Universal Music Group

Good evening and welcome to Universal Music Group's fourth quarter and full year earnings call for the period ended December 31st, 2025. My name is Nadia and I'll be your conference operator today. Your speakers for today's call will be Sir Lucian Grange, Chairman and CEO of Universal Music Group, Michael Nash, Chief Digital Officer and Matt Ellis, Chief Financial Officer. They will be joined during Q&A by Boyd Muir, Chief Operating Officer. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw a question, please press star followed by two. As a reminder, this call is being recorded. Please also let me remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ from expected results, please see the risk factors section of UMG's 2024 annual report. which is available on the investor relations page of UMG's website at universalmusic.com. Management's commentary will also refer to non-IFRS measures on today's call. Reconciliations are available in the press release on the investor relations page of UMG's website. Thank you. Sir Lucian, you may begin your conference.

Many thanks and thank you all for joining us on today's call. As you can clearly see from our results, last year was a very good year. Our artists, songwriters, and labels once again wrapped up record-breaking successes. We made excellent progress across our strategic initiatives and continued our long, uninterrupted streak of strong financial growth. I'm pleased to report that in 2025, both revenue and adjusted EBITDA grew by nearly 9%. I must begin by highlighting the creative excellence and commercial success of our artists and songwriters. Their extraordinary music continues to shape culture across the world. Every year, the IFPI, the Recorded Music Industry's Global Trade Association, reveals the world's top selling artists. For 2025, nine out of the top 10 were UMG artists, with Taylor Swift at number one, as you let that astonishing fact sink in let me throw in another one 2025 was the third year in a row that we have represented nine out of the top ten best-selling artists on the planet the only recording artist whom we did not represent on recorded is bad bunny and he's represented by our universal music publishing division No other company has ever come even remotely close to UMG's outstanding performance year after year in developing new artists who go on to become global brands. A quick look at the 2025 lists across major platforms reveals our remarkable industry leading position. This slide highlights just a handful of them. Our extraordinary momentum continues to build with a string of recent number one albums across genres and geographies, from Taylor to Olivia Dean, King and Prince, Mrs. Greenapple, both from Japan, Stray Kids, J. Cole, and I could go on and on. As for the critical acclaim and awards, I'll briefly mention how our artists and songwriters won big at this year's Grammys. UMG artist and songwriter Kendrick Lamar was the night's biggest winner with five awards, including record of the year. Kendrick is now the Grammy's most decorated rap artist of all time with 27 awards. Olivia Dean was named Best New Artist, the fourth time in the past five years that a UMG artist has received that honor. That also is an unprecedented achievement. Billy Eilish, Lola Young, Lady Gaga, Jelly Roll, Leon Thomas and UMPG's Bad Bunny were amongst many other winners. It was also an incredible night at last week's Brit Awards at the weekend, where UMG swept the major categories. Olivia Dean took home four awards, including Artist of the Year, Album of the Year and Song of the Year. Other winners include Sam Fender, Lola Young, Dave and Jacob Boulogne. The Olivia Dean success is an indication how our UK company is developing new artists and once again delivering them to the world across all geographies. The demand for our music continues to grow. The subscriber numbers increase. So does the consumption. Industry data from Luminate shows that on-demand audio streams topped 5.1 trillion last year, an increase of nearly 10%. We unequivocally believe that the growth of the business will continue, hitting the 1 billion subscriber mark in the next few years. A multi-pronged strategy to capture this growth Of course, includes our excellence in office development, along with continued implementation of our streaming 2.0 initiatives. But we will also make bold moves in four key areas of the strategic plan, each of which will create meaningful monetization opportunities, driving growth across an entire interconnected ecosystem. And that word interconnected is very significant. So today, as I want to share with you the progress we're making in those four areas, expanding our presence in label and artist services, accelerating our efforts in high potential markets, strengthening our direct to consumer and super fan initiatives, and adding to our growing portfolio of responsible AI partnerships. The first critical area is our services to independent labels, entrepreneurs, and artists around the world. one of the fastest-growing areas of the business. Those labels operate in a diversity of markets, genres, and languages and generate meaningful revenue from artist rosters of varying sizes. As much as they differ, they share a common desire to partner with a company that provides them with the best and widest range of services. In 2021, we established Virgin Music Group, to expand our expertise and resources in this fast-growing sector, which will be further accelerated by the recent acquisition of Downtown Music. Matt will go into detail about Downtown's financials later, but for now, I will say that the combination of Virgin Music and Downtown will create a global end-to-end solution designed to meet the evolving needs of independent artists, entrepreneurs, and rights holders at every stage of their development. The combined company will offer a broad, more flexible suite of services ranging from high touch to self-service platforms, including digital and physical distribution, marketing, business intelligence, neighboring rights, synchronization, royalties, as well as publishing rights management. Our last acquisition of this magnitude was in 2011, which of course was EMI. At that time, we saw the value that others did not and doubled down on the traditional A&R and catalogue business. Today, 15 years later, that acquisition is universally acknowledged as one of the most successful and strategically important in the history of the music industry. I firmly believe that our acquisition of Downtown will be as transformational. It creates a scalable and profitable engine of growth that also elevates UMG's core label publishing and super fan businesses, enabling us to better cover the entire music industry. It is no small matter that downtown also expands UMG's global footprint, collectively serving more than 5,000 business clients and more than 4 million creators in 145 countries. That last point leads us to the second critical area of our strategic plan, our growing geographical expansion into high potential markets. UNG's approach is to create a compelling array of business solutions that offer multiple ways for artists, labels, and entrepreneurs to engage with us. Always in compliance with our strict investment criteria, we partner with the best of them and then deepen the partnership over time. Here's an example of our strategy in action. In India, Universal Music had operated a multi-label structure for years, already offering artists a compelling choice of brands. Earlier this year, we supplemented that choice by investing in Excel Entertainment. Excel is the leading film and digital content studio in a country where original soundtracks remain at the heart of the fast-growing music market. The deal gave UMG global distribution rights to Excel's future soundtracks, while our publishing division became Excel's exclusive music publishing partner, and the two companies will launch a dedicated Excel music label. On top of this, Through Downtown and Virgin Music Group, we now service approximately 100 clients in the region, including new deals with Punjabi label Just Records and South Indian label Millennium Records. When you take a step back, you can see how UMG has built multiple points of entry into the Indian market. Each of our business units operate with its own unique creative and commercial expertise. but also has access to UMG's powerful global systems and resources. As a result, our ability to capture growth efficiently is increasing. This is an approach that is working well in many other dynamic, highly populated markets, including China. Moving on to our third key strategic effort, I'm very bullish about superfans, as you all know. Given the enormous demand for great products and exciting experiences, we believe this segment is massively under-monetized. Our own D2C business has grown to 1,600 online stores and generates hundreds of millions of dollars in revenue. This only scrapes the surface of our potential. We will further scale our D2C business by stimulating an entire category of third-party superfan platforms, each with its own distinctive approach and model. These will operate alongside the premium tiers being developed by the traditional DSPs as well as what we're creating and how we're creating an ecosystem in which special events, experiences, and products will entice super vans in both the virtual and physical worlds. As more common competition develops, more innovation will result. Connectivity to fans will increase, and the opportunities to drive monetization will continue to multiply. We recently announced two partnerships in this space. The first is with Stationhead, a live music segment platform that connects artists and fans through real-time listening experiences, community interaction, and integrated commerce. With over 250 UMG artist events in 2025, Stationhead contributed billions of premium UMG artist streams on subscription platforms across millions of active users. Their week of release listening parties contributed to 11 number one albums, across the entire industry. They've executed very successful fan campaigns for UMG, artists such as Sabrina Carpenter, Billie Eilish, Ariana Grande, K-pop Demon Hunters, Nicki Minaj, Olivia Rodrigo, and many others. The second partnership is with Even, which provides superfans with early access to music, exclusive content, and community features. Interscope artist J. Cole, for example, used Even for multiple direct-to-fan campaigns including the 10th anniversary of Forest Hills Drives and the pre-release strategy for his latest album. Both projects leveraged Even's white label solution to reach hundreds of thousands of fans and sell millions of dollars of physical product. The Even campaign was a significant factor in the fall off his new album debuting at number one in the US. We don't need to develop a new platform, but both Stationhead and Even integrate directly into UMG's current architecture and its direct to consumer architecture, capturing fan data and fostering a deeper relationship between artists and fans. Superfan opportunities are rapidly evolving and we will be right there at every step of their evolution. This evolution is being supercharged by AI, which leads us to obviously the fourth focus of our strategic discussion. Our embrace of responsible AI technologies continues to be very aggressive. We're forging partnerships across a spectrum of artist creation and fan engagement initiatives. And they're two separate initiatives. I'm very aware that a large swathe of the investment community looks at the intersection of AI and media and sees only some of the risks. I want to be very clear. We fundamentally disagree with that view. We believe AI represents an unprecedented commercial opportunities for UMG and our artists in both the near and the long term. We're working tirelessly to shape the business models and the legal and legislative frameworks that will form the foundation of a responsible AI ecosystem. I encourage people to spend time to really understand the work that's being done and the opportunities that lie ahead. Personally, I've never really been more energized about the possibilities that we are pursuing. And once again, we face another exciting transformation. Here are just a few of the things that I'm excited about. On our last call, we discussed our agreements with Udeo and Stability AI. Not long after that, we announced our licensing agreement with Clay Vision. Clay's large music model is trained entirely on licensed music. It will evolve AI experiences for super fans while respecting the rights of artists and songwriters. We're excited about this company's vision and applaud their commitment to ethicality in generative AI music. In December, We then revealed we're also collaborating with Splice, the world's most popular music creation platform. Together, we're building a roadmap for the development of commercial AI tools rooted in creative control and sonic excellence. Last month, we unveiled the first of its kind alliance with NVIDIA, the world leader in AI computing. Our shared ambition is to transform and enrich the music experience for billions of music fans around the world. This collaboration will cover everything from artist tools to music discovery to fan engagement. NVIDIA articulated the relationship perfectly when they said, we're entering into an era where a music catalog can be exploited like an intelligent universe, conversational, contextual, and genuinely interactive, and we'll do it the right way, responsibly, with safeguards that protect artists' work, ensure attribution, and respect copyright. How phenomenal. Our work with NVIDIA will be a multi-year partnership, and like our other AI initiatives, create significant win-win potential in market-led solutions. Our strategy for these AI deals is informed by a significant amount of consumer research, both our own and third party. We're just not sticking our finger in the wind. Our insights team recently conducted a global study on consumer attitudes towards AI and music. The key takeaway is that consumers want AI driven by human intent or AI as an enhancement of and not as a replacement for human creativity. Plus consumers are asking for transparency with respect to how AI is used in the creation of music. This research underscores our belief that AI isn't just an incremental revenue opportunity. it's going to introduce entirely new formats. The superfan AI experiences I mentioned earlier at just the beginning, we foresee entirely new AI formats that will offer fans greater personalization, hyper-personalization, and social expression through artist-centric music experiences. Given the high level of interest in AI from both the creative and investor communities, I've asked Mike Nash, who you know well, our Chief Digital Officer, to present more on this and more detail later on this important, important topic. So that we can see how excited we are. What I've covered in my remarks today is only a fraction of what we're executing every day at UMG. With an artist roster and a music catalogue that are the envy of the industry, We're also the biggest driver of new subscribers to the DSPs. And because we've earned a unique level of credibility and influence, working with both established and emerging innovators, we continue to expand our already broad portfolio of revenue streams. Our vision is a stronger, more connected, and ever-growing ecosystem that is attracting new entrepreneurs, expanding our full global footprint accelerating our D2C business, creating new products and experiences, and leveraging AI to take music to places fans can barely imagine and in ways in which they can barely imagine. In short, we're designing and building a strong foundation for a profitable and exciting future for our artists and our songwriters, for our company, for the industry, and obviously for our shareholders. We're extremely confident about the path ahead look forward to a really strong 2026. now on that basis of excitement and optimism let me hand it over to michael and then we'll hear from matt thank you thank you lucien i'll take a few moments to discuss in more detail how we're advancing the best interests of our artists and their fans with our ai strategy while promoting innovation

I'll do that by addressing two topics that are critical to better understanding the risks and benefits of AI for our business. The first topic is the perception of risk of AI revenue dilution and the thoughtful measures we've taken to neutralize any negative impact. The second topic relates to consumer receptivity to responsible AI innovation. First, misunderstandings have resulted from anecdotal press reports that AI generated content has somehow overtaken the charts. Nothing could be further from the truth. Stories about number one AI songs have been reported based on digital download charts, where 2,500 units of a $0.99 legacy product can manufacture a chart number one. As you can see from the data on this slide, a handful of anecdotes have been completely over-extrapolated. We assembled this top 10 of chart-debuting AI acts as identified by Billboard and Luminate. Consumption of this top 10 has been immaterial. The Most Streamed Act didn't break into the top 7,000 globally in 2025, and the Number 10 Act didn't break into the top 92,000. In the aggregate, the most prominent AI content barely registers, even in the leading market for this English language repertoire, totaling less than one, excuse me, totaling less than 50 one-hundredths of a percent of the streams of the top 50,000 artists in the U.S. last year. Some commentators say, that's right now. What about the future? We don't have to theorize about the future of AI saturation as it's become a marketplace reality with 60,000 AI tracks being uploaded a day at present. What impact is any streaming of these tracks having on our revenue? Most of this content is AI swap or fraud fodder associated with royalty diversion schemes. 85% of AI streams on one representative platform, Deezer, were identified as fraud and then excluded from royalty pool allocation. Apple recently reported that its efforts to address the flood of AI uploads included exclusion of 2 billion fraudulent streams last year. Platforms like Spotify have also outright removed tens of millions of spamming AI tracks from their services. Despite the huge volume of AI uploads, the aggregate organic consumption of AI content by actual consumers is less than half of 1% based on the best available data. That's consumption. What about revenue? It's important to take into account all three aspects of our deals to protect us from a revenue perspective. In addition to one, anti-fraud provisions, there's two. DEMONETIZATION OF GENERIC AI SLOT UNDER UMG ARTIST CENTRAL AGREEMENTS. AND THREE, ANTI-AI DELUTION PROVISIONS IN NUMEROUS UMG AGREEMENTS WE PREVIOUSLY ANNOUNCED AND DISCUSSED. ANTI-AI DELUTION STIPULATIONS GENERALLY MEAN THAT PURE AI GENERATED CONTENT SIMILAR TO OTHER NON-MUSIC CONTENT IS REMOVED FROM THE CALCULATION OF SHARE OF STREAMS BY THE DSP FOR PURPOSES OF DETERMINING OUR ARTIST ROYALTIES. THEREFORE, While we remain vigilant in addressing infringing AI services, we're seeing no indication that AI royalty dilution is a material issue for UMG from a revenue perspective. When you take into consideration the significant opportunities to commercialize AI innovation through new products and services that Lucien outlined, and the empirical data demonstrating insignificant and comprehensively mitigated risk, Thoughtful analysis will conclude that the impact AI will have on our business will be overwhelmingly net positive. The data on this slide makes it very clear that consumers are rejecting AI slop and bakery. What do they want from AI innovation is applied to their music experience instead. That's the second topic I'll address with another set of data points. As Lucia noted, UMG conducts rigorous consumer research on strategic topics. Related to the highlights he covered, here you see some key findings that emerged from a survey of 28,000 consumers conducted in 13 countries, representative of the global music marketplace. Use of AI is fast becoming mainstream, with 54% of global consumers expressing familiarity. Not surprisingly, the predominant use case is search, and among those users, nearly half report conducting music-based queries, such as what to listen to, what merch is available for my favorite artists, What concerts are near me? We see this as an early indication of the promise of AI that it holds for elevating discovery, recommendation, and contextualization as AI becomes more integrated into music services. The vast majority of consumers continue to prioritize human artistry. They want clear disclosure in AI labeling, and most seek transparency, safeguards, and ethicality in AI music development and deployment. Confirming what the consumption data told us on the prior slide, by an almost seven-to-one ratio, consumers expressed disinterest versus interest in so-called AI artists. In fact, over two-thirds of consumers want to be able to block purely AI-generated music entirely. In the U.S., where AI awareness is highest, nearly three-fourths of consumers want to block AI. With this backdrop of attitudes and preferences, let's focus on music applications. Roughly half of consumers under 45 express interest in AI for music, predominantly interest in AI for enhancement of music experience, meaning deeper personalization of the experience and customization of music, restoring, remixing, and reinterpreting favorite songs, and interactive and co-creative music experiences. These emerge as key triggers of consumer interest and perceived value. The expression of interest translates into some of the most important components we are focused on with the partners Lucien highlighted in development of innovative new AI music services. What consumers are rejecting and what they want to embrace will define the business landscape of significant opportunity for UMG moving forward with AI innovation. And with that, I'll turn it over to Matt.

Thank you, Michael. 2025 was another excellent year for UMG. both creatively and commercially. Lucien outlined the strong, sustained performance of our artists, songwriters, and company, and how our multi-prompt strategy will continue to propel our growth. Before I get into the details of our financials, I want to address our proposed US listing. With the uncertainty in the market creating meaningful dislocation in valuations, our board does not see this as the right time to move ahead with the listing. Should that change, we will update the market. Turning to our results, once again in 2025, we achieved healthy growth on both the top and bottom line. As always, we present our results on a constant currency basis. FX movements impacted 2025 revenue growth rates by 3%, and based on currency markets, we expect 2026 to include a 4% to 5% headwind to revenue. For the year in constant currency, revenue grew 8.7%, which was more than a point of acceleration above the previous year's growth rate, and adjusted EBITDA grew 8.6%. This resulted in an adjusted EBITDA margin of 22.5%, in line with the prior year. Cost savings and operating leverage helped us maintain margins for the year despite headwinds from revenue mix and repertoire mix, cost pressures in our merchandising business, and incremental overheads from business combinations. 2025 adjusted diluted EPS grew to 1 euro and 3 cents, up from 96 cents in 2024. We remain on schedule with our 250 million euro cost savings program, which began in 2024. We achieved our planned 90 million euros in cost savings in 2025, including the expected 40 million euros in savings in the second half of the year. We continue to expect that an incremental 40 to 50 million euros in phase two savings will be realized in 2026, with the remaining 35 to 45 million to benefit 2027. Before turning to the results for the quarter, I'd like to mention certain items that impact comparability of our results versus a prior year. This detail is laid out on the slide you see in front of you, as well as in our press release. First, the fourth quarter of 2025 includes a legal resolution contributing revenue of 45 million euros and EBITDA of 26 million euros. This is booked in downloads and other digital revenue in recorded music. We call out settlements for purposes of comparability, but as a reminder, legal recoveries are common in our business and represent real revenue earned from the copyrights we own. In fact, you may recall the fourth quarter of 2024 included two legal settlements. Together they accounted 40 million euros of revenue and 29 million of EBITDA and were booked primarily in recorded music licensing with a small amount in music publishing. In addition, the fourth quarter of 2024 included catch-up income of 20 million euros from a DSP partner related to new product rollouts in the second and third quarters of 2024. This was booked in recorded music subscription revenue and had associated EBITDA of €12 million. Since its revenue related to activity in the second and third quarters of 2024, it does not impact comparability for the folio results. So with that out of the way, let me turn to the quarterly results, where I will also provide figures adjusted for the items impacting comparability. In the fourth quarter, total revenue grew 10.6% in constant currency. Adjusted EBITDA grew 6.4%, while adjusted EBITDA margin of 22.5% was 70 basis points lower than the prior year quarter. Excluding the items impacting comparability in both years, total revenue grew 11.2% and adjusted EBITDA grew 8.6%. Margin was down 40 basis points to 22.0%, primarily due to headwinds from revenue mix and repertoire mix in recorded music, and cost pressures in our merchandising business. Now let me turn to the results from each of our business segments. Recorded music revenue grew a very strong 13.9% for the quarter and 9.3% for the year. Excluding the items impacting comparability, recorded music revenue grew 14.4% for the quarter and 9.1% for the year. Recorded music adjusted EBITDA grew 9.6% for the year. Excluding the items impacting comparability, adjusted EBITDA grew 9.7% in 2025, and adjusted EBITDA margin expanded 20 basis points to 25.5%. The benefit of cost savings and operating leverage more than offset margin headwinds from repertoire mix, outsides growth in lower margin physical sales, and incremental overheads from business combinations. The margin pressure from repertoire mix includes strong growth in Virgin Music, which has a different business model and margin structure than our traditional frontline label business. Looking further at recorded music revenue, subscription revenue grew 7.7% for the quarter. Excluding the DSP catch-up income in the fourth quarter of 2024, subscription revenue grew 9.6% for the quarter, largely thanks to continued healthy subscriber growth at many global, regional, and local DSV partners. Six of the top 10 markets, including the US, saw high single-digit or double-digit subscription revenue growth. The acceleration in subscription growth in the fourth quarter was primarily driven by retail price increases in some smaller markets, which more than offset minor 2024 price increase benefits we have now begun to lap. Subscription revenue grew 8.6% for the year, not very different from the rate of growth seen in 2024, even with a lower contribution from pricing and encouraging results as we look forward to the benefits still to come from our new Streaming 2.0 deals. 2025 growth did include an approximate 1% benefit from various acquisitions. We expect 2026 subscription revenue to benefit from improved wholesale rates in these agreements with the benefits layering in throughout the year. Ad-supported streaming revenue grew 9.3% in the fourth quarter and was up 4.7% for the year. Stripping out some contractual benefits in the quarter, underlying growth was mid-single digits and was driven by slightly better performance to several key platform partners. Physical revenue grew 21.3% in the fourth quarter and 11.4% for the year. The strength in the fourth quarter was largely driven by vinyl sales of Taylor Swift's The Life of a Showgirl, which drove outsized direct-to-consumer growth in the US and Europe. License and other revenue also performed well, up 18.1% in the fourth quarter and 11.0% for the year. Excluding the legal settlements in the prior year, License and other revenue grew 26.8% in the quarter and 13.6% for the year. In addition to underlying licensing growth, the quarter benefited from strong live event and other related income, primarily in Japan, as well as from a compensatory payment as part of a strategic licensing agreement with an AI music platform. Turning now to music publishing, revenue grew 1.4% in the quarter, or 2.8% excluding the prior year settlement referenced earlier. The slower growth in the quarter was due to the timing of collections in certain societies and other sources, which helped results in the fourth quarter of 2024. Underlying growth in the business remains healthy. While the growth rates vary, Music Publishing's reported revenue by quarter in 2025 was much more consistent than 2024. The performance of our publishing business is better viewed on a four-year basis. In 2025, music publishing revenue grew 9.3% or 9.8% excluding the prior year settlement. The strong music publishing growth for the year was fueled by strength in digital and synchronization revenue, while performance and mechanical revenue also grew. The growth benefited from the inclusion of Chord and a major television studio business win in this year's results. and we have now lapped the inclusion of both of these items. Music publishing adjusted EBITDA grew 10.0% for the year, or 10.5% excluding the items impacting comparability, and adjusted EBITDA margin expanded 20 basis points to 24.3%. Moving to merchandising, revenue was flat both in the quarter and for the year, as this is a transactional business with release and tour schedule driven volatility. In the fourth quarter, growth in touring and direct-to-consumer revenue offset lower retail sales. Merchandising adjusted EBITDA for the year declined 61% due to higher manufacturing and distribution costs driven by both product mix and broader cost pressures. We are continuing to take steps to improve the profitability of our merchandising business, including investing in our DTC business and working to reconfigure our manufacturing supply chain. Net profit for 2025 amounted to 1.53 billion euros compared to 2.09 billion euros in 2024, resulting in earnings per share of 84 euro cents compared to 1 euro and 14 cents last year. The decrease in net profit in 2025 was due to a smaller increase in the valuation of investments in listed companies, which increased 283 billion euros in 2025 compared to 1.2 billion euros in 2024. Net profit included the €227 million in non-cash share-based compensation expense for 2025 compared to €329 million in 2024. We expect a similar level of share-based compensation expense for 2026. In addition, net profit reflects restructuring costs of €95 million in 2025 related to our strategic organizational redesign, as well as €45 million of costs related to our U.S. listing and certain M&A advisory costs compared to €169 million of restructuring costs in 2024. Adjusted net profit grew 7.0% to €1.91 billion in 2025, resulting in adjusted diluted EPS growth of 7.3% to €1.03 compared to 96 cents in 2024. In line with our commitment to pay a dividend of at least 50% of our net profits, as adjusted for certain non-cash items, UMG has proposed a final dividend for 2025 of 514 million euros, or 28 euro cents per share. If approved at our AGM, this would bring our full-year dividend to 52 cents per share, in line with our 2024 dividend. Before I turn to cash flow, I'd like to take a moment to talk about the importance of our long term minded and financially disciplined reinvestment in our business. With our focus on long term value creation, we continue to reinvest in the healthy growth we see enduring in our business for years to come. This could take a number of forms. For one, it of course includes signing new artists and resigning, broadening and extending our relationships with existing artists. It includes investing in our infrastructure and technology to maximize opportunities in an evolving landscape, for example, around AI, data and analytics, direct-to-consumer, and superfan efforts. It includes the addition of music and publishing catalogs to our best-in-class collection. And it also includes M&A, as we strengthen our presence in high-potential music markets and expand our independent label services businesses through Virgin Music Group. I'd like to take a minute to speak about the resigning of artists and specifically royalty advances. As a reminder, advances are recoupable against artists' future royalties. Cash royalties are paid once an advance is fully recouped. There's a very low level of risk in advances to our most established artists, given that we have a long history of how they have performed, clear visibility of the returns, and a unique understanding of where opportunities exist to expand our partnership beyond recorded music, or music publishing rights. Further, deals are most often structured to extend until advances are recouped, giving us added protection. The advances are normally recouped not just through the future releases from our artists, but also the catalogue of the prior work that audiences continue to engage with. Our spend on advances is a strong reflection of the health of our business. We have an unprecedented roster of the world's best artists, which continues to expand. And we expect continued healthy growth in the monetization of our robust catalog of songs and recordings. In 2025, we proactively extended and expanded deals with some of our biggest recording acts and songwriters, as we expect to do in 2026 as well. We view the successful long-term relationships with our superstar artists and songwriters as the truest reflection of the value UMG provides them. In many cases, these artists are not only extending their existing partnership with UMG, but broadening into new areas where they haven't historically worked with us. It's important to recognize that advances in one year don't typically relate to revenue in that particular year, and recruitment is not necessarily associated with advances made in the same year. Therefore, it's difficult to draw any meaningful conclusion from looking at net advances in a given year or from advances of the percent of sales. Looking over a longer period allows for a more meaningful analysis, so consider this view of the past six years. Between 2019 and 2025, gross advances grew at an 8% CAGR. During the same time frame, UMG's revenue grew by 10%, and adjusted EBITDA improved 14%. In combination with the other areas of investment I mentioned, such as accelerating our investment in Virgin Music and expanding our growth in high potential markets, we have put in place a 1 billion euro bridge facility to help fund this investment cycle. With the underlying growth in our EBITDA, our leverage remains unchanged at 0.9 times as of December 31st, 2025, and we are committed to maintaining our current credit ratings. UMG is the company that is today due to the consistent investment in the future that Solution and the team have made year after year. We remain financially disciplined and our best position to assess and value any music assets in the market. The level of investment in our sector by non-traditional players in recent years shows the conviction that others have about the future of music, and we couldn't agree with them more. Our optimism about the future means that we intend to continue our disciplined investing to ensure that UMG remains the industry leader. Now let me turn to free cash flow. In 2025, our net cash provided by operating activities before income taxes paid was 2.14 billion euros, compared to 2.10 billion euros in 2024. As I mentioned, 2025 included a step up in royalty advance payments related to the timing of major artist renewals. Royalty advance payments, net of recoupments, amounted to €402 million in 2025, compared to €186 million last year. Income taxes paid increased to €403 million from €349 million in 2024, and net interest in other financing activities was €90 million, compared to €70 million in the prior year. Free cash flow before investing activities amounted to €1.6 billion in 2025, similar to 2024. Conversion to free cash flow before investments was 55% of adjusted EBITDA. While this is at the lower end of our historical range, it reflects the variability of the timing of artist advances, which I discussed the importance of a moment ago. This significant cash generation allowed us to continue our long-term investment in the business. We spent 854 million euros on investments in 2025, including on CapEx, catalogs, and other strategic acquisitions compared to 1.1 billion euros in 2024. Free cash flow amounted to 702 billion euros compared to 523 million euros last year, driven by the strong cash generation of the business and lower level of investments year over year. To give you a bit more color on our investments, in 2025, we spent 280 million euros on catalog acquisitions, netted divestments of intangible assets, similar to our spent net spend of 266 million in 2024. the divestments include the catalogs transfer to cord as well as other intangible sales we spent 195 million euros on capex and other intangible asset investments which mostly includes capex like software investments compared to 183 million euros in 2024. we expect capex to be 1 to 200 million euros higher in 2026 due to real estate projects in a number of our key locations. The remainder of our other 2025 investment spending of 379 million euros focused largely on deals which push forward our strategic initiatives, including deals in Thailand, Vietnam, Indonesia, and Japan, as well as certain superfan initiatives. We also used 104 million euros on further funding for court. This number will obviously be higher in 2026 with the inclusion of the downtown and Excel investments, together with activities still to come during the year. Before we move to Q&A, I want to take a moment to comment on our recently closed downtown acquisition. For purposes of comparability, we plan to break out quarterly revenue and EBITDA for downtown in 2026. To give you a sense of the scale of their business, in 2025, Downtown's unaudited results show revenue of €891 million and EBITDA of €40 million. With the strong 2025 results, we've made a 17x 2025 EBITDA on a pre-synergy basis and expect the post-synergy multiple to be closer to 13x. We're very excited to welcome Downtown to the UMG family and we're encouraged about the future for Virgin Music Group. In summary, 2025 was another year of strong financial, strategic, and operational performance, and provides us with the optimism for the opportunities ahead of us in 2026 and beyond. And with that, Seleucian, Boyd, Muir, Michael Nash, and I will now take your questions. Operator, please open the line for Q&A.

Great, thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When the parent asks your question, please ensure to unmute yourself locally. We ask you please send yourselves to two questions. The first question goes to Omar Magias of Wells Fargo. Omar, please go ahead.

Good evening, guys, and thanks for the question. Maybe first on subscription growth. You've now delivered subscription growth of eight plus percent over the past six quarters with little to no material benefit from pricing and now growth is approaching double digit levels. With Streaming 2.0 agreements kicking in and DSPs implementing price hikes, are there any offsetting items that would prevent subscription growth from further accelerating over the next couple quarters? Just trying to get a better understanding on some of the puts and takes impacting growth going forward. Thanks.

Thanks, Omar. Let me start with that, and then Michael will add some color commentary as well. So thank you for pointing out the strong growth we've had for six quarters, now over 8%, as you say, without really the benefits of Streaming 2.0 benefits kicking in. In terms of any offsetting items, you know, of course, the only thing I'd refer to is, you know, as I said in my prepared remarks, we had a small benefit last year from some of the companies we added. But we expect to see the pricing changes kick in during the course of 2026. You won't see the full effect coming all at once as of January 1. But as you say, we're excited that we've created this level of momentum as we now come into this new period of time. So with that, Michael, I'll let you add.

Let me just add, referencing Capital Markets Day, we provided a framework for thinking about the streaming 2.0 deals that we were looking to implement. We've now announced three of those streaming 2.0 deals. As Matt said, we're looking for the benefits from the rate rises to start to impact the results. And I would still reference the 8 to 10% K or midterm guidance that we gave you for the period from 2023 to 2028. That's the target that we're delivering to. We would be delighted if we had opportunities to accelerate, but at this time I would just focus on the fact that we established a game plan, we're executing the game plan, and we expect to be able to continue to deliver to the targeted guidance.

The next question goes to James Heaney of Jefferies. James, please go ahead.

Yeah, great. Thanks for the question. Can you just talk about the strength that you saw in streaming revenue in the quarter? How much of that do you think is overall improvements to the ad products at the DSPs versus just general ad market strength? Anything to parse out there would be helpful.

Yeah, thank you for the question. As I mentioned in the remarks, we have a diversity of partner services and formats, and every quarter we see some differences in the comps. related to different deal terms and timing of renewals. About half of the growth in 4Q is actually due to a contractual benefit that came through. I think if you look at the low to mid single digits, underlying growth posted in prior three quarters, that gives you a probably a better sense of where the, you know, as we think about that revenue stream going forward there. Certainly enjoyed the jump up there in the fourth quarter, but would expect something more in line with prior quarters going forward. Michael, you can talk a little more about ongoing efforts in that space.

Moving forward, we do continuously urge caution in revenue growth expectations here, as we have reminded you all on these calls. over the last several quarters, but we remain highly focused on driving growth over the midterm. And what we reflect on as we look at market evolution is, you know, there is a secular migration of advertising spend from analog to digital. We see a focus on, you know, video and social as being very attractive categories to be recipients of that spend. We believe in working with our partners on better monetization, about support of listening, the increased engagement with social video platforms, and we do expect to see sustained growth over the midterm in ad support.

The next question goes to Julian at Roche of Barclays. Julian, please go ahead.

Yes, good evening. Two questions for Matt, if I may. On catalog acquisition, you did 280, which was higher than I thought, as my understanding is that Core Music would do some of the catalog acquisition that you had done directly in the past. So could you give us an indication for catalog acquisition in 2026? I understand it depends on the opportunity, but some indication would be useful. And then you had a whole speech about net content investment in ARTIS, how it comes with positive returns. But you also said that 26 would see an elevated level like 2025. So is the interpretation that the 26 level will be broadly around 400 million of 25? Is that the right interpretation of what you said?

Yeah. Excuse me. Thank you, Julian. Thank you for the question. So look, 26 advances will depend on when certain artist deals close. But it's, it's really not surprising that in a growing industry, where royalties are increasing, that advances would also be increasing. So as I mentioned earlier, since 2019, advances are grown by an 8% CAGR and revenues are grown by 10%. So you can see certainly those things are moving together. And just based off of both the roster of artists that we've had for a while, and you heard from Lucien's comments, the success we've had with new artists again in 2025, as shown at the two awards shows over the past couple of weeks, that we continue to bring more successful artists into the roster. And that's going to continue to drive advances that we pay out and also recoup again. So, you know, we'll wait and see which deals close during the course of the year to see where that goes. But I actually see increases in advances outstanding as a sign of a healthy growth in the industry going forward. In terms of expectations around catalog acquisitions in 2026, and Boyd, maybe you can jump in on this one as well. uh again it's a little bit of uh you know very early in the year here and we'll see what comes out we're excited about the uh the uh the progress the court has made as they continue to acquire uh catalogs if we work closely with them as i mentioned in my remarks we had uh not only our investment our initial investment in them in 2024 we made an incremental investment last year because they are continuing to uh to find good catalogs to invest in and we're happy to partner with them and uh expect to continue to see strong volumes of catalog transactions and we will uh we will be in our fair share or more of those i'm sure as the year goes on i mean excuse me let me just go add to what matt

You said, you know, we've got very clear, if you look to the priorities, the strategic priorities that Lucien ran through, clearly, you know, aligning ourselves in the growth markets to a similar market share position as we have in the more developed markets is incredibly important, particularly as we see the increasing number of subscribers being added into those growth markets. So, you know, we've stated that as our objective. One aspect of this is clearly is M&A. It's all local language. The deals are all relatively small. But over the last three years, we've acquired 18 businesses in these growth markets. And we're looking at, we have a pipeline of deals that we're working on at the moment. And just, you know, similarly on, on on cord i mean card um card has performed very well uh 20 um catalog acquisitions in its basically its first full year it's been part of the probably associated with universal music and um and also you know what is good is that their ability to attract a long-term long-term time horizon uh investors um has been very strong in 2025. So I think we were very positive about where we are with CORD.

The next question goes to Peter Sapino of Wolf Research. Peter, please go ahead.

Good afternoon. I wanted to ask you a question at the intersection of investment and growth. As your cash investment pace normalizes in the 27 or 2028 timeframe as contemplated in your capital markets day, can Universal still maintain a 7% like sales growth rate, which was the view expressed at that time? Or is that a growth rate which includes the normalized benefits of heavy acquisitions like you've made in the last two years? Thank you.

Yeah. Thank you, Peter. So, look, certainly when we gave capital market state guidance, we were focused on the view of the business about five years at that point in time. I would say looking at the business today, there is nothing that changes our positive outlook for the business, not just through 2028, but beyond. Certainly, we expect to continue to invest in the business as well. and that will supplement the growth. But there is still significant runway in the core part of streaming and subscription business for both increased subscriber volumes and increasing ARPU. We don't expect those things to, in aggregate, to flatline, you know, three years from now. So, Michael, I don't know if you want to add anything as we look at that.

I think that everything we've seen with the evolution of the market makes us confident in what we have projected as the performance of the business on an organic basis. So we're not at this point saying that we need to change the allocation of cash to support the objectives that we identified, which we're delivering to.

And the other thing that I would add, In the guidance that we gave, we did note that that guidance did not include any transformational M&A. And we talked, Matt and Lucien talked about the acquisition of downtown and that clearly is a transformational transaction.

The next question goes to Clay Griffin of Moffitts Nathanson. Clay, please go ahead.

Yes, thanks. Good afternoon. Matt, you framed the advance, the change in advance well, I think, but just maybe just step back and explain or help us think through the competitive dynamics in that space. Are you seeing renewed pressure from from PE and some of these JV structures? And how is that impacting your ability to retain top tier talent?

That's a great question. As I think about it, we see more activity in the catalog space than in the advanced space in terms of those what I would refer to as newer entrants to the music business. um so that's where we see them show up more but as i said in my remarks we're advantaged from the standpoint that our view of the value of any music asset is based off of the largest data set in the industry so that helps us ensure that you know we believe we know the the right value for each catalog that uh that comes to market and is available uh but we do see more of the uh of them showing up in processes. We're also involved in the catalog space more than the advances space.

No, you said it well.

Thank you. The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.

Thank you. Good afternoon. Wanted to ask first, just to go back to the first question in your response about subscription growth in 2026. It sounded like your answer implied that or maybe explicitly said that you expect the growth rate to be within the range that you provided at the investor day of eight to 10%. Is that a fair characterization or do you think that this is one of those years where you could exceed that range of growth? And then my second question is about these consumer facing AI services, if I could. They appear close to rolling out. The majority of the discussion seems to be around newer players, like Urio and Clay, rather than sort of your established DSP partners. Do you expect the majority of that engagement with AI tools to come from new players, or do you expect launches from your DSP partners, and do they have the rights to launch products at this point? Thank you.

Yeah. Let me start with your first question, Michael. Thank you for both of them. Just to be clear, when I provided some factors that will drive subscriber growth this year and was certainly excited about having the new deals actually show up in our revenue streams this year, I did not say that our expectation is that subscription growth this year would be in the range that we provided for the full five-year period of eight to ten. So, you know, we'll see where it plays out during the year. We're confident that with the continued growth we see and those new price points kicking in, there will be a positive benefit for 2026. Michael, I'll let you.

It's Lucy, and I'd like to just add there, sorry to interrupt you. The work that we've done over the last 10, 12, 13 years with the DSPs, um they feel uh like our established business partners and of course that they are but you have to remember that uh uh 15 years ago no one had ever heard of them so uh the work that we're doing and the work that they're doing spotify apple amazon youtube obviously um i what i've seen uh i'm extremely encouraged by And we will be working with them. We are working with them alongside new players. We talked about Nvidia. I'm not able to talk about the array of other conversations that we're having with companies and platforms, which are equally as innovative and exciting and well-funded. They're investing many, many billions in infrastructure, as we all know. And whenever there's a new technology, a new format comes out of it. So we've got an encouraging environment where we're working to keep every single format that we have going, growing and improving in terms of what the technology and the products can provide. At the same time is, and I've said this before, We want to be and are the hostess with the mostest. We want to be at every single dinner party that there is around town. And that's what we continue to do. These formats and these businesses are not mutually exclusive. We are working with them all. And it comes back to why we were as excited about what the products are, about the opportunities for artists. I've seen them. They're incredibly compelling in the same way that I saw ad funded streaming and I saw that the dream from ad funded streaming was going to be into premium subscription. And we are right. We've seen this. I've done it. We've managed these transformations. If you really want to go down memory lane, I've gone through from LP vinyl into the CD, then into the digital downloads. I like what's going on, I like what I see, and we're attacking it and we're excited by it.

The final question goes to Silvia Cuneo of Deutsche Bank. Silvia, please go ahead.

Thanks. Good evening, everyone. I wanted to ask about downtown music. Since the completion of the acquisition, could you please elaborate on the first strategic priorities for the business and the main revenue drivers for 2026? Any color on the recent trends will be helpful. And then secondly, regarding UAI partnerships, particularly with audio, Can you comment about what is expected as a contribution of the audio licensing to your 2026 financials, perhaps at high level and from when? And if you could comment about the potential AI licensing opportunities pipeline in 2026. Thank you.

I'd like to just comment before I hand it over to the team on some of the specifics on high level strategy. with regard to downtown. In the same way that I spoke just a few moments ago about sort of parallel businesses and parallel activities, I see exactly the same with downtown. You can see our performance year in, year out. The last three years, we've had nine out of the top ten best-selling artists in the world. So that's the top of the market. But we are very aware and we can all see that the rest of the market is also growing. So downtown gives us an opportunity to to grow our artists and label services. And we've got a two step twin approach to everything that's going on within the marketplace. So in the same way that we talk about Mrs. Green Apple or King and Prince in Japan or BTS out of Korea, We are also looking at and talking about tuck-in investments and bringing in entrepreneurs and providing label services throughout the rest of the world through the downtown Virgin strategy. You have to remember, Virgin is, I suppose, the brand name. It was Virgin that acquired downtown. And we also have another company in there, which is a white label business called InGrooves. So we've actually got three interfacing businesses at various stages of the artist, entrepreneur, label services, business and function, which is growing. And I'm excited about what we're doing. I'm excited that we're able to close downtown. And that's one of the reasons why we did it. We're covering every single blade of grass in terms of region, content, culture, genre, format, technology.

And that's how we're doing it with respect to the 2nd question regarding the planned launches of some of the announced new services and the pipeline. I think that we said publicly in the announcement of some of these services that they have plans for launching this year. To be more specific about that. Obviously, that would be a conversation with the individual services, but we're working to support the launches of the. partnerships that we've entered into. In terms of giving you any guidance with revenue contribution, that's not something that we typically do in any category or would be doing with respect to the launch of new services. But in terms of the pipeline, I would direct you back to Lucien's call to action note in October of 2025, in which she talked about a dozen different partnerships potentially being in the pipeline. Now, we've obviously delivered on the number of those new deals since then. But you can rest assured that we're speaking with every single relevant party, whether that's a new entrant or that's an established platform, about the potential to harness AI innovation in developing their services. So we're very focused in delivering on that pipeline. With respect to scope of opportunity, one point that I would make is we've talked about super premium. And our research suggesting that 20% of the current subscriber base is the target for a significantly improved offer they'd be willing to pay double the current subscription price for. What's happened over the last year is that AI innovation has kind of overtaken the conversation around technology innovation with all the service providers and with respect to the evolution of music. We're going to see AI being a significant component what will become the super premium tiers of 2026 and beyond. So that gives you some sense of scope of opportunity. But then as Lucien mentioned, AI is not just an incremental revenue opportunity. AI is an introduction of a new set of formats. This is a paradigmatic change in the landscape with respect to innovation and the evolution of music. So we believe that this is something that over time implemented in a number of different ways, including things like agentic AI, could potentially lead to significant opportunity for customer value realization at the end of this decade and into the next.

Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.