Warner Music Group Corp.

Welcome to Warner Music Group's first quarter earnings call for the period ended December 31st, 2021. At the request of Warner Music Group, today's call is being recorded for replay purposes, and if you object, you may disconnect any time. Now, I would like to turn today's call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Good morning, everyone. Welcome to Warner Music Group's fiscal first quarter earnings conference call. Please note that our earnings press release, earnings snapshot, and Form 10-Q, which filed this morning, will be available on our website. On today's call, we have our CEO, Steve Cooper, and Lou Dickler, our acting CFO, who will take you through our results, and then we will answer your questions. Before our prepared remarks, I'd like to refer you to the second slide of the earnings snapshot to remind you that this communication involves forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non-GAAP results during this conference call, and in our earnings snapshot slides, and have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there's a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that can cause actual results that differ materially from our expectations. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our filings with the SEC. And with that, I'll turn it over to Steve.

Thanks, Kareem. Good morning, everyone, and thanks for joining us. When we spoke last in mid-November, I indicated to you that we would have a productive end to 2021. The last few months have met those expectations, and as a result, we're off to a great start in fiscal 22. In Q1, our total revenue was $1.6 billion, an all-time high during our 18 years as a standalone company. We saw growth over the prior year quarter of 21% and 22% on an as-reported and constant currency basis, respectively. Adjusted EBITDA was $389 million, an increase of 31%, with margin improvement driven by strong revenue growth in both our recorded music and publishing businesses. In recorded music, our revenue was nearly $1.4 billion, another 18-year record, an increase of 21% from the prior year quarter. Streaming revenue grew 22%. Artist services and physical continued to show impressive recovery with revenue growth of 33% and 14% respectively. Licensing revenue grew 13%. In publishing, we delivered revenue of $229 million and growth of 32% over the prior year quarters. driven by double-digit increases across all revenue lines. Both the quarterly revenue and year-over-year growth also represent record highs. I regularly highlighted our increasing focus on revenue from emerging streaming platforms in areas like social, fitness, and gaming. Until now, We've been reporting this revenue only for recorded music. Going forward, we'll report this revenue for recorded music and for publishing on a combined basis. On an annualized basis, this revenue will increase from $310 million in Q4 to $325 million in Q1, driven by growth in recorded music and publishing. Our approach to music is all about expanding our universe of opportunities. We are constantly seeking innovative openings to bring more music to more people in more ways and in more places. The agility and imagination with which we maximize the value of our music sets us apart from our competitors. Right now, a lot of money is being thrown at music as a so-called asset class. In this environment, artists, songwriters, and tech entrepreneurs have many different options for building their businesses and brands. We're being recognized for our unique position in this growing music ecosystem. Our creative expertise, our global infrastructure, our willingness to experiment, give us our strength, and give us our edge. While taking risks is part of our business, we pride ourselves on taking educated risks across the wide investment portfolio with a financially disciplined ROI-focused perspective. Toward the end of the calendar year, we completed several strategic acquisitions that reflect our approach. We acquired 300 Entertainment, one of the most influential labels to emerge in the 21st century. It has developed a distinctive identity and a dynamic community of artists. We are honored to welcome to the Warner Music Group Megan Thee Stallion, Young Thug, Gunna, Mary J. Blige, and many more. 300 shares the independent spirit that's always been part of Warner's story, our DNA, and our vision. With this deal, Kevin Lyles, who co-founded 300, became the chairman and CEO of both 300 and our Elektra music group. We also acquired... the rights to David Bowie's entire publishing catalog, encompassing hundreds of songs across his revolutionary six-decade career. Three months earlier, we closed a career-spanning licensing deal for Bowie's recorded music catalog. We're now home to his incredible body of work as both a recording artist and songwriter. And in a deal that makes us one of the biggest music distributors in Africa, we acquired a majority stake in Africore, the continent's leading artist development, rights management, and digital distribution company. Last year, Africore recorded strong revenue growth across all major ESPs, through the generation of hundreds of millions of audio streams and billions of YouTube views. These deals are already producing dividends. Gunnett's new album on 300 Entertainment, DS Forever, landed at number one on the Billboard 200, giving him his second chart topper. And just a month after our Bowie acquisition, Peloton introduced the David Bowie collection, which makes every release in his catalog available for Peloton users as the soundtrack to their workouts. 300, Bowie, and Africory Bolster are already incredible roster of artists and songwriters. Our star power was on full display when this year's Grammy nominations were announced. Elektra's Brandi Carlile and Atlantic's Silk Sonic both received multiple nominations, also landing in the top categories were Atlantic's Ed Sheeran for Song of the Year and Warner Records' Sweetie for Best New Artist. In publishing, we received numerous nominations, including Song of the Year and Best Rap and Country Songs, among many others. We bring original artists and inspiring songwriters of every genre, geography, and generation to the world stage. We're a place where quality and diversity matter. That's the mindset behind our constant, ever-growing flow of great new music. In Q1, we saw the chart-topping album, Chart Topping Return, albums of stars like Kodak Black and Roddy Ricch, as well as strong carryover performances from Ed Sheeran and Coldplay. Latin American artists Tiago Pizite and Pedro Sanpeo have set social media on fire with hundreds of thousands of TikTok videos having been created from their hip songs. With over 800 million on-demand audio and video streams combined, Dua Lipa's Levitating was the most streamed song of 2021 in the U.S. and was the number one song of the year on Billboard's year-end singles chart. Atlantic's rising star, Gayle, has racked up over 3 million TikTok video creations and half a billion streams from her debut single, South Africa's CK continued to hit new peaks with multiple versions of his global smash Love Nwantiti, which has surpassed 600 million streams, more than triple what I reported on our last call. Meanwhile, Warner Chappell continued its impressive run, signing key deals with Cardi B, and R&B icon, Jhene Aiko, and partnering on a new deal with Tim and Danny Music to sign Sam Smith. Warner Chappell National landed BMI Publisher of the Year for the fourth consecutive year and took home CSAP's Publisher of the Year accolade, its second win in three years. Warner Chappell was also number one on Billboard's year-end Latin publisher chart for the fourth year in a row and ranked second on Billboard's year-end Hot 100 Publishers list. Music is no longer linear, transactional, or limited by format. It's complex, multifaceted, and interactive. The intersection of virtual social spaces, gaming and music presents enormous opportunities to engage with massive and diverse audiences. We're leaning in and taking control of our future through a series of strategic partnerships, collaborations, and investments. We kicked off the year with collaborations with some of the biggest names in the space. Roblox featured David Guetta in the first-ever DJ set performed by an avatar. On Fortnite, Tones and I brought hits from her debut chart-topping album to the platform's Soundwave series. Meanwhile, Silksonic joined the platform's Icon series, allowing players to express themselves as the Grammy-nominated duo with 70s-inspired outfits. and accessories and to discover music through the new icon radio station. From collectibles to music royalties, Web3 represents an exciting future for the music industry that will help our artists reach millions upon millions of new fans in interesting and innovative ways. Since our investment in Dapper Labs in 2019, We've been consistently investing, building, and partnering with Web3 opportunities. We're continuing in this direction at an even faster clip in 2022. In January alone, we launched three important partnerships in the Web3 space. We partnered with one of the company backed by music legend, Quincy Jones. we'll be collaborating to create artists NFTs using their eco-friendly Green Web 3 platform. We announced the first major music partnership with the digital's collectible platform, Block Party. Our initial collaboration is with the Finnish superstar, Stig. We also became the first major music company to partner with The Sandbox, We'll be working with them to build out WMG Land, a space where fans will be able to connect with their favorite artists through virtual experiences and NFTs. We've been talking to you for several quarters now about our differentiated dynamic range of artists and label services, covering everything from streaming to merch to branded content and beyond. This strategy was crystallized late last year when we unveiled WMX, giving this important segment of our business a fresh look and unified approach. WMX brings together a culturally curious audience of music lovers that currently totals more than a quarter of a billion monthly unique visitors. These connections are driven by our wholly owned media brands, Uproxx, Songkick, and Hip Hop DS. WMX is ranked by Comscore among the top five video media companies for 18 to 34-year-old audiences in the United States. It generates almost 50 billion monthly views on our premium YouTube other streaming and social media platforms. WMX is helping to differentiate us in our mission to attract and amplify original artists by building broader and deeper fan bases. As you all know, there's a growing wave of interest in what companies are doing about important environmental, social and governance issues. To us, Continuing to become a more equitable and sustainable company is a moral, commercial, and creative imperative. This is something we've been passionate about for many years, and we've taken important steps since we hired Samantha Sims as our head of ESG back in August. Last week, we released our inaugural ESG report, which can be found on our website, The report outlines how we believe we can more effectively address the social and environmental challenges our global society is facing. Along with details about our North Star DEI commitments, the report also highlights some of our initial accomplishments related to fighting climate change, producing more sustainable products, and other important initiatives. We recently announced the third round of grant recipients from the Warner Music Group or Botnik Family Foundation's Social Justice Fund. Since the fund was announced in June 2020, it has pledged $22.5 million to two dozen organizations. Its contributions continue to reflect the fund's strategic pillars, criminal justice reform, education, and arts and culture, while also addressing the intersection of race and gender inequity. We view all these initiatives as long-term commitments to action and accountability, and we're excited about the path we're on. Before I pass the mic to Luke, I have some good news about the return of our CFO, Eric Levin. As you are all aware, Eric has been out of medical leave since November, and we're happy and excited that he'll be rejoining us as CFO next week. Many, many thanks to Lou for the amazing job that he's been doing as acting CFO, in addition to his important responsibilities as our SVP and corporate controller. We couldn't be more enthusiastic about the amazing new music we have in store this year from our talented artists and songwriters. Lizzo, Cardi B, Jack Harlow, Bella Porch, and many, many others are going to be back with really great new music. We're more convinced than ever that Web3 will be one of the next steps in the evolution of the music ecosystem. As the global entertainment economy continues to change at light speed, Major music companies are the only ones with the skill sets, the global footprint, and the financial resources to fully support artists and songwriters. At the Warner Music Group, we're unrelenting champions of the incredible work of our artists and songwriters and fierce advocates for their rights as creators. So again, thank you to everyone in our company who makes this possible. and thank you to our shareholders for your continued support. With that, I'll hand it over to Lou.