Warner Music Group Corp.

Welcome to Warner Music Group's fourth quarter earnings call for the period and fiscal year ended September 30th, 2023. At the request of Warner Music Group, today's call is being recorded for replay purposes, and if you object, you may disconnect at any time. Now, I would like to turn today's call over to your host, Mr. Kareem Chen, Head of Investor Relations. You may begin.

Good morning, everyone, and welcome to Warner Music Group's fiscal fourth quarter and four-year earnings conference call. Please note that our earnings press release and earnings snapshot are available on our website, and we plan to file our Form 10-K during the week of November 20th. On today's call, we have our CEO, Robert Kinsel, and our CFO, Brian Castellani, who will take you through our results. They will then be joined by Eric Levin for the Q&A portion of the call. Before our prepared remarks, I would like to refer you to the second slide of the earnings snapshot to remind you that this communication includes 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 is 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 Robert.

Thanks, Karim. And good morning, everyone. I'd like to warmly welcome Brian Castellani, who joined us as CFO last month. Brian's been more than two decades at Disney, most recently as CFO of Disney Entertainment and ESPN. We're excited he's part of our team now. I'd like to say a heartfelt thank you to Eric Levin, who's been our CFO for the past nine years. Eric has brought smart, steady financial leadership to WMG during a transformational period for the industry and our company. Given this quarter was his last as CFO, he'll be available for Q&A. I have no doubt you'll join me in wishing him the very best as he moves into retirement in January. I'm happy to say our Q4 performance continues to deliver on the second half improvement that we promised on our Q1 earnings call. Led by an acceleration in our streaming revenue, Q4 revenue and adjusted OIVDA grew 5% and 18% respectively. We also saw robust margin expansion of 230 basis points. For the full year, we reached a key milestone in eclipsing $6 billion of revenue for the first time ever. Our revenue and adjusted OIBDA grew 4% and 10% respectively, and we delivered 120 basis points of margin expansion. Importantly, operating cash flow conversion was 56% of adjusted OIBDA. With industry tailwinds at our back and a solid slate of new music to start the year, we've headed into fiscal 24 with strong momentum. As always, Everything we accomplish begins with our amazingly talented artists and songwriters. In recorded music, the diversity of our artist roster was showcased by a range of success stories, from the global phenomenon of the Barbie soundtrack to the breakthrough country superstar Zach Bryan, with whom we also signed for publishing this year. Warner Records artist Kenya Grace scored a global hit with Strangers, which rose to number one on Billboard's dance and electronic chart. In the UK, we celebrated number one albums from Ed Sheeran, Burna Boy, Blur, and Liam Gallagher. And in Japan, Misamo, made up of members of the super group Twice, hit number one with their first album. We continue to bolster our local success in multiple territories across the globe. We had number one hits by Goffs in Denmark, Jartan Lauridsen in Norway, Aiva, Anna, and Kapo Plaza in Italy, Elva Xiao in China, and Justine Royale in India, just to name a few. At the same time, we brought bold, innovative thinking to attracting new fans to our legendary artists and classic recordings. Recent examples included a new deluxe edition of Talking Heads Stop Making Sense, the 15th anniversary of Slipknot's All Hope Is Gone, and the 20th anniversary of Linkin Park's Meliora. With Madonna on tour, it's been a pleasure to find new ways to create cultural moments around her iconic career. These include a series of remix albums, the special pride edition of her box set containing 50 number one tracks, and the celebratory viral campaign, We Love Madonna. In music publishing, our powerful momentum continues as Warner Chappell writers contributed to eight out of 14 Billboard number one spots in Q4, including Zach Ryan's I Remember Everything and Last Night by Morgan Whelan. We're always expanding our publishing roster and have recently signed hotly contested deals with up-and-coming stars Kali and Lepe and Maria Becerra. We're always reinvigorating our incredible publishing catalog. which includes evergreen copyrights from composers such as George Michael, who was just inducted into the Rock and Roll Hall of Fame, Gamble and Huff, Van Morrison, and Stephen Sondheim. As we speak, there are three Sondheim musicals running in New York, including a revival of Sweeney Todd starring Warner Records star Josh Groban, which was just nominated for a Grammy. Looking forward to a new fiscal year, I'm even more optimistic than I was when I started. We're excited about the trends we're seeing in the industry and energized by our plans to capitalize on them. Let's start with the industry. It bears repeating, music is the most popular form of entertainment and it's only getting bigger. Our addressable market encompasses virtually everyone on the planet. Growth in the music business is now well aligned with the opportunities constantly being created by the ongoing global penetration of smartphones and internet service. Ever since I arrived at WMG, I've been laser focused on how we can realize the true value of music. I'm grateful to all of our partners who are leaning in and figuring out how we make positive changes together. We're taking a two-prong approach. First, price optimization. I see this as the most immediate and impactful growth lever for our industry. A more sophisticated and dynamic approach to consumer pricing will benefit the streaming platforms, music companies, artists, and songwriters, the entire ecosystem, driving greater investment and innovation. In the last year, we've seen the first round of subscription price increases across every major DSP, and we strongly believe there is a greater pricing opportunity in the future. Second, the evolution of royalty models. We've been consistently clear that streaming services should ascribe more value to what their customers value most. It's the creativity of popular artists and songwriters that delivers subscriber engagement and growth. To state the obvious, premium music should be better compensated than low quality filler or functional music. We were delighted to work with Deezer to help shape their new approach to rewarding premium music. Look out for similar developments with other partners in the coming months. While these proof points represent a good start, they are just that. We will continue to work collaboratively with our partners to align behind the long-term growth of the industry. I just told you why we're excited about the music industry. Now let me explain why we're excited about Warner Music Group specifically. The future of music will be forged at the intersection of creativity and technology. With that in mind, we're carving out a distinctive proposition through the combination of the following. a deep iconic catalog, as well as up-and-coming talent and thriving superstars. Two, global scale with strong local capabilities and the discovery and promotion of talent. Three, the ability to use technology as a force multiplier on the previous two attributes. Our commitment to each of these key areas is always underpinned by our focus on financial discipline, and we're constantly challenging ourselves to operate more efficiently and effectively. As a rule of thumb, our recorded music revenue is evenly split among three release vintages. New releases, which are less than three years old, shallow catalog, which is more than three, but less than 10 years old, and deep catalog, which is more than 10 years old. We invest in A&R and marketing across each of these vintages to create a consistent flow of music from our artists and songwriters all around the world, past, present, and future. We pride ourselves on discovering original talents and unique voices with long-term potential. We provide them with tailored approaches to become standout global success stories. Think one-of-a-kind, genre-defying artists like Bruno Mars, Ed Sheeran, Cardi B, Dua Lipa, Zach Ryan, and many more. The beauty of the streaming universe is that every time one of our superstars releases a new album, or goes on a tour, or scores a big sync placement, the fan engagement spikes across their entire body of work. Equally, in the world of playlisting and social media, any track from our catalog can go viral at any moment. We've seen hits from legends like Fleetwood Mac, Boney M, and Madonna explode on multiple platforms, introducing these artists to a new generation. For instance, my 20-year-old daughter discovered Fleetwood Mac when their 1977 hit, Dreams, went viral on TikTok two years ago. They are now her favorite band of all time. To fuel... maximize, and monetize this uplift and engagement requires real expertise and a wide network of relationships. This is how we demonstrate our value and our relevance in the entertainment ecosystem, not just by discovering talent and promoting their latest works, but by thinking holistically about their careers and growing their legacies. Our entrepreneurial culture extends to how we select which companies to invest in or acquire. A perfect example is our new venture with 10K Projects, which brings us a dynamic artist roster, fresh catalog, and a visionary team led by Elliott Grange. Investing in our core business isn't just about the recordings and compositions that we own. It's also about leveling up our distribution business in ways that delivers profitable growth. We created more capacity for ADA to focus on developing new distribution partnerships and for our technology team to build scalable solutions to enable these partnerships. In the last year, we signed deals with a range of labels, including Australia's Last Ride Records, the UK's LAB Records, and the US Rostrum Records, which launched the careers of hip-hop stars like Mac Miller and Wiz Khalifa. let me turn now to our approach to global expansion and emerging markets. For some time now, our goal hasn't been just to market Anglo-American repertoire in local markets. Instead, we sign and develop local talent that can have regional or global success. As I've mentioned before, we're making great inroads in fast-growing territories like China, the Middle East, and Africa. India is a great example of this strategy in action. With a vast population of 1.4 billion people and its huge diversity of demographics, India has an endlessly evolving music scene. According to IFPI, India has more than doubled its recorded music revenue over the last five years, and it also has the highest growth of any top 20 country in 2022, at 48%. We've made huge strides since first launching our local office in Mumbai in 2020. This year alone, we've grown our presence there by acquiring E-Positive, an Indian management and live events company, launching a new JV, 91 North Records, and expanding our partnership with Sky Digital, an aggregator of Punjabi music. Our team in India is attracting massive stars, including hip-hop artist King, who became the first Indian performer to hit Spotify's Global Top 30. The music ecosystem is healthy and has a number of exciting growth drivers. With price increases happening across all major DSPs, royalty models evolving to reward quality, and emerging markets gaining traction, we're very confident and positive about the path ahead. We're excited about our new releases for fiscal 24, including some that came out just last Friday from David Guetta, Jack Harlow, Big Panthers, And of course, Dua Lipa, who had her biggest global launch to date with her new single, Houdini. There are also eagerly anticipated projects from Green Day, Kenya Grace, Fredigan, Gabby Barrett, Maria Becerra, and Mike Towers, among many others. We've been working hard to build a WMG that will excel in the music industry of tomorrow. Our work is already beginning to bear fruit. And I assure you that there is much more excitement to come. And now, here's Brian to walk you through our financial results.