What Cancelled SPAC Deal? Universal Music Group H1 Earnings Surge 38% Year-Over-Year

Bill Ackman of Pershing Square Tontine Holdings (PTSH) SPAC, which bailed on its plan to purchase 10% of Universal Music Group.
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Bill Ackman of Pershing Square Tontine Holdings (PTSH) SPAC, which bailed on its plan to purchase 10% of Universal Music Group.
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Bill Ackman of Pershing Square Tontine Holdings, Ltd. (PSTH) (photo: United States Senate CC by 2.0)

Despite getting left at the altar by Bill Ackman-led SPAC Pershing Square Tontine Holdings, Universal Music Group seems to be walking it off without a problem — with strong earnings generating plenty of momentum ahead of its touted IPO.

Thanks to a strong first-half earnings scorecard, mega-major Universal Music Group now has a bolt of momentum heading into its planned Q4 public offering. The unaudited financial disclosure, shared just hours ago with Digital Music News, reveals a robust 38% gain in EBIT-measured profits (earnings before interest, income taxes, and amortization). Overall, EBITA hit €753 million, or roughly $892 million, according to parent company Vivendi, a 37.7 percent year-over-year increase.

“For the first half of 2021, UMG’s EBITA was €753 million, up 37.7% at constant currency and perimeter compared to the first half of 2020 (+32.8% on an actual basis), while the EBITA margin improved to 19.7% from 16.4% for the first half of 2020, driven by the revenue growth and control of costs,” Vivendi announced.

For those searching for a splashier headline, UMG’s EBITDA (earnings before interest, income taxes, depreciation, and amortization) approached $1 billion — or ten figures. Specifically, first-half EBIDTA topped €822 million (or $973 million), up 31.8% at constant currency, with a corresponding EBITDA margin of 21.5%.

Either way, Universal Music Group enjoyed a very fruitful first half, spurred by heady gains across recordings, publishing assets, streaming, and even physical products.

Overall, recorded music revenues jumped 20% at constant currencies. That sounds solid, and UMG pointed to COVID-fueled growth of both ad-supported streaming and physical assets (which likely refers to vinyl). It also includes a “digital royalty claim,” which is understood to be modest, as well as an unspecified “catch-up payment from a digital service provider,” both of which could slightly muddle the year-over-year analysis.

In total, UMG reported that subscription and streaming revenues surged by 24.7%, while physical sales (again, most likely powered by vinyl records) were up 40.1% compared to the same period last year.

In terms of total revenues, Universal reached €3.831 billion ($4.54 billion), up 17.3% at constant currencies (and 10.7% on an actual basis).

During the period, Universal Music Group was clearly in dealmaking mode. “During the first half of 2021, UMG entered into a number of new agreements in the social media space, including with TikTok, Triller, and Snap Inc., among others,” the company reported. “UMG also announced a deal to serve as the first music partner to Liteboxer, a home-fitness boxing company. This follows a series of deals UMG has closed recently in the fitness and wellness space with companies including Calm and Equinox+.”

As for the squashed Bill Ackman-led Pershing Tontine, this deal ain’t quite over yet.

Pershing shareholders seemed sour on the UMG share acquisition, which was planned at 10%. Now, Ackman has indicated interest in buying at least 5% of Universal Music Group, and as much as 10%. Vivendi, in turn, plans to sell the remaining stake to meet the 10% threshold, while positioning a 60% share for public investment via an IPO on the Euronext Amsterdam. Tencent owns the remaining 20%.

Here’s a complete breakdown of who owns Universal Music Group currently.