Warner Music(WMG) - 2025 Q1 - Quarterly Report

Financial Performance - For the fiscal quarter ended December 31, 2024, the company reported a significant increase in revenue, reaching $1.2 billion, representing a 15$300 million, reflecting a 10% increase compared to the previous year[112]. - Total revenues decreased by $82 million, or 5$1,666 million for the three months ended December 31, 2024, compared to $1,748 million for the same period in 2023[134]. - Recorded Music revenues decreased by$100 million, or 7%, to $1,345 million for the three months ended December 31, 2024, from$1,445 million for the same period in 2023[136]. - Digital revenues decreased by $22 million, or 2$1,082 million for the three months ended December 31, 2024, from $1,104 million for the same period in 2023[135]. - Adjusted OIBDA decreased by$88 million, or 20%, to $363 million, with the Adjusted OIBDA margin declining to 22$140 million to $214 million for the three months ended December 31, 2024, from$354 million for the same period in 2023[159]. - Net income increased by $48 million to$241 million for the three months ended December 31, 2024, from $193 million for the same period in 2023[163]. - Adjusted EBITDA for the twelve months ended December 31, 2024, was$1,519 million, up from $1,416 million in 2023, with the three months ended December 31, 2024, showing$383 million compared to $461 million in 2023[203]. Revenue Segments - The recorded music segment generated$900 million in revenue, accounting for 75% of total revenue, with a 12% increase from the prior year[114]. - The music publishing segment reported revenue of $300 million, which is a 20$19 million, or 6%, to $323 million for the three months ended December 31, 2024, compared to$304 million for the same period in 2023[133]. - Music Publishing revenues increased by $19 million, or 6$323 million for the three months ended December 31, 2024, from $304 million for the same period in 2023[172]. - International Music Publishing revenue increased by$18 million, or 14%, to $150 million, driven by growth in digital and performance revenues[141]. Cost Management - The company is focusing on reducing overhead costs and has implemented strategies that are expected to yield$50 million in annual savings[112]. - The company expects to incur total non-recurring restructuring charges of approximately $230 million, including$150 million of after-tax charges, as part of its Strategic Restructuring Plan[128]. - The company aims to allocate a majority of cost savings from the Strategic Restructuring Plan to increase investment in core Recorded Music and Music Publishing businesses[129]. - Total cost of revenues increased by $14 million, or 2$894 million, with artist and repertoire costs rising by $34 million, or 6$15 million, or 6%, to $284 million, largely due to unfavorable foreign currency exchange movements[146]. - Selling and marketing expenses decreased by$18 million, or 10%, to $158 million, reflecting lower variable marketing spend[147]. - Restructuring and impairment charges increased to$27 million for the three months ended December 31, 2024, compared to no charges in the same period in 2023[155][156]. Future Outlook - Future outlook indicates a projected revenue growth of 10-12% for the next fiscal year, driven by increased streaming adoption and new artist signings[112]. - Recent acquisitions, including 300 Entertainment, are expected to contribute an additional $100 million in revenue over the next year[116]. Shareholder Value - The company is committed to returning value to shareholders through dividends and share repurchases, with plans to allocate$200 million for these purposes in the upcoming year[112]. - The company declared a cash dividend of $0.18 per share, resulting in total cash dividends of approximately$94 million paid to stockholders for the three months ended December 31, 2024[196]. - A new $100 million share repurchase program was authorized on November 14, 2024, intended to offset dilution from the Omnibus Incentive Plan[189]. - The company repurchased and retired 60,383 shares for$2 million during the three months ended December 31, 2024[190]. Debt and Liquidity - As of December 31, 2024, the company had $3.955 billion in debt,$802 million in cash and equivalents, resulting in a net debt of $3.153 billion[180]. - The total long-term debt, including the current portion, was$3.987 billion as of December 31, 2024, netting to $3.955 billion after accounting for issuance premium and deferred financing costs[191]. - Senior Secured Indebtedness as of December 31, 2024, was approximately$3.205 billion, resulting in a Leverage Ratio of 2.11x[203]. - The company continues to evaluate opportunities for debt repayment, dividends, and equity repurchases based on market conditions and financial liquidity[206]. - Management believes that operational cash flow and available credit will be sufficient to meet debt service and capital expenditure requirements in the foreseeable future[206]. Currency and Interest Rate Impact - Foreign currency forward exchange contracts outstanding as of December 31, 2024, included sales of $438 million and purchases of$260 million[209]. - A hypothetical 10% depreciation of the U.S. dollar against foreign currencies would decrease the fair value of foreign exchange forward contracts by $18 million[210]. - A 25 basis point increase or decrease in interest rates would affect the fair value of fixed-rate debt by approximately$30 million[212].