MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: You should read the following discussion of our results of operations and financial condition with the unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 (the “Quarterly Report”).
+Added: You should read the following discussion of our results of operations and financial condition with the unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 (the “Quarterly Report”).
“SAFE HARBOR” STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
70 unchanged sentences
• Results of operations.
−Removed: This section provides an analysis of our results of operations for the three and six months ended March 31, 2023 and March 31, 2022.
+Added: This section provides an analysis of our results of operations for the three and nine months ended June 30, 2023 and June 30, 2022.
This analysis is presented on both a consolidated and segment basis.
• Financial condition and liquidity.
−Removed: This section provides an analysis of our cash flows for the six months ended March 31, 2023 and March 31, 2022, as well as a discussion of our financial condition and liquidity as of March 31, 2023.
+Added: This section provides an analysis of our cash flows for the nine months ended June 30, 2023 and June 30, 2022, as well as a discussion of our financial condition and liquidity as of June 30, 2023.
The discussion of our financial condition and liquidity includes recent debt financings and a summary of the key debt covenant compliance measures under our debt agreements.
98 unchanged sentences
The fiscal year ended September 30, 2022 included 53 weeks, with the additional week falling in the fiscal quarter ended December 31, 2021.
−Removed: Accordingly, the results of operations for the six months ended March 31, 2022 reflect 27 weeks, or 189 days, compared to 182 days for the six months ended March 31, 2023.
−Removed: For the six months ended March 31, 2022, the revenue benefit of the additional week was approximately $73 million, primarily reflected in Recorded Music streaming revenue.
+Added: Accordingly, the results of operations for the nine months ended June 30, 2022 reflect 40 weeks, or 280 days, compared to 273 days for the nine months ended June 30, 2023.
+Added: For the nine months ended June 30, 2022, the revenue benefit of the additional week was approximately $73 million, primarily reflected in Recorded Music streaming revenue.
Restructuring
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The Company expects to incur total non-recurring restructuring charges of approximately $41 million for severance costs, all of which is expected to be paid in cash.
−Removed: The Restructuring Plan is expected to be substantially completed by the end of the fiscal quarter ended June 30, 2023, with related cash expenditures expected by the end of fiscal 2024.
+Added: The Restructuring Plan is substantially complete as of June 30, 2023, with related cash expenditures expected by the end of fiscal 2024.
The Company expects the headcount reductions to generate pre-tax cost savings of approximately $19 million in fiscal year 2023 and $48 million on an annualized run-rate basis in fiscal year 2024.
The Company anticipates investing a portion of the cost savings from the headcount reductions in an amount to be determined for targeted hires, to add new skill sets and for other initiatives intended to position the Company for long-term growth.
−Removed: For the three and six months ended March 31, 2023, the Company recognized total restructuring costs of $41 million, consisting of severance costs.
+Added: There were no restructuring costs incurred in the three months ended June 30, 2023.
+Added: Total restructuring costs were $41 million for the nine months ended June 30, 2023, consisting of severance costs.
All restructuring costs were recorded in the Recorded Music segment.
−Removed: During the three and six months ended March 31, 2023, in connection with the Restructuring Plan, the Company recognized $2 million of non-cash stock-based compensation related to the accelerated vesting of certain RSUs.
+Added: During the nine months ended June 30, 2023, in connection with the Restructuring Plan, the Company recognized $2 million of non-cash stock-based compensation related to the accelerated vesting of certain RSUs.
Executive Transition Costs
−Removed: During the three and six months ended March 31, 2023, the Company incurred costs associated with the departure of our Chief Executive Officer which occurred in January 2023 and our Chief Financial Officer which is expected to occur by the end of calendar 2023 (the “Executive Transition Costs”).
−Removed: For the three and six months ended March 31, 2023, the Executive Transition Costs were approximately $3 million which consisted of severance for our previous CEO and our departing CFO.
+Added: During the three and nine months ended June 30, 2023, the Company incurred costs associated with the departure of our Chief Executive Officer which occurred in January 2023 and our Chief Financial Officer which is expected to occur by the end of calendar 2023 (the “Executive Transition Costs”).
+Added: For the three and nine months ended June 30, 2023, the Executive Transition Costs were approximately $1 million and $4 million, respectively, which consisted of severance for our previous CEO and our departing CFO.
Such costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
−Removed: The aforementioned departure of our CEO resulted in the recognition of $12 million of non-cash stock-based compensation expense for the three and six months ended March 31, 2023 for RSUs and common stock as there is no remaining service required for vesting.
+Added: The aforementioned departures of our CEO and CFO resulted in the recognition of $1 million and $13 million of non-cash stock-based compensation expense for the three and nine months ended June 30, 2023, respectively, for RSUs and common stock as there is no remaining service required for vesting.
Such costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
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RESULTS OF OPERATIONS
−Removed: Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022
+Added: Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022
Consolidated Results
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For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
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Total Revenues
−Removed: Total revenues increased by $23 million, or 2%, to $1,399 million for the three months ended March 31, 2023 from $1,376 million for the three months ended March 31, 2022.
+Added: Total revenues increased by $132 million, or 9%, to $1,564 million for the three months ended June 30, 2023 from $1,432 million for the three months ended June 30, 2022.
The increase includes $9 million of unfavorable currency exchange fluctuations.
−Removed: Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenue for the three months ended March 31, 2023, respectively, and 83% and 17% of total revenue for the three months ended March 31, 2022, respectively.
+Added: Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenue for the three months ended June 30, 2023, respectively, and 83% and 17% of total revenue for the three months ended June 30, 2022, respectively.
Prior to intersegment eliminations, U.S.
−Removed: and international revenues represented 47% and 53% of total revenues for the three months ended March 31, 2023 and 46% and 54% of total revenues for the three months ended March 31, 2022.
−Removed: Total digital revenues after intersegment eliminations increased by $11 million, or 1%, to $942 million for the three months ended March 31, 2023 from $931 million for the three months ended March 31, 2022.
−Removed: Total streaming revenue increased 2% with growth in Music Publishing of 16%, partially offset by a decrease in Recorded Music streaming revenue of $3 million, which includes $20 million of unfavorable currency exchange fluctuations.
−Removed: Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2023 were composed of U.S.
−Removed: revenues of $473 million and international revenues of $469 million, or 50% of total digital revenues for each of U.S.
−Removed: and international revenues.
−Removed: Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2022 were composed of U.S.
+Added: and international revenues represented 45% and 55% of total revenues for each of the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Total digital revenues after intersegment eliminations increased by $83 million, or 9%, to $1,027 million for the three months ended June 30, 2023 from $944 million for the three months ended June 30, 2022.
+Added: Total streaming revenue increased 10% driven by growth across Recorded Music and Music Publishing.
+Added: The growth in Music Publishing includes a benefit in the quarter and the prior-year quarter of $7 million and $17 million, respectively, resulting from a ruling by the Copyright Royalty Board in Phonorecords III upholding higher percentage revenue of U.S.
+Added: mechanical royalty rates (the “CRB Rate Benefit”).
+Added: Prior to intersegment eliminations, total digital revenues for the three months ended June 30, 2023 were composed of U.S.
revenues of $506 million and international revenues of $522 million, or 49% and 51% of total digital revenues, respectively.
−Removed: Recorded Music revenues decreased by $4 million to $1,143 million for the three months ended March 31, 2023 from $1,147 million for the three months ended March 31, 2022.
−Removed: The decrease includes $32 million of unfavorable currency exchange fluctuations.
−Removed: Recorded Music revenues were $522 million and $518 million, or 46% and 45% of consolidated Recorded Music revenues for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Recorded Music revenues were $621 million and $629 million, or 54% and 55% of consolidated Recorded Music revenues for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall decrease in Recorded Music revenue was driven by decreases in artist services and expanded-rights, digital and physical revenues.
−Removed: Artist services and expanded-rights revenue decreased by $10 million due to an unfavorable impact of foreign currency exchange rates of $4 million and lower merchandising and advertising revenue, partially offset by higher concert promotion revenue.
−Removed: Digital revenue decreased by $8 million, which includes an unfavorable impact of foreign currency exchange rates of $20 million.
−Removed: Revenue from streaming services decreased by $3 million to $773 million for the three months ended March 31, 2023 from $776 million for the three months ended March 31, 2022 and was impacted by unfavorable foreign currency exchange rates of $20 million, or 3%.
−Removed: Streaming revenue reflects a lighter release schedule, as well as a market-related slowdown in ad-supported revenue.
−Removed: The quarter included success from Michael Bublé, Ed Sheeran, Zach Bryan and Dua Lipa.
−Removed: Download and other digital revenues decreased by $5 million, or 18%, to $23 million for the three months ended March 31, 2023 from $28 million for the three months ended March 31, 2022 due to the continued shift to streaming services.
−Removed: Physical revenue decreased by $4 million, driven by an unfavorable impact of foreign currency exchange rates of $5 million, which offset strong physical performance in the United States.
−Removed: Licensing revenue increased by $18 million, which includes growth in brand income and a licensing settlement, partially offset by an unfavorable impact of foreign currency exchange rates of $3 million.
−Removed: Music Publishing revenues increased by $27 million, or 12%, to $257 million for the three months ended March 31, 2023 from $230 million for the three months ended March 31, 2022.
−Removed: Music Publishing revenues were $135 million and $117 million, or 53% and 51% of consolidated Music Publishing revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Music Publishing revenues were $122 million and $113 million, or 47% and 49% of consolidated Music Publishing revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall increase in Music Publishing revenue was mainly driven by increases in digital revenue of $19 million, or 15%, performance revenue of $9 million and mechanical revenue of $3 million, partially offset by a decrease in synchronization revenue of $4 million.
−Removed: The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services and the impact of digital deal renewals, partially offset by an unfavorable impact of foreign currency exchange rates of $3 million.
−Removed: Revenue from streaming services grew by $20 million, or 16%, to $142 million for the three months ended March 31, 2023 from $122 million for the three months ended March 31, 2022.
−Removed: Performance revenue increased due to the timing of payments from collection societies and continued recovery from COVID disruption, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.
−Removed: Mechanical revenue increased from strong share of physical sales.
−Removed: The decrease in synchronization revenue is attributable to lower commercial licensing activity in the United States and an unfavorable impact of foreign currency exchange rates of $2 million, partially offset by copyright infringement settlements.
+Added: Prior to intersegment eliminations, total digital revenues for the three months ended June 30, 2022 were composed of U.S.
+Added: revenues of $486 million and international revenues of $459 million, or 51% and 49% of total digital revenues, respectively.
+Added: Recorded Music revenues increased by $93 million to $1,282 million for the three months ended June 30, 2023 from $1,189 million for the three months ended June 30, 2022.
+Added: The increase included $9 million of unfavorable currency exchange fluctuations.
+Added: Recorded Music revenues were $557 million and $515 million, or 43% of consolidated Recorded Music revenues for each of the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Recorded Music revenues were $725 million and $674 million, or 57% of consolidated Recorded Music revenues for each of the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall increase in Recorded Music revenue was driven by increases in digital, artist services and expanded-rights, licensing and physical revenues.
+Added: Digital revenue increased by $45 million, which included an unfavorable impact of foreign currency exchange rates of $9 million.
+Added: Revenue from streaming services increased by $49 million, or 6%, to $822 million for the three months ended June 30, 2023 from $773 million for the three months ended June 30, 2022 and was impacted by unfavorable foreign currency exchange rates of $7 million, or 1%.
+Added: Growth in streaming revenue increased due to a stronger release schedule and growth in ad-supported revenue recovered due to moderation in a market-related slowdown.
+Added: The quarter included success from Ed Sheeran, PinkPantheress, Bailey Zimmerman and Dua Lipa.
+Added: Download and other digital revenues decreased by $4 million, or 14%, to $24 million for the three months ended June 30, 2023 from $28 million for the three months ended June 30, 2022 due to the continued shift to streaming services.
+Added: Artist services and expanded-rights revenue increased by $28 million due to higher concert promotion and merchandising revenue and a favorable impact of foreign currency exchange rates of $1 million.
+Added: Licensing revenue increased by $17 million, with growth across synchronization, broadcast fees and other licensing revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.
+Added: Physical revenue increased by $3 million primarily due to stronger performance in the United States.
+Added: Music Publishing revenues increased by $38 million, or 16%, to $283 million for the three months ended June 30, 2023 from $245 million for the three months ended June 30, 2022.
+Added: Music Publishing revenues were $147 million and $137 million, or 52% and 56% of consolidated Music Publishing revenues, for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Music Publishing revenues were $136 million and $108 million, or 48% and 44% of consolidated Music Publishing revenues, for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall increase in Music Publishing revenue was driven by increases in digital revenue of $38 million, or 26%, and mechanical revenue of $6 million, partially offset by decreases in performance revenue of $5 million.
+Added: The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services, the impact of digital deal renewals and a revenue true-up of $9 million, partially offset by a $10 million quarter-over-quarter decrease in the impact of the CRB Rate Benefit and an unfavorable impact of foreign currency exchange rates of $1 million.
+Added: Revenue from streaming services grew by $38 million, or 27%, to $178 million for the three months ended June 30, 2023 from $140 million for the three months ended June 30, 2022.
+Added: Mechanical revenue increased from a higher share of physical sales and timing of distributions.
+Added: Performance revenue decreased due to the timing of payments from collection societies and an unfavorable impact of foreign currency exchange rates of $1 million.
+Added: Synchronization revenue remained flat primarily due to lower commercial licensing activity, offset by copyright infringement settlements.
Revenue by Geographical Location
−Removed: revenue increased by $22 million, or 3%, to $657 million for the three months ended March 31, 2023 from $635 million for the three months ended March 31, 2022.
+Added: revenue increased by $52 million, or 8%, to $704 million for the three months ended June 30, 2023 from $652 million for the three months ended June 30, 2022.
Recorded Music revenue increased by $42 million, or 8%.
The primary driver was the increase of U.S.
−Removed: Recorded Music licensing revenue of $12 million, which includes a licensing settlement.
+Added: Recorded Music artist services and expanded-rights revenue of $23 million primarily driven by higher merchandising revenue.
+Added: Recorded Music licensing revenue increased by $8 million, primarily from synchronization revenue.
+Added: Digital revenue increased by $7 million, or 2%, due to higher streaming revenue of $9 million, or 2%, partially offset by download and other digital decrease of $2 million.
+Added: Growth in ad-supported revenue recovered due to moderation in a market-related slowdown.
Increases are also attributable to higher U.S.
1 unchanged sentence
physical releases.
−Removed: Digital revenue was flat with streaming revenue increase of $1 million, which was impacted by a lighter release schedule, as well as a market-related slowdown in ad-supported revenue, offset by download and other digital decrease of $1 million.
−Removed: Recorded Music artist services and expanded-rights revenue decreased by $11 million primarily driven by lower advertising and merchandising revenue.
−Removed: Music Publishing revenue increased by $18 million, or 15%, to $135 million for the three months ended March 31, 2023 from $117 million for the three months ended March 31, 2022.
−Removed: This was primarily driven by the increase in U.S.
−Removed: Music Publishing of $16 million in digital revenue due to the continued growth in streaming services and the impact of digital deal renewals.
+Added: Music Publishing revenue increased by $10 million, or 7%, to $147 million for the three months ended June 30, 2023 from $137 million for the three months ended June 30, 2022.
+Added: This was primarily driven by an increase in U.S.
+Added: Music Publishing digital revenue of $13 million due to the continued growth in streaming services and the impact of digital deal renewals, partially offset by a $10 million quarter-over-quarter decrease in the impact of the CRB Rate Benefit.
Music Publishing streaming revenue increased by $14 million, or 16%.
−Removed: Performance revenue increased by $4 million driven by the timing of payments from collection societies.
−Removed: Mechanical revenue increased by $1 million.
−Removed: The decrease in synchronization revenue of $3 million is due to lower commercial licensing activity, partially offset by copyright infringement settlements.
−Removed: International revenue increased by $1 million to $743 million for the three months ended March 31, 2023 from $742 million for the three months ended March 31, 2022.
+Added: Mechanical and synchronization revenue each increased by $1 million.
+Added: Performance revenue decreased by $6 million driven by the timing of payments from collection societies.
+Added: International revenue increased by $79 million to $861 million for the three months ended June 30, 2023 from $782 million for the three months ended June 30, 2022.
Excluding the unfavorable impact of foreign currency exchange rates of $10 million, International revenue increased by $89 million, or 12%.
−Removed: International Recorded Music revenue decreased by $8 million primarily due to decreases in digital revenue of $8 million and physical revenue of $7 million, partially offset by an increase in licensing revenue of $6 million and artist services and expanded-rights revenue of $1 million.
−Removed: International Recorded Music digital revenue decreased due to a $4 million, or 1%, decrease in streaming revenue which was primarily driven by an unfavorable impact of foreign currency exchange rates of $20 million.
−Removed: International Recorded Music physical revenue decreased by $7 million, primarily driven by an unfavorable impact of foreign currency exchange rates and a lighter release schedule.
−Removed: International Recorded Music licensing revenue increased by $6 million, which includes growth in brand income, partially offset by an unfavorable impact of foreign currency exchange rates.
−Removed: International Recorded Music artist services and expanded-rights revenue increased by $1 million due to higher concert promotion revenue, partially offset by lower direct-to-consumer merchandising revenue at EMP and the unfavorable impact of foreign currency exchange rates of $4 million.
−Removed: International Music Publishing revenue increased from the prior-year quarter by $9 million, or 8%, to $122 million for the three months ended March 31, 2023 from $113 million for the three months ended March 31, 2022.
−Removed: This was driven by the increase in performance revenue of $5 million, digital revenue of $3 million and mechanical revenue of $2 million, partially offset by a decrease in synchronization revenue of $1 million.
−Removed: Performance revenue increase was driven by continued recovery from COVID disruption.
−Removed: International Music Publishing streaming revenue increased by $6 million, or 11%, while download and other digital decreased by $3 million.
−Removed: Mechanical revenue increased from strong share of physical sales.
−Removed: Lower synchronization revenue is primarily due to the unfavorable impact of foreign currency exchange rates, which offset increased television licensing activity.
+Added: International Recorded Music revenue increased by $51 million primarily due to increases in digital revenue of $38 million, licensing revenue of $9 million and artist services and expanded-rights revenue of $5 million, partially offset by a decrease in physical revenue of $1 million.
+Added: International Recorded Music digital revenue increased due to a $40 million, or 10%, increase in streaming revenue which included an unfavorable impact of foreign currency exchange rates of $7 million.
+Added: International Recorded Music licensing revenue increased by $9 million, primarily due to higher broadcast fees and other licensing revenue, partially offset by an unfavorable impact of foreign currency exchange rates.
+Added: International Recorded Music artist services and expanded-rights revenue increased by $5 million due to higher concert promotion revenue and the favorable impact of foreign currency exchange rates of $1 million, partially offset by lower direct-to-consumer merchandising revenue at EMP.
+Added: International Recorded Music physical revenue decreased by $1 million against higher sales in the prior-year quarter from the success of new releases in Asia.
+Added: International Music Publishing revenue increased from the prior-year quarter by $28 million, or 26%, to $136 million for the three months ended June 30, 2023 from $108 million for the three months ended June 30, 2022.
+Added: This was driven by the increase in digital revenue of $25 million, mechanical revenue of $5 million and performance revenue of $1 million, partially offset by a decrease in synchronization revenue of $1 million.
+Added: International Music Publishing streaming revenue increased by $24 million, or 47%, which includes a revenue true-up of $9 million and download and other digital revenue increased by $1 million.
+Added: Mechanical revenue increased from a higher share of physical sales and timing of distributions.
+Added: Performance revenue increase was driven by continued growth from bars, restaurants, concerts and live events, partially offset by an unfavorable impact of foreign currency exchange rates.
+Added: Lower synchronization revenue is primarily due to lower commercial licensing activity.
Cost of revenues
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For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
Total cost of revenues $ 850 $ 766 $ 84 11 %
−Removed: Artist and repertoire costs increased by $14 million, to $462 million for the three months ended March 31, 2023 from $448 million for the three months ended March 31, 2022.
−Removed: Artist and repertoire costs as a percentage of revenue remained constant at 33% for each of the three months ended March 31, 2023 and March 31, 2022.
−Removed: Product costs increased by $10 million, to $259 million for the three months ended March 31, 2023 from $249 million for the three months ended March 31, 2022.
−Removed: Product costs as a percentage of revenue increased to 19% for the three months ended March 31, 2023 from 18% for the three months ended March 31, 2022.
−Removed: The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.
+Added: Artist and repertoire costs increased by $44 million, to $530 million for the three months ended June 30, 2023 from $486 million for the three months ended June 30, 2022.
+Added: Artist and repertoire costs as a percentage of revenue remained constant at 34% for each of the three months ended June 30, 2023 and June 30, 2022 due to the favorable impact of foreign currency exchange rates, offset by revenue mix.
+Added: Product costs increased by $40 million, to $320 million for the three months ended June 30, 2023 from $280 million for the three months ended June 30, 2022.
+Added: Product costs as a percentage of revenue remained constant at 20% for each of the three months ended June 30, 2023 and June 30, 2022.
Selling, general and administrative expenses
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
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______________________________________
−Removed: (1) Includes depreciation expense of $22 million and $20 million for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: Total selling, general and administrative expense increased by $8 million, or 2%, to $452 million for the three months ended March 31, 2023 from $444 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of revenue, total selling, general and administrative expense remained constant at 32% for each of the three months ended March 31, 2023 and March 31, 2022.
−Removed: General and administrative expense increased by $24 million to $253 million for the three months ended March 31, 2023 from $229 million for the three months ended March 31, 2022.
−Removed: The increase in general and administrative expense was mainly due to higher non-cash stock-based compensation and other related expenses of $14 million, primarily related to the separation agreement with our previous Chief Executive Officer, and the Executive Transition Costs of $3 million.
−Removed: Expressed as a percentage of revenue, general and administrative expense increased to 18% for the three months ended March 31, 2023 from 17% for the three months ended March 31, 2022 due to the factors described above.
−Removed: Selling and marketing expense decreased by $17 million, or 9%, to $172 million for the three months ended March 31, 2023 from $189 million for the three months ended March 31, 2022 due to lower variable marketing spend.
−Removed: Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the three months ended March 31, 2023 from 14% for the three months ended March 31, 2022.
−Removed: Distribution expense was $27 million for the three months ended March 31, 2023 and $26 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended March 31, 2023 and March 31, 2022.
−Removed: Restructuring
−Removed: For the three months ended March 31, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
+Added: (1) Includes depreciation expense of $22 million and $18 million for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Total selling, general and administrative expense increased by $10 million, or 2%, to $461 million for the three months ended June 30, 2023 from $451 million for the three months ended June 30, 2022.
+Added: Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 29% for the three months ended June 30, 2023 from 31% for the three months ended June 30, 2022.
+Added: General and administrative expense increased by $19 million to $244 million for the three months ended June 30, 2023 from $225 million for the three months ended June 30, 2022.
+Added: The increase in general and administrative expense was mainly due to increased employee related costs, net of savings from the Restructuring Plan, which includes incremental overhead in technology and higher non-cash stock-based compensation and other related expenses of $2 million, the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior-year quarter related to an acquisition and higher depreciation, partially offset by lower professional services and severance expenses.
+Added: Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the three months ended June 30, 2023 and June 30, 2022.
+Added: Selling and marketing expense decreased by $13 million, or 7%, to $185 million for the three months ended June 30, 2023 from $198 million for the three months ended June 30, 2022 primarily due to lower variable marketing spend and savings from the Restructuring Plan.
+Added: Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the three months ended June 30, 2023 from 14% for the three months ended June 30, 2022.
+Added: Distribution expense was $32 million for the three months ended June 30, 2023 and $28 million for the three months ended June 30, 2022.
+Added: Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended June 30, 2023 and June 30, 2022.
Reconciliation of Net Income Attributable to Warner Music Group Corp.
4 unchanged sentences
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
5 unchanged sentences
Income before income taxes 167 164 3 2 %
−Removed: Other expense 31 8 23 — %
+Added: Other income (20) (50) 30 -60 %
Interest expense, net 38 32 6 19 %
+Added: Loss on extinguishment of debt 4 — 4 — %
Operating income 189 146 43 29 %
2 unchanged sentences
OIBDA $ 275 $ 233 $ 42 18 %
−Removed: OIBDA decreased by $48 million to $207 million for the three months ended March 31, 2023 as compared to $255 million for the three months ended March 31, 2022 as a result of higher revenues offset by higher cost of revenues and selling, general and administrative expenses, as well as the Restructuring Plan costs of $41 million.
−Removed: Expressed as a percentage of total revenue, OIBDA margin decreased to 15% for the three months ended March 31, 2023 from 19% for the three months ended March 31, 2022 primarily due to the Restructuring Plan costs of $41 million, the increase in non-cash stock-based compensation and other related expenses of $14 million and the Executive Transition Costs of $3 million.
+Added: OIBDA increased by $42 million to $275 million for the three months ended June 30, 2023 as compared to $233 million for the three months ended June 30, 2022 as a result of higher revenues offset by higher cost of revenues and selling, general and administrative expense.
+Added: Expressed as a percentage of total revenue, OIBDA margin increased to 18% for the three months ended June 30, 2023 from 16% for the three months ended June 30, 2022 primarily due to strong operating performance, lower variable marketing spend, savings from the Restructuring Plan and the favorable impact of foreign currency exchange rates, partially offset by revenue mix, incremental overhead in technology and the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior-year quarter related to an acquisition.
Depreciation expense
−Removed: Our depreciation expense increased by $2 million to $22 million for the three months ended March 31, 2023 from $20 million for the three months ended March 31, 2022 primarily due to an increase in IT capital spend and assets being placed into service.
+Added: Our depreciation expense increased by $4 million to $22 million for the three months ended June 30, 2023 from $18 million for the three months ended June 30, 2022 primarily due to an increase in IT capital spend and assets being placed into service.
Amortization expense
−Removed: Our amortization expense decreased by $8 million, or 12%, to $61 million for the three months ended March 31, 2023 from $69 million for the three months ended March 31, 2022.
+Added: Our amortization expense decreased by $5 million, or 7%, to $64 million for the three months ended June 30, 2023 from $69 million for the three months ended June 30, 2022.
The decrease is primarily due to certain intangible assets becoming fully amortized.
Operating income
−Removed: Our operating income decreased by $42 million to $124 million for the three months ended March 31, 2023 from $166 million for the three months ended March 31, 2022.
−Removed: The decrease in operating income was due to the factors that led to the decrease in OIBDA, partially offset by lower amortization as noted above.
+Added: Our operating income increased by $43 million to $189 million for the three months ended June 30, 2023 from $146 million for the three months ended June 30, 2022.
+Added: The increase in operating income was due to the factors that led to the increase in OIBDA and lower amortization, partially offset by higher depreciation as noted above.
+Added: Loss on extinguishment of debt
+Added: We recorded a loss on extinguishment of debt in the amount of $4 million for the three months ended June 30, 2023 which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans.
+Added: There was no loss on extinguishment of debt for the three months ended June 30, 2022.
Interest expense, net
−Removed: Our interest expense, net, increased to $35 million for the three months ended March 31, 2023 from $32 million for the three months ended March 31, 2022 due to a higher principal balance from the issuance of the incremental Senior Term Loan Facility in January 2023 and higher interest rates on variable rate debt, partially offset by interest income.
−Removed: Other expense
−Removed: Other expense for the three months ended March 31, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $20 million and currency exchange losses on our intercompany loans of $13 million.
−Removed: This compares to aggregate realized and unrealized losses of $39 million on the mark-to-market of equity investments, partially offset by foreign currency gains on our Euro-denominated debt of $19 million and currency exchange gains on our intercompany loans of $11 million for the three months ended March 31, 2022.
+Added: Our interest expense, net, increased to $38 million for the three months ended June 30, 2023 from $32 million for the three months ended June 30, 2022 due to a higher principal balance from the issuance of the incremental Senior Term Loan Facility and higher interest rates on variable rate debt, partially offset by interest income.
+Added: Other income for the three months ended June 30, 2023 primarily includes foreign currency gains on our Euro-denominated debt of $2 million, currency exchange gains on the Company’s intercompany loans of $11 million and aggregate realized and unrealized gains of $5 million on the mark-to-market of equity investments.
+Added: This compares to foreign currency gains on our Euro-denominated debt of $46 million and currency exchange gains on the Company’s intercompany loans of $5 million for the three months ended June 30, 2022.
Income tax expense
−Removed: Our income tax expense decreased by $13 million to $21 million for the three months ended March 31, 2023 from $34 million for the three months ended March 31, 2022.
−Removed: The decrease of $13 million in income tax expense is primarily due to the impact of lower pre-tax income in the current-year quarter.
−Removed: Net income decreased by $55 million to $37 million for the three months ended March 31, 2023 from $92 million for the three months ended March 31, 2022 as a result of the factors described above.
+Added: Our income tax expense increased by $4 million to $43 million for the three months ended June 30, 2023 from $39 million for the three months ended June 30, 2022.
+Added: The increase of $4 million in income tax expense is primarily due to the impact of higher foreign withholding taxes, an increase in unrecognized tax benefit related to uncertain tax positions and an increase in non-deductible executive compensation under IRC Section 162(m) in the current-year quarter.
+Added: These charges were partially offset by the benefit of R&D credits and release of U.S.
+Added: state valuation allowance recognized in the current-year quarter.
+Added: Net income decreased by $1 million to $124 million for the three months ended June 30, 2023 from $125 million for the three months ended June 30, 2022 as a result of the factors described above.
Noncontrolling interest
−Removed: There was $3 million of income attributable to noncontrolling interest for the three months ended March 31, 2023 and no income attributable to noncontrolling interest for the three months ended March 31, 2022.
+Added: There was $2 million of income attributable to noncontrolling interest for the three months ended June 30, 2023 and $1 million of income attributable to noncontrolling interest for the three months ended June 30, 2022.
Business Segment Results
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
15 unchanged sentences
Recorded Music
−Removed: Recorded Music revenue decreased by $4 million to $1,143 million for the three months ended March 31, 2023 from $1,147 million for the three months ended March 31, 2022.
−Removed: Recorded Music revenues were $522 million and $518 million, or 46% and 45% of consolidated Recorded Music revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Recorded Music revenues were $621 million and $629 million, or 54% and 55% of consolidated Recorded Music revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall decrease in Recorded Music revenue was driven by decreases in artist services and expanded-rights, digital and physical revenues, partially offset by licensing revenue growth as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
+Added: Recorded Music revenue increased by $93 million to $1,282 million for the three months ended June 30, 2023 from $1,189 million for the three months ended June 30, 2022.
+Added: Recorded Music revenues were $557 million and $515 million, or 43% of consolidated Recorded Music revenues, for each of the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Recorded Music revenues were $725 million and $674 million, or 57% of consolidated Recorded Music revenues, for each of the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall increase in Recorded Music revenue was driven by increases in digital, artist services and expanded-rights, licensing and physical revenues as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
Cost of revenues
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
Total cost of revenues $ 669 $ 606 $ 63 10 %
−Removed: Recorded Music cost of revenues increased by $14 million, or 3%, to $568 million for the three months ended March 31, 2023 from $554 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 27% for each of the three months ended March 31, 2023 and March 31, 2022.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music product costs increased to 23% for the three months ended March 31, 2023 from 22% for the three months ended March 31, 2022.
−Removed: The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.
+Added: Recorded Music cost of revenues increased by $63 million, or 10%, to $669 million for the three months ended June 30, 2023 from $606 million for the three months ended June 30, 2022.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 27% for each of the three months ended June 30, 2023 and June 30, 2022, due to the favorable impact of foreign currency exchange rates, offset by revenue mix.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music product costs increased to 25% for the three months ended June 30, 2023 from 24% for the three months ended June 30, 2022.
+Added: The overall increase as a percentage of revenue primarily relates to revenue mix due to higher artist services and expanded-rights and third-party distributed label revenue.
Selling, general and administrative expense
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
4 unchanged sentences
______________________________________
−Removed: (1) Includes depreciation expense of $13 million and $14 million for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: Recorded Music selling, general and administrative expense decreased by $13 million, or 4%, to $344 million for the three months ended March 31, 2023 from $357 million for the three months ended March 31, 2022.
−Removed: The increase in general and administrative expense includes higher non-cash stock-based compensation and other related expenses of $2 million.
−Removed: The decrease in selling and marketing expense was primarily due to lower variable marketing spend.
−Removed: The increase in distribution expense was primarily due to rising costs and revenue mix.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 30% for the three months ended March 31, 2023 from 31% for the three months ended March 31, 2022.
−Removed: Restructuring
−Removed: For the three months ended March 31, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
+Added: (1) Includes depreciation expense of $13 million and $12 million for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Recorded Music selling, general and administrative expense decreased by $6 million, or 2%, to $365 million for the three months ended June 30, 2023 from $371 million for the three months ended June 30, 2022.
+Added: The increase in general and administrative expense was mainly due to increased employee related costs, net of savings from the Restructuring Plan, and the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior-year quarter related to an acquisition, partially offset by the favorable movements in foreign currency exchanges rates of $4 million, lower severance and professional services expenses.
+Added: The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Restructuring Plan.
+Added: The increase in distribution expense was primarily due to higher artist services and expanded- rights revenue.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 28% for the three months ended June 30, 2023 from 31% for the three months ended June 30, 2022.
Operating Income and OIBDA
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
OIBDA $ 261 $ 224 $ 37 17 %
−Removed: Recorded Music OIBDA decreased by $47 million to $203 million for the three months ended March 31, 2023 from $250 million for the three months ended March 31, 2022 as a result of lower revenues, higher cost of revenue and the Restructuring Plan costs of $41 million, partially offset by lower selling, general and administrative expenses.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin decreased to 18% for the three months ended March 31, 2023 from 22% for the three months ended March 31, 2022 primarily due to the Restructuring Plan costs of $41 million and revenue mix resulting from higher third-party distributed label revenue, partially offset by lower variable marketing spend.
−Removed: Recorded Music operating income decreased by $38 million to $151 million for the three months ended March 31, 2023 from $189 million for the three months ended March 31, 2022 due to the factors that led to the decrease in Recorded Music OIBDA noted above, partially offset by a decrease in amortizable intangible assets.
+Added: Recorded Music operating income increased by $41 million to $207 million for the three months ended June 30, 2023 from $166 million for the three months ended June 30, 2022 as a result of higher revenues, lower selling, general and administrative expense and a decrease in amortizable intangible assets, partially offset by higher cost of revenue.
+Added: Recorded Music OIBDA increased by $37 million to $261 million for the three months ended June 30, 2023 from $224 million for the three months ended June 30, 2022 due to the factors that led to the increase in Recorded Music operating income noted above.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin increased to 20% for the three months ended June 30, 2023 from 19% for the three months ended June 30, 2022 primarily due to stronger operating performance, lower variable marketing spend, savings from the Restructuring Plan and the favorable impact of foreign currency exchange rates, partially offset by revenue mix resulting from higher artist services and expanded-rights and third-party distributed label revenue and the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior-year quarter related to an acquisition.
Music Publishing
−Removed: Music Publishing revenues increased by $27 million, or 12%, to $257 million for the three months ended March 31, 2023 from $230 million for the three months ended March 31, 2022.
−Removed: Music Publishing revenues were $135 million and $117 million, or 53% and 51% of consolidated Music Publishing revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Music Publishing revenues were $122 million and $113 million, or 47% and 49% of consolidated Music Publishing revenues, for the three months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall increase in Music Publishing revenue was driven by growth in digital, performance and mechanical revenues, partially offset by lower synchronization revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
+Added: Music Publishing revenues increased by $38 million, or 16%, to $283 million for the three months ended June 30, 2023 from $245 million for the three months ended June 30, 2022.
+Added: Music Publishing revenues were $147 million and $137 million, or 52% and 56% of consolidated Music Publishing revenues, for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Music Publishing revenues were $136 million and $108 million, or 48% and 44% of consolidated Music Publishing revenues, for the three months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall increase in Music Publishing revenue was driven by growth in digital and mechanical revenues, partially offset by lower performance revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
Cost of revenues
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
1 unchanged sentence
Total cost of revenues $ 182 $ 162 $ 20 12 %
−Removed: Music Publishing cost of revenues increased by $11 million, or 8%, to $155 million for the three months ended March 31, 2023 from $144 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 60% for the three months ended March 31, 2023 from 63% for the three months ended March 31, 2022, primarily attributable to revenue mix and the favorable impact of foreign currency exchange rates.
+Added: Music Publishing cost of revenues increased by $20 million, or 12%, to $182 million for the three months ended June 30, 2023 from $162 million for the three months ended June 30, 2022.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 64% for the three months ended June 30, 2023 from 66% for the three months ended June 30, 2022, primarily due to the favorable impact of foreign currency exchange rates, partially offset by revenue mix.
Selling, general and administrative expense
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
3 unchanged sentences
______________________________________
−Removed: (1) Includes depreciation expense of $1 million for each of the three months ended March 31, 2023 and March 31, 2022.
−Removed: Music Publishing selling, general and administrative expense increased by $2 million, or 8%, to $28 million for the three months ended March 31, 2023 from $26 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense remained constant at 11% for each of the three months ended March 31, 2023 and March 31, 2022.
+Added: (1) Includes no depreciation expense for the three months ended June 30, 2023 and $1 million of depreciation expense for the three months ended June 30, 2022.
+Added: Music Publishing selling, general and administrative expense increased by $1 million, or 4%, to $28 million for the three months ended June 30, 2023 from $27 million for the three months ended June 30, 2022.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the three months ended June 30, 2023 from 11% for the three months ended June 30, 2022.
Operating Income and OIBDA
1 unchanged sentence
For the Three Months Ended
−Removed: March 31, 2023 vs.
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
OIBDA $ 73 $ 57 $ 16 28 %
−Removed: Music Publishing OIBDA increased by $14 million, or 23%, to $75 million for the three months ended March 31, 2023 from $61 million for the three months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing OIBDA margin increased to 29% for the three months ended March 31, 2023 from 27% for the three months ended March 31, 2022, primarily due to strong operating performance.
−Removed: Music Publishing operating income increased by $14 million to $52 million for the three months ended March 31, 2023 from $38 million for the three months ended March 31, 2022 due to the factors that led to the increase in Music Publishing OIBDA noted above.
+Added: Music Publishing operating income increased by $17 million to $50 million for the three months ended June 30, 2023 from $33 million for the three months ended June 30, 2022, as a result of higher revenue, partially offset by higher cost of revenue.
+Added: Music Publishing OIBDA increased by $16 million, or 28%, to $73 million for the three months ended June 30, 2023 from $57 million for the three months ended June 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing OIBDA margin increased to 26% for the three months ended June 30, 2023 from 23% for the three months ended June 30, 2022 primarily due to strong operating performance and the favorable impact of foreign currency exchange rates, partially offset by revenue mix.
Corporate Expenses and Eliminations
−Removed: Our operating loss from corporate expenses and eliminations increased by $18 million for the three months ended March 31, 2023 to $79 million from $61 million for the three months ended March 31, 2022, due to higher employee related costs including non-cash stock-based compensation and other related expenses of $11 million, primarily related to the separation agreement with our previous Chief Executive Officer, and the Executive Transition Costs of $3 million, an increase in depreciation and expenses related to transformation initiatives, partially offset by lower professional services.
−Removed: Our OIBDA loss from corporate expenses and eliminations increased by $15 million for the three months ended March 31, 2023 to $71 million from $56 million for the three months ended March 31, 2022, primarily due to the operating loss factors noted above.
+Added: Our operating loss from corporate expenses and eliminations increased by $15 million for the three months ended June 30, 2023 to $68 million from $53 million for the three months ended June 30, 2022, primarily due to higher employee related costs including incremental overhead in technology, higher non-cash stock-based compensation and other related expenses of $1 million, the Executive Transition Costs of $1 million and an increase in depreciation.
+Added: Our OIBDA loss from corporate expenses and eliminations increased by $11 million for the three months ended June 30, 2023 to $59 million from $48 million for the three months ended June 30, 2022, primarily due to the operating loss factors noted above.
RESULTS OF OPERATIONS
−Removed: Six Months Ended March 31, 2023 Compared with Six Months Ended March 31, 2022
+Added: Nine Months Ended June 30, 2023 Compared with Nine Months Ended June 30, 2022
Consolidated Results
Our revenues were composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
24 unchanged sentences
Total Revenues
−Removed: Total revenues decreased by $103 million, or 3%, to $2,887 million for the six months ended March 31, 2023 from $2,990 million for the six months ended March 31, 2022.
+Added: Total revenues increased by $29 million, or 1%, to $4,451 million for the nine months ended June 30, 2023 from $4,422 million for the nine months ended June 30, 2022.
The prior year included an additional week, primarily reflected in Recorded Music streaming revenue.
−Removed: The decrease includes $122 million of unfavorable currency exchange fluctuations.
−Removed: Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the six months ended March 31, 2023, respectively, and 85% and 15% of total revenues for the six months ended March 31, 2022, respectively.
+Added: The increase included $131 million of unfavorable currency exchange fluctuations.
+Added: Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the nine months ended June 30, 2023, respectively, and 84% and 16% of total revenues for the nine months ended June 30, 2022, respectively.
Prior to intersegment eliminations, U.S.
−Removed: and international revenues represented 46% and 54% for the six months ended March 31, 2023, respectively, and 45% and 55% for the six months ended March 31, 2022, respectively.
−Removed: Total digital revenues after intersegment eliminations decreased by $39 million, or 2%, to $1,894 million for the six months ended March 31, 2023 from $1,933 million for the six months ended March 31, 2022.
−Removed: Total streaming revenue decreased 1% with growth in Music Publishing of 15%, offset by a decline in Recorded Music streaming revenue of 4% which includes $55 million of unfavorable currency exchange fluctuations.
−Removed: Prior to intersegment eliminations, total digital revenues for the six months ended March 31, 2023 were composed of U.S.
−Removed: revenues of $957 million and international revenues of $937 million, or 51% and 49% of total digital revenues, respectively.
−Removed: Prior to intersegment eliminations, total digital revenues for the six months ended March 31, 2022 were composed of U.S.
+Added: and international revenues represented 46% and 54% for the nine months ended June 30, 2023, respectively, and 45% and 55% for the nine months ended June 30, 2022, respectively.
+Added: Total digital revenues after intersegment eliminations increased by $44 million, or 2%, to $2,921 million for the nine months ended June 30, 2023 from $2,877 million for the nine months ended June 30, 2022.
+Added: Total streaming revenue increased 2% with growth in Music Publishing of 19%, partially offset by a decline in Recorded Music streaming revenue of $10 million which included $62 million of unfavorable currency exchange fluctuations.
+Added: Prior to intersegment eliminations, total digital revenues for the nine months ended June 30, 2023 were composed of U.S.
revenues of $1,463 million and international revenues of $1,459 million, or 50% of total digital revenues for each of U.S.
and international revenues.
−Removed: Recorded Music revenues decreased by $151 million, or 6%, to $2,382 million for the six months ended March 31, 2023 from $2,533 million for the six months ended March 31, 2022.
+Added: Prior to intersegment eliminations, total digital revenues for the nine months ended June 30, 2022 were composed of U.S.
+Added: revenues of $1,457 million and international revenues of $1,422 million, or 51% and 49% of total digital revenues, respectively.
+Added: Recorded Music revenues decreased by $58 million, or 2%, to $3,664 million for the nine months ended June 30, 2023 from $3,722 million for the nine months ended June 30, 2022.
The decrease includes $115 million of unfavorable currency exchange fluctuations.
−Removed: Recorded Music revenues were $1,061 million and $1,126 million, or 45% and 44% of consolidated Recorded Music revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Recorded Music revenues were $1,321 million and $1,407 million, or 55% and 56% of consolidated Recorded Music revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall decrease in Recorded Music revenue was driven by decreases in digital, physical and artist services and expanded-rights revenues.
−Removed: Digital revenue decreased by $75 million, which includes an unfavorable impact of foreign currency exchange rates of $57 million.
−Removed: Revenue from streaming services decreased by $59 million, or 4%, to $1,553 million for the six months ended March 31, 2023 from $1,612 million for the six months ended March 31, 2022 and was impacted by unfavorable foreign currency exchange rates of $55 million, or 3%.
−Removed: Streaming revenue reflects a lighter release schedule and the impact of the additional week in the prior year, as well as market-related slowdown in ad-supported revenue.
−Removed: The current year included carryover success from Ed Sheeran, Dua Lipa, Zach Bryan and Michael Bublé.
−Removed: Download and other digital revenues decreased by $16 million, or 26%, to $46 million for the six months ended March 31, 2023 from $62 million for the six months ended March 31, 2022 due to the continued shift to streaming services.
+Added: Recorded Music revenues were $1,618 million and $1,641 million, or 44% of consolidated Recorded Music revenues, for each of the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Recorded Music revenues were $2,046 million and $2,081 million, or 56% of consolidated Recorded Music revenues, for each the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall decrease in Recorded Music revenue was driven by decreases in physical, digital and artist services and expanded-rights revenues, partially offset by an increase in licensing revenue.
Physical revenue decreased by $63 million, or 14%, driven by an unfavorable impact of foreign currency exchange rates of $19 million and a lighter release schedule.
−Removed: Artist services and expanded-rights revenue decreased by $36 million due to an unfavorable impact of foreign currency exchange rates of $21 million, lower direct-to-consumer merchandising revenue at EMP and lower advertising revenue, partially offset by higher concert promotion revenue.
−Removed: Licensing revenue increased by $26 million, which includes a licensing settlement and growth in brand income and broadcast fees revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $9 million.
−Removed: Music Publishing revenues increased by $48 million, or 10%, to $507 million for the six months ended March 31, 2023 from $459 million for the six months ended March 31, 2022.
−Removed: Music Publishing revenues were $268 million and $232 million, or 53% and 51% of consolidated Music Publishing revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Music Publishing revenues were $239 million and $227 million, or 47% and 49% of Music Publishing revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
+Added: Digital revenue decreased by $30 million, or 1%, which includes an unfavorable impact of foreign currency exchange rates of $66 million.
+Added: Revenue from streaming services decreased by $10 million to $2,375 million for the nine months ended June 30, 2023 from $2,385 million for the nine months ended June 30, 2022 and was impacted by unfavorable foreign currency exchange rates of $62 million, or 3%.
+Added: Streaming revenue reflects a lighter release schedule and the impact of the additional week in the prior year, as well as the market-related slowdown in ad-supported revenue.
+Added: The current year included success from Ed Sheeran, Dua Lipa, Zach Bryan and Bailey Zimmerman.
+Added: Download and other digital revenues decreased by $20 million, or 22%, to $70 million for the nine months ended June 30, 2023 from $90 million for the nine months ended June 30, 2022 due to the continued shift to streaming services.
+Added: Artist services and expanded-rights revenue decreased by $8 million due to an unfavorable impact of foreign currency exchange rates of $20 million, lower merchandising revenue, primarily direct-to-consumer merchandising revenue at EMP, and lower advertising revenue, partially offset by higher concert promotion.
+Added: Licensing revenue increased by $43 million, which includes a licensing settlement and growth in brand income, synchronization and broadcast fees revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $10 million.
+Added: Music Publishing revenues increased by $86 million, or 12%, to $790 million for the nine months ended June 30, 2023 from $704 million for the nine months ended June 30, 2022.
+Added: Music Publishing revenues were $415 million and $369 million, or 53% and 52% of consolidated Music Publishing revenues, for the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Music Publishing revenues were $375 million and $335 million, or 47% and 48% of Music Publishing revenues, for the nine months ended June 30, 2023 and June 30, 2022, respectively.
The overall increase in Music Publishing revenue was mainly driven by increases in digital revenue of $73 million, or 18%, performance revenue of $11 million and mechanical revenue of $9 million, partially offset by a decrease in synchronization revenue of $7 million.
−Removed: The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services and the impact of digital deal renewals, partially offset by an unfavorable impact of foreign currency exchange rates of $7 million.
−Removed: Revenue from streaming services grew by $37 million, or 15%, to $288 million for the six months ended March 31, 2023 from $251 million for the six months ended March 31, 2022.
−Removed: Performance revenue increased due to the timing of payments from collection societies and continued recovery from COVID disruption, partially offset by an unfavorable impact of foreign currency exchange rates of $4 million.
−Removed: Mechanical revenue increased from strong share of physical sales, partially offset by an unfavorable impact of foreign currency exchange rates of $2 million.
−Removed: The decrease in synchronization revenue is attributable to lower commercial licensing activity in the United States and an unfavorable impact of foreign currency exchange rates of $3 million.
+Added: The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services, the impact of digital deal renewals and a revenue true-up of $9 million, partially offset by a $10 million quarter-over-quarter decrease in the impact of the CRB Rate Benefit and an unfavorable impact of foreign currency exchange rates of $8 million.
+Added: Revenue from streaming services grew by $75 million, or 19%, to $466 million for the nine months ended June 30, 2023 from $391 million for the nine months ended June 30, 2022.
+Added: Performance revenue increased primarily due to continued recovery from COVID disruption, partially offset by an unfavorable impact of foreign currency exchange rates of $5 million.
+Added: Mechanical revenue increased from a higher share of physical sales and timing of distributions, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.
+Added: The decrease in synchronization revenue is attributable to lower commercial licensing activity and an unfavorable impact of foreign currency exchange rates of $3 million, partially offset by copyright infringement settlements.
Revenue by Geographical Location
−Removed: revenue decreased by $29 million, or 2%, to $1,329 million for the six months ended March 31, 2023 from $1,358 million for the six months ended March 31, 2022.
+Added: revenue increased by $23 million, or 1%, to $2,033 million for the nine months ended June 30, 2023 from $2,010 million for the nine months ended June 30, 2022.
Recorded Music revenue decreased by $23 million, or 1%.
The primary driver was the decrease of U.S.
−Removed: Recorded Music digital revenue of $47 million.
+Added: Recorded Music digital revenue of $40 million, or 3%.
Recorded Music streaming revenue decreased by $32 million, or 3%, as a result of a lighter release schedule and the impact of the additional week in the prior year, as well as a market-related slowdown in ad-supported revenue.
2 unchanged sentences
Recorded Music physical revenue of $13 million due to a lighter release schedule.
−Removed: Recorded Music artist services and expanded-rights revenue decreased by $16 million primarily driven by lower advertising revenues.
−Removed: The increase in licensing revenue of $15 million includes a licensing settlement.
−Removed: Music Publishing revenue increased by $36 million, or 16%, to $268 million for the six months ended March 31, 2023 from $232 million for the six months ended March 31, 2022.
+Added: The increase in licensing revenue of $23 million includes a licensing settlement and higher synchronization revenue.
+Added: Recorded Music artist services and expanded-rights revenue increased by $7 million primarily driven by higher merchandising revenues.
+Added: Music Publishing revenue increased by $46 million, or 12%, to $415 million for the nine months ended June 30, 2023 from $369 million for the nine months ended June 30, 2022.
This was primarily driven by the increase in U.S.
−Removed: Music Publishing of $33 million in digital revenue due to the continued growth in streaming services and the impact of digital deal renewals.
+Added: Music Publishing of $46 million in digital revenue due to the continued growth in streaming services and the impact of digital deal renewals, partially offset by a $10 million quarter-over-quarter decrease in the impact of the CRB Rate Benefit.
Music Publishing streaming revenue increased by $46 million, or 20%.
−Removed: Performance revenue increased by $9 million driven by the timing of payments from collection societies and continued recovery from COVID disruption.
+Added: Performance revenue increased by $3 million driven by continued recovery from COVID disruption.
Mechanical revenue increased by $2 million.
−Removed: The decrease in synchronization revenue of $7 million is due to lower commercial licensing activity.
−Removed: International revenue decreased by $74 million, or 5%, to $1,560 million for the six months ended March 31, 2023 from $1,634 million for the six months ended March 31, 2022.
+Added: The decrease in synchronization revenue of $6 million is due to lower commercial licensing activity, partially offset by copyright infringement settlements.
+Added: International revenue increased by $5 million to $2,421 million for the nine months ended June 30, 2023 from $2,416 million for the nine months ended June 30, 2022.
Excluding the unfavorable impact of foreign currency exchange rates, International revenue increased by $137 million, or 6%.
−Removed: International Recorded Music revenue decreased by $86 million due to decreases in physical revenue of $49 million, digital revenue of $28 million and artist services and expanded-rights revenue of $20
−Removed: million, partially offset by an increase in licensing revenue of $11 million.
+Added: International Recorded Music revenue decreased by $35 million due to decreases in physical revenue of $50 million and artist services and expanded-rights revenue of $15 million, partially offset by increases in licensing revenue of $20 million and digital revenue of $10 million.
International Recorded Music physical revenue decreased by $50 million, primarily driven by an unfavorable impact of foreign currency exchange rates and a lighter release schedule.
−Removed: International Recorded Music digital revenue decreased due to a $18 million, or 2%, decrease in streaming revenue which was primarily driven by an unfavorable impact of foreign currency exchange rates of $55 million.
−Removed: Download and other digital revenues decreased by $10 million.
International Recorded Music artist services and expanded-rights revenue decreased by $15 million due to the unfavorable impact of foreign currency exchange rates of $20 million and lower direct-to-consumer merchandising revenue at EMP, partially offset by higher concert promotion revenue.
+Added: International Recorded Music digital revenue increased due to a $22 million, or 2%, increase in streaming revenue which includes unfavorable impact of foreign currency exchange rates of $62 million.
+Added: Download and other digital revenues decreased by $12 million.
International Recorded Music licensing revenue increased by $20 million, including growth in brand income and broadcast fees revenue, partially offset by the unfavorable impact of foreign currency exchange rates.
−Removed: International Music Publishing revenue increased by $12 million, or 5%, to $239 million for the six months ended March 31, 2023 from $227 million for the six months ended March 31, 2022.
−Removed: This was primarily driven by the increase in performance revenue of $7 million, mechanical revenue of $2 million and digital revenue of $2 million.
−Removed: Performance revenue increased driven by continued recovery from COVID disruption.
−Removed: Higher mechanical revenue is primarily driven by strong share of physical sales.
−Removed: International Music Publishing streaming revenue increased by $5 million, or 5%, which includes unfavorable impact of foreign currency exchange rates of $6 million.
+Added: International Music Publishing revenue increased by $40 million, or 12%, to $375 million for the nine months ended June 30, 2023 from $335 million for the nine months ended June 30, 2022.
+Added: This was primarily driven by the increase in digital revenue of $27 million, performance revenue of $8 million and mechanical revenue of $7 million.
+Added: International Music Publishing streaming revenue increased by $29 million, or 18%, which includes a revenue true-up of $9 million, partially offset by an unfavorable impact of foreign currency exchange rates of $7 million.
Download and other digital revenue decreased by $2 million.
−Removed: Synchronization revenue remained constant primarily due to an unfavorable impact of foreign currency exchange rates, which offset higher commercial and television licensing activity.
+Added: Performance revenue increased driven by continued recovery from COVID disruption.
+Added: Higher mechanical revenue is primarily driven by a higher share of physical sales and timing of distributions.
+Added: Synchronization revenue decreased by $1 million primarily due to an unfavorable impact of foreign currency exchange rates, which offset higher television licensing activity.
Cost of revenues
Our cost of revenues was composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
Total cost of revenues $ 2,332 $ 2,281 $ 51 2 %
−Removed: Artist and repertoire costs decreased by $15 million, to $926 million for the six months ended March 31, 2023 from $941 million for the six months ended March 31, 2022.
−Removed: Artist and repertoire costs as a percentage of revenue increased to 32% for the six months ended March 31, 2023 from 31% for the six months ended March 31, 2022, primarily due to timing of artist and repertoire investments.
−Removed: Product costs decreased by $18 million, to $556 million for the six months ended March 31, 2023 from $574 million for the six months ended March 31, 2022.
−Removed: Product costs as a percentage of revenue remained constant at 19% for each of the six months ended March 31, 2023 and March 31, 2022.
+Added: Artist and repertoire costs increased by $29 million, to $1,456 million for the nine months ended June 30, 2023 from $1,427 million for the nine months ended June 30, 2022.
+Added: Artist and repertoire costs as a percentage of revenue increased to 33% for the nine months ended June 30, 2023 from 32% for the nine months ended June 30, 2022, primarily due to revenue mix and the timing of artist and repertoire investments, partially offset by the favorable impact of foreign currency exchange rates.
+Added: Product costs increased by $22 million, to $876 million for the nine months ended June 30, 2023 from $854 million for the nine months ended June 30, 2022.
+Added: Product costs as a percentage of revenue increased to 20% for the nine months ended June 30, 2023 from 19% for the nine months ended June 30, 2022 due to revenue mix from higher third-party distributed label revenue.
Selling, general and administrative expenses
Our selling, general and administrative expenses were composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
4 unchanged sentences
______________________________________
−Removed: (1) Includes depreciation expense of $43 million and $41 million for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: Total selling, general and administrative expense decreased by $49 million, or 5%, to $892 million for the six months ended March 31, 2023 from $941 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of revenue, total selling, general and administrative expense remained constant at 31% for each of the six months ended March 31, 2023 and March 31, 2022.
−Removed: General and administrative expense increased by $3 million to $474 million for the six months ended March 31, 2023 from $471 million for the six months ended March 31, 2022.
−Removed: The increase in general and administrative expense was mainly due to higher employee related costs including non-cash stock-based compensation and other related expenses of $5 million and the Executive Transition Costs of $3 million and expenses related to transformation initiatives, partially offset by higher acquisition transaction costs
−Removed: and the impact of the additional week in the prior year and favorable movements in foreign currency exchange rates of $11 million.
−Removed: Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the six months ended March 31, 2023 and March 31, 2022.
−Removed: Selling and marketing expense decreased by $43 million, or 11%, to $360 million for the six months ended March 31, 2023 from $403 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the six months ended March 31, 2023 from 13% for the six months ended March 31, 2022 due to lower variable marketing spend.
−Removed: Distribution expense was $58 million for the six months ended March 31, 2023 and $67 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the six months ended March 31, 2023 and March 31, 2022.
+Added: (1) Includes depreciation expense of $65 million and $59 million for the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Total selling, general and administrative expense decreased by $39 million, or 3%, to $1,353 million for the nine months ended June 30, 2023 from $1,392 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 30% for the nine months ended June 30, 2023 from 31% for the nine months ended June 30, 2022.
+Added: General and administrative expense increased by $22 million to $718 million for the nine months ended June 30, 2023 from $696 million for the nine months ended June 30, 2022.
+Added: The increase in general and administrative expense was mainly due to higher employee related costs, net of savings from the Restructuring Plan, which includes non-cash stock-based compensation and other related expenses of $7 million, the Executive Transition Costs of $4 million, incremental overhead in technology, the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition, higher depreciation and expenses related to transformation initiatives, partially offset by higher acquisition transaction costs, the impact of the additional week in the prior year, lower severance costs and favorable movements in foreign currency exchange rates of $12 million.
+Added: Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the nine months ended June 30, 2023 and June 30, 2022.
+Added: Selling and marketing expense decreased by $56 million, or 9%, to $545 million for the nine months ended June 30, 2023 from $601 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the nine months ended June 30, 2023 from 14% for the nine months ended June 30, 2022 due to lower variable marketing spend and savings from the Restructuring Plan.
+Added: Distribution expense was $90 million for the nine months ended June 30, 2023 and $95 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the nine months ended June 30, 2023 and June 30, 2022.
Restructuring
−Removed: For the six months ended March 31, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
+Added: For the nine months ended June 30, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
Net gain on divestiture
−Removed: During the six months ended March 31, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying condensed consolidated statement of operations.
+Added: During the nine months ended June 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying condensed consolidated statement of operations.
Reconciliation of Net Income Attributable to Warner Music Group Corp.
3 unchanged sentences
to operating income for purposes of the discussion that follows (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
7 unchanged sentences
Interest expense, net 105 94 11 12 %
+Added: Loss on extinguishment of debt 4 — 4 — %
Operating income 578 551 27 5 %
2 unchanged sentences
OIBDA $ 831 $ 808 $ 23 3 %
−Removed: OIBDA decreased by $19 million to $556 million for the six months ended March 31, 2023 as compared to $575 million for the six months ended March 31, 2022 as a result of lower revenues and the Restructuring Plan costs of $41 million, partially offset by lower cost of revenues and selling, general and administrative expenses and the net gain on sale of the Company’s interest in certain sound recording rights.
−Removed: Expressed as a percentage of total revenue, OIBDA margin remained constant at 19% for each of the six months ended March 31, 2023 and March 31, 2022 with the Restructuring Plan costs offset by the net gain on sale of the Company's interest in certain sound recording rights.
+Added: OIBDA increased by $23 million to $831 million for the nine months ended June 30, 2023 as compared to $808 million for the nine months ended June 30, 2022 as a result of higher revenues, lower selling, general and administrative expense and the net gain on sale of the Company’s interest in certain sound recording rights, partially offset by the Restructuring Plan costs of $41 million and higher cost of revenues.
+Added: Expressed as a percentage of total revenue, OIBDA margin increased to 19% for the nine months ended
+Added: June 30, 2023 from 18% for the nine months ended June 30, 2022 due to the net gain on sale of the Company's interest in certain sound recording rights, lower variable marketing spend and favorable impact of foreign currency exchange rates, partially offset by the Restructuring Plan costs, the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition and the impact of revenue mix.
Depreciation expense
−Removed: Our depreciation expense increased by $2 million to $43 million for the six months ended March 31, 2023 from $41 million for the six months ended March 31, 2022.
+Added: Our depreciation expense increased by $6 million to $65 million for the nine months ended June 30, 2023 from $59 million for the nine months ended June 30, 2022.
This increase is primarily due to an increase in IT capital spend and assets being placed into service.
Amortization expense
−Removed: Our amortization expense decreased by $5 million, or 4%, to $124 million for the six months ended March 31, 2023 from $129 million for the six months ended March 31, 2022.
+Added: Our amortization expense decreased by $10 million, or 5%, to $188 million for the nine months ended June 30, 2023 from $198 million for the nine months ended June 30, 2022.
The decrease is primarily due to certain intangible assets becoming fully amortized.
Operating income
−Removed: Our operating income decreased by $16 million to $389 million for the six months ended March 31, 2023 from $405 million for the six months ended March 31, 2022.
−Removed: The decrease in operating income was due to the factors that led to the decrease in OIBDA, partially offset by lower amortization as noted above.
+Added: Our operating income increased by $27 million to $578 million for the nine months ended June 30, 2023 from $551 million for the nine months ended June 30, 2022.
+Added: The increase in operating income was due to the factors that led to the increase in OIBDA and lower amortization, partially offset by higher depreciation as noted above.
+Added: Loss on extinguishment of debt
+Added: We recorded a loss on extinguishment of debt in the amount of $4 million for the nine months ended June 30, 2023 which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans.
+Added: There was no loss on extinguishment of debt for the nine months ended June 30, 2022.
Interest expense, net
−Removed: Our interest expense, net, increased to $67 million for the six months ended March 31, 2023 from $62 million for the six months ended March 31, 2022 due to a higher principal balance due to the issuance of the incremental Senior Term Loan Facility in January 2023 and higher interest rates, partially offset by interest income.
+Added: Our interest expense, net, increased to $105 million for the nine months ended June 30, 2023 from $94 million for the nine months ended June 30, 2022 due to a higher principal balance due to the issuance of the incremental Senior Term Loan Facility and higher interest rates, partially offset by interest income.
Other expense (income)
−Removed: Other expense for the six months ended March 31, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $88 million.
−Removed: This compares to foreign currency gains on our Euro-denominated debt of $50 million, currency exchange gains on our intercompany loans of $17 million and unrealized gains on hedging activity of $5 million, partially offset by aggregate realized and unrealized losses of $31 million on the mark-to-market of equity investments for the six months ended March 31, 2022.
+Added: Other expense for the nine months ended June 30, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $86 million, partially offset by currency exchange gains on the Company’s intercompany loans of $14 million.
+Added: This compares to foreign currency gains on our Euro-denominated debt of $96 million, currency exchange gains on the Company’s intercompany loans of $23 million and unrealized gains on foreign currency forward exchange contracts of $9 million, partially offset by aggregate realized and unrealized losses of $37 million on the mark-to-market of equity investments for the nine months ended June 30, 2022.
Income tax expense
−Removed: Our income tax expense decreased by $40 million to $69 million for the six months ended March 31, 2023 from $109 million for the six months ended March 31, 2022.
−Removed: The decrease of $40 million in income tax expense is primarily due to the impact of lower pre-tax income in the current year.
−Removed: Net income decreased by $119 million to $161 million for the six months ended March 31, 2023 from $280 million for the six months ended March 31, 2022 as a result of the factors described above.
+Added: Our income tax expense decreased by $36 million to $112 million for the nine months ended June 30, 2023 from $148 million for the nine months ended June 30, 2022.
+Added: The decrease of $36 million in income tax expense is primarily due to the impact of lower pre-tax income in the current year, benefit of R&D credits, and release of U.S.
+Added: state valuation allowance recognized in the current year.
+Added: These benefits were partially offset by an increase in unrecognized tax benefit related to uncertain tax positions and higher withholding taxes in the current year.
+Added: Net income decreased by $120 million to $285 million for the nine months ended June 30, 2023 from $405 million for the nine months ended June 30, 2022 as a result of the factors described above.
Noncontrolling interest
−Removed: There was $5 million of income attributable to noncontrolling interest for the six months ended March 31, 2023 and $1 million of income attributable to noncontrolling interest for the six months ended March 31, 2022.
+Added: There was $7 million of income attributable to noncontrolling interest for the nine months ended June 30, 2023 and $2 million of income attributable to noncontrolling interest for the nine months ended June 30, 2022.
Business Segment Results
Revenues, operating income (loss) and OIBDA by business segment were as follows (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
15 unchanged sentences
Recorded Music
−Removed: Recorded Music revenue decreased by $151 million, or 6%, to $2,382 million for the six months ended March 31, 2023 from $2,533 million for the six months ended March 31, 2022.
−Removed: Recorded Music revenues were $1,061 million and $1,126 million, or 45% and 44% of consolidated Recorded Music revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Recorded Music revenues were $1,321 million and $1,407 million, or 55% and 56% of consolidated Recorded Music revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: The overall decrease in Recorded Music revenue was driven by decreases in digital, physical and artist services and expanded-rights revenues, partially offset by licensing revenue growth, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
+Added: Recorded Music revenue decreased by $58 million, or 2%, to $3,664 million for the nine months ended June 30, 2023 from $3,722 million for the nine months ended June 30, 2022.
+Added: Recorded Music revenues were $1,618 million and $1,641 million, or 44% of consolidated Recorded Music revenues, for each of the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Recorded Music revenues were $2,046 million and $2,081 million, or 56% of consolidated Recorded Music revenues, for each of the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: The overall decrease in Recorded Music revenue was driven by decreases in physical, digital and artist services and expanded-rights revenues, partially offset by licensing revenue growth, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
Cost of revenues
Recorded Music cost of revenues was composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
Total cost of revenues $ 1,845 $ 1,828 $ 17 1 %
−Removed: Recorded Music cost of revenues decreased by $46 million, or 4%, to $1,176 million for the six months ended March 31, 2023 from $1,222 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 26% for each of the six months ended March 31, 2023 and March 31, 2022.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music product costs remained constant at 23% for each of the six months ended March 31, 2023 and March 31, 2022.
+Added: Recorded Music cost of revenues increased by $17 million, or 1%, to $1,845 million for the nine months ended June 30, 2023 from $1,828 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 26% for each of the nine months ended June 30, 2023 and June 30, 2022, due to the favorable impact of foreign currency exchange rates, offset by revenue mix and the timing of artist and repertoire investments.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music product costs increased to 24% for the nine months ended June 30, 2023 from 23% for the nine months ended June 30, 2022.
+Added: The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.
Selling, general and administrative expense
Recorded Music selling, general and administrative expenses were composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
4 unchanged sentences
______________________________________
−Removed: (1) Includes depreciation expense of $26 million and $28 million for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: Recorded Music selling, general and administrative expense decreased by $67 million, or 9%, to $692 million for the six months ended March 31, 2023 from $759 million for the six months ended March 31, 2022.
−Removed: The decrease in general and administrative expense was primarily due to the favorable movements in foreign currency exchange rates of $11 million and lower expenses related to acquisition transaction costs and employee related costs.
−Removed: The decrease in selling and marketing expense was primarily due to lower variable marketing spend.
+Added: (1) Includes depreciation expense of $39 million and $40 million for the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Recorded Music selling, general and administrative expense decreased by $73 million, or 6%, to $1,057 million for the nine months ended June 30, 2023 from $1,130 million for the nine months ended June 30, 2022.
+Added: The decrease in general and administrative expense was primarily due to the favorable movements in foreign currency exchange rates of $15 million and lower severance costs, expenses related to acquisition transaction costs and employee related costs, including savings from the Restructuring Plan, partially offset by the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition.
+Added: The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Restructuring Plan.
The decrease in distribution expense was primarily due to lower physical and artist services and expanded-rights revenue, partially offset by rising costs.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the six months ended March 31, 2023 from 30% for the six months ended March 31, 2022.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the nine months ended June 30, 2023 from 30% for the nine months ended June 30, 2022.
Restructuring
−Removed: For the six months ended March 31, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
+Added: For the nine months ended June 30, 2023, total restructuring costs were $41 million consisting of severance costs for the Restructuring Plan.
Net gain on divestiture
−Removed: During the six months ended March 31, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying condensed consolidated statement of operations.
+Added: During the nine months ended June 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying condensed consolidated statement of operations.
Operating Income and OIBDA
Recorded Music OIBDA included the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
OIBDA $ 801 $ 804 $ (3) — %
−Removed: Recorded Music OIBDA decreased by $40 million, to $540 million for the six months ended March 31, 2023 from $580 million for the six months ended March 31, 2022 as a result of lower revenues and the Restructuring Plan costs of $41 million, partially offset by lower costs of revenue and selling, general and administrative expenses and the net gain on sale of the Company’s interest in certain sound recording rights.
−Removed: Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin remained constant at 23% for each of the six months ended March 31, 2023 and March 31, 2022 with the Restructuring Plan costs offset by the net gain on sale of the Company’s interest in certain sound recording rights.
−Removed: Recorded Music operating income decreased by $31 million to $434 million for the six months ended March 31, 2023 from $465 million for the six months ended March 31, 2022 due to the factors that led to the decrease in Recorded Music OIBDA noted above, partially offset by a decrease in amortization due to certain intangible assets becoming fully amortized.
+Added: Recorded Music operating income increased by $10 million to $641 million for the nine months ended June 30, 2023 from $631 million for the nine months ended June 30, 2022 as a result of lower selling, general and administrative expense, the net gain on sale of the Company’s interest in certain sound recording rights and a decrease in amortization due to certain intangible assets becoming fully amortized, partially offset by lower revenues, higher costs of revenue and the Restructuring Plan costs of $41 million.
+Added: Recorded Music OIBDA decreased by $3 million, to $801 million for the nine months ended June 30, 2023 from $804 million for the nine months ended June 30, 2022 due to the factors that led to the increase in Recorded Music operating income noted above, offset by lower depreciation and amortization.
+Added: Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin remained constant at 22% for each of the nine months ended June 30, 2023 and June 30, 2022 due to the net gain on sale of the Company’s interest in certain sound recording rights, lower variable marketing spend and favorable impact of foreign currency exchange rates, partially offset by the Restructuring Plan costs and the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition and the impact of revenue mix.
Music Publishing
−Removed: Music Publishing revenues increased by $48 million, or 10%, to $507 million for the six months ended March 31, 2023 from $459 million for the six months ended March 31, 2022.
−Removed: Music Publishing revenues were $268 million and $232 million, or 53% and 51% of consolidated Music Publishing revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: International Music Publishing revenues were $239 million and $227 million, or 47% and 49% of consolidated Music Publishing revenues, for the six months ended March 31, 2023 and March 31, 2022, respectively.
+Added: Music Publishing revenues increased by $86 million, or 12%, to $790 million for the nine months ended June 30, 2023 from $704 million for the nine months ended June 30, 2022.
+Added: Music Publishing revenues were $415 million and $369 million, or 53% and 52% of consolidated Music Publishing revenues, for the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: International Music Publishing revenues were $375 million and $335 million, or 47% and 48% of consolidated Music Publishing revenues, for the nine months ended June 30, 2023 and June 30, 2022, respectively.
The overall increase in Music Publishing revenue was driven by growth in digital, performance and mechanical revenue, partially offset by lower synchronization revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
1 unchanged sentence
Music Publishing cost of revenues were composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
1 unchanged sentence
Total cost of revenues $ 491 $ 457 $ 34 7 %
−Removed: Music Publishing cost of revenues increased by $14 million, or 5%, to $309 million for the six months ended March 31, 2023 from $295 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 61% for the six months ended March 31, 2023 from 64% for the six months ended March 31, 2022, primarily attributable to revenue mix and the favorable impact of foreign currency exchange rates.
+Added: Music Publishing cost of revenues increased by $34 million, or 7%, to $491 million for the nine months ended June 30, 2023 from $457 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 62% for the nine months ended June 30, 2023 from 65% for the nine months ended June 30, 2022, primarily attributable to the favorable impact of foreign currency exchange rates, partially offset by revenue mix.
Selling, general and administrative expense
Music Publishing selling, general and administrative expenses were composed of the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
3 unchanged sentences
______________________________________
−Removed: (1) Includes depreciation expense of $2 million and $3 million for the six months ended March 31, 2023 and March 31, 2022, respectively.
−Removed: Music Publishing selling, general and administrative expense increased to $53 million for the six months ended March 31, 2023 from $52 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the six months ended March 31, 2023 from 11% for the six months ended March 31, 2022.
+Added: (1) Includes depreciation expense of $2 million and $4 million for the nine months ended June 30, 2023 and June 30, 2022, respectively.
+Added: Music Publishing selling, general and administrative expense increased to $81 million for the nine months ended June 30, 2023 from $79 million for the nine months ended June 30, 2022.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the nine months ended June 30, 2023 from 11% for the nine months ended June 30, 2022.
Operating Income and OIBDA
Music Publishing OIBDA included the following amounts (in millions):
−Removed: For the Six Months Ended
−Removed: March 31, 2023 vs.
+Added: For the Nine Months Ended
+Added: June 30, 2023 vs.
2023 2022 $ Change % Change
2 unchanged sentences
OIBDA $ 220 $ 172 $ 48 28 %
−Removed: Music Publishing OIBDA increased by $32 million, or 28%, to $147 million for the six months ended March 31, 2023 from $115 million for the six months ended March 31, 2022.
−Removed: Expressed as a percentage of Music Publishing revenue, Music Publishing
−Removed: OIBDA margin increased to 29% for the six months ended March 31, 2023 from 25% for the six months ended March 31, 2022.
−Removed: The increase was due to strong operating performance and the favorable impact of foreign currency exchange rates.
−Removed: Music Publishing operating income increased by $31 million to $101 million for the six months ended March 31, 2023 from $70 million operating income for the six months ended March 31, 2022 largely due to the factors that led to the increase in Music Publishing OIBDA noted above, partially offset by an increase in amortizable intangible assets related to the acquisition of music-related assets.
+Added: Music Publishing operating income increased by $48 million to $151 million for the nine months ended June 30, 2023 from $103 million for the nine months ended June 30, 2022 as a result of higher revenues, partially offset by higher cost of revenues and selling, general and administrative expense.
+Added: Music Publishing OIBDA increased by $48 million, or 28%, to $220 million for the nine months ended June 30, 2023 from $172 million for the nine months ended June 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.
+Added: Expressed as a percentage of Music Publishing revenue, Music Publishing OIBDA margin increased to 28% for the nine months ended June 30, 2023 from 24% for the nine months ended June 30, 2022 due to strong operating performance and the favorable impact of foreign currency exchange rates.
Corporate Expenses and Eliminations
−Removed: Our operating loss from corporate expenses and eliminations increased by $16 million to $146 million for the six months ended March 31, 2023 from $130 million for the six months ended March 31, 2022, primarily due to higher employee related costs including non-cash stock-based compensation and other related expenses of $6 million and the Executive Transition Costs of $3 million, higher depreciation and expenses related to transformation initiatives, partially offset by the impact of the additional week in the prior year and a decrease in professional services.
−Removed: Our OIBDA loss from corporate expenses and eliminations increased by $11 million to $131 million for the six months ended March 31, 2023 from $120 million for the six months ended March 31, 2022 due to the operating loss factors noted above.
+Added: Our operating loss from corporate expenses and eliminations increased by $31 million to $214 million for the nine months ended June 30, 2023 from $183 million for the nine months ended June 30, 2022, primarily due to higher employee related costs including non-cash stock-based compensation and other related expenses of $7 million, the Executive Transition Costs of $4 million and incremental overhead in technology, higher depreciation and expenses related to transformation initiatives, partially offset by the impact of the additional week in the prior year.
+Added: Our OIBDA loss from corporate expenses and eliminations increased by $22 million to $190 million for the nine months ended June 30, 2023 from $168 million for the nine months ended June 30, 2022 due to the operating loss factors noted above.
FINANCIAL CONDITION AND LIQUIDITY
−Removed: Financial Condition at March 31, 2023
−Removed: At March 31, 2023, we had $3.986 billion of debt (which is net of $43 million of premiums, discounts and deferred financing costs), $601 million of cash and equivalents (net debt of $3.385 billion, defined as total debt, less cash and equivalents and premiums, discounts and deferred financing costs) and $252 million of Warner Music Group Corp.
+Added: Financial Condition at June 30, 2023
+Added: At June 30, 2023, we had $3.988 billion of debt (which is net of $40 million of premiums, discounts and deferred financing costs), $600 million of cash and equivalents (net debt of $3.388 billion, defined as total debt, less cash and equivalents and premiums, discounts and deferred financing costs) and $281 million of Warner Music Group Corp.
This compares to $3.732 billion of debt (which is net of $41 million of premiums, discounts and deferred financing costs), $584 million of cash and equivalents (net debt of $3.148 billion) and $152 million of Warner Music Group Corp.
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The following table summarizes our historical cash flows (in millions).
−Removed: The financial data for the six months ended March 31, 2023 and March 31, 2022 are unaudited and have been derived from our condensed consolidated interim financial statements included elsewhere herein.
−Removed: Six Months Ended
+Added: The financial data for the nine months ended June 30, 2023 and June 30, 2022 are unaudited and have been derived from our condensed consolidated interim financial statements included elsewhere herein.
+Added: Nine Months Ended
Cash provided by (used in):
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Operating Activities
−Removed: Cash provided by operating activities was $203 million for the six months ended March 31, 2023 as compared with cash provided by operating activities of $173 million for the six months ended March 31, 2022.
−Removed: The $30 million increase in cash provided by operating activities was primarily due to timing of A&R investments and other movements within working capital.
+Added: Cash provided by operating activities was $349 million for the nine months ended June 30, 2023 as compared with cash provided by operating activities of $336 million for the nine months ended June 30, 2022.
+Added: The $13 million increase in cash provided by operating activities was primarily due to timing of working capital partially offset by higher cash taxes due to lower available foreign tax credits to shield U.S.
+Added: taxable income coupled with higher forecasted taxable income.
Investing Activities
−Removed: Cash used in investing activities was $51 million for the six months ended March 31, 2023 as compared with cash used in investing activities of $649 million for the six months ended March 31, 2022.
−Removed: The $51 million of cash used in investing activities in the six months ended March 31, 2023 consisted of $17 million relating to investments and acquisitions of businesses, $42 million to acquire music-related assets, and $56 million relating to capital expenditures, partially offset by $42 million of proceeds from divestitures and $22 million of proceeds from the sale of investments.
−Removed: The $649 million of cash used in investing activities in the six months ended March 31, 2022 consisted of $429 million relating to investments and acquisitions of businesses, a portion of which was debt-financed, $169 million to acquire music-related assets, a portion of which was debt-financed, and $62 million relating to capital expenditures, partially offset by $11 million of proceeds from the sale of investments.
+Added: Cash used in investing activities was $104 million for the nine months ended June 30, 2023 as compared with cash used in investing activities of $763 million for the nine months ended June 30, 2022.
+Added: The $104 million of cash used in investing activities in the nine months ended June 30, 2023 consisted of $26 million relating to investments and acquisitions of businesses, $53 million to acquire music-related assets, and $89 million relating to capital expenditures, partially offset by $42 million of proceeds from divestitures and $22 million of proceeds from the sale of investments.
+Added: The $763 million of cash used in investing activities in the nine months ended June 30, 2022 consisted of $499 million relating to investments and acquisitions of businesses, a portion of which was debt-financed, $178 million to acquire music-related assets, a portion of which was debt-financed, and $97 million relating to capital expenditures, partially offset by $11 million of proceeds from the sale of investments.
Financing Activities
−Removed: Cash used in financing activities was $143 million for the six months ended March 31, 2023 as compared with cash provided by financing activities of $363 million for the six months ended March 31, 2022.
−Removed: The $143 million of cash used in financing activities for the six months ended March 31, 2023 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $133 million, dividends paid of $167 million, deferred financing costs of $2 million and distributions to noncontrolling interest holders of $7 million, partially offset by proceeds from the incremental Senior Term Loan Facility of $147 million and proceeds from the Term Loan Mortgage of $19 million.
−Removed: The $363 million of cash provided by financing activities for the six months ended March 31, 2022 consisted of proceeds from debt issuance of $535 million which was used to fund the acquisition of a business and music-related assets, partially offset by dividends paid of $156 million, taxes paid related to net share settlement of restricted stock units of $6 million, deferred financing costs of $5 million, cash paid to settle contingent consideration of $4 million and distributions to noncontrolling interest holders of $1 million.
+Added: Cash used in financing activities was $233 million for the nine months ended June 30, 2023 as compared with cash provided by financing activities of $280 million for the nine months ended June 30, 2022.
+Added: The $233 million of cash used in financing activities for the nine months ended June 30, 2023 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $133 million, repayment of Senior Term Loan Facility Tranche H loans of $150 million, dividends paid of $251 million, deferred financing costs of $3 million and distributions to noncontrolling interest holders of $11 million, partially offset by proceeds from the Senior Term Loan Facility Tranche G loans of $149 million, proceeds from the Senior Term Loan Facility Tranche H loans of $147 million and proceeds from the Term Loan Mortgage of $19 million.
+Added: The $280 million of cash provided by financing activities for the nine months ended June 30, 2022 consisted of proceeds from debt issuance of $535 million which was used to fund the acquisition of a business and music-related assets, partially offset by dividends paid of $235 million, taxes paid related to net share settlement of restricted stock units of $6 million, deferred financing costs of $5 million, cash paid to settle contingent consideration of $4 million and distributions to noncontrolling interest holders of $5 million.
Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and equivalents and funds available for drawing under our Revolving Credit Facility.
−Removed: These sources of liquidity are needed to fund our debt service requirements, working capital requirements, capital expenditure requirements, strategic acquisitions and investments, and dividends, prepayments of debt, repurchases or retirement of our outstanding debt or notes or repurchases of our outstanding equity securities in open market purchases, privately negotiated purchases or otherwise, we may elect to pay or make in the future.
−Removed: maintain our cash in various banks and other financial institutions around the world, and in some cases those cash deposits are in excess of FDIC or other deposit insurance.
+Added: These sources of liquidity are needed to fund our debt service requirements, working capital requirements, capital expenditure requirements, strategic acquisitions and investments, and
+Added: dividends, prepayments of debt, repurchases or retirement of our outstanding debt or notes or repurchases of our outstanding equity securities in open market purchases, privately negotiated purchases or otherwise, we may elect to pay or make in the future.
+Added: We maintain our cash in various banks and other financial institutions around the world, and in some cases those cash deposits are in excess of FDIC or other deposit insurance.
In the event of a bank failure or receivership, we may not have access to those cash deposits in excess of the relevant deposit insurance, which could have an adverse effect on our liquidity and financial performance.
3 unchanged sentences
In April 2023, we successfully launched certain components of our new technology platform in select territories.
−Removed: The Company will continue to deploy our new technology platform to remaining territories in a wave-based approach with additional territories expected to implement during fiscal year 2023 and fiscal year 2024.
+Added: The Company will continue to deploy our new technology platform to remaining territories in a wave-based approach with additional territories expected to implement during fiscal year 2023, fiscal year 2024 and into fiscal year 2025.
Annualized run-rate savings from the financial transformation initiative are expected to be between approximately $35 million and $40 million once fully implemented.
3 unchanged sentences
For example, our S&P corporate credit rating improved from B in 2017 to BB+ in July 2021 with a stable outlook, and our Moody’s corporate family rating improved from B1 in 2016 to Ba2 in April 2023.
−Removed: In addition, our weighted-average interest rate on our outstanding indebtedness has decreased from 10.5% in 2011 to 4.0% as of March 31, 2023.
+Added: In addition, our weighted-average interest rate on our outstanding indebtedness has decreased from 10.5% in 2011 to 4.1% as of June 30, 2023.
Our nearest-term maturity date is in 2028.
13 unchanged sentences
On March 23, 2023, Acquisition Corp.
−Removed: entered into an amendment (the “Fourth Revolving Credit Agreement Amendment”) to the Revolving Credit Agreement among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, as administrative agent, governing Acquisition Corp.’s revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto.
+Added: entered into an amendment (the “Fourth Revolving Credit Agreement Amendment”) to the Revolving Credit Agreement among Acquisition Corp.
+Added: and Credit Suisse AG, as administrative agent, governing Acquisition Corp.’s revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto.
The Fourth Revolving Credit Agreement Amendment provides for the replacement of LIBOR-based rates with a SOFR-based rate and other rates for alternate currencies, such as EURIBOR and SONIA.
1 unchanged sentence
This transition does not result in a financial impact to our consolidated financial statements.
−Removed: Existing Debt as of March 31, 2023
−Removed: As of March 31, 2023, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions):
+Added: May 2023 Senior Term Loan Credit Agreement Amendment
+Added: On May 10, 2023, Acquisition Corp.
+Added: entered into an amendment (the “Senior Term Loan Credit Agreement Amendment”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the guarantors party thereto and Credit Suisse AG, as administrative agent.
+Added: The Senior Term Loan Credit Agreement Amendment provides for the replacement of LIBOR-based rates with a SOFR-based rate.
+Added: We utilized the expedients set forth in ASC Topic 848, including those relating to derivative instruments used in hedging relationships.
+Added: This transition does not result in a financial impact to our consolidated financial statements.
+Added: June 2023 Senior Term Loan Credit Agreement Amendment
+Added: On June 30, 2023, Acquisition Corp.
+Added: entered into an increase supplement (the “Third Increase Supplement”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the guarantors party thereto, the lender party thereto and Credit Suisse AG, as administrative agent, pursuant to which Acquisition Corp.
+Added: has borrowed additional Tranche G term loans in an amount equal to $150 million, the proceeds of which have been used to prepay the Tranche H term loans in full (see “Senior Term Loan Facility Amendment”), for an aggregate principal amount outstanding under the Senior Term Loan Credit Agreement of $1,295 million.
+Added: The Company recorded a loss on extinguishment of debt of approximately $4 million for the three and nine months ended June 30, 2023, which represents the remaining unamortized discount and deferred financing costs of the Tranche H term loan.
+Added: Existing Debt as of June 30, 2023
+Added: As of June 30, 2023, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions):
Revolving Credit Facility (a) $ —
10 unchanged sentences
______________________________________
−Removed: (a) Reflects $300 million of commitments under the Revolving Credit Facility available at March 31, 2023, less letters of credit outstanding of approximately $4 million at March 31, 2023.
−Removed: There were no loans outstanding under the Revolving Credit Facility at March 31, 2023.
+Added: (a) Reflects $300 million of commitments under the Revolving Credit Facility available at June 30, 2023, less letters of credit outstanding of approximately $4 million at June 30, 2023.
+Added: There were no loans outstanding under the Revolving Credit Facility at June 30, 2023.
For further discussion of our debt agreements, see “Liquidity” in the “Financial Condition and Liquidity” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
3 unchanged sentences
Therefore, there can be no assurance that the Company will pay any dividends to holders of the Company’s common stock, or as to the amount of any such dividends.
−Removed: On February 10, 2023, the Company’s board of directors declared a cash dividend of $0.16 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on March 1, 2023.
−Removed: The Company paid an aggregate of approximately $83 million and $167 million, or $0.16 and $0.32 per share, in cash dividends to stockholders and participating security holders for the three and six months ended March 31, 2023, respectively.
+Added: On May 10, 2023, the Company’s board of directors declared a cash dividend of $0.16 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on June 1, 2023.
+Added: The Company paid an aggregate of approximately $84 million and $251 million, or $0.16 and
+Added: $0.48 per share, in cash dividends to stockholders and participating security holders for the three and nine months ended June 30, 2023, respectively.
Covenant Compliance
−Removed: The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of March 31, 2023.
+Added: The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of June 30, 2023.
On January 18, 2019, we delivered a notice to the trustee under the 2012 Secured Indenture and 2014 Unsecured Indenture changing the Fixed GAAP Date, as defined under the indentures, to October 1, 2018.
6 unchanged sentences
(2) any non-cash charges (including any impairment charges);
−Removed: (3) any net loss resulting from hedging currency exchange risks;
−Removed: (4) the amount of management, monitoring, consulting and advisory fees paid to Access;
+Added: (3) any net loss resulting from interest rate swap transactions or foreign currency forward exchange transactions;
(4) business optimization expenses (including consolidation initiatives, severance costs and other costs relating to initiatives aimed at profitability improvement);
30 unchanged sentences
The following is a reconciliation of net income (loss), which is a U.S.
−Removed: GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended March 31, 2023, for the twelve months ended March 31, 2022 and for the three months ended March 31, 2023 and March 31, 2022.
−Removed: In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended March 31, 2023.
+Added: GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended June 30, 2023, for the twelve months ended June 30, 2022 and for the three months ended June 30, 2023 and June 30, 2022.
+Added: In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended June 30, 2023.
The terms and related calculations are defined in the Revolving Credit Agreement.
2 unchanged sentences
Twelve Months Ended
−Removed: March 31, Three Months Ended
+Added: June 30, Three Months Ended
2023 2022 2023 2022
6 unchanged sentences
Restructuring costs (c) 60 29 1 6
−Removed: Net hedging and foreign exchange (gains) losses (d) (30) (78) 31 (32)
+Added: Net foreign exchange (gains) losses (d) 13 (148) (12) (55)
Transaction costs (e) — 13 — 1
9 unchanged sentences
(b) Reflects net gains on sale of securities and divestitures.
−Removed: (c) Reflects severance costs and other restructuring related expenses, including those related to the Restructuring Plan as well as the Executive Transition Costs in the current quarter.
−Removed: (d) Reflects unrealized (gains) losses due to foreign exchange on our Euro-denominated debt, losses (gains) from hedging activities and intercompany transactions.
+Added: (c) Reflects severance costs and other restructuring related expenses, including those related to the Restructuring Plan as well as the Executive Transition Costs in the twelve months ended June 30, 2023.
+Added: (d) Reflects unrealized (gains) losses due to foreign exchange on our Euro-denominated debt, losses (gains) from foreign currency forward exchange contracts and intercompany transactions.
(e) Reflects mainly transaction related costs and mark-to-market adjustments of an earn-out liability related to a transaction in 2021.
−Removed: (f) Reflects costs associated with our transformation initiatives and IT system updates, which includes costs of $12 million and $42 million related to our finance transformation and other related costs for the three and twelve months ended March 31, 2023, respectively, as well as $10 million and $39 million for the three and twelve months ended March 31, 2022, respectively.
+Added: (f) Reflects costs associated with our transformation initiatives and IT system updates, which includes costs of $12 million and $43 million related to our finance transformation and other related costs for the three and twelve months ended June 30, 2023, respectively, as well as $11 million and $41 million for the three and twelve months ended June 30, 2022, respectively.
(g) Reflects non-cash stock-based compensation expense related to the Omnibus Incentive Plan and the Warner Music Group Corp.
1 unchanged sentence
(h) Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market adjustment of equity investments, investment losses (gains), mark-to-market adjustments of an earn-out liability in 2022 and other non-cash impairments.
−Removed: (i) Reflects expected savings resulting from transformation initiatives, including the Restructuring Plan, and the pro forma impact of certain specified transactions for the three and twelve months ended March 31, 2023.
+Added: (i) Reflects expected savings resulting from transformation initiatives, including the Restructuring Plan, and the pro forma impact of certain specified transactions for the three and twelve months ended June 30, 2023.
Certain of these cost savings initiatives and transactions impacted quarters prior to the quarter during which they were identified within the last twelve-month period.
−Removed: The pro forma impact of these specified transactions and initiatives resulted in a $38 million increase in the twelve months ended March 31, 2023 Adjusted EBITDA.
+Added: The pro forma impact of these specified transactions and initiatives resulted in a $15 million increase in the twelve months ended June 30, 2023 Adjusted EBITDA.
(j) Reflects the balance of senior secured debt at Acquisition Corp.
1 unchanged sentence
(k) Reflects the ratio of Senior Secured Indebtedness, including Revolving Credit Agreement Indebtedness, to Adjusted EBITDA.
−Removed: This is calculated net of cash and equivalents of the Company as of March 31, 2023 not exceeding $250 million.
+Added: This is calculated net of cash and equivalents of the Company as of June 30, 2023 not exceeding $250 million.
If the outstanding aggregate principal amount of borrowings and drawings under letters of credit which have not been reimbursed under our Revolving Credit Facility is greater than $105 million at the end of a fiscal quarter, the maximum leverage ratio permitted under the Revolving Credit Facility is 5.00:1.00.
−Removed: The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings
−Removed: and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $105 million at the end of a fiscal quarter.
+Added: The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $105 million at the end of a fiscal quarter.
On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.
7 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.