- Revenue & Profit Growth: Q3 revenue up 7%, adjusted OIBDA surged 16% to $405M, margin expanded 170 bps to 22.1%.
- Streaming Momentum: Recorded Music subscription growth hit 8.5% (adjusted), driven by market share gains and chart-topping titles.
- Cost Efficiency Plan: $300M cost savings target from reorganization, including streamlined marketing and APAC leadership overhaul.
- Dividend Increase: Quarterly dividend raised 6% to $0.19/share, fifth consecutive annual hike reflecting confidence in cash flow.
Strategy and Cost Savings
The company has announced a strategic reorganization plan, which is expected to generate $300 million in cost savings and improve the company's financial profile. The plan includes a new marketing setup, a sharper focus on hip-hop and R&B, and the appointment of a new leader in APAC. As stated by the CEO, "We're pleased with our releases and expect financial performance to reflect our artists' and songwriters' success as we move past tough comparables and see uplift from recent renewals with streaming services."
Financial Outlook and Capital Allocation
The company has increased its quarterly dividend for the fifth year in a row to $0.19 a share, an increase of 6%. WMG's capital allocation priority is to invest in its business, followed by returning capital to shareholders through buybacks and dividends. The company is confident about its midterm growth guidance of 8% to 10%. Regarding subscription streaming, WMG is happy with its 8.5% core growth and expects future growth driven by industry trends, DSP renewals, and investments in M&A and its core business.
Valuation
Warner Music Group's strong financial performance and growth prospects are reflected in its valuation metrics. The company trades at a P/E Ratio of 36.5, a P/B Ratio of 29.1, and an EV/EBITDA of 16.32. The dividend yield stands at 2.27%, and the free cash flow yield is 3.47%. With a ROIC of 9.62% and a ROE of 85.57%, WMG's financial profile appears attractive.