Warner Music(US:WMG)2024-05-09 18:51Financial Data and Key Metrics Changes - Total revenue increased by 7% in Q2, with Recorded Music and Music Publishing growing by 4% and 19% respectively [20][21] - On a normalized basis, total revenue grew by 9%, with Recorded Music up by 7% [21][61] - Adjusted OIBDA increased by 9%, with a margin of 20.9%, reflecting a 40 basis point increase year-over-year [61][37] - Streaming revenue grew by 11%, with Subscription Streaming growth accelerating to 13.5% [21][61] - Operating cash flow decreased to a use of $31 million from a use of $6 million in the prior year quarter [38][64] Business Line Data and Key Metrics Changes - Music Publishing division, Warner Chappell, reported a revenue growth of 19%, driven by streaming and performance revenue [37][61] - Digital and streaming revenue in Music Publishing increased by 27% and 29% respectively [37] - Physical revenue in Recorded Music decreased by 7%, attributed to the timing of releases [62] - Artist services and expanded-rights revenue decreased by 3%, while licensing revenue grew by 5% [62] Market Data and Key Metrics Changes - Warner Music Group outpaced peers in 2023, growing global market share in Music Publishing [26] - Argentina was noted as the fastest-growing market in 2023, with year-over-year revenue doubling [55] - In Sub-Saharan Africa, Warner Music was the only major music company to grow share in 2023 [55] Company Strategy and Development Direction - The company has three strategic priorities: growing engagement with music, increasing the value of music, and evolving operational methods [11][30] - A joint venture with 10K Projects has been successful, opening new channels for talent [12] - Warner Music South Asia was launched to tap into a market of 400 million people [13] - The company is focusing on organic growth and partnerships while exploring M&A opportunities [29][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum in music and business, anticipating healthy top-line growth and margin expansion [40][59] - The company is optimistic about upcoming releases and the potential for continued growth in streaming [40][59] - Management highlighted the importance of AI in evolving the music industry and protecting artists' rights [31][57] Other Important Information - The company sold entertainment websites UPROXX and HipHopDX to strengthen its foundation [33] - The weighted average cost of debt is 4.5%, with a nearest maturity date in 2028 [39] - The company aims for a cash flow conversion of 50% to 60% over a multi-year period [64] Q&A Session Summary Question: Why did the deal with Believe fall apart? - Management indicated that the timing and public nature of the situation were out of their control, leading to the decision not to pursue the deal [43] Question: Is this year still expected to be second half-weighted from a release slate perspective? - Management confirmed that the second half will see the full impact of previous price increases and is optimistic about subscriber growth [47] Question: Can you elaborate on the initiative to monetize superfans? - The company is focusing on a cross-platform approach to engage superfans, recognizing the ubiquity of music across various platforms [77] Question: What are the tools to drive engagement with older content? - Management emphasized the importance of optimizing the catalog for streaming across all major DSPs to enhance performance [89] Question: What is the expected pace of margin expansion this year? - Management noted that margin expansion will be assessed over the year rather than quarter-to-quarter, with a focus on long-term goals [92]