Warner Music(WMG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue grew by 10% and adjusted OIBDA increased by 18%, with margins growing by 140 basis points year-on-year [59][88] - Recorded Music revenue increased by 9%, while streaming revenue grew by 7%, reflecting double-digit growth in subscription revenue and modest growth in ad-supported revenue [59][89] - Music Publishing revenue grew by 16%, driven by strong streaming growth of 28% [60][92] Business Line Data and Key Metrics Changes - Recorded Music adjusted OIBDA increased by 16% with a margin of 20.6%, an increase of 130 basis points compared to the prior year quarter [91] - Music Publishing adjusted OIBDA increased by 32% to $74 million with a margin increasing by 310 basis points to 26.1$35 million to $40 million once fully implemented [94] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment, noting a more positive outlook for growth drivers [42] - The company anticipates continued improvement in results and is focused on margin growth for fiscal 2024 [97] - There is a belief that the market can bear further price increases in subscription services, with expectations for a more regular cadence of such increases [73] Other Important Information - The company has successfully launched components of its financial transformation program in select territories [94] - The cash balance as of June 30 was$600 million, with total debt of approximately $4 billion [96] - The company is actively managing costs, including marketing, to improve margins [37][110] Q&A Session Summary Question: Can you provide insights on the impact of recent price increases by DSPs? - Management expects to see the full impact of price increases reflected in fiscal 2024, not in Q4 2023 [36] Question: What is the status of the financial transformation program? - The program is live in several markets, with benefits expected to roll in modestly in 2024 and more robustly in 2026 [18][94] Question: How is the company addressing the challenges and opportunities presented by AI? - The company is engaged with distribution partners and generative AI engines, ensuring artists have a choice in how AI is used in their music [30][32] Question: Can you elaborate on the TikTok agreement and its implications? - The agreement is designed to ensure fairness across all distributors and opens new growth drivers as TikTok rolls out subscription services [120][121] Question: What are the expectations for emerging streaming platform revenue growth? - Emerging streaming revenue continues to grow nicely, with expectations for improvement in both emerging and traditional ad-supported categories [125]