WMG Q3 Revenue Up 10% in Preliminary Earnings

Robert Kyncl

Warner Music Group isn't waiting until earnings day to celebrate.

Following last week's executive shakeup—in which Warner Records Co-Chairman/COO Tom Corson was elevated to WMG COO, longtime CFO/COO Armin Zerza exited and Chief Accounting Officer Louis Dickler was installed as acting CFO—the Robert Kyncl-piloted company has released preliminary fiscal Q3 results that point to another quarter of healthy growth.

For the period ending June 30, revenue is expected to have climbed 10% year over year to approximately $1.86b, powered by gains in recorded music, publishing and digital. Recorded-music revenue rose 10% to roughly $1.48m; music publishing shot up 12% to $377m.

Streaming again powered the quarter. Digital revenue spiked 11% to approximately $1.25b, led by 12% growth in recorded-music streaming revenue to just over $1b. Subscription streaming grew 12%, ad-supported streaming improved 10% and music-publishing digital revenue jumped 15% to $235m.

Profitability also surged. Operating income is projected to have risen 80% to $305m, with adjusted OIBDA increasing 16% to $433m, expanding margin to 23.2% from 22.1%. Warner attributed the improvement to strong operating performance and savings generated by its ongoing restructuring program.

Cash generation saw one of the quarter's biggest leaps, with operating cash flow soaring 209% to approximately $142m, compared to $46m in the prior-year period. The company finished June with roughly $618m in cash and $4.71b in debt.

Adjusted EPS is expected to increase 21% to $0.51, while GAAP EPS improved to $0.39 from a loss of $0.03 a year earlier.

WMG also reaffirmed its longer-term outlook, maintaining guidance for high-single-digit consolidated revenue growth, double-digit adjusted OIBDA and adjusted EPS growth, and 50-60% operating cash-flow conversion.

The preliminary release advances Warner's full earnings report, scheduled for Aug. 5. Shares traded modestly higher following the announcement.