Financial Highlights
- Continued Momentum Across Traditional and Emerging Streaming Platforms Drove Double-Digit Digital Revenue Growth for the Quarter and Full Year
- Recovery in COVID-Impacted Areas Led by Strong Growth in Artist Services and Physical Revenue
- Delivered Margin Improvement and Double-Digit Growth in Adjusted OIBDA and Adjusted EBITDA
- Robust Free Cash Flow Conversion and Growth Underpinned by Strong Operating Leverage and Financially Disciplined Investments
For the three months ended
- Total revenue grew 22% or 21% in constant currency
- Digital revenue grew 19% or 18% in constant currency
- Net income was
$30 million versus$1 million in the prior-year quarter - OIBDA increased 15% to
$179 million versus$155 million in the prior-year quarter - Adjusted OIBDA increased 25% to
$218 million versus$174 million in the prior-year quarter - Adjusted EBITDA increased 34% to
$237 million versus$177 million in the prior-year quarter
For the twelve months ended
- Total revenue grew 19% or 15% in constant currency
- Digital revenue grew 22% or 19% in constant currency
- Net income was
$307 million versus net loss of$470 million in the prior year - OIBDA was
$915 million versus$32 million in the prior year - Adjusted OIBDA increased 29% to
$1,018 million versus$790 million in the prior year - Adjusted EBITDA increased 30% to
$1,090 million versus$837 million in the prior year
“Music is essential to billions of people across the globe. But now, more than ever, great talent needs help to cut through the noise. By delivering for new artists and songwriters, returning superstars, and global legends, we’ve also delivered outstanding results in 2021,” said
“Our strong fourth-quarter results put an exclamation point on an outstanding year,” said
Total WMG
Total WMG Summary Results | |||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||
For the Three Months Ended 2021 | For the Three Months Ended 2020 | % Change | For the Twelve Months Ended 2021 | For the Twelve Months Ended 2020 | % Change | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
Revenue | $ | 1,376 | $ | 1,126 | 22 | % | $ | 5,301 | $ | 4,463 | 19 | % | |||||||||
Recorded Music revenue | 1,172 | 958 | 22 | % | 4,544 | 3,810 | 19 | % | |||||||||||||
Music Publishing revenue | 205 | 169 | 21 | % | 761 | 657 | 16 | % | |||||||||||||
Digital revenue | 926 | 778 | 19 | % | 3,539 | 2,903 | 22 | % | |||||||||||||
Operating income (loss) | 100 | 88 | 14 | % | 609 | (229 | ) | — | % | ||||||||||||
Adjusted operating income(1) | 139 | 107 | 30 | % | 712 | 529 | 35 | % | |||||||||||||
OIBDA(1) | 179 | 155 | 15 | % | 915 | 32 | — | % | |||||||||||||
Adjusted OIBDA(1) | 218 | 174 | 25 | % | 1,018 | 790 | 29 | % | |||||||||||||
Net income (loss) | 30 | 1 | — | % | 307 | (470 | ) | — | % | ||||||||||||
Adjusted net income(1) | 69 | 20 | — | % | 410 | 288 | 42 | % | |||||||||||||
Net cash provided by operating activities | 228 | 176 | 30 | % | 638 | 463 | 38 | % | |||||||||||||
Free Cash Flow | 193 | 139 | 39 | % | 545 | 378 | 44 | % | |||||||||||||
Adjusted EBITDA(1) | 237 | 177 | 34 | % | 1,090 | 837 | 30 | % | |||||||||||||
(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 22.2% (or 20.8% in constant currency). The revenue increase in the quarter was driven by strong digital revenue growth of 19.0% (or 17.5% in constant currency) across
Operating income was
Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude non-cash stock-based compensation and other related expenses, COVID-related expenses and expenses related to restructuring and other transformation initiatives in both the quarter and the prior-year quarter. In the prior-year quarter, costs associated with the Company’s IPO and the Company's
Adjusted OIBDA increased 25.3% from
Adjusted EBITDA increased 33.9% from
Adjusted net income was
Basic and Diluted earnings per share was
As of
Cash provided by operating activities increased 30% to
Full-Year Results
Total revenue increased 18.8% (or 15.4% in constant currency). The revenue increase was driven by strong digital revenue growth of 21.9% (or 19.1% in constant currency) across
Operating income was
Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude non-cash stock-based compensation and other related expenses, COVID-related expenses and expenses related to restructuring and other transformation initiatives in both the year and the prior year. In the prior year, costs associated with the Company’s IPO and the Company's
Adjusted OIBDA increased 28.9% from
Adjusted EBITDA increased 30.2% from
Adjusted net income was
Net debt (defined as total debt, net of deferred financing costs, premiums and discounts, minus cash and equivalents) at the end of the year was
Basic and Diluted earnings per share was
Cash provided by operating activities increased 38% to
Recorded Music
Recorded Music Summary Results | |||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||
For the Three Months Ended 2021 | For the Three Months Ended 2020 | % Change | For the Twelve Months Ended 2021 | For the Twelve Months Ended 2020 | % Change | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
Revenue | $ | 1,172 | $ | 958 | 22 | % | $ | 4,544 | $ | 3,810 | 19 | % | |||||||||
Digital revenue | 807 | 679 | 19 | % | 3,105 | 2,568 | 21 | % | |||||||||||||
Operating income | 129 | 108 | 19 | % | 733 | 175 | — | % | |||||||||||||
Adjusted operating income(1) | 151 | 118 | 28 | % | 772 | 582 | 33 | % | |||||||||||||
OIBDA(1) | 182 | 151 | 21 | % | 936 | 349 | — | % | |||||||||||||
Adjusted OIBDA(1) | 204 | 161 | 27 | % | 975 | 756 | 29 | % | |||||||||||||
(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 | For the Three Months Ended | For the Three Months Ended | |||||||||
As reported | As reported | Constant | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
Revenue by Segment: | |||||||||||
Recorded Music | |||||||||||
Digital | $ | 807 | $ | 679 | $ | 688 | |||||
Physical | 127 | 105 | 104 | ||||||||
Total Digital and Physical | 934 | 784 | 792 | ||||||||
Artist services and expanded-rights | 168 | 98 | 99 | ||||||||
Licensing | 70 | 76 | 77 | ||||||||
Total Recorded Music | $ | 1,172 | $ | 958 | $ | 968 |
Recorded Music revenue was up 22.3% (or 21.1% in constant currency). The revenue increase was primarily due to increases in digital revenue, which reflects the continuing growth in streaming, the Company’s largest source of revenue. Digital revenue grew 18.9% (or 17.3% in constant currency) due to the strong performance of new and carryover releases, as well as accelerated revenue growth from emerging streaming platforms such as Facebook,
Recorded Music operating income was
Full-Year Results
Recorded Music Revenue | |||||||||||
(dollars in millions) | |||||||||||
For the Twelve Months Ended | For the Twelve Months Ended | For the Twelve Months Ended | |||||||||
As reported | As reported | Constant | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
Revenue by Segment: | |||||||||||
Recorded Music | |||||||||||
Digital | $ | 3,105 | $ | 2,568 | $ | 2,628 | |||||
Physical | 549 | 434 | 449 | ||||||||
Total Digital and Physical | 3,654 | 3,002 | 3,077 | ||||||||
Artist services and expanded-rights | 599 | 525 | 551 | ||||||||
Licensing | 291 | 283 | 292 | ||||||||
Total Recorded Music | $ | 4,544 | $ | 3,810 | $ | 3,920 |
Recorded Music revenue increased 19.3% (or 15.9% in constant currency). The revenue increase was primarily due to increases in digital revenue, which reflects the continuing growth in streaming, the Company’s largest source of revenue. Digital revenue grew 20.9% (or 18.2% in constant currency) due to the strong performance of new and carryover releases, as well as accelerated revenue growth from emerging streaming platforms such as Facebook,
Recorded Music operating income was
Music Publishing
Music Publishing Summary Results | |||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||
For the Three Months Ended 2021 | For the Three Months Ended 2020 | % Change | For the Twelve Months Ended 2021 | For the Twelve Months Ended 2020 | % Change | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
Revenue | $ | 205 | $ | 169 | 21 | % | $ | 761 | $ | 657 | 16 | % | |||||||||
Digital revenue | 120 | 100 | 20 | % | 436 | 337 | 29 | % | |||||||||||||
Operating income | 28 | 23 | 22 | % | 89 | 81 | 10 | % | |||||||||||||
Adjusted operating income(1) | 28 | 23 | 22 | % | 94 | 84 | 12 | % | |||||||||||||
OIBDA(1) | 49 | 43 | 14 | % | 174 | 157 | 11 | % | |||||||||||||
Adjusted OIBDA(1) | 49 | 43 | 14 | % | 179 | 160 | 12 | % | |||||||||||||
(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 | For the Three Months Ended | For the Three Months Ended | |||||||||
As reported | As reported | Constant | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
Revenue by Segment: | |||||||||||
Music Publishing | |||||||||||
Performance | $ | 30 | $ | 28 | $ | 29 | |||||
Digital | 120 | 100 | 101 | ||||||||
Mechanical | 13 | 10 | 11 | ||||||||
Synchronization | 39 | 27 | 28 | ||||||||
Other | 3 | 4 | 3 | ||||||||
$ | 205 | $ | 169 | $ | 172 |
Music Publishing revenue increased 21.3% (or 19.2% in constant currency). The revenue increase was driven by growth in digital, synchronization, mechanical and performance revenue. Digital revenue increased 20.0% (or 18.8% in constant currency) reflecting the continuing growth in streaming, including emerging streaming platforms, and timing of new digital deals. Digital revenue growth in the quarter was impacted by a favorable one-time settlement in the prior-year quarter, as well as a shift in the collection of writer’s share of
Music Publishing operating income was
Full-Year Results
Music Publishing Revenue | |||||||||||
(dollars in millions) | |||||||||||
For the Twelve Months Ended | For the Twelve Months Ended | For the Twelve Months Ended | |||||||||
As reported | As reported | Constant | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
Revenue by Segment: | |||||||||||
Music Publishing | |||||||||||
Performance | $ | 122 | $ | 142 | $ | 147 | |||||
Digital | 436 | 337 | 346 | ||||||||
Mechanical | 49 | 48 | 52 | ||||||||
Synchronization | 144 | 119 | 121 | ||||||||
Other | 10 | 11 | 10 | ||||||||
$ | 761 | $ | 657 | $ | 676 |
Music Publishing revenue increased 15.8% (or 12.6% in constant currency). The revenue increase was driven by growth in digital, synchronization and mechanical revenue, partially offset by a decline in performance revenue. Music Publishing digital revenue increased 29.4% (or 26.0% in constant currency) reflecting the continuing growth in streaming, including emerging streaming platforms, and timing of new digital deals. Digital revenue growth in the year was impacted by a favorable one-time settlement in the prior year, as well as a shift in the collection of writer’s share of
Music Publishing operating income was
This morning, management will be hosting a conference call to discuss the results at
About
With a legacy extending back over 200 years,
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995
This communication includes forward-looking statements that reflect the current views of
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
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
Figure 1. | ||||||||||||
(dollars in millions) | ||||||||||||
For the Three Months Ended | For the Three Months Ended | % Change | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Revenue | $ | 1,376 | $ | 1,126 | 22 | % | ||||||
Cost and expenses: | ||||||||||||
Cost of revenue | (752 | ) | (606 | ) | 24 | % | ||||||
Selling, general and administrative expenses | (465 | ) | (383 | ) | 21 | % | ||||||
Amortization expense | (59 | ) | (49 | ) | 20 | % | ||||||
Total costs and expenses | $ | (1,276 | ) | $ | (1,038 | ) | 23 | % | ||||
Operating income | $ | 100 | $ | 88 | 14 | % | ||||||
Loss on extinguishment of debt | (10 | ) | (34 | ) | -71 | % | ||||||
Interest expense, net | (29 | ) | (29 | ) | — | % | ||||||
Other expense, net | (9 | ) | (45 | ) | -80 | % | ||||||
Income (loss) before income taxes | $ | 52 | $ | (20 | ) | — | % | |||||
Income tax (expense) benefit | (22 | ) | 21 | — | % | |||||||
Net income | $ | 30 | $ | 1 | — | % | ||||||
Less: Income attributable to noncontrolling interest | (2 | ) | (2 | ) | — | % | ||||||
Net income (loss) attributable to | $ | 28 | $ | (1 | ) | — | % | |||||
Net income (loss) per share attributable to common stockholders: | ||||||||||||
Class A – Basic and Diluted | $ | 0.05 | $ | 0.00 | ||||||||
Class B – Basic and Diluted | $ | 0.05 | $ | 0.00 |
For the Twelve Months Ended | For the Twelve Months Ended | % Change | ||||||||||
(unaudited) | (audited) | |||||||||||
Revenue | $ | 5,301 | $ | 4,463 | 19 | % | ||||||
Cost and expenses: | ||||||||||||
Cost of revenue | (2,742 | ) | (2,333 | ) | 18 | % | ||||||
Selling, general and administrative expenses | (1,721 | ) | (2,169 | ) | -21 | % | ||||||
Amortization expense | (229 | ) | (190 | ) | 21 | % | ||||||
Total costs and expenses | $ | (4,692 | ) | $ | (4,692 | ) | — | % | ||||
Operating income (loss) | $ | 609 | $ | (229 | ) | — | % | |||||
Loss on extinguishment of debt | (22 | ) | (34 | ) | -35 | % | ||||||
Interest expense, net | (122 | ) | (127 | ) | -4 | % | ||||||
Other expense, net | (9 | ) | (57 | ) | -84 | % | ||||||
Income (loss) before income taxes | $ | 456 | $ | (447 | ) | — | % | |||||
Income tax expense | (149 | ) | (23 | ) | — | % | ||||||
Net income (loss) | $ | 307 | $ | (470 | ) | — | % | |||||
Less: Income attributable to noncontrolling interest | (3 | ) | (5 | ) | -40 | % | ||||||
Net income (loss) attributable to | $ | 304 | $ | (475 | ) | — | % | |||||
Net income (loss) per share attributable to common stockholders: | ||||||||||||
Class A – Basic and Diluted | $ | 0.58 | $ | (0.82 | ) | |||||||
Class B – Basic and Diluted | $ | 0.58 | $ | (0.95 | ) |
Figure 2. | ||||||||||||
(dollars in millions) | ||||||||||||
2021 | 2020 | % Change | ||||||||||
(unaudited) | (audited) | |||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and equivalents | $ | 499 | $ | 553 | -10 | % | ||||||
Accounts receivable, net | 839 | 771 | 9 | % | ||||||||
Inventories | 99 | 79 | 25 | % | ||||||||
Royalty advances expected to be recouped within one year | 373 | 220 | 70 | % | ||||||||
Prepaid and other current assets | 86 | 55 | 56 | % | ||||||||
Total current assets | $ | 1,896 | $ | 1,678 | 13 | % | ||||||
Royalty advances expected to be recouped after one year | 457 | 269 | 70 | % | ||||||||
Property, plant and equipment, net | 364 | 331 | 10 | % | ||||||||
Operating lease right-of-use assets, net | 268 | 273 | -2 | % | ||||||||
1,830 | 1,831 | — | % | |||||||||
Intangible assets subject to amortization, net | 2,017 | 1,653 | 22 | % | ||||||||
Intangible assets not subject to amortization | 154 | 154 | — | % | ||||||||
Deferred tax assets, net | 31 | 68 | -54 | % | ||||||||
Other assets | 194 | 153 | 27 | % | ||||||||
Total assets | $ | 7,211 | $ | 6,410 | 12 | % | ||||||
Liabilities and Equity (Deficit) | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 302 | $ | 264 | 14 | % | ||||||
Accrued royalties | 1,880 | 1,628 | 15 | % | ||||||||
Accrued liabilities | 461 | 382 | 21 | % | ||||||||
Accrued interest | 14 | 30 | -53 | % | ||||||||
Operating lease liabilities, current | 43 | 39 | 10 | % | ||||||||
Deferred revenue | 348 | 297 | 17 | % | ||||||||
Other current liabilities | 102 | 80 | 28 | % | ||||||||
Total current liabilities | $ | 3,150 | $ | 2,720 | 16 | % | ||||||
Long-term debt | 3,346 | 3,104 | 8 | % | ||||||||
Operating lease liabilities, noncurrent | 287 | 299 | -4 | % | ||||||||
Deferred tax liabilities, net | 207 | 163 | 27 | % | ||||||||
Other noncurrent liabilities | 175 | 169 | 4 | % | ||||||||
Total liabilities | $ | 7,165 | $ | 6,455 | 11 | % | ||||||
Equity (deficit): | ||||||||||||
Class A common stock | $ | — | $ | — | — | % | ||||||
Class B common stock | 1 | 1 | — | % | ||||||||
Additional paid-in capital | 1,942 | 1,907 | 2 | % | ||||||||
Accumulated deficit | (1,710 | ) | (1,749 | ) | -2 | % | ||||||
Accumulated other comprehensive loss, net | (202 | ) | (222 | ) | -9 | % | ||||||
$ | 31 | $ | (63 | ) | — | % | ||||||
Noncontrolling interest | 15 | 18 | -17 | % | ||||||||
Total equity (deficit) | 46 | (45 | ) | — | % | |||||||
Total liabilities and equity (deficit) | $ | 7,211 | $ | 6,410 | 12 | % |
Figure 3. | |||||||||
(dollars in millions) | |||||||||
For the Three Months Ended | For the Three Months Ended | ||||||||
(unaudited) | (unaudited) | ||||||||
Net cash provided by operating activities | $ | 228 | $ | 176 | |||||
Net cash used in investing activities | (72 | ) | (132 | ) | |||||
Net cash used in financing activities | (96 | ) | (28 | ) | |||||
Effect of foreign currency exchange rates on cash and equivalents | (3 | ) | 5 | ||||||
Net increase in cash and equivalents | $ | 57 | $ | 21 | |||||
For the Twelve Months Ended | For the Twelve Months Ended | ||||||||
(unaudited) | (audited) | ||||||||
Net cash provided by operating activities | $ | 638 | $ | 463 | |||||
Net cash used in investing activities | (638 | ) | (219 | ) | |||||
Net cash used in financing activities | (61 | ) | (316 | ) | |||||
Effect of foreign currency exchange rates on cash and equivalents | 7 | 6 | |||||||
Net decrease in cash and equivalents | $ | (54 | ) | $ | (66 | ) |
Figure 4. | ||||||||||
(dollars in millions) | ||||||||||
For the Three Months Ended | For the Three Months Ended | % Change | ||||||||
(unaudited) | (unaudited) | |||||||||
Streaming | $ | 777 | $ | 639 | 22 | % | ||||
Downloads and Other Digital | 30 | 40 | -25 | % | ||||||
Total Recorded Music Digital Revenue | $ | 807 | $ | 679 | 19 | % | ||||
For the Twelve Months Ended | For the Twelve Months Ended | % Change | ||||||||
(unaudited) | (unaudited) | |||||||||
Streaming | $ | 2,972 | $ | 2,403 | 24 | % | ||||
Downloads and Other Digital | 133 | 165 | -19 | % | ||||||
Total Recorded Music Digital Revenue | $ | 3,105 | $ | 2,568 | 21 | % |
Supplemental Disclosures Regarding Non-GAAP Financial Measures
We evaluate our operating performance based on several factors, including the following non-GAAP financial measures:
OIBDA
OIBDA reflects our operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets. We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses, and believe the presentation of OIBDA helps improve the ability to understand our operating performance and evaluate our performance in comparison to comparable periods. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses. Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) and other measures of financial performance reported in accordance with
Figure 5. | |||||||||||
(dollars in millions) | |||||||||||
For the Three Months Ended | For the Three Months Ended | % Change | |||||||||
(unaudited) | (unaudited) | ||||||||||
Net income (loss) attributable to | $ | 28 | $ | (1 | ) | — | % | ||||
Income attributable to noncontrolling interest | 2 | 2 | — | % | |||||||
Net income | $ | 30 | $ | 1 | — | % | |||||
Income tax expense (benefit) | 22 | (21 | ) | — | % | ||||||
Income including income taxes | $ | 52 | $ | (20 | ) | — | % | ||||
Other expense, net | 9 | 45 | -80 | % | |||||||
Interest expense, net | 29 | 29 | — | % | |||||||
Loss on extinguishment of debt | 10 | 34 | -71 | % | |||||||
Operating income | $ | 100 | $ | 88 | 14 | % | |||||
Amortization expense | 59 | 49 | 20 | % | |||||||
Depreciation expense | 20 | 18 | 11 | % | |||||||
OIBDA | $ | 179 | $ | 155 | 15 | % | |||||
Operating income margin | 7.3 | % | 7.8 | % | |||||||
OIBDA margin | 13.0 | % | 13.8 | % | |||||||
For the Twelve Months Ended | For the Twelve Months Ended | % Change | |||||||||
(unaudited) | (unaudited) | ||||||||||
Net income (loss) attributable to | $ | 304 | $ | (475 | ) | — | % | ||||
Income attributable to noncontrolling interest | 3 | 5 | -40 | % | |||||||
Net income (loss) | $ | 307 | $ | (470 | ) | — | % | ||||
Income tax expense | 149 | 23 | — | % | |||||||
Income including income taxes | $ | 456 | $ | (447 | ) | — | % | ||||
Other expense, net | 9 | 57 | -84 | % | |||||||
Interest expense, net | 122 | 127 | -4 | % | |||||||
Loss on extinguishment of debt | 22 | 34 | -35 | % | |||||||
Operating income (loss) | $ | 609 | $ | (229 | ) | — | % | ||||
Amortization expense | 229 | 190 | 21 | % | |||||||
Depreciation expense | 77 | 71 | 8 | % | |||||||
OIBDA | $ | 915 | $ | 32 | — | % | |||||
Operating income margin | 11.5 | % | -5.1 | % | |||||||
OIBDA margin | 17.3 | % | 0.7 | % |
Figure 6. | ||||||||||||
(dollars in millions) | ||||||||||||
For the Three Months Ended | For the Three Months Ended | % Change | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Total WMG operating income – GAAP | $ | 100 | $ | 88 | 14 | % | ||||||
Depreciation and amortization expense | (79 | ) | (67 | ) | 18 | % | ||||||
Total WMG OIBDA | $ | 179 | $ | 155 | 15 | % | ||||||
Operating income margin | 7.3 | % | 7.8 | % | ||||||||
OIBDA margin | 13.0 | % | 13.8 | % | ||||||||
Recorded Music operating income – GAAP | $ | 129 | $ | 108 | 19 | % | ||||||
Depreciation and amortization expense | (53 | ) | (43 | ) | 23 | % | ||||||
Recorded Music OIBDA | $ | 182 | $ | 151 | 21 | % | ||||||
Recorded Music operating income margin | 11.0 | % | 11.3 | % | ||||||||
Recorded Music OIBDA margin | 15.5 | % | 15.8 | % | ||||||||
Music Publishing operating income – GAAP | $ | 28 | $ | 23 | 22 | % | ||||||
Depreciation and amortization expense | (21 | ) | (20 | ) | 5 | % | ||||||
Music Publishing OIBDA | $ | 49 | $ | 43 | 14 | % | ||||||
Music Publishing operating income margin | 13.7 | % | 13.6 | % | ||||||||
Music Publishing OIBDA margin | 23.9 | % | 25.4 | % | ||||||||
For the Twelve Months Ended | For the Twelve Months Ended | % Change | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Total WMG operating income (loss) – GAAP | $ | 609 | $ | (229 | ) | — | % | |||||
Depreciation and amortization expense | (306 | ) | (261 | ) | 17 | % | ||||||
Total WMG OIBDA | $ | 915 | $ | 32 | — | % | ||||||
Operating income (loss) margin | 11.5 | % | -5.1 | % | ||||||||
OIBDA margin | 17.3 | % | 0.7 | % | ||||||||
Recorded Music operating income – GAAP | $ | 733 | $ | 175 | — | % | ||||||
Depreciation and amortization expense | (203 | ) | (174 | ) | 17 | % | ||||||
Recorded Music OIBDA | $ | 936 | $ | 349 | — | % | ||||||
Recorded Music operating income margin | 16.1 | % | 4.6 | % | ||||||||
Recorded Music OIBDA margin | 20.6 | % | 9.2 | % | ||||||||
Music Publishing operating income – GAAP | $ | 89 | $ | 81 | 10 | % | ||||||
Depreciation and amortization expense | (85 | ) | (76 | ) | 12 | % | ||||||
Music Publishing OIBDA | $ | 174 | $ | 157 | 11 | % | ||||||
Music Publishing operating income margin | 11.7 | % | 12.3 | % | ||||||||
Music Publishing OIBDA margin | 22.9 | % | 23.9 | % |
Adjusted Operating Income (Loss), Adjusted OIBDA and Adjusted Net Income (Loss)
Adjusted operating income (loss), Adjusted OIBDA and Adjusted net income (loss) is operating income (loss), OIBDA and net income (loss), respectively, adjusted to exclude the impact of certain items that affect comparability. Factors affecting period-to-period comparability of the unadjusted measures in the quarter included the items listed in Figure 7 below. We use Adjusted operating income (loss), Adjusted OIBDA and Adjusted net income (loss) to evaluate our actual operating performance. We believe that the adjusted results provide relevant and useful information for investors because they clarify our actual operating performance, make it easier to compare our results with those of other companies in our industry and allow investors to review performance in the same way as our management. Since these are not measures of performance calculated in accordance with
Figure 7. | ||||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||||||||
Total WMG Operating Income | Recorded Music Operating Income | Music Publishing Operating Income | Total WMG OIBDA | Recorded Music OIBDA | Music Publishing OIBDA | Net Income | ||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||
Reported Results | $ | 100 | $ | 129 | $ | 28 | $ | 179 | $ | 182 | $ | 49 | $ | 30 | ||||||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||||||||||
Restructuring and Other Transformation Related Costs | 26 | 15 | — | 26 | 15 | — | 26 | |||||||||||||||||||||||
COVID-19 Related Costs | 1 | 1 | — | 1 | 1 | — | 1 | |||||||||||||||||||||||
Non-Cash Stock-Based Compensation and Other Related Costs | 12 | 6 | — | 12 | 6 | — | 12 | |||||||||||||||||||||||
Adjusted Results | $ | 139 | $ | 151 | $ | 28 | $ | 218 | $ | 204 | $ | 49 | $ | 69 | ||||||||||||||||
Adjusted Margin | 10.1 | % | 12.9 | % | 13.7 | % | 15.8 | % | 17.4 | % | 23.9 | % | ||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||||||||
Total WMG Operating Income | Recorded Music Operating Income | Music Publishing Operating Income | Total WMG OIBDA | Recorded Music OIBDA | Music Publishing OIBDA | Net Income | ||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||
Reported Results | $ | 88 | $ | 108 | $ | 23 | $ | 155 | $ | 151 | $ | 43 | $ | 1 | ||||||||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||||||||||||
Restructuring and Other Transformation Related Costs | 7 | 1 | — | 7 | 1 | — | 7 | |||||||||||||||||||||||
IPO Related Costs | (1 | ) | — | — | (1 | ) | — | — | (1 | ) | ||||||||||||||||||||
COVID-19 Related Costs | 4 | 1 | — | 4 | 1 | — | 4 | |||||||||||||||||||||||
L.A. Office Consolidation | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||
Non-Cash Stock-Based Compensation and Other Related Costs | 8 | 8 | — | 8 | 8 | — | 8 | |||||||||||||||||||||||
Adjusted Results | $ | 107 | $ | 118 | $ | 23 | $ | 174 | $ | 161 | $ | 43 | $ | 20 | ||||||||||||||||
Adjusted Margin | 9.5 | % | 12.3 | % | 13.6 | % | 15.5 | % | 16.8 | % | 25.4 | % |
For the Twelve Months Ended | |||||||||||||||||||||||||||||
Total WMG Operating Income | Recorded Music Operating Income | Music Publishing Operating Income | Total WMG OIBDA | Recorded Music OIBDA | Music Publishing OIBDA | Net Income | |||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||
Reported Results | $ | 609 | $ | 733 | $ | 89 | $ | 915 | $ | 936 | $ | 174 | $ | 307 | |||||||||||||||
Factors Affecting Comparability: | |||||||||||||||||||||||||||||
Restructuring and Other Transformation Related Costs | 54 | 15 | 3 | 54 | 15 | 3 | 54 | ||||||||||||||||||||||
COVID-19 Related Costs | 1 | — | — | 1 | — | — | 1 | ||||||||||||||||||||||
Non-Cash Stock-Based Compensation and Other Related Costs | 48 | 24 | 2 | 48 | 24 | 2 | 48 | ||||||||||||||||||||||
Adjusted Results | $ | 712 | $ | 772 | $ | 94 | $ | 1,018 | $ | 975 | $ | 179 | $ | 410 | |||||||||||||||
Adjusted Margin | 13.4 | % | 17.0 | % | 12.4 | % | 19.2 | % | 21.5 | % | 23.5 | % | |||||||||||||||||
For the Twelve Months Ended | |||||||||||||||||||||||||||||
Total WMG Operating (Loss) Income | Recorded Music Operating Income | Music Publishing Operating Income | Total WMG OIBDA | Recorded Music OIBDA | Music Publishing OIBDA | Net (Loss) Income | |||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||
Reported Results | $ | (229 | ) | $ | 175 | $ | 81 | $ | 32 | $ | 349 | $ | 157 | $ | (470 | ) | |||||||||||||
Factors Affecting Comparability: | |||||||||||||||||||||||||||||
Restructuring and Other Transformation Related Costs | 42 | 1 | 3 | 42 | 1 | 3 | 42 | ||||||||||||||||||||||
IPO Related Costs | 89 | — | — | 89 | — | — | 89 | ||||||||||||||||||||||
COVID-19 Related Costs | 17 | 13 | — | 17 | 13 | — | 17 | ||||||||||||||||||||||
L.A. Office Consolidation | 2 | 2 | — | 2 | 2 | — | 2 | ||||||||||||||||||||||
Non-Cash Stock-Based Compensation and Other Related Costs | 608 | 391 | — | 608 | 391 | — | 608 | ||||||||||||||||||||||
Adjusted Results | $ | 529 | $ | 582 | $ | 84 | $ | 790 | $ | 756 | $ | 160 | $ | 288 | |||||||||||||||
Adjusted Margin | 11.9 | % | 15.3 | % | 12.8 | % | 17.7 | % | 19.8 | % | 24.4 | % |
Constant Currency
Because exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of revenue on a constant-currency basis in addition to reported revenue helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period over period. We use results on a constant-currency basis as one measure to evaluate our performance. We calculate constant-currency results by applying current-year foreign currency exchange rates to prior-year results. However, a limitation of the use of the constant-currency results as a performance measure is that it does not reflect the impact of exchange rates on our revenue. These results should be considered in addition to, not as a substitute for, results reported in accordance with
Figure 8. | ||||||||||||||
(dollars in millions) | ||||||||||||||
For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | ||||||||||||
As reported | As reported | Constant | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||
Recorded Music | $ | 531 | $ | 418 | $ | 418 | ||||||||
Music Publishing | 101 | 83 | 83 | |||||||||||
International revenue | ||||||||||||||
Recorded Music | 641 | 540 | 550 | |||||||||||
Music Publishing | 104 | 86 | 89 | |||||||||||
Intersegment eliminations | (1 | ) | (1 | ) | (1 | ) | ||||||||
Total Revenue | $ | 1,376 | $ | 1,126 | $ | 1,139 | ||||||||
Revenue by Segment: | ||||||||||||||
Recorded Music | ||||||||||||||
Digital | $ | 807 | $ | 679 | $ | 688 | ||||||||
Physical | 127 | 105 | 104 | |||||||||||
Total Digital and Physical | 934 | 784 | 792 | |||||||||||
Artist services and expanded-rights | 168 | 98 | 99 | |||||||||||
Licensing | 70 | 76 | 77 | |||||||||||
Total Recorded Music | 1,172 | 958 | 968 | |||||||||||
Music Publishing | ||||||||||||||
Performance | 30 | 28 | 29 | |||||||||||
Digital | 120 | 100 | 101 | |||||||||||
Mechanical | 13 | 10 | 11 | |||||||||||
Synchronization | 39 | 27 | 28 | |||||||||||
Other | 3 | 4 | 3 | |||||||||||
205 | 169 | 172 | ||||||||||||
Intersegment eliminations | (1 | ) | (1 | ) | (1 | ) | ||||||||
Total Revenue | $ | 1,376 | $ | 1,126 | $ | 1,139 | ||||||||
Total Digital Revenue | $ | 926 | $ | 778 | $ | 788 |
For the Twelve Months Ended | For the Twelve Months Ended | For the Twelve Months Ended | ||||||||||||
As reported | As reported | Constant | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||
Recorded Music | $ | 1,985 | $ | 1,609 | $ | 1,609 | ||||||||
Music Publishing | 378 | 325 | 325 | |||||||||||
International revenue | ||||||||||||||
Recorded Music | 2,559 | 2,201 | 2,311 | |||||||||||
Music Publishing | 383 | 332 | 351 | |||||||||||
Intersegment eliminations | (4 | ) | (4 | ) | (4 | ) | ||||||||
Total Revenue | $ | 5,301 | $ | 4,463 | $ | 4,592 | ||||||||
Revenue by Segment: | ||||||||||||||
Recorded Music | ||||||||||||||
Digital | $ | 3,105 | $ | 2,568 | $ | 2,628 | ||||||||
Physical | 549 | 434 | 449 | |||||||||||
Total Digital and Physical | 3,654 | 3,002 | 3,077 | |||||||||||
Artist services and expanded-rights | 599 | 525 | 551 | |||||||||||
Licensing | 291 | 283 | 292 | |||||||||||
Total Recorded Music | 4,544 | 3,810 | 3,920 | |||||||||||
Music Publishing | ||||||||||||||
Performance | 122 | 142 | 147 | |||||||||||
Digital | 436 | 337 | 346 | |||||||||||
Mechanical | 49 | 48 | 52 | |||||||||||
Synchronization | 144 | 119 | 121 | |||||||||||
Other | 10 | 11 | 10 | |||||||||||
761 | 657 | 676 | ||||||||||||
Intersegment eliminations | (4 | ) | (4 | ) | (4 | ) | ||||||||
Total Revenue | $ | 5,301 | $ | 4,463 | $ | 4,592 | ||||||||
Total Digital Revenue | $ | 3,539 | $ | 2,903 | $ | 2,972 |
Free Cash Flow
Our definition of Free Cash Flow has been revised in the fourth quarter of fiscal 2021 and is now defined as cash flow provided by operating activities less capital expenditures. We use Free Cash Flow, among other measures, to evaluate our operating performance. Management believes Free Cash Flow provides investors with an important perspective on the cash available to fund our debt service requirements, ongoing working capital requirements, capital expenditure requirements, strategic acquisitions and investments, and any dividends, prepayments of debt or repurchases or retirement of our outstanding debt or notes in open market purchases, privately negotiated purchases, any repurchases of our common stock or otherwise. As a result, Free Cash Flow is a significant measure of our ability to generate long-term value. It is useful for investors to know whether this ability is being enhanced or degraded as a result of our operating performance. We believe the presentation of Free Cash Flow is relevant and useful for investors because it allows investors to view performance in a manner similar to the method management uses.
Free Cash Flow is not a measure of performance calculated in accordance with
Figure 9. | |||||||
(dollars in millions) | |||||||
For the Three Months Ended | For the Three Months Ended | ||||||
(unaudited) | (unaudited) | ||||||
Net cash provided by operating activities | $ | 228 | $ | 176 | |||
Less: Capital expenditures | 35 | 37 | |||||
Free Cash Flow | $ | 193 | $ | 139 | |||
For the Twelve Months Ended | For the Twelve Months Ended | ||||||
(unaudited) | (unaudited) | ||||||
Net cash provided by operating activities | $ | 638 | $ | 463 | |||
Less: Capital expenditures | 93 | 85 | |||||
Free Cash Flow | $ | 545 | $ | 378 |
Adjusted EBITDA
Adjusted EBITDA is equivalent to “EBITDA” as defined in our Revolving Credit Facility and our 2020 indenture and substantially similar to “Consolidated EBITDA” as defined under our 2012 and 2014 indentures and “EBITDA” as defined under our Senior Term Loan Facility, respectively. Adjusted EBITDA differs from the term “EBITDA” as it is commonly used. The definition of Adjusted EBITDA, in addition to adjusting net income to exclude interest expense, income taxes, and depreciation and amortization, also adjusts net income by excluding items or expenses such as, among other items, (1) the amount of any restructuring charges or reserves; (2) any non-cash charges (including any impairment charges); (3) any net loss resulting from hedging currency exchange risks; (4) the amount of management, monitoring, consulting and advisory fees paid to Access under the Management Agreement or otherwise; (5) business optimization expenses (including consolidation initiatives, severance costs and other costs relating to initiatives aimed at profitability improvement); (6) transaction expenses; (7) equity-based compensation expense; and (8) certain extraordinary, unusual or non-recurring items. The definition of EBITDA under the Revolving Credit Facility also includes adjustments for the pro forma impact of certain projected cost savings, operating expense reductions and synergies and any quality of earnings analysis prepared by independent certified public accountants in connection with an acquisition, merger, consolidation or other investment.
Adjusted EBITDA is a key measure used by our management to understand and evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under
Figure 10. | |||||||||||||||||||
(dollars in millions) | |||||||||||||||||||
For the Three Months Ended 2021 | For the Three Months Ended 2020 | For the Twelve Months Ended 2021 | For the Twelve Months Ended 2020 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
Net Income (Loss) | $ | 30 | $ | 1 | $ | 307 | $ | (470 | ) | ||||||||||
Income tax expense (benefit) | 22 | (21 | ) | 149 | 23 | ||||||||||||||
Interest expense, net | 29 | 29 | 122 | 127 | |||||||||||||||
Depreciation and amortization | 79 | 67 | 306 | 261 | |||||||||||||||
Loss on extinguishment of debt (a) | 10 | 34 | 22 | 34 | |||||||||||||||
Net gain on divestitures and sale of securities (b) | — | — | (3 | ) | (1 | ) | |||||||||||||
Restructuring costs (c) | 18 | 9 | 29 | 22 | |||||||||||||||
Net hedging and foreign exchange (gains) losses (d) | (20 | ) | 51 | 11 | 61 | ||||||||||||||
Management fees (e) | — | (3 | ) | — | 20 | ||||||||||||||
Transaction costs (f) | 5 | (1 | ) | 10 | 76 | ||||||||||||||
Business optimization expenses (g) | 12 | 6 | 42 | 39 | |||||||||||||||
Non-cash stock-based compensation expense (h) | 12 | 8 | 45 | 608 | |||||||||||||||
Other non-cash charges (i) | 30 | (6 | ) | 5 | 10 | ||||||||||||||
Pro forma impact of cost savings initiatives and specified transactions (j) | 10 | 3 | 45 | 27 | |||||||||||||||
Adjusted EBITDA | $ | 237 | $ | 177 | $ | 1,090 | $ | 837 |
______________________________________ | |
(a) | Reflects loss on extinguishment of debt, primarily including tender fees and unamortized deferred financing costs. |
(b) | Reflects net gain on sale of securities and divestitures. |
(c) | Reflects severance costs and other restructuring related expenses. |
(d) | Reflects (gains) losses from hedging activities and unrealized (gains) losses due to foreign exchange on our Euro-denominated debt and intercompany transactions. |
(e) | Reflects management fees and related expenses paid to Access pursuant to the management agreement, which was terminated upon completion of the IPO in |
(f) | Reflects mainly integration, transaction and qualifying IPO costs. |
(g) | Reflects costs associated with our transformation initiatives and IT system updates, which includes costs of |
(h) | Reflects non-cash stock-based compensation expense related to the |
(i) | Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market of an equity method investment, investment losses (gains) and other non-cash impairments. |
(j) | Reflects expected savings resulting from transformation initiatives and the pro forma impact of specified transactions for the three and twelve months ended |
Media Contact: | Investor Contact: |
(212) 275-2213 | |
James.Steven@wmg.com | Investor.Relations@wmg.com |
Source:
2021 GlobeNewswire, Inc., source