin increased 1.8 percentage points from 15.9% to 17.7% due to margin improvement associated with an increase in higher-margin streaming revenue and decreases in lower-margin physical revenue and artist services and expanded-rights revenue, as well as lower operating costs. Adjusted operating income increased 19.1% from $444 million to $529 million in the year due to the same factors affecting Adjusted OIBDA.

Adjusted EBITDA increased 13.6% from $737 million to $837 million. The increase was largely due to the same factors affecting Adjusted OIBDA in addition to higher pro forma savings expected to be realized from certain cost-savings initiatives and transactions.

Net loss was $470 million compared to income of $258 million in the prior year. Adjusted net income was $288 million compared to $346 million in the prior year. The decrease in net income and Adjusted net income was primarily due to the unfavorable impact of exchange rates on the Company’s external euro-denominated debt and intercompany loans, a loss on extinguishment of debt of $34 million due to recent refinancing activity and an increase in income tax expense due to a higher release of a U.S. deferred tax valuation allowance in the prior year, which was partially offset by lower interest expense due to refinancing activity.

Net debt (defined as total long-term debt, net of deferred financing costs, minus cash and equivalents) at the end of the current year was $2.551 billion compared to $2.355 billion at the end of the prior year.

Basic and Diluted earnings per share was a loss of $0.82 for the Class A and $0.95 for the Class B shareholders. The loss was due to the same factors affecting net loss.

Cash provided by operating activities was $463 million compared to $400 million in the prior year due to timing of royalty payments and lower spending due to COVID. Free Cash Flow was $244 million, compared to $24 million in the prior year, reflecting the acquisition of EMP for $183 million. Capital expenditures were $85 million for the current year as compared to $104 million in the prior year driven by spend related to the Company's Los Angeles office consolidation.

Recorded Music

Recorded Music Summary Results
(dollars in millions)
	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			% Change			For the Twelve Months Ended September 30, 2020			For the Twelve Months Ended September 30, 2019			% Change
	(unaudited)			(unaudited)						(unaudited)			(unaudited)
Revenue	$	958		$	953		1	%		$	3,810		$	3,840		-1	%
Digital revenue	679			599			13	%		2,568			2,343			10	%
Operating income	108			57			89	%		175			439			-60	%
Adjusted operating income(1)	118			75			57	%		582			490			19	%
OIBDA(1)	151			101			50	%		349			623			-44	%
Adjusted OIBDA(1)	161			119			35	%		756			674			12	%
(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.

Fourth-Quarter Results

Recorded Music Revenue
(dollars in millions)
	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			For the Three Months Ended September 30, 2019
	As reported			As reported			Constant
	(unaudited)			(unaudited)			(unaudited)
Revenue by Segment:
Recorded Music
Digital	$	679		$	599		$	602
Physical	105			103			106
Total Digital and Physical	784			702			708
Artist services and expanded-rights	98			171			177
Licensing	76			80			81
Total Recorded Music	$	958		$	953		$	966

Recorded Music revenue was up 0.5% (or down 0.8% in constant currency). The revenue increase was primarily due to the continued growth in streaming revenue—which grew 16.2% over the prior-year quarter and 8.5% over the prior quarter—which was partially offset by COVID-related business disruption and exchange rates in the current quarter. Physical revenue was flat. Growth in digital revenue was partially offset by declines in artist services and expanded-rights revenue and licensing revenue. Digital revenue growth reflects the continuing shift to streaming, the Company’s largest and fastest-growing source of revenue. The decline in artist services and expanded-rights revenue was due to tour postponements and cancellations and lower tour merchandise revenue resulting from COVID-related business disruption. The decline in licensing revenue reflects a decrease in broadcast fees and synchronization revenue from lower advertising, television and film deal activity due to the impact of COVID. Physical revenue reflects the continued shift to streaming, which was partially offset by strong releases in the quarter. Major sellers included Dua Lipa, Roddy Ricch,Tones and I, Aimyon and Cardi B.

Recorded Music operating income was $108 million, up from $57 million in the prior-year quarter and operating margin was up 5.3 percentage points to 11.3% versus 6.0% in the prior-year quarter. OIBDA increased to $151 million from $101 million in the prior-year quarter and OIBDA margin increased 5.2 percentage points to 15.8%. Adjusted OIBDA was $161 million versus $119 million in the prior-year quarter with Adjusted OIBDA margin up 4.3 percentage points to 16.8%. The increases in operating income and OIBDA were driven by lower non-cash stock-based compensation expense and an increase in Adjusted OIBDA. The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily due to overall cost savings and revenue mix.

Full-Year Results

Recorded Music Revenue
(dollars in millions)
	For the Twelve Months Ended September 30, 2020			For the Twelve Months Ended September 30, 2019			For the Twelve Months Ended September 30, 2019
	As reported			As reported			Constant
	(audited)			(audited)			(unaudited)
Revenue by Segment:
Recorded Music
Digital	$	2,568		$	2,343		$	2,321
Physical	434			559			558
Total Digital and Physical	3,002			2,902			2,879
Artist services and expanded-rights	525			629			631
Licensing	283			309			307
Total Recorded Music	$	3,810		$	3,840		$	3,817

Recorded Music revenue declined 0.8% (or 0.2% in constant currency). Declines in physical, artist services and expanded-rights and licensing revenue were partially offset by an increase in digital revenue. The decline in physical revenue was largely driven by the overall market decline, timing of releases and the impact of COVID. Artist services and expanded-rights revenue decreased due to the impact of COVID, which resulted in tour postponements and cancellations and decreased tour merchandising revenue. Lower licensing revenue was primarily related to COVID, which resulted in lower broadcast fees and lower synchronization revenue due to a decrease in advertising, television and film deal activity which was partially offset by one-time legal settlements. Digital revenue growth reflects the continuing shift to streaming and timing of releases, which were partially offset by a decrease in download revenue. Recorded Music digital revenue grew 9.6% (or 10.6% in constant currency) and represented 67.4% of total Recorded Music revenue versus 61.0% in the prior year. US Recorded Music digital revenue was $1.292 billion, or 80.3% of total US Recorded Music revenue, versus 74.2% in the prior year. Major sellers included Dua Lipa, Roddy Ricch,Tones and I, Aimyon and Cardi B.

Recorded Music operating income was $175 million down from $439 million in the prior year. Recorded Music OIBDA decreased 44.0% to $349 million and OIBDA margin declined 7.0 percentage points to 9.2%. Recorded Music Adjusted OIBDA improved 12.2% to $756 million and Recorded Music Adjusted OIBDA margin increased 2.2 percentage points to 19.8%. The decreases in operating income and OIBDA were driven by higher non-cash stock-based compensation expense of $359 million and an increase in Adjusted OIBDA. The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily due to overall cost savings and revenue mix.

Music Publishing

Music Publishing Summary Results
(dollars in millions)
	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			% Change			For the Twelve Months Ended September 30, 2020			For the Twelve Months Ended September 30, 2019			% Change
	(unaudited)			(unaudited)						(unaudited)			(unaudited)
Revenue	$	169		$	173		-2	%		$	657		$	643		2	%
Digital revenue	100			76			32	%		337			271			24	%
Operating income	23			25			-8	%		81			92			-12	%
Adjusted operating income(1)	23			25			-8	%		84			92			-9	%
OIBDA(1)	43			44			-2	%		157			166			-5	%
Adjusted OIBDA(1)	43			44			-2	%		160			166			-4	%
(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.

Fourth-Quarter Results

Music Publishing Revenue
(dollars in millions)
	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			For the Three Months Ended September 30, 2019
	As reported			As reported			Constant
	(unaudited)			(unaudited)			(unaudited)
Revenue by Segment:
Music Publishing
Performance	$	28		$	48		$	48
Digital	100			76			78
Mechanical	10			14			14
Synchronization	27			31			31
Other	4			4			4
Total Music Publishing	$	169		$	173		$	175

Music Publishing revenue decreased 2.3% (or 3.4% in constant currency). Growth in digital revenue was more than offset by declines in performance, synchronization and mechanical revenue. Digital revenue growth reflects the continuing shift to streaming and timing of deals with digital service providers. The decrease in synchronization revenue relates to decreases in advertising spend and licensing activity resulting from COVID-related business disruption. The decrease in mechanical revenue is due to COVID-related business disruption and the continuing shift to streaming. The decrease in performance revenue was primarily driven by COVID-related business disruption.

Music Publishing operating income was $23 million compared to $25 million in the prior-year quarter. Operating margin decreased 0.9 percentage points to 13.6%. Music Publishing OIBDA decreased by $1 million or 2.3% to $43 million, and OIBDA margin was flat. Adjusted OIBDA decreased by $1 million and Adjusted OIBDA margin was flat.

Full-Year Results

Music Publishing Revenue
(dollars in millions)
	For the Twelve Months Ended September 30, 2020			For the Twelve Months Ended September 30, 2019			For the Twelve Months Ended September 30, 2019
	As reported			As reported			Constant
	(audited)			(audited)			(unaudited)
Revenue by Segment:
Music Publishing
Performance	$	142		$	183		$	179
Digital	337			271			270
Mechanical	48			55			55
Synchronization	119			120			119
Other	11			14			14
Total Music Publishing	$	657		$	643		$	637

Music Publishing revenue increased 2.2% (or was up 3.1% in constant currency). Digital revenue growth was partially offset by declines in performance and mechanical revenue. Music Publishing digital revenue increased 24.4% (or 24.8% in constant currency) reflecting the continuing shift to streaming, and represented 51.3% of total Music Publishing revenue versus 42.1% in the prior year. The decreases in Music Publishing performance revenue and mechanical revenue were primarily due to COVID-related business disruption and the timing of distributions. Synchronization revenue was flat due to increased deal activity in China and the UK offset by COVID-related business disruption.

Music Publishing operating income was $81 million, down 12.0% from $92 million in the prior year driven largely by higher artists and repertoire (“A&R”) spend, and increased overhead due to employee-related costs and restructuring. Operating margin was 12.3%, down 2.0 percentage points from 14.3% in the prior year. Music Publishing OIBDA decreased 5.4% to $157 million, and Music Publishing OIBDA margin declined 1.9 percentage points to 23.9%, due to the same factors which impacted operating income and operating margin. Adjusted OIBDA decreased 3.6% to $160 million and Music Publishing Adjusted OIBDA margin declined to 24.4% due to higher A&R spend and employee-related costs, which were partially offset by revenue mix.

Financial details for the fiscal year can be found in the Company’s Annual Report on Form 10-K for the period ended September 30, 2020, filed today with the Securities and Exchange Commission.

This morning, management will be hosting a conference call to discuss the results at 8:30 A.M. EST. The call will be webcast on www.wmg.com.

About Warner Music Group

With a legacy extending back over 200 years, Warner Music Group today is home to an unparalleled family of creative artists, songwriters, and companies that are moving culture across the globe. At the core of WMG’s Recorded Music division are four of the most iconic companies in history: Atlantic, Elektra, Parlophone, and Warner Records. They are joined by renowned labels such as Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Reprise, Rhino, Roadrunner, Sire, Spinnin’ Records, Warner Classics, and Warner Music Nashville. Warner Chappell Music - which traces its origins back to the founding of Chappell & Company in 1811 - is one of the world's leading music publishers, with a catalog of more than one million copyrights spanning every musical genre, from the standards of the Great American Songbook to the biggest hits of the 21st century.

"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995

This communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. Words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and variations of such words or similar expressions that predict or indicate future events or trends, or that do not relate to historical matters, identify forward-looking statements. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that management's expectations, beliefs and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Please refer to our Form 10-K, Form 10-Qs and our other filings with the U.S. Securities and Exchange Commission concerning factors that could cause actual results to differ materially from those described in our forward-looking statements.

We maintain an Internet site at www.wmg.com. We use our website as a channel of distribution for material company information. Financial and other material information regarding Warner Music Group is routinely posted on and accessible at http://investors.wmg.com. In addition, you may automatically receive email alerts and other information about Warner Music Group by enrolling your email address through the “email alerts” section at http://investors.wmg.com. Our website and the information posted on it or connected to it shall not be deemed to be incorporated by reference into this communication.

Basis of Presentation

The Company maintains a 52-53 week fiscal year ending on the last Friday in each reporting period. As such, all references to September 30, 2020 and September 30, 2019 relate to the periods ended September 25, 2020 and September 27, 2019, respectively. For convenience purposes, the Company continues to date its financial statements as of September 30.

Figure 1. Warner Music Group Corp. - Consolidated Statements of Operations, Three and Twelve Months Ended September 30, 2020 versus September 30, 2019
(dollars in millions)
	For the Three Months Ended September 30, 2020					For the Three Months Ended September 30, 2019					% Change
	(unaudited)					(unaudited)
Revenue	$	1,126				$	1,124				—	%
Cost and expenses:
Cost of revenue	(606		)			(639		)			-5	%
Selling, general and administrative expenses	(383		)			(408		)			-6	%
Amortization expense	(49		)			(48		)			2	%
Total costs and expenses	$	(1,038	)			$	(1,095	)			-5	%
Operating income	$	88				$	29				—	%
Loss on extinguishment of debt	(34		)			—					—	%
Interest expense, net	(29		)			(34		)			-15	%
Other (expense) income, net	(45		)			19					—	%
(Loss) income before income taxes	$	(20	)			$	14				—	%
Income tax benefit	21					77					-73	%
Net income	$	1				$	91				-99	%
Less: Income attributable to noncontrolling interest	(2		)			(1		)			100	%
Net (loss) income attributable to Warner Music Group Corp.	$	(1	)			$	90				—	%
Net (loss) income per share attributable to common stockholders:
Class A – Basic and Diluted	$	0.00				$	—
Class B – Basic and Diluted	$	0.00				$	0.18

	For the Twelve Months Ended September 30, 2020					For the Twelve Months Ended September 30, 2019					% Change
	(audited)					(audited)
Revenue	$	4,463				$	4,475				—	%
Cost and expenses:
Cost of revenue	(2,333		)			(2,401		)			-3	%
Selling, general and administrative expenses	(2,169		)			(1,510		)			44	%
Amortization expense	(190		)			(208		)			-9	%
Total costs and expenses	$	(4,692	)			$	(4,119	)			14	%
Operating (loss) income	$	(229	)			$	356				—	%
Loss on extinguishment of debt	(34		)			(7		)			—	%
Interest expense, net	(127		)			(142		)			-11	%
Other (expense) income, net	(57		)			60					—	%
(Loss) income before income taxes	$	(447	)			$	267				—	%
Income tax expense	(23		)			(9		)			—	%
Net (loss) income	$	(470	)			$	258				—	%
Less: Income attributable to noncontrolling interest	(5		)			(2		)			—	%
Net (loss) income attributable to Warner Music Group Corp.	$	(475	)			$	256				—	%
Net (loss) income per share attributable to common stockholders:
Class A – Basic and Diluted	$	(0.82	)			$	—
Class B – Basic and Diluted	$	(0.95	)			$	0.51

Figure 2. Warner Music Group Corp. - Consolidated Balance Sheets at September 30, 2020 versus September 30, 2019
(dollars in millions)
	September 30, 2020					September 30, 2019					% Change
	(audited)					(audited)
Assets
Current assets:
Cash and equivalents	$	553				$	619				-11	%
Accounts receivable, net	771					775					-1	%
Inventories	79					74					7	%
Royalty advances expected to be recouped within one year	220					170					29	%
Prepaid and other current assets	55					53					4	%
Total current assets	$	1,678				$	1,691				-1	%
Royalty advances expected to be recouped after one year	269					208					29	%
Property, plant and equipment, net	331					300					10	%
Operating lease right-of-use assets, net	273					—					—	%
Goodwill	1,831					1,761					4	%
Intangible assets subject to amortization, net	1,653					1,723					-4	%
Intangible asse

FAQ

What were Warner Music Group's Q4 2020 financial results?

Warner Music Group reported Q4 2020 revenue of $1.126 billion, with a 15% increase in digital revenue.

How did Warner Music Group perform in the full year of 2020?

In 2020, Warner Music Group experienced a net loss of $470 million, compared to a net income of $258 million in 2019.

What is the adjusted EBITDA for Warner Music Group in Q4 2020?

Adjusted EBITDA for Q4 2020 was $177 million, representing a 33% increase year-over-year.

What percentage of Warner Music Group's total revenue came from digital in Q4 2020?

Digital revenue accounted for 65% of Warner Music Group's total revenue in Q4 2020.

What challenges did Warner Music Group face in 2020?

Warner Music Group faced declines in physical and artist services revenue primarily due to COVID-19 disruptions.