Warner Music Group's (NASDAQ:WMG) Q1 Sales Top Estimates

Max Juang /
2024/05/09 7:32 am EDT

Global music entertainment company Warner Music Group (NASDAQ:WMG) reported results ahead of analysts' expectations in Q1 CY2024, with revenue up 6.8% year on year to $1.49 billion. It made a GAAP profit of $0.18 per share, improving from its profit of $0.07 per share in the same quarter last year.

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Warner Music Group (WMG) Q1 CY2024 Highlights:

  • Revenue: $1.49 billion vs analyst estimates of $1.48 billion (small beat)
  • EPS: $0.18 vs analyst estimates of $0.16 (9.8% beat)
  • Gross Margin (GAAP): 47.1%, down from 48.5% in the same quarter last year
  • Free Cash Flow was -$57 million, down from $264 million in the previous quarter
  • Market Capitalization: $18.46 billion

Launching the careers of legendary artists like Frank Sinatra, Warner Music Group (NASDAQ:WMG) is a music company managing a diverse portfolio of artists, recordings, and music publishing services worldwide.


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Sales Growth

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Warner Music Group's annualized revenue growth rate of 8.3% over the last five years was weak for a consumer discretionary business. Warner Music Group Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Warner Music Group's recent history shows the business has slowed as its annualized revenue growth of 5.8% over the last two years is below its five-year trend.

We can better understand the company's revenue dynamics by analyzing its most important segments, Recorded Music and Music Publishing, which are 79.6% and 20.5% of revenue. Over the last two years, Warner Music Group's Recorded Music revenue (new music production) averaged 3.8% year-on-year growth while its Music Publishing revenue (royalties from catalog music) averaged 18.5% growth.

This quarter, Warner Music Group reported solid year-on-year revenue growth of 6.8%, and its $1.49 billion of revenue outperformed Wall Street's estimates by 0.9%. Looking ahead, Wall Street expects sales to grow 3.8% over the next 12 months, a deceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Warner Music Group has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 10.3%, slightly better than the broader consumer discretionary sector.

Warner Music Group Free Cash Flow Margin

Warner Music Group burned through $57 million of cash in Q1, equivalent to a negative 3.8% margin, reducing its cash burn by 39% year on year.

Key Takeaways from Warner Music Group's Q1 Results

It was good to see Warner Music Group narrowly beat analysts' revenue and EPS expectations this quarter, driven by outperformance in its Music Publishing segment. On the other hand, its operating margin missed and it burned cash-Wall Street was anticipating positive free cash flow. Overall, this was a bad quarter for Warner Music Group. The company is down 1.9% on the results and currently trades at $35 per share.

Warner Music Group may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.