Warner Music Stock Surges on Q1 Performance, Announces Major Restructuring for Future Growth

Warner Music Group Corp WMG shares climbed 5% during the premarket session after it reported first-quarter fiscal 2024 results Wednesday.

Adjusted EPS of $0.30 missed the consensus of $0.43. Revenue grew 17% year-on-year (Y/Y) to $1.75 billion, beating the consensus of $1.67 billion.

Recorded Music revenue grew by 17% Y/Y at $1.45 billion in the quarter. Music Publishing revenue increased by 22% Y/Y to $304 million, and Digital increased by 16% Y/Y to $1.10 billion.

Adjusted OIBDA rose 35% Y/Y to $451 million with margin increased by 330 bps to 25.8%. 

Warner Music held $754 million in cash and equivalents as of December 31, 2023. Operating cash flow increased 40% to $293 million from $209 million in the prior-year quarter.

CFO Bryan Castellani said, “The strength and resilience of our business was highlighted by an acceleration in Recorded Music streaming growth and continued momentum in Music Publishing, which saw its fifth consecutive quarter of increasing revenue growth.”

Warner Music Group also disclosed a strategic restructuring plan to free up more funds to invest in music and accelerate growth for the next decade. 

It targets pre-tax cost savings of approximately $200 million on an annualized run-rate basis by the end of fiscal year 2025.

The company targets a combination of the disposal or winding down of certain non-core owned and operated media properties, including the in-house ad sales function (the “O&O Media Properties”).

Warner Music Group sees a reduction in headcount of approximately 600 or 10%, most of which will be related to the O&O Media Properties. 

The plan will likely result in $140 million of non-recurring pre-tax charges or $105 million of total after-tax charges.

The company will incur the majority of the charges associated with the plan by the end of fiscal year 2024. 

Price Action: WMG shares traded higher by 5.03% at $38.01 premarket on the last check Thursday.

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