Warner Music Group Corp 10-Q for FY2024 Q2

Warner Music Group Corp. (WMG)

10-Q 2024-05-09 For: 2024-03-31

Added on April 10, 2026

About this 10-Q

Warner Music Group Corp filed this 10-Q on May 9, 2024, covering the quarter ended March 31, 2024 (FY2024 Q2).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.49B; up 6.8% from $1.4B a year earlier
Net income: $96M; up 182.4% from net income of $34M a year earlier

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		Page Number
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 202 4 and September 30, 2023	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 202 4 and March 31, 2023	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended March 31, 202 4 and March 31, 2023	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 202 4 and March 31, 2023	4
	Condensed Consolidated Statements of Equity for the Three and Six Months Ended March 31, 202 4 and March 31, 2023	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
Part II.	Other Information
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
Signatures		58


	March 31, 2024		September 30, 2023
Assets
Current assets:
Cash and equivalents	$	587	$	641
Accounts receivable, net of allowances of $21 million and $19 million	1,197		1,120
Inventories	97		126
Royalty advances expected to be recouped within one year	456		413
Prepaid and other current assets	113		102
Total current assets	2,450		2,402
Royalty advances expected to be recouped after one year	759		688
Property, plant and equipment, net of accumulated depreciation of $573 million and $523 million	462		458
Operating lease right-of-use assets, net	233		245
Goodwill	2,007		1,993
Intangible assets subject to amortization, net	2,318		2,353
Intangible assets not subject to amortization	150		149
Deferred tax assets, net	30		32
Other assets	322		225
Total assets	$	8,731	$	8,545
Liabilities and Equity
Current liabilities:
Accounts payable	$	306	$	300
Accrued royalties	2,409		2,219
Accrued liabilities	465		533
Accrued interest	18		18
Operating lease liabilities, current	43		41
Deferred revenue	234		371
Other current liabilities	58		57
Total current liabilities	3,533		3,539
Long-term debt	3,984		3,964
Operating lease liabilities, noncurrent	239		255
Deferred tax liabilities, net	236		216
Other noncurrent liabilities	154		141
Total liabilities	$	8,146	$	8,115
Equity:
Class A common stock, $0.001 par value; 1,000,000 shares authorized, 141,596 and 138,345 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively	$	—	$	—
Class B common stock, $0.001 par value; 1,000,000 shares authorized, 376,315 and 377,650 issued and outstanding as of March 31, 2024 and September 30, 2023, respectively	1		1
Additional paid-in capital	2,043		2,015
Accumulated deficit	(1,310)		(1,387)
Accumulated other comprehensive loss, net	(301)		(322)
Total Warner Music Group Corp. equity	433		307
Noncontrolling interest	152		123
Total equity	585		430
Total liabilities and equity	$	8,731	$	8,545


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Revenue	$	1,494	$	1,399	$	3,242	$	2,887
Costs and expenses:
Cost of revenue	(791)		(721)		(1,671)		(1,482)
Selling, general and administrative expenses (a)	(446)		(452)		(922)		(892)
Restructuring and impairments	(95)		(41)		(95)		(41)
Amortization expense	(57)		(61)		(112)		(124)
Total costs and expenses	(1,389)		(1,275)		(2,800)		(2,539)
Net gain on divestitures	14		—		31		41
Operating income	119		124		473		389

Interest expense, net	(42)		(35)		(81)		(67)
Other income (expense)	37		(31)		(13)		(92)
Income before income taxes	114		58		379		230
Income tax expense	(18)		(21)		(90)		(69)
Net income	96		37		289		161
Less: Income attributable to noncontrolling interest	—		(3)		(34)		(5)
Net income attributable to Warner Music Group Corp.	$	96	$	34	$	255	$	156

Net income per share attributable to common stockholders:
Class A – Basic and Diluted	$	0.18	$	0.06	$	0.49	$	0.30
Class B – Basic and Diluted	$	0.18	$	0.06	$	0.49	$	0.30
Weighted average common shares:
Class A – Basic and Diluted	141,044		138,257		140,013		137,841
Class B – Basic and Diluted	376,800		377,650		377,145		377,650

(a) Includes depreciation expense:	$	(26)	$	(22)	$	(52)	$	(43)


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Net income	$	96	$	37	$	289	$	161
Other comprehensive (loss) income, net of tax:
Foreign currency adjustment	(41)		19		23		91
Deferred (loss) gain on derivative financial instruments	—		(4)		(1)		(5)
Minimum pension liability	—		—		(1)
Other comprehensive (loss) income, net of tax	(41)		15		21		86
Total comprehensive income	55		52		310		247
Less: Income attributable to noncontrolling interest	—		(3)		(34)		(5)
Comprehensive income attributable to Warner Music Group Corp.	$	55	$	49	$	276	$	242


	Six Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net income	$	289	$	161
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	164		167
Unrealized (gains) losses and remeasurement of foreign-denominated loans and foreign currency forward exchange contracts	18		93
Deferred income taxes	16		(3)
Net loss (gain) on investments	(5)		3
Net loss (gain) on divestitures	(31)		(41)
Non-cash interest expense	2		3
Non-cash stock-based compensation expense	18		35
Non-cash impairments	50		—
Changes in operating assets and liabilities:
Accounts receivable, net	(68)		—
Inventories	30		2
Royalty advances	(105)		(25)
Other noncurrent assets	(85)		(7)
Accounts payable and accrued liabilities	(51)		(65)
Royalty payables	171		67

Operating lease liabilities	(3)		(1)
Deferred revenue	(139)		(123)
Other balance sheet changes	(9)		(63)
Net cash provided by operating activities	262		203
Cash flows from investing activities
Acquisition of music publishing rights and music catalogs, net	(82)		(42)
Capital expenditures	(55)		(56)
Investments and acquisitions of businesses, net of cash received	(17)		(17)
Proceeds from the sale of investments	12		22
Proceeds from divestitures	17		42
Net cash used in investing activities	(125)		(51)
Cash flows from financing activities

Partial proceeds from Senior Term Loan Facility refinancing	42		147
Partial repayment of Senior Term Loan Facility refinancing	(42)		—
Deferred financing costs paid	(2)		(2)

Distribution to noncontrolling interest holders	(5)		(7)
Dividends paid	(178)		(167)
Taxes paid related to net share settlement of restricted stock units and common stock	(5)		—
Proceeds from Term Loan Mortgage	—		19
Payment of deferred and contingent consideration	—		(133)
Net cash used in financing activities	(190)		(143)
Effect of exchange rate changes on cash and equivalents	(1)		8
Net (decrease) increase in cash and equivalents	(54)		17
Cash and equivalents at beginning of period	641		584
Cash and equivalents at end of period	$	587	$	601


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Warner Music Group Corp. (Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		13-4271875 (I.R.S. Employer Identification No.)
	1633 Broadway New York, NY 10019 (Address of principal executive offices) (212) 275-2000 (Registrant’s telephone number, including area code)


Six Months Ended March 31, 2024
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Warner Music Group Corp. Equity		Non-controlling Interest		Total Equity

	Shares	Value		Shares	Value
Balance at September 30, 2023	138,345	$	—	377,650	$	1	$	2,015	$	(1,387)	$	(322)	$	307	$	123	$	430
Net income	—	—		—	—		—		255		—		255		34		289
Other comprehensive income, net of tax	—	—		—	—		—		—		21		21		—		21
Dividends ($0.34 per share)	—	—		—	—		—		(178)		—		(178)		—		(178)
Stock-based compensation	—	—		—	—		33		—		—		33		—		33
Distribution to noncontrolling interest holders	—	—		—	—		—		—		—		—		(5)		(5)


Shares issued under the Plan	1,738	—		—	—		—		—		—		—		—		—
Exchange of Class B shares for Class A shares	1,335	—		(1,335)	—		—		—		—		—		—		—
Shares issued under Omnibus Incentive Plan	178	—		—	—		(5)		—		—		(5)		—		(5)

Balance at March 31, 2024	141,596	$	—	376,315	$	1	$	2,043	$	(1,310)	$	(301)	$	433	$	152	$	585


Three Months Ended March 31, 2024
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Warner Music Group Corp. Equity		Non-controlling Interest		Total Equity

	Shares	Value		Shares	Value
Balance at December 31, 2023	140,637	$	—	377,103	$	1	$	2,039	$	(1,317)	$	(260)	$	463	$	153	$	616
Net income	—	—		—	—		—		96		—		96		—		96
Other comprehensive income, net of tax	—	—		—	—		—		—		(41)		(41)		—		(41)
Dividends ($0.17 per share)	—	—		—	—		—		(89)		—		(89)		—		(89)
Stock-based compensation	—	—		—	—		9		—		—		9		—		9
Distribution to noncontrolling interest holders	—	—		—	—		—		—		—		—		(1)		(1)
Shares issued under the Plan	—	—		—	—		—		—		—		—		—		—
Exchange of Class B shares for Class A shares	788	—		(788)	—		—		—		—		—		—		—
Shares issued under Omnibus Incentive Plan	171	—		—	—		(5)		—		—		(5)		—		(5)

Balance at March 31, 2024	141,596	$	—	376,315	$	1	$	2,043	$	(1,310)	$	(301)	$	433	$	152	$	585


Six Months Ended March 31, 2023
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Warner Music Group Corp. Equity		Non-controlling Interest		Total Equity

	Shares	Value		Shares	Value
Balance at September 30, 2022	137,199	$	—	377,650	$	1	$	1,975	$	(1,477)	$	(347)	$	152	$	16	$	168
Net income	—	—		—	—		—		156		—		156		5		161
Other comprehensive income, net of tax	—	—		—	—		—		—		86		86		—		86
Dividends ($0.32 per share)	—	—		—	—		—		(167)		—		(167)		—		(167)
Stock-based compensation	—	—		—	—		25		—		—		25		—		25
Distribution to noncontrolling interest holders	—	—		—	—		—		—		—		—		(7)		(7)
Shares issued under the Plan	869	—		—	—		—		—		—		—		—		—
Shares issued under Omnibus Incentive Plan	256	—		—	—		—		—		—		—		—		—
Balance at March 31, 2023	138,324	$	—	377,650	$	1	$	2,000	$	(1,488)	$	(261)	$	252	$	14	$	266


Three Months Ended March 31, 2023
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Warner Music Group Corp. Equity		Non-controlling Interest		Total Equity

	Shares	Value		Shares	Value
Balance at December 31, 2022	138,073	$	—	377,650	$	1	$	1,984	$	(1,439)	$	(276)	$	270	$	12	$	282
Net income	—	—		—	—		—		34		—		34		3		37
Other comprehensive income, net of tax	—	—		—	—		—		—		15		15		—		15
Dividends ($0.16 per share)	—	—		—	—		—		(83)		—		(83)		—		(83)
Stock-based compensation	—	—		—	—		16		—		—		16		—		16
Distribution to noncontrolling interest holders	—	—		—	—		—		—		—		—		(1)		(1)
Shares issued under Omnibus Incentive Plan	251	—		—	—		—		—		—		—		—		—
Balance at March 31, 2023	138,324	$	—	377,650	$	1	$	2,000	$	(1,488)	$	(261)	$	252	$	14	$	266


	Three Months Ended March 31,
	2024				2023
	Class A		Class B		Class A		Class B
Basic and Diluted EPS:
Numerator
Net income attributable to Warner Music Group Corp.	$	27	$	69	$	10	$	24
Less: Net income attributable to participating securities	(1)		—		(1)		—
Net income attributable to common stockholders	$	26	$	69	$	9	$	24
Denominator
Weighted average shares outstanding	141,044		376,800		138,257		377,650
Basic and Diluted EPS	$	0.18	$	0.18	$	0.06	$	0.06

	Six Months Ended March 31,
	2024				2023
	Class A		Class B		Class A		Class B
Basic and Diluted EPS:
Numerator
Net income attributable to Warner Music Group Corp.	$	71	$	184	$	43	$	113
Less: Net income attributable to participating securities	(3)		—		(2)		—
Net income attributable to common stockholders	$	68	$	184	$	41	$	113
Denominator
Weighted average shares outstanding	140,013		377,145		137,841		377,650
Basic and Diluted EPS	$	0.49	$	0.49	$	0.30	$	0.30


	Rest of FY24		FY25		FY26		Thereafter		Total
	(in millions)
Remaining performance obligations	$	352	$	285	$	23	$	6	$	666
Total	$	352	$	285	$	23	$	6	$	666


FORM 10-Q


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
	(in millions)
Revenue by Type
Digital	$	848	$	796	$	1,756	$	1,599
Physical	111		118		265		251
Total digital and physical	959		914		2,021		1,850
Artist services and expanded-rights	126		131		330		337
Licensing	104		98		283		195
Total Recorded Music	1,189		1,143		2,634		2,382
Performance	52		45		103		90
Digital	187		146		383		295
Mechanical	15		16		30		30
Synchronization	48		46		87		85
Other	4		4		7		7
Total Music Publishing	306		257		610		507
Intersegment eliminations	(1)		(1)		(2)		(2)
Total revenues	$	1,494	$	1,399	$	3,242	$	2,887
Revenue by geographical location
U.S. Recorded Music	$	508	$	522	$	1,135	$	1,061
U.S. Music Publishing	170		135		342		268
Total U.S.	678		657		1,477		1,329
International Recorded Music	681		621		1,499		1,321
International Music Publishing	136		122		268		239
Total international	817		743		1,767		1,560
Intersegment eliminations	(1)		(1)		(2)		(2)
Total revenues	$	1,494	$	1,399	$	3,242	$	2,887


	March 31, 2024		September 30, 2023
	(in millions)
Revolving Credit Facility (a)	$	—	$	—
Senior Term Loan Facility due 2031	1,295		1,295
2.750% Senior Secured Notes due 2028 (€325 face amount)	351		343
3.750% Senior Secured Notes due 2029	540		540
3.875% Senior Secured Notes due 2030	535		535
2.250% Senior Secured Notes due 2031 (€445 face amount)	481		471
3.000% Senior Secured Notes due 2031	800		800
Mortgage Term Loan due 2033	18		$	18
Total long-term debt, including the current portion	$	4,020	$	4,002
Issuance premium less unamortized discount and unamortized deferred financing costs	(36)		(38)
Total long-term debt, including the current portion, net	$	3,984	$	3,964


	For the Three Months Ended March 31,				2024 vs. 2023
	2024		2023		$ Change		% Change
Revenue by Type
Digital	$	848	$	796	$	52	7	%
Physical	111		118		(7)		-6	%
Total digital and physical	959		914		45		5	%
Artist services and expanded-rights	126		131		(5)		-4	%
Licensing	104		98		6		6	%
Total Recorded Music	1,189		1,143		46		4	%
Performance	52		45		7		16	%
Digital	187		146		41		28	%
Mechanical	15		16		(1)		-6	%
Synchronization	48		46		2		4	%
Other	4		4		—		—	%
Total Music Publishing	306		257		49		19	%
Intersegment eliminations	(1)		(1)		—		—	%
Total revenues	$	1,494	$	1,399	$	95	7	%
Revenue by Geographical Location
U.S. Recorded Music	$	508	$	522	$	(14)	-3	%
U.S. Music Publishing	170		135		35		26	%
Total U.S.	678		657		21		3	%
International Recorded Music	681		621		60		10	%
International Music Publishing	136		122		14		11	%
Total international	817		743		74		10	%
Intersegment eliminations	(1)		(1)		—		—	%
Total revenues	$	1,494	$	1,399	$	95	7	%


	Foreign Currency Translation Loss (a)		Minimum Pension Liability Adjustment		Deferred Gains (Losses) On Derivative Financial Instruments		Accumulated Other Comprehensive Loss, net
	(in millions)
Balances at September 30, 2023	$	(322)	$	(1)	$	1	$	(322)
Other comprehensive income (loss)	23		(1)		(1)		21
Balances at March 31, 2024	$	(299)	$	(2)	$	—	$	(301)


	Recorded Music		Music Publishing		Total
	(in millions)
Balances at September 30, 2023	$	1,529	$	464	$	1,993
Acquisitions	5		—		5

Other adjustments (a)	9		—		9
Balances at March 31, 2024	$	1,543	$	464	$	2,007


	Weighted-Average Useful Life	March 31, 2024		September 30, 2023
		(in millions)
Intangible assets subject to amortization:
Recorded music catalog	12 years	$	1,537	$	1,507
Music publishing copyrights	24 years	2,120		2,026
Artist and songwriter contracts	13 years	1,105		1,091
Trademarks	17 years	73		111
Other intangible assets	6 years	72		104
Total gross intangible assets subject to amortization		4,907		4,839
Accumulated amortization		(2,589)		(2,486)
Total net intangible assets subject to amortization		2,318		2,353
Intangible assets not subject to amortization:
Trademarks and tradenames	Indefinite	150		149
Total net intangible assets		$	2,468	$	2,502


	Severance Costs
	(in millions)
Balance at September 30, 2023	$	—
Restructuring charges	46
Cash payments	(1)
Balance at March 31, 2024	$	45


	Recorded Music		Music Publishing		Corporate expenses and eliminations		Total
Three Months Ended	(in millions)
March 31, 2024
Revenues	$	1,189	$	306	$	(1)	$	1,494
Adjusted OIBDA	272		82		(42)		312

March 31, 2023
Revenues	$	1,143	$	257	$	(1)	$	1,399
Adjusted OIBDA	249		76		(39)		286

	Recorded Music		Music Publishing		Corporate expenses and eliminations		Total
Six Months Ended	(in millions)
March 31, 2024
Revenues	$	2,634	$	610	$	(2)	$	3,242
Adjusted OIBDA	684		168		(89)		763

March 31, 2023
Revenues	2,382		507		(2)		2,887
Adjusted OIBDA	548		148		(75)		621


	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2024		2023		2024		2023
Operating income	$	119	$	124	$	473	$	389
Amortization expense	57		61		112		124
Depreciation expense	26		22		52		43
Restructuring and impairments	95		41		95		41
Transformation initiatives and other related costs	19		14		38		26
Executive transition costs	—		3		—		3
Net gain on divestitures	(14)		—		(31)		(41)
Non-cash stock-based compensation and other related costs	10		21		24		36
Adjusted OIBDA	$	312	$	286	$	763	$	621


	Fair Value Measurements as of March 31, 2024
	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)



Other current liabilities:

Foreign currency forward exchange contracts (a)	$	—	$	(1)	$	—	$	(1)

Other noncurrent assets:


Equity investments with readily determinable fair value (c)	12		—		—		12
Other noncurrent liabilities:
Contractual obligations (b)	—		—		(1)		(1)


	Fair Value Measurements as of September 30, 2023
	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Other current assets:
Interest rate swap (d)	$	—	$	2	$	—	$	2
Other noncurrent assets:
Equity investment with readily determinable fair value (c)	15		—		—		15
Other noncurrent liabilities:
Contractual obligations (b)	—		—		(1)		(1)


	Twelve Months Ended March 31,				Three Months Ended March 31,
	2024		2023		2024		2023
Net Income	$	567	$	436	$	96	$	37
Income tax expense	191		145		18		21
Interest expense, net	155		130		42		35
Depreciation and amortization	329		336		83		83
Loss on extinguishment of debt (a)	4		—		—		—
Net gains on divestitures and sale of securities (b)	(41)		(42)		(17)		(1)
Restructuring costs (c)	60		65		46		45
Net foreign exchange losses (gains) (d)	(27)		(30)		(32)		31

Transaction costs (e)	6		1		3		—
Business optimization expenses (f)	86		56		24		14
Non-cash stock-based compensation expense (g)	32		44		9		21
Other non-cash charges (h)	50		13		52		4
Pro forma impact of cost savings initiatives and specified transactions (i)	126		81		28		18
Adjusted EBITDA	$	1,538	$	1,235	$	352	$	308
Senior Secured Indebtedness (j)	$	3,746
Leverage Ratio (k)	2.44x


Exhibit Number						Exhibit Description
10.1						Eighth Incremental Commitment Amendment to Credit Agreement, dated as of January 24, 2024, among WMG Acquisition Corp., the several banks and other financial institutions party thereto and JPMorgan Chase Bank, N.A., as administrative agent, relating to the term loan credit agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 24, 2024)
31.1*						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
31.2*						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
32.1**						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


			WARNER MUSIC GROUP CORP.

			By:						/s/ ROBERT KYNCL
			Name: Title:						Robert Kyncl Chief Executive Officer (Principal Executive Officer)

			By:						/s/ BRYAN CASTELLANI
			Name: Title:						Bryan Castellani Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)


			/S/ ROBERT KYNCL
			Chief Executive Officer (Principal Executive Officer)


			/S/ BRYAN CASTELLANI
			Chief Financial Officer (Principal Financial and Accounting Officer)