Warner Music Group Corp (WMG) delivered a resilient QQ2 2024 performance with total revenue up 7% year over year (YoY) and 9% on a normalized basis, driven by strength in Recorded Music streaming and a robust Music Publishing backdrop. Total revenue reached $1.494 billion, with Recorded Music up 4% and Music Publishing up 19% on a reported basis. On a normalized basis, Recorded Music grew 7% and Music Publishing remained a high-growth driver. Gross margin stood at ~41.5%, and operating margin came in around 16.5%, supported by ongoing cost discipline and a favorable mix between publishing and recordings. Management highlighted that streaming revenue rose 11% (subscription streaming up 13.5%), underscoring the ongoing monetization of the company’s catalog and new artist slate.
However, the quarter also underscored balance-sheet and cash-flow headwinds. Net debt rose to approximately $3.68 billion on a net basis, reflecting a leverage profile that remains elevated given total debt around $4.27 billion and cash around $587 million. Free cash flow was negative at roughly ($80) million, with operating cash flow negative at about ($31) million due in part to working capital dynamics and timing in licensing/settlements. The company reiterated a multi-year plan to deliver $200 million of annualized run-rate cost savings by the end of fiscal 2025, with initial savings modestly realized in the quarter and predominantly reinvested in technology and platform improvements. Management emphasized a long-term, organic-growth-focused capital allocation framework (organic investments, selective inorganic opportunities, and shareholder returns).
Looking forward, management signaled a second-half weighted cadence with several high-profile releases (Dua Lipa, Twenty One Pilots, Sia, Megan Thee Stallion, and others) and ongoing catalog monetization progress. The company expects continued benefits from price increases across major DSPs and a push to grow the value of music (pie growth and participant share). At the same time, there are notable ongoing risks, including the BMG digital revenue roll-off headwind that tempts near-term revenue variability, Stated guidance centers on margin expansion and cash-flow conversion over a multi-year horizon, but near-term cash flow remains pressured by working-capital timing and licensing settlements. Overall, WMG presents a compelling growth narrative anchored in catalog strength and an evolving pricing and AI-enabled strategy, albeit with sizable leverage and cash-flow risks to monitor.