Coronavirus

Kobalt Revenue Up 35% Even as Losses Widened in 2019

Willard Ahdritz
Courtesy of Kobalt

Willard Ahdritz

The company says it's "aiming for future growth and profitability" and has enough capital to invest in its staff and clients during the coronavirus crisis

The Kobalt Music Group lost $56.78 million on revenues of $543.44 million for the year ended June 30, 2019. While that performance represented a widening of losses from the prior year when the company had $38.89 million in red ink, it also showed a faster rate of growth as revenue increased 35.1% from the prior year's revenue total of $402.14 million for the year ended June 30, 2018. In the latter year, the company only grew at a 25.3% rate from $321 million in revenue for 2017.

"This past year was another banner year of growth," the company's founder and chairman Willard Ahdritz said in a statement. "In addition, we successfully scaled our business to support our clients in the next phase of Kobalt. Kobalt has worked to create a better music industry for artists and songwriters. Our pace and focus on more transparency, less confusion, and being tech and talent-friendly has had a major impact on the industry.

"Kobalt's mission is stronger than ever and we are aiming for future growth and profitability," Ahdritz added. "I'm very excited to continue to serve our clients with the global strength of our staff, systems, technology and partners."

During its fiscal 2019, Kobalt's gross collections — which also includes funds collected under the agency accounting model — jumped nearly 25% to $616 million from $493 million in the prior year. That total includes, for example, all funds — $69.65 million — collected by its neighboring rights operation, of which only its fee of $6.11 million is counted toward Kobalt's revenue.

Kobalt's adjusted earnings before interest, taxes, depreciation and amortization also widened to a loss of $21.635 million, growing 41% from the prior year when adjusted EBITDA loss was $15.34 million. The company further reported an operating loss of $44.14 million, up from $41.4 million in the prior year.

While the company has never turned a profit in the 18 years it has been reporting its financials, Kobalt's "on-going losses are the result of a conscious decision to prioritize growth through making strategic investments over short-term profitability," the company's financial filing states. "The results are in line with the Group's long-term forecasts."

Moreover, "in the past three years, Kobalt has grown significantly and succeeded in many areas," Kobalt CEO Laurent Hubert said in a statement. "With any company that grows at our pace to compete with highly entrenched competitors, it's remarkable what we've been able to achieve."

"As an agent of change in the publishing industry to help songwriters and help take artists to the top of the charts via our recordings arm, AWAL, we still know there's more to do," Hubert continued. "There's opportunities to be more efficient and provide more value. I'm excited about this next phase of profitable growth, while continuing to offer the best global services to talent and partners."

Kobalt engages in four music industry business segments: music publishing and administration, independent distribution and label services, under the name AWAL, neighboring rights collections, and performance rights organization collections, under the brand AMRA.

Its publishing operation saw revenues grow 39.1% to $405 million from $291.7 million for the year ended June 30, 2018.

During the year, Kobalt expanded its publishing roster to including landing catalogs by Michael McDonald, Gregg Allman, DJ Mustard, Bonnie McKee, LunchMoney Lewis, and Blackground Records, and extended agreements for Lindsey Buckingham, Pasek & Paul, Herbie Hancock, Bjork, The Lumineers, Lionel Richie, and Fleet Foxes, according to its filing.

AWAL almost doubled its revenues, growing to $106.16 million from the prior year when revenues were $57.3 million, while acts like Lauf, Rex Orange County and Lil Peep, each exceeded 1 billion audio streams during the year, with the former artist hitting the 3 billion mark, according to the Kobalt filing. During the year, the company's roster continue to growth through such signed artists as Kim Petras, Steve Lacy, Bruno Major, Cold War Kids, Omar Apollo, and Girl in Red; and labels like Glassnote, SideOne Dummy, B Unique, and 30th Century Records.

Kobalt says that its neighboring rights operation, Kobalt Neighbouring Rights, is the largest in the world, but its collections fell to $69.65 million for the year ended June 30, 2019, down from $91.242 million in the prior year.

Rounding out operations, AMRA enjoyed growth of 46.3% with revenue increasing to $65.6 million from $44.83 million.

During the year, Kobalt's employee count averaged 652 — that's up from 515 employees in the prior year. The company closed the frame with nearly $125 million in cash on hand, having drawn down all of the funding from a $125 million term loan, which it obtained in November 2018 that replaced a $50 million revolving credit facility. That loan matures in 2023, according to company documents.

As Kobalt heads toward the close of another financial year — on June 30, 2020 — the music industry, like all sectors of the global economy, is under pressure by the coronavirus pandemic, causing uncertain times, especially for the live music sector, which Ahdritz acknowledged in a statement.

"As much as I believed large parts of the industry would transform into digital 20 years ago, I'm confident that our company — and others that have truly invested in tech, systems and global remote workforces — are well-prepared to continue to support artists, songwriters and partners during this time of crisis," Ahdritz stated. "Our hearts go out to the songwriters, artists and all those hard-working people behind the scenes whose livelihoods are severely disrupted right now especially in the live music industry and we all hope for a swift recovery."

Hubert added that the company had transitioned to an all remote workforce back on March 10th.

"Kobalt has taken many proactive steps to ensure our staff's safety and well-being in this uncertain time," Hubert said in a statement. "While not intentional for this exact scenario, our unique global setup that allows our teams and creatives to leverage tech remotely has us well-prepared. It did not take us long to get our operations up and running to support all of our clients. Kobalt is well-capitalized and we will continue to invest in staff's well-being and our client services to achieve our long-term business goals."

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