Warner Music Group Corp.

Welcome to Warner Music Group's second quarter earnings call for the period ended March 31, 2025. 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 Chin, head of investor relations. You may begin.

Good morning, everyone, and welcome to Warner Music Group's fiscal second 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 departing 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. 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 hello, everyone. While you were waiting, you just heard new tracks from Rosé and Don Tolliver, both featured in the hotly anticipated F1 movie. The blockbuster Apple film starring Brad Pitt will be released in June. Its soundtrack will add to our run-of-hit albums for movies, such as Barbie and The Greatest Showman. As many of you know, Brian Castellani will be leaving us, and I'd like to thank him for his counsel, partnership, and contributions to our company. I know everyone joins me in wishing him the best in his next endeavor. Armin Zerza joined us as CFO this week, and he brings a strong track record of operational excellence, commercial innovation, and financial discipline. He was previously CFO at gaming giant Activision Blizzard, where he played pivotal roles in the company's growth for almost a decade. I look forward to working with Armin as we enter the next exciting era for music. I'll get into our broader strategy shortly, but first, let's talk about the quarter. Our results in Q2 reflect a lighter release schedule, market share pressure in China, and a tough year-over-year comparison in subscription streaming, where we saw strong double-digit growth in the prior year quarter. As a result, the company's revenue increased 1% as recorded music revenue grew 1%, and music publishing revenue grew 3%. Within recorded music, subscription streaming grew 3%. total company adjusted oivda decreased one percent and adjusted oivda margin decreased 50 basis points we recognize this is a moment of transition in the industry and for our company even so we are very optimistic for many reasons but three in particular one against the backdrop of global uncertainty music is the most resilient art form and currently the least expensive two The industry across music companies and DSPs is a line behind driving growth through subscribers and price increases. And three, WMG has the right creative and commercial strategies in place, and we're sharpening our execution as we stay focused on our long-term growth and profitability. I'd like to dive deeper here and give you insight into the progress we're making across the three priorities we've previously shared. grow market share, grow the value of music, and become more efficient, freeing up more capital, both for reinvestment and to drive greater shareholder return. I'll start with growing market share. From great new signings to returning superstars to timeless legends across genres and geographies, every aspect of our artist and songwriter development engine is heating up. With our investment activities also gathering pace, we're well positioned to take a bigger slice of the pie. In recorded music, our new talent is really shining through. From mega hits like Teddy Swim's Lose Control, the longest running top 10 song in the history of Billboard Hot 100, to Benson Boone's Beautiful Things, the number one song in the world for all of 2024. The next wave of rising stars includes Alex Warren, who's hit Ordinary, has topped the UK chart for seven consecutive weeks, and also rose to number one on the Billboard Global 200. And Ovi on the drums, W Sound, whose La Plena is the biggest Latin song in the world, reaching number one in 13 markets. There's also huge momentum behind artists like Marias, Sombor, Raven-Lanae, and Forrest Frank. At the same time, our superstars continue to build momentum. Ed Sheeran's Aziz Am hit the top 10 in several markets, including the UK, in advance of his latest album, Play, which comes out in September. Rosé and Bruno Mars' APT spends his 27th week in the Spotify Global Top 5, and Bruno Mars' record-breaking duet with Lady Gaga, Dive With a Smile, currently sits at number one for the 29th week. And we have more number ones across established markets with domestic artists like SCH in France, Province in Germany, Gang Parade in Japan, and many more. We're also seeing real progress in high-growth markets such as MENA, Nigeria, and India, where we've meaningfully increased our market share in an environment where monetization is rapidly shifting towards paid streaming. We recently signed a promising new deal with highly regarded entrepreneur Angela Acharya to help break artists of South Asian heritage in North America. I've known Angela since my days at Netflix, and I partnered with her at YouTube, and I'm very excited to be working with her again. Our legendary catalog also consistently performs. We recently commanded nearly half of the top 50 best-selling albums for Record Store Day in the U.S., the biggest vinyl sales day of the year. Classic tracks continue to research and impact today's culture. For example, Wale's 2013 single Love, Hate, Thing went viral on TikTok, and so streams rise more than 6,000% over seven weeks. In music publishing, Warner Chappell swept Billboard's Publishers Quarterly for the first time, taking the number one spot on the radio airplay, Hot 100 songs, and country airplay charts. Composer Daniel Blumberg won the Best Original Score Oscar for The Brutalist, and we continue to make exciting new signings, including superstar DJ Diplo and reggaeton star Yandel. I'd like to highlight that our creative engine is firing on all cylinders. Our share on the Spotify global charts has grown very consistently and by nearly 50% since mid-2023, with Q3 on trend to be our highest chart share in two years. In addition, right now, WMG's recording artists hold five of the top 10 tracks on the Billboard global chart, including the top three with Alex Warren, Bruno Mars, and Rosé. These results are a promising sign that our strategy is working. We take a twin-engine approach to growing our market share. Alongside organic and our investment, we're also increasing our M&A activity. We expect to have more news about our M&A investment plans in the near future. Now let's turn to our second priority, growing the value of music. One key shift in the industry is that it's moving from just subscriber growth to growth driven by both subscribers and price increases. Our collaboration with many of the biggest tech companies in the world, including Spotify and Amazon, provides more opportunities for innovation, along with greater certainty around our economic participation as price increases become more regular. Growing the value of music starts with protecting our artists and songwriters. And today, nowhere is that more crucial than with AI. I was in D.C. last month to support a revised No Fakes Act, the same legislation that I testified for at a Senate hearing last April. The bill provides protections against unauthorized deepfakes while setting up a licensing framework paving the way for new revenue streams and more trustworthy products. This is not only a bipartisan bill. that we have gathered support across music, entertainment, and tech industries, including MPA, SAG-AFTRA, YouTube, OpenAI, and others. It also could serve as a blueprint for the treatment of name, image, likeness, and voice rights around the world. Our role as a music company has never been more relevant and is becoming increasingly pivotal as the ecosystem gets more complex. Bringing together millions of copyrights across recorded music and publishing, we use our scale and expertise to create value for artists and songwriters across a vast global network of multibillion-dollar tech companies. Finally, let's turn to efficiency. As we make organizational changes to optimize our performance while yielding benefits from tech upgrades, we are driving a virtuous cycle. so we can invest more for the benefit of artists, songwriters and shareholders. Since 2023, we've announced plans to achieve a cumulative total of more than 300 million in annualized cost savings, the majority of which is being reinvested in music and technology. This is an ongoing process that has become part of our DNA, and we will continue to look for ways to drive even more efficiencies. By doing so, we will free up additional resources to pursue the most attractive opportunities through a disciplined capital allocation plan. As I told you on our last earnings call, we saw our A&R spend increase double digits last year, and it will increase by even more this year. We're starting to see signs of our strategy paying off. As I mentioned earlier, we have the strongest chart presence that we've had in a long time. which is translating to expanding market share in new releases across the U.S., the largest market in the world. As we replicate this strategy across our other labels and geographies, we will augment our growth with M&A. In short, we're putting more wood behind fewer arrows to turbocharge our core business. Our tempo investment is a good signpost for the kinds of acquisitions you can expect us to make. The deal is a prime example of our M&A strategy in action, reinvesting cost savings into high-quality essential music with high margins. And we continue to invest in technology to sharpen our competitive edge and improve services for our artists and songwriters. A key example is the recent beta launch of WMG Pulse. This is an app which offers real-time insights drawn from every major DSP and social media platforms. This week, we invited 100 artists and songwriters to use the app, and we'll be adding more sophisticated features and financial data in the coming months. In an ever-evolving industry, we're confident we'll drive more consistent long-term growth and profitability. However, we expect these challenges we experienced this quarter to persist for the remainder of the fiscal year, resulting in lower subscription streaming growth than previously expected. As Armin settles into his new role, we'll provide updates on our business and capital allocation priorities on the next earnings call. With highly anticipated new releases from Ed Sheeran, Lizzo, David Guetta, Benson Boone, Alex Warren, Rosé, Bernaboy, Teddy Swims, Mike Towers, and others coming this year, we are excited about the momentum we're building into 2026. I'll now pass it over to Brian, who will take you through the numbers.