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While its streaming numbers were strong, Warner Music’s earnings took a hit during the second fiscal quarter of 2020 as the coronavirus pandemic wreaked havoc on the economy. The company has placed its IPO, announced earlier this year, on hold for the time being, although plans remain active.

Streaming revenues were up 11% to $586 million, up $49 million year over year, and digital revenue was up 5.7% (7.4% in constant currency).

However, total revenue was down 1.7% compared to the prior year-quarter or flat in constant currency, net loss was $74 million versus net income of $67 million in the prior-year quarter and OIBDA was $12 million versus $191 million in the prior-year quarter. Recorded music revenues were down 2.8% year over year (1.5% at constant currency) to $907 million.

Physical music sales were hit hard, dropping 27.7% ($36 million) to $94 million.

CEO Steve Cooper and COO Eric Levin spoke of the challenges in the current climate and highlighted the company’s “fundamental strength,” the durability of digital and the value of streaming, its caution with costs and that it “remains positive about the future,” while noting that the full impact of the pandemic will not be evident until the next quarter. They also noted that the company’s publishing division, Warner Chappell, contributed to every No. 1 single on the Billboard Hot 100 in the quarter and the signing of a new licensing deal with Spotify.

Cooper highlighted the success in the quarter of Dua Lipa, Lil Uzi Vert, Lizzo, Roddy Rich, Ed Sheeran, Japan’s Tones & I and Korea’s Twice.

“We had a tough comparison with an especially strong Q2 in 2019, so I’m pleased that we’ve matched our excellent performance in the prior-year quarter,” Cooper said, “due in large part to an 11% increase in Recorded Music streaming revenue and a 17% increase in Music Publishing digital revenue. That’s a tremendous achievement, especially coming on the heels of Q1, when we achieved the highest quarterly revenue in our sixteen-year history as a standalone company. In these unprecedented times, we’re determined to protect the livelihoods of our artists, our songwriters and our people. We’re confident that our distinctive combination of creative innovation and financial discipline will help us weather this storm and emerge stronger, better and more agile than ever.”

“For the rest of the fiscal year, we’re focused on delivering robust results and managing our costs carefully,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO. “Our cash position is robust, and our goal now is to come out the other side of the COVID-19 pandemic stronger than ever.”

Revenue was down 1.7% (or flat in constant currency), and the company’s growth in recorded music digital revenue and music publishing digital, synchronization and mechanical revenue was more than offset by a deep decline in recorded music physical and artist services, and also expanded-rights revenue and in music publishing performance revenue, according to the company. Recorded music licensing revenue was flat.

The revenue decline was primarily due to a lighter release schedule, some COVID-related business disruption and foreign exchange rates in the current quarter and one-time impact of a digital streaming license in the prior-year quarter, the company said. Digital revenue grew 5.7% (or 7.4% in constant currency), and represented 65.3% of total revenue, compared to 60.6% in the prior-year quarter.

Operating loss was $49 million compared to operating income of $122 million in the prior-year quarter.  OIBDA was $12 million, down 93.7% from $191 million in the prior-year quarter and OIBDA margin decreased 16.4 percentage points to 1.1% from 17.5% in the prior-year quarter.

Net loss was $74 million compared to net income of $67 million in the prior-year quarter and adjusted net loss was $43 million compared to Adjusted net income of $75 million in the prior-year quarter.  The decrease was due to the operating loss in the quarter, losses on investments compared to a gain in the prior-year quarter and lower other income associated with the gain on the company’s Euro-denominated debt and intercompany loans due to foreign exchange rates, partially offset by a tax benefit in the quarter due to lower pre-tax income, according to the announcement. Adjusted operating income, adjusted OIBDA and adjusted net income exclude costs related to the Company’s proposed initial public offering, certain one-time non-cash charges resulting from COVID-related business disruption and restructuring and other related costs in the current quarter and certain costs related to the Company’s Los Angeles office consolidation and restructuring and other related costs in the prior-year quarter.

Recorded music revenue was down 2.8% (or 1.5% in constant currency), due to a lighter release schedule, some COVID-related business disruption and foreign exchange rates in the current quarter and the one-time impact of a digital streaming license in the prior-year quarter.

Growth in digital revenue was more than offset by declines in physical and artist services and expanded-rights revenue.  Licensing revenue was flat. Digital revenue growth reflects the continuing shift to streaming and was impacted by a one-time digital streaming license in the prior year-quarter.

Recorded Music operating income was $36 million, down 73.1% from $134 million in the prior-year quarter and operating margin was down 10.4 percentage points to 4.0% versus 14.4% in the prior-year quarter.

Music publishing revenue grew 5.1% (or 7.8% in constant currency).  Growth in digital, synchronization and mechanical revenue was offset by a decline in performance revenue.

Music publishing operating income was $30 million compared to $27 million in the prior-year quarter largely driven by higher revenue and lower amortization expense.  Operating margin grew 1.0 percentage points to 18.1%.  Music Publishing OIBDA increased by $1 million or 2.1% to $48 million, and OIBDA margin declined 0.8 percentage points to 28.9% from 29.7%. Adjusted OIBDA increased by $2 million and Adjusted OIBDA margin declined 0.2 percentage points to 29.5% due to the timing of A&R spend, partially offset by revenue mix.