Warner Music(US:WMG)2022-11-22 18:18Financial Data and Key Metrics Changes - Total revenue in Q4 was $1.5 billion, representing year-over-year growth of 16% [6][17] - Adjusted EBITDA increased 16% to $276 million, with a margin of 18.4% compared to 17.2% in the prior year quarter [6][17] - For the full year, total revenue growth was 16% and adjusted OIBDA growth was 18% [8][19] - Operating cash flow increased 78% to $406 million in Q4, and free cash flow increased 91% to $368 million [22] Business Line Data and Key Metrics Changes - Recorded music revenue was $1.24 billion, an increase of 13% [6][18] - Streaming revenue grew 10.4% when adjusted for the one-time impact of the DSP renewal [7][18] - Artist services revenue increased by 33%, while licensing and physical revenue were up by 38% and 6%, respectively [7][18] - Music publishing revenue grew 32% to $254 million, with digital revenue increasing by 39% [7][18] Market Data and Key Metrics Changes - Developed markets continue to grow in the double digits, while emerging markets are growing at higher percentages [8][23] - Global smartphone penetration is expected to increase significantly in the coming years, supporting streaming growth [8][23] - Consumption in Eastern Europe grew 20% in 2021, indicating a new growth area for music [12] Company Strategy and Development Direction - The company focuses on four key pillars: music, globalization, innovation, and people [9] - Emphasis on identifying and developing original artists globally, moving from an Anglo-centric model to a truly global music entertainment company [12] - The company is investing in emerging markets and diversifying its revenue streams through partnerships with over 200 streaming services [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges from financial volatility, rising interest rates, and declines in online advertising spend [6][17] - There is optimism about the future, with expectations of continued growth in streaming revenue and potential price increases from digital partners [8][23] - The company is well-positioned to capitalize on the recovery of the online ad market and the growth of emerging streaming platforms [23] Other Important Information - The company has a cash balance of $584 million and total debt of $3.7 billion as of September 30 [22] - A leadership transition is underway, with Robert Kyncl set to become CEO in January 2023 [15] Q&A Session All Questions and Answers Question: What has been the biggest change for the industry and the company over the last five to ten years? - The biggest change has been the shift from an Anglo-American music company to a global music entertainment platform, focusing on offering fans access to unlimited music [26][27] Question: Can you help frame the emerging streaming opportunity in fiscal '23? - The company expects to start a series of deal renewals in fiscal '23, with a focus on negotiating for the full value of music [28][29] Question: How will the shift to a normalized reporting schedule affect modeling for '23? - The main impact will be in fiscal Q1 of '23 due to the previous 53-week reporting cycle, but subsequent quarters will have consistent year-over-year comparisons [32][33] Question: Are there any parts of the story that remain misunderstood by investors? - The business is often misunderstood when evaluated on a quarterly basis rather than on a longer-term trajectory, which shows consistent growth [36][37] Question: What are the expectations for recorded music streaming revenue in 2023? - The company anticipates continued strong growth in subscription streaming, with emerging markets showing even faster growth than developed markets [40][41] Question: What is the approach to negotiating with ByteDance and improving monetization? - The company aims to negotiate each deal to ensure full value for music, focusing on expanding products and services positively for consumption [44][46]