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Warner Music Group’s Class A shares (NASDAQ:WMG) saw a remarkable after-hours surge of over 6% on Wednesday, following the announcement of a significant overhaul in its business strategy. The recording label giant unveiled plans to downsize its workforce, a move intended to unlock additional resources for investment in the heart of its operations: music.
The stock soared to $38.50 after hours, marking a 6.4% uptick.
To achieve its investment objectives, the media powerhouse anticipates a workforce reduction of around 600 employees – a substantial 10% of its staff. The brunt of the layoffs will be linked to the winding down of its in-house ad sales business, O&O Media Properties, as noted in the regulatory filing by Warner Music. This unfolding restructuring plan is set to yield pre-tax cost savings of approximately $200 million on an annualized run-rate basis by the close of fiscal year 2025, according to WMG.
Warner Music’s headcount restructuring scheme comes hot on the heels of a similar decision by its rival, Universal Music Group (OTCPK:UMGNF), the world’s largest record company, which recently announced impending staff layoffs.
In addition to this strategic overhaul, Warner Music reported its FQ1 2024 results. The company posted an earnings figure of 30 cents per share, falling short of estimates by 12 cents. However, there was positive news on the revenue front, with a 17.4% year-over-year increase to $1.75 billion, surpassing expectations by $80 million.
WMG’s quarterly operating income surged by 34% year-over-year, reaching $354 million. Furthermore, its adjusted operating income before depreciation and amortization soared by 35% to $451 million. “The quarter was highlighted by an acceleration in Recorded Music streaming growth and continued momentum in Music Publishing, which saw its fifth consecutive quarter of increasing revenue growth,” said Warner Music’s finance chief, Bryan Castellani.
Within its segments, recorded music witnessed a 17% year-over-year revenue surge to $1.45 billion, while the music publishing segment recorded a substantial 22% gain in revenue, amounting to $304 million.
Notable contributors to Warner Music’s sales success in the quarter included American singer-songwriters Zach Bryan and Bruno Mars, and English sensation Ed Sheeran. The soundtrack album for the highest-grossing film of 2023, “Barbie,” was also a significant contributor.
Crucially, the crux of Warner Music’s business revolves around its four iconic record labels: Atlantic, Elektra, Parlophone, and Warner Records.
