Warner Music set a record for quarterly revenue in the fiscal first quarter that ended on Dec. 31, 2021, with $1.614 in revenue powered by a 31% increase in publishing revenue, 19% in recorded music and 21% in digital revenue. Major sellers for the quarter included Ed Sheeran, Coldplay, Dua Lipa and Silk Sonic.
“Hitting an all-time high in our 18 years as a standalone company is proof that we’ve never been stronger. At the same time, we’ve never had so much opportunity ahead of us,” said Steve Cooper, CEO, Warner Music Group. “Our creative expertise, global agility, and willingness to experiment set us apart from the competition and solidify our important role across the entire music ecosystem. In the coming year, we look forward to welcoming back huge superstars, breaking new artists and songwriters, and seeking out more innovative ways to bring more music to more people in more places.”
Revenue was up 20.9% (or 22.4% in constant currency) driven by digital revenue growth of 21.5% (or 22.2% in constant currency) across recorded music and publishing.
The quarter included an additional week, primarily reflected in recorded music streaming revenue. The announcement also noted that the quarter included the impact of a new deal with an unspecified digital partner, impacting recorded music streaming revenue.
Total streaming revenue increased 22.8% (or 23.6% in constant currency) driven by growth across recorded music and music publishing, including revenue from emerging streaming platforms. Digital revenue represented 62.1% of total revenue in the quarter, compared to 61.8% in the prior-year quarter.
Operating income was $239 million compared to $196 million in the prior-year quarter. Net income was $188 million compared to $99 million in the prior-year quarter. OIBDA was $320 million, an increase from $267 million in the prior-year quarter, and OIBDA margin decreased 0.2 percentage points to 19.8% from 20% in the prior-year quarter. The decrease in OIBDA margin was primarily due to an increase in non-cash stock-based compensation and other related expenses from a one-time equity grant and the timing of expense recognition for new annual equity grants in the quarter.
Adjusted OIBDA increased 25.9% from $282 million to $355 million and Adjusted OIBDA margin increased 0.9 percentage points to 22.0% from 21.1% in the prior-year quarter due to strong operating performance, which was partially offset by growth of lower-margin COVID-impacted revenue streams in the quarter. Adjusted operating income increased 29.9% from $211 million to $274 million due to the same factors affecting Adjusted OIBDA, partially offset by higher depreciation and amortization expenses due to recent acquisitions and capital spending.
As of December 31, 2021, the company reported a cash balance of $450 million, total debt of $3.846 billion and net debt (defined as total debt, net of deferred financing costs, premiums and discounts, minus cash and equivalents) of $3.396 billion.
Recorded Music revenue was up 19.4% (or 20.9% in constant currency) due to growth across all revenue lines, including increases in digital revenue which reflect the continued growth in streaming, the company’s largest source of revenue. Adjusted for the benefit of the additional week and the impact of the new deal with one of our digital partners, as noted above, recorded music revenue was up 15.9% (or 17.4% in constant currency).
Digital revenue grew 19.7% (or 20.5% in constant currency). Streaming revenue grew 20.8% (or 21.9% in constant currency). Adjusted for the additional week and the impact of the new digital deal, recorded music streaming revenue was up 16.9% (or 18.0% in constant currency). Digital revenue represented 62.8% of total recorded music revenue versus 62.6% in the prior-year quarter. Artist services and expanded-rights revenue increased 28.9% (or 33.3% in constant currency), reflecting an increase in merchandising and concert promotion revenue, both of which were disrupted by COVID in the prior-year quarter.
Physical revenue grew 12.1% (or 14.0% in constant currency) primarily due to new releases, an increasing demand for vinyl products and COVID disruption in the prior-year quarter. Licensing revenue increased 11.3% (or 12.7% in constant currency), mainly due to higher synchronization and other licensing revenue, as businesses continued to recover from COVID disruption.
Recorded music operating income was $276 million, up from $223 million in the prior-year quarter, and operating margin was up 0.7 percentage points to 19.9% versus 19.2% in the prior-year quarter. OIBDA increased to $330 million from $269 million in the prior-year quarter and OIBDA margin increased 0.6 percentage points to 23.8%.
Music publishing revenue increased 30.9% (or 31.6% in constant currency). The revenue increase was driven by growth across all revenue lines. Digital revenue increased 34.3% (as reported and in constant currency) reflecting the continuing growth in streaming, including emerging streaming platforms, and timing of new digital deals.
Digital revenue growth in the quarter was impacted by a shift in the collection of writer’s share of U.S. digital performance income from certain digital service providers. This change has no impact on Music Publishing OIBDA, but results in a slight improvement to OIBDA margin. Streaming revenue increased 37.2% (or 35.8% in constant currency). Digital revenue represented 58.1% of total music publishing revenue versus 56.6% in the prior-year quarter. Synchronization revenue increased due to higher television, motion picture and commercial income and COVID disruption in the prior-year quarter. Performance revenue increased as bars, restaurants, concerts and live events continued to recover from COVID disruption. Mechanical revenue increased as businesses continued to recover from COVID disruption and from strong physical sales.
Music publishing operating income was $32 million compared to $18 million in the prior-year quarter, largely driven by increased revenue. Operating margin increased 3.7 percentage points to 14.0%. Music Publishing OIBDA increased 38.5% to $54 million and OIBDA margin increased 1.3 percentage points to 23.6%. Adjusted OIBDA increased 37.5% to $55 million and Adjusted OIBDA margin increased 1.1 percentage points to 24.0%. The increases in OIBDA margin and Adjusted OIBDA margin were primarily due to strong operating performance.