Warner Music Group Swings to Net Loss, But Sees Revenue Growth In Third Quarter

Warner Music Group Swings to Net Loss, But Sees Revenue Growth In Third Quarter

Warner Music Group swung to a net loss of $16 million in the third quarter after reporting net income of $141 million a year earlier. 

However, revenue increased to $1.7 billion from $1.5 billion, driven by an increase in streaming revenue. Shares of Warner Music were up about 3 percent in pre-market trading Thursday.

“We saw a broad based re-acceleration, with total revenue growth of 7% reflecting growth across recorded music and music publishing. Recorded Music subscription streaming grew 8.5% adjusted for notable items,” CEO Robert Kyncl said on the earnings call.

Kyncl also highlighted the company’s “sustained and impressive showing on the charts,” which included recording artists with half of the top 10 on the Spotify global chart for 12 weeks, and currently seven of the top 20 spots on Billboard Global 200, propelled by artists including Alex Warren, Teddy swims, Benson Boone and ROSÉ.

New music is expected to come from Ed Sheeran, Zach Ryan, Alex Warren, 21 Pilots, Sombr, Cardi B David Guetta and more.

The company attributed the net loss in the third quarter to about $9 million in expenses related to the departure of the company’s CFO Bryan Castellani, an increase in restructuring and impairment charges, an increase in amortization expenses, the impact of exchange rates on the company’s Euro-dominated debt resulting in a $70 million loss and unrealized losses on hedging activity of $8 million in the quarter, among other items. Armin Zerza, formerly the CFO at Activision Blizzard, stepped into the CFO at Warner Music May 5.

As a result of some of these factors, operating income also decreased to $169 million from $207 million in the year-earlier period.

Recorded music revenue hit $1.3 billion, up from $1.2 billion, which includes $16 million of digital revenue from the settlement of copyright infringement cases.

Part of the growth path going forward includes a restructuring plan announced in May that is meant to lower costs by $300 million and includes job cuts. Warner Music also announced a partnership with Bain Capital in July to purchase up to $1.2 billion in music catalogs in recorded music and publishing.

“This quarter we delivered massive chart hits, breakthrough stars, strong revenue growth, and market share gains … all of which show our strategy is working,” Kyncl said in the earnings release. “As we continue to evolve our company, we’re focusing on the artists, songwriters, and markets with the greatest potential, while expanding our iconic catalog, and building the dynamic teams and tools that will help our talent have the biggest global impact.”