Warner Music(US:WMG)2019-11-27 13:28Financial Performance - Warner Music Group's primary financial measure of operating performance is OIBDA, which is considered an important indicator of operational strengths [196]. - Total revenues increased by $470 million, or 12%, to $4,475 million for the fiscal year ended September 30, 2019, compared to $4,005 million for the fiscal year ended September 30, 2018 [219]. - OIBDA increased by $147 million, or 31%, to $625 million for the fiscal year ended September 30, 2019, compared to $478 million for the fiscal year ended September 30, 2018 [256]. - Operating income increased by $139 million to $356 million for the fiscal year ended September 30, 2019, from $217 million for the fiscal year ended September 30, 2018 [263]. - Net income decreased by $54 million to $258 million for the fiscal year ended September 30, 2019, from $312 million for the fiscal year ended September 30, 2018 [276]. - Cash provided by operating activities was $400 million for the fiscal year ended September 30, 2019, compared to $425 million for the fiscal year ended September 30, 2018 [322]. Revenue Sources - The company reported a significant increase in digital revenues, which are expected to be a major source of growth and new revenue streams [204]. - Warner Music Group's Recorded Music revenues are derived from four main sources, including digital, physical, artist services, and licensing [207]. - The company has expanded its revenue streams through artist services and expanded-rights deals, allowing participation in artists' revenue from touring and merchandising [206]. - Warner Music Group's Music Publishing operations are conducted through Warner Chappell Music, which controls rights to over 1.4 million musical compositions [208]. - Recorded Music revenues increased by $480 million, or 14%, to $3,840 million for the fiscal year ended September 30, 2019, driven by growth in digital revenue and artist services [222]. Digital Revenue Growth - Digital revenues increased by $358 million, or 16%, to $2,610 million for the fiscal year ended September 30, 2019, representing 58% of consolidated revenues [220]. - Streaming services revenue grew by $391 million to $1,733 million for the fiscal year ended September 30, 2018, up from $1,342 million in the previous year [230]. - International Recorded Music digital revenue increased by $168 million due to streaming services, partially offset by a $35 million decline in download revenue [234]. Cost and Expenses - Total cost of revenues increased by $230 million, or 11%, to $2,401 million for the fiscal year ended September 30, 2019, remaining constant at 54% of revenues [239]. - Artist and repertoire costs increased by $103 million, or 7%, to $1,574 million for the fiscal year ended September 30, 2019, with a decrease in percentage of revenues to 35% [240]. - Selling and marketing expenses increased by $102 million, or 19%, to $632 million for the fiscal year ended September 30, 2019, representing 14% of revenues [248]. - General and administrative expenses decreased by $50 million, or 6%, to $764 million for the fiscal year ended September 30, 2019, representing 17% of revenues [247]. Debt and Financing - At September 30, 2019, the company had $2.974 billion of debt and $619 million of cash and equivalents, resulting in net debt of $2.355 billion [319]. - The company has a $180 million revolving credit facility, with a final maturity date of January 31, 2023 [337]. - The Senior Term Loan Facility amounts to $1.326 billion, maturing on November 1, 2023 [340]. - The company issued $300 million in 5.000% Secured Notes and $250 million in 4.875% Secured Notes, among other debt instruments, to manage its financing [346]. - The company expects to continue taking opportunistic steps to extend maturity dates and reduce interest expenses [335]. Dividends and Shareholder Returns - The company declared a cash dividend of $206.25 million on September 23, 2019, which was paid to stockholders on October 4, 2019 [369]. - For fiscal year 2019, the company paid a total of $93.75 million in cash dividends, compared to $925 million in fiscal year 2018 [369]. - The company has a regular quarterly dividend policy and intends to pay a variable dividend based on cash generated from operations [370]. Goodwill and Impairment - The company has recorded goodwill of $1.761 billion, with $1.297 billion attributed to Recorded Music and $464 million to Music Publishing [389]. - The company tests goodwill for impairment annually, with no impairment recorded for fiscal 2019 [389].