Warner Music Group Corp.

Welcome to Warner Music Group's first quarter earnings call for the period ended December 31st, 2024. 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 first quarter earnings conference call. Please note that our earnings press release, Earnings Snapshot, and Form 10-Q are available on our website. On today's call, we have our CEO, Robert Kinsel, and our CFO, Brian Castellani, 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 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. References to adjusted revenue and adjusted OIDA are adjusted for all previously disclosed notable items. The details of these can be found in our press release. 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 Robert.

Thanks, Karim. And hello, everyone. I am speaking to you today from Los Angeles, where the community is recovering from the devastation of the wildfires. We continue to support the relief effort for those most in need. This past Sunday, our artists and songwriters took home Grammy Awards, including Charli XCX winning her first three, Bruno winning his 16th, and Amy Allen winning the Songwriter of the Year Award. It was fantastic to see everyone pull together and demonstrate the healing power of music. Our results this quarter were driven by artists and songwriters of all stages of their careers. and from all corners of the world, across new releases and reinvigorated catalog. Warner Music Group's engine is strong. We built up sustained momentum during 2024, delivering year-over-year double-digit growth in subscription streaming revenue and adjusted OIVDA, while reallocating more resources to key areas like A&R investment. And Warner Music Group is a crucial part of a thriving ecosystem. It's music's resilience, shareability, and durability that makes it such a unique and valuable sector. Our results this quarter reflect the impact of temporary macro trends, both in our industry and in the global economy. And I'll give you the headlines, and Brian will go through more detail. The following figures are adjusted for all previously disclosed notable items. You can find the details in our earnings press release. Total company revenue and adjusted OIVDA grew 4% and 1%, respectively. Recorded music revenue grew 4%, and music publishing revenue grew 7%. Within recorded music, subscription streaming grew 7%, reflecting the expected deceleration from last year's double-digit growth as we left a series of DSP price increases. During the quarter, we faced significant FX headwinds, largely driven by the strengthening of the dollar against key currencies, such as the euro and pound. Given that more than half of our revenue is in non-dollar currencies, these currency movements created a roughly 200 basis point headwind to our adjusted OIPDA margin. As all of these impacts will stabilize over time, I'd like to focus my remarks on our strategy and explain why we're so confident about the future. Our goals are clear. Increase our share of the pie, meaning market share, grow the pie itself by increasing the value of music, and become more efficient, providing greater cash flow, both for reinvestment and for shareholder return. First, in terms of growing our share, you've often heard me talk about us becoming the best home for talent at every stage of their careers, from baby bands to veteran superstars. Our recent successes have showcased how we're firing on all cylinders across that entire continuum, including new stars such as Benson Boone, who had the biggest song in the world last year with Beautiful Things, and Teddy Swims, who had the biggest song in the U.S. with Lose Control. Regional superstars like Joliet, the most listened to artist in Italy in 2024, or Jeff Satter, Thailand's number one streaming artist of 2024. Global superstars, including Charlie XCX, Dua Lipa, Coldplay, Mike Towers, and Bruno Mars, who has become the number one artist in the world on Spotify, with a record-breaking 150 million monthly listeners. Music legends, from Cher to Linkin Park to Mac Miller, whose latest album went top 10 in 10 markets. And finally, our irreplaceable catalog, which includes household names from likes of Fleetwood Mac, The Grateful Dead, The Prince, and Aretha Franklin. A great example of how catalog music can remain vital and relevant is the most recent success of Alphaville's iconic 1994 recording Forever Young. A huge viral trend drove streams to increase over 300% in 2024 versus the prior year, and we released a new version by David Guetta, Alphaville, and Ava Max, reaching number two on the EU Airplay chart. I am pleased to see that so many of our recording artists are also songwriters signed to Warner Chapel, including Benson Boone, Teddy Swims, Zach Ryan, Cardi B, Dua Lipa, Madonna, and The Grateful Dead. The latest superstar to partner with us across both set of rights is Blackpink's Rosé, whose debut has become the highest charting album by a K-pop female soloist in the United States. In addition to growing our organic investment behind A&R, We continue to pull other levers in the quarter as part of our ongoing efforts to generate increased market share, including partnering with local players such as Skillbox in India, acquiring valuable catalogs like Cloud9 and Benelux, and making leadership changes, including appointing a new CEO in Japan. All of this hard work is aimed at growing our global market share. We are already seeing early positive signs as Atlantic one of our flagship labels, increased its market share by half a percentage point in the U.S. over the prior year quarter, according to Luminate data. At the same time, Warner Chappell continues its strong performance, landing at number two on Billboard's year-end Hot 100 publishing chart. Second, let's talk about how we're aligned with our widening network of partners in growing the pie. Collaborative innovation has always been part of our DNA. We actively work with our partners to constantly evolve and to attract more customers in the music ecosystem. Whether it's launching new formats, expanding features, adding new tiers, or experimenting with business models, our collective goal is to ensure the continued growth of the Pi. As that is starting to happen, our goal is to ensure that the value of music increases as the revenue pie expands. While there is still progress to be made across the industry, our recent deals, including the renewal we just inked with Spotify, represent positive momentum. Today, we're announcing an important new agreement that provides additional benefits for artists and songwriters, as well as WMG and Spotify, enabling us to move forward collaboratively to expand the entire music ecosystem. We look forward to seeing the value of music increase as we drive growth through further innovation together with Spotify. It is our increasingly powerful combination of recorded music and music publishing rights that make our repertoire essential for any service. In 2024, our artists and songwriters contributed to nine of Billboard's top 10 and over half of Billboard's Hot 100. Our music has fueled massive subscriber growth over the past 16 years and will continue to do so. Moving on to efficiency. My mantra is focus and simplicity bring greater intensity and impact. Through a combination of organizational changes and investments into technology, we are continuing to make the company more effective and efficient. At the same time, we've exited some non-core businesses in order to allocate our resources to the most accretive activities while doubling down on our central value proposition to artists and songwriters. We've made real progress on these fronts and we're delivering on schedule through our previously announced restructuring programs. As we've told you, our goal was to reinvest the majority of these savings into strategically important initiatives that will propel our business forward. This enabled us to increase our A&R investment by double digits last year and this year. Today, we announced the acquisition of a controlling interest in Tempo Music from Providence Equity Partners. with an option to acquire the remainder by the end of 2027. Tempo will provide us with an evergreen catalog, which includes premium music rights to songs recorded by artists such as Bruno Mars, Twenty One Pilots, Adele, Wiz Khalifa, Florida Georgia Line, and Lucas Graham. In addition to the high quality of these rights, Tempo's robust margins and cash flow generation make for an attractive financial profile that meets our key investment criteria. We have a preexisting administration agreement with Tempo, and this investment will become even more accretive as deals with other publishers roll off, and we expand the scope of our direct control over the catalog. Our Tempo acquisition is a great example of our M&A strategy in action. As we become more efficient, we're creating a virtuous cycle that will enable greater reinvestment that delivers accelerated growth. Our long-term outlook remains intact, and our confidence is based upon a healthy and evolving industry underpinned by collaborative innovation with the DSPs, our ability to provide value to our artists and songwriters through our global services and deep expertise, and focus on a propelling growth through operational efficiency. Finally, we're really excited about our upcoming new music from Lizzo, David Guetta, Jack Harlow, Jisoo, Benson Boone, Maria Becerra, Tara Najula, and Zach Bryan, as well as the excellent performance of our catalog. And with that, I'll turn it over to Bryan.