Warner Music Group narrowed its losses to $37 million and grew revenues to $815 million in its fiscal first quarter, ended Dec. 31. While that's an improvement from the $80 million net loss the company posted for the corresponding quarter in 2012, as well as growth over the $769 million in revenue WMG posted in that time period, the company suffered a decline in operating profit to $15 million from $51 million a year ago.
The company attributed the 6% revenue increase to its acquisition of Parlophone Records; without income from that label of $74 million, its revenue would have declined 3.6% due to a light release schedule.
WMG CEO Stephen Cooper said that the company's release schedule would get better in the second half of the years, although he didn't disclose any artists that would release records then.
After cost of goods and selling general and administrative expenses, the company produced $93 million in operating income before depreciation and amortization, but after those items are subtracted, WMG was left with $15 million in operating income. That compares with $112 million in OIBDA and $51 million in the corresponding period of 2012.
However, this time out OIBDA was impacted by the Parlophone acquisition, as the company spent $20 million for integration costs and acquisition fees and another $7 million in restructuring costs. Without those costs, its adjusted OIBDA would have been $120 million, or a 7.1% increase over the $112 million in OIBDA posted in the first fiscal quarter of 2013.
Within the company, music publishing revenue grew to $128 million in the first quarter from $116 million, a 10.3% increase, but the company said that the performance and mechanical revenue portion of that growth was driven by the timing of collection society payouts to the company.
Recorded music also posted an increase of 5.2%, to $691 million, from $657 million in the prior corresponding period.
In talking about the transitioning music business, WMG said its overall digital revenue grew by 8.2% to $276 million from the $255 million posted in the three-month period ended Dec. 31, 2012.
Nevertheless, for the recorded music operation, physical revenue was still dominant, accounting for $273 million of revenue versus $256 million for digital, with another $78 million coming from licensing and $84 million from artist services and expanded rights.
During a conference call with analysts, Cooper said that while digital had surpassed physical in the company's U.S. recorded music operation and that digital was by far the dominant format in the Nordic countries, he said that physical was still very strong in Japan and Germany. Nevertheless, he expressed optimism about the growth of streaming, which he said would have a growing positive impact on the industry.
During the quarter, cash flow wasn't enough to fund operations, so the company tapped its revolving credit facility to the tune of $55 million, the company reported, while the company's long-term debt increased slightly to $2.86 billion. During the period, the company's equity declined by 6.4% to $698 million from $743 million it had at the end of the first quarter of the prior year.