Universal Music Grp U/Adr

executive vice president and chief digital 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 your 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. Solution, you may begin your conference.

Thank you for joining us on Universal Music Group's earnings call for the first quarter of 2025. I'm pleased to report to you today that financially, commercially, and strategically, the year is off to a very strong start. In a few minutes, Boyd will dive into the numbers with you, but the headline is revenue is up 9.5% and adjusted EBITDA is up 10%. In addition, during the quarter, we've continued to make progress on our key strategic initiatives, the global expansion of our business, the market adoption of our responsible AI initiatives, and the advancement of Streaming 2.0. In particular, with regard to Streaming 2.0, our win-win partnership approach to our work with the DSBs is already producing meaningful results. Our 9.3% growth in subscription revenue this quarter is geographically diversified between developed and high potential markets and well represented across our partner portfolio. In fact, we had double digit revenue growth from four of our major DSP partners, underscoring the health and breadth of our subscription ecosystem. By geography, UMG subscription revenue grew at double digit rates in top developed music markets where subscription is still at an earlier stage, such as Japan and Germany. In addition, we saw double digit growth in large population markets where digital music consumption is booming, such as China and Mexico. These four markets are each among UMG's top 10 markets for subscription revenue and illustrate the progress of our global expansion initiatives. You'll recall that in March, approximately six weeks ago, we discussed these strategic objectives in detail. So today I'd like to focus mainly on our core competency, the development and marketing of our artists and their music. It's the very reason that UMG stands alone as a category of one, that is, as the most successful music company in history. As I take you through a number of our quarter's many outstanding commercial successes, I'd like you to take note of how they occur in all parts of the world, in many languages, cultures, and across a wide variety of genres. These achievements, by both our new artists and our established ones, are also an indication of how our talented and experienced executives maximize the underlying health, broad diversity, and enduring longevity of our entire roster. Let's start with the U.S. For the first quarter, we had seven of the top ten albums with Kendrick Lamar's GNX at number one. Of the industry's five best-selling album debuts, In the quarter, UMG had all five, with The Weeknd's Hurry Up Tomorrow at number one. In March, Morgan Wallen reached a monumental US chart milestone. His latest studio album, One Thing at a Time, collected its 100th week in the top 10 on the Billboard 200 chart. He is the only solo artist in history with an album that has stayed in the top 10 for at least 100 weeks. His new album, I'm the Problem, is coming in May. Playboi Carti's third studio album, Music, has spent three weeks in the US at number one, making it the best-selling rap debut this year. The album is also the seventh biggest album debut in Spotify's history, with more than half the streams coming from outside the US. A total of 31 of Playboi Carti's songs hit the US Hot 100 chart, making him only the third artist, along with fellow UMD artists Taylor Swift and Morgan Wallen, to capture at least 30 spots on the Hot 100 simultaneously. Drake's collaborative project with Party Next Door debuted at number one in the US. Now having had 14 chart-topping albums on the Billboard 200, Drake has tied Jay-Z and Taylor Swift for the most albums by a solo artist in the entire chart's history. Lady Gaga's album Mayhem debuted at number one in the US, as well as in the UK and 15 other countries. Her recent headlining set at Coachella received extraordinary critical acclaim. As new fans are discovering her genius, Long-time fans are re-engaging. There's been a huge uptick in her streaming numbers. She recently commenced on her first arena tour since 2018. The tour's already sold out, proving yet again why Lady Gaga is a once-in-a-generation pop icon. We also had another stellar quarter in the UK. There, UMG had six of the top ten albums, with Sabrina Carpenter at number one and Sam Fender at number two. We also had eight of the top 10 singles with Lola Young's Messy at number one. UMG artists held the number one spot on the UK chart for 11 of the quarter's 13 weeks. And we also had nine of the top 10 artists with Taylor Swift, Sabrina Carpenter, Sam Fender, The Weeknd, Kendrick Lamar, Lady Gaga, Billie Eilish, Drake, and Chapel Roan. The world's second largest music market by revenue is Japan. This past quarter in Japan, in an incredible display of the range of great artists who grace our labels, UMG swept all the main categories of the 39th Annual Gold Disc Award. Japanese Artist of the Year, Mrs. Green Apple. Western Artist of the Year, of course, Taylor Swift. Best Asian Artist, 17. Japanese New Artist of the Year, A Group. And the Western New Artist of the Year was The Last Dinner Party, an astonishing result, to say the least, of which we're very proud. Our tremendous success in Japan is especially gratifying because it highlights not only the regional strength of our artist rosters, but also the deep experience and wide expertise of our local management teams. Just a few more words, while I can, about Mrs. Greenapple, the Japanese Artist of the Year. At the moment, the band has 18 different singles on Billboard's Japan Hot 100, including the number one. They also celebrated their 10th anniversary with visual displays at a number of landmarks around Tokyo, along with a takeover of Universal Music Retail Store. I could go on and on, but I think it should be very clear by now why, as I said, I'm so proud to be relaying all these accomplishments. There are so many of them to be proud of. Standing still, resting on our laurels, and looking back is never an option for us. To stay on the cutting edge of artist development and marketing, and to continue to be the leading home for artists worldwide, we relentlessly reexamine and adjust our organizational structure wherever and whenever it is necessary to do. As you know, last year, we reorganized our East and West Coast operations from a position of strength. The result? At year end, our flagship U.S. label groups, Republic Collective and Interscope Geffen A&M & Capital, were, respectively, the number one and number two labels in the U.S. Similarly, given the increasing global force of country music, we're reorganizing our operations in Nashville and, once again, doing so from a position of strength. UMG is the industry market share leader in country music, according to Luminate. Over the last two weeks, we've announced two major strategic steps in our country music operations. First, we relaunched the Nashville-based label Lost Highway Records with new management team and an ambitious creative vision. And secondly, last week, UMG Nashville was rebranded Music Corporation of America, also under new leadership with a strong strategic vision. We're convinced these transformations will ensure that UMG continues to lead the vital and growing community of country music innovators. Before I turn it over to Boyd for the financials, let me close by saying I'm incredibly excited by our strong start to this year. Despite the economic uncertainty in the world, we remain confident not only in our performance, but in the resiliency of our global business. Having been at this all of my career, I've navigated our organization through various periods of macroeconomic uncertainty. One thing that is for certain is that throughout these periods, each time I've witnessed how music remains vital, financially sticky, and critical to culture. And while no company or sector is completely immune from market volatility, Time and time again, we've demonstrated our ability to embrace disruptive forces and transform them into opportunities that ultimately lead to another wave of growth. Over the years, we've evolved our business into one characterized by predictable, high-quality, recurring revenue with attractive margins and enormous upside in both established markets and those with the potential for high growth. Even more fundamentally, music is one of the least expensive forms of entertainment, and nothing provides more comfort in times of uncertainty and anxiety than music. To quote Dylan, it's a shelter from the storm. And in that sense, when it comes to music, we've built the largest and strongest shelter there is. Boyd, over to you. Thank you.

Thank you, Lucien. As Lucien indicated, 2025 is off to a strong start. The figures are laid out in the press release, but let me provide some additional color. I'd remind you that any growth rates we discussed today will be in constant currency. Total revenue in the quarter grew 9.5% year over year to 2.9 billion euros, with growth in recorded music and music publishing. The broad-based nature of the growth continues to underpin our confidence about the health and sustainability of our business. In looking at the segments, recorded music revenue grew 10.3%, with strong growth in subscription, physical, and in licensing and other revenue. Subscription revenue grew 9.3%, driven primarily by growth in the number of subscribers, and to a much lesser extent, helped by certain price increases. Year-over-year subscription revenue growth accelerated compared to the fourth quarter, partly due to improved global subscriber and revenue growth on several platforms. This improvement was supported by growth in higher ARPU subs in key established markets, including the US and Japan, and also better conversion of free users to paid in key emerging markets such as China. In addition, revenue from fitness platforms was stable this quarter. Ad-supported streaming revenue was largely flat, up 0.3% in constant currency. The marginal improvement in year-over-year growth was a result of an easier comp against two of the months where we were off platform with TikTok in early 2024. Looking through this, underlying trends were similar, as growth continued to be challenged by the shift to short-form consumption, which is not yet adequately monetized, but also encouragingly improved conversion to premium subscribers In Q2, we will comp against one lost month of TikTok revenue and will begin to anniversary the loss of the Meta premium music video license. Physical sales were strong, up 15% year over year, driven by vinyl growth in the US and in Europe. Many of our top overall sellers this quarter had healthy physical sales, including Kendrick Lamar, Sabrina Carpenter, and Lady Gaga, among others. Even with a strong release slate, we continue to expect physical revenue to be largely flat for the year against a challenging two-year comp. License and other revenues grew meaningfully this quarter, driven by particularly strong live income in certain markets in Europe, as well as by growth in synchronization income. Turning to music publishing, revenue grew 9.5% over the prior year quarter. This result was driven by 17% growth in digital revenue, thanks to continued growth in streaming and subscription activity. Performance revenue saw a timing-related decline against a particularly difficult comp as Q1 2024 performance revenue was up 28%. Moving on to merchandising, as expected, merchandising revenue declined 5%. Direct-to-consumer income continued to exhibit healthy growth, but this was more than offset by a difficult comp in touring merch sales due to the timing of tours. Now turning to adjusted EBITDA. Adjusted EBITDA grew 10% in the quarter to €661 million driven by the revenue growth. Adjusted EBITDA excludes non-cash share-based compensation expenses of €58 million during the first quarter of 2025 compared to €101 million in the first quarter of 2024. Adjusted EBIT margin was flat at 22.8%. The flat margin reflects the benefit of cost savings and operating leverage, but offset by the negative impact of revenue and repertoire mix, resulting from strong growth in physical revenue, outsized growth in low-margin live income within our licensing and other revenue line, and the incremental administration revenues of music publishing catalogs such as CORD. Next quarter, we look forward to updating you on our implementation plans for phase two of our strategic organizational redesign. As planned, phase two will include another 125 million euros of cost savings to bring the total amount of the program to 250 million euros. So overall, 2025 is off to a strong start, and our focus on our key strategic initiatives positions us to achieve our midterm financial objectives. Lucien, Michael, and I would now be happy to take your questions. Operator, please open the line for Q&A.