Warner Music Has the Beat - TheStreet

Warner Music Has the Beat

Second-quarter numbers are better than guidance.
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Warner Music

(WMG) - Get Report

posted a stronger-than-expected second quarter Friday, riding a 15% domestic revenue gain.

The New York-based music company lost $7 million, or a nickel a share, for the quarter ended March 31. A year ago the company made $4 million, but that translated into a 28-cent-a-share loss after the company marked to market some warrants associated with its divestiture from

Time Warner



Revenue rose 4% from a year ago to $796 million, as domestic revenue rose 15% and international revenue slid 6% as reported and rose 2% on a constant currency basis. On a comparable basis, assuming comparable currencies and excluding the sold music sheet business, revenue rose 10% from a year ago in the latest quarter.

Analysts surveyed by Thomson Financial were looking for a 16-cent loss on sales of $771 million.

Digital revenue rose 30% sequentially to $90 million, accounting for 11% of total revenue. Operating income before depreciation and amortization rose 18% from a year ago to $104 million.

"One year since our IPO, Warner Music has grown revenue, outperforming the market and gaining significant margin and market share," said CEO Edgar Bronfman Jr. "Through its strategy for profitable growth, this team has led the industry in the digital space, enhanced its competitiveness in the independent arena and gained share in the highest-growth market segments. Our artists and labels have had a remarkable year -- including both innovative efforts with established artists and development of new artists."

Free cash flow -- cash flow from operations less capital expenditures and cash paid for investments -- fell to $162 million from $193 million a year ago. Unlevered after-tax cash flow -- free cash flow excluding cash interest paid and non-recurring management fees -- dropped to $186 million from $220 million.

The news comes as EMI makes a third attempt in six years to acquire Warner. Warner this week rejected a $28.50-a-share cash-and-stock bid, but observers believe a sweetened bid is likely.