First-quarter revenue held flat at €2.9 billion as a weak U.S. dollar offset 8.1% constant-currency growth
Plans to divest half of its Spotify $SPOT shareholding and expand its buyback authorization to €1 billion headlined UMG's first-quarter announcement, with reported revenue flat at €2.9 billion as the weaker U.S. dollar erased underlying gains, the company said.
In constant currency, revenue grew 8.1% in the quarter ended March 31. On a constant-currency basis, adjusted EBITDA improved 3.9%, though the reported figure came to €636 million, a 3.8% decline.
The board authorized the Spotify stake reduction in March, the company said. Proceeds will be directed initially toward UMG's buyback program and also shared with artists on a non-recoupable basis — a commitment made when Taylor Swift re-signed with the label in 2018, according to Reuters.
If shareholders approve at the annual general meeting, a second €500 million buyback will follow the March program, bringing total authorized repurchases to €1 billion. The board said these actions address a gap between the company’s share price and its actual performance and outlook.
The moves follow an unsolicited bid for UMG from activist investor Bill Ackman. Through Pershing Square $SQ Capital Management, Ackman holds a greater-than-4.5% position in UMG, according to Bloomberg. His roughly $65 billion takeover proposal envisioned liquidating UMG's full Spotify position, with net proceeds of €1.5 billion flowing to shareholders after taxes and artist payments. Rather than follow that blueprint, UMG's board opted for a partial divestiture and is channeling the money back into the business. Speaking to analysts about the quarterly results, Grainge declined to address Ackman's offer directly, saying a response would come only after the board finishes its deliberations.
On the operating side, recorded music subscription revenue grew 12.5% in constant currency to €1.3 billion, driven by wholesale price increases from Streaming 2.0 agreements and the February acquisition of Downtown Music Holdings. Music publishing revenue grew 7.0% in constant currency. Merchandising and other revenue declined 1.9% in constant currency.
Among the quarter's strongest performers were BTS, Taylor Swift, Morgan Wallen, Olivia Dean, and the K-Pop Demon Hunters soundtrack.
