Warner Music Group (WMG) Q4 2022 Earnings Call Transcript

For the period ending September 30, 2022

November 22, 2022 8:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Warner Music Group’s fourth quarter earnings call for the period and fiscal year ended September 30, 2022. At the request of Warner Music Group, today’s call is being recorded for replay purposes, and if you object, you may disconnect at any time.

Now, I would like to turn today’s call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Kareem Chin

Good morning, everyone. Welcome to Warner Music Group’s fiscal fourth quarter and full year earnings conference call. Please note that our earnings press release, earnings snapshot, and the Form 10-Q we filed this morning will be available on our website. On today’s call, we have our CEO, Steve Cooper; and our CFO, Eric Levin, who will take you through our results, and then we will answer your questions.

Before our prepared remarks, I’d like to refer you to the second slide of the earnings snapshot to remind you that this communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non-GAAP results during this conference call and in our earnings snapshot slides, and have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency, unless otherwise noted. All forward-looking statements are made as of today and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that can cause actual results to differ materially from our expectations. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our filings with the SEC.

And with that, I’ll turn it over to Steve.

Steve Cooper

Thanks, Kareem. Good morning, everyone, and thanks for joining us. As you may know, I'll be stepping down as CEO in January, so this is my last earnings call. I'll have more to say about our leadership transition later, but let's start by talking about what's happening today. It's no secret that we've been challenged on multiple fronts as we navigated the tumultuous macro environment. This includes financial volatility, rising interest rates, inflation, declines in online advertising spend, and currency headwinds. In addition, we've been navigating the complexities created by the pandemic and dealing with the impact of the war in Ukraine. Despite all these challenges, I'm pleased to say that we've had a very successful quarter. Our total revenue in Q4 was $1.5 billion, representing year-over-year growth of 16%. Adjusted EBITDA also increased 16% to $276 million, with a margin of 18.4% compared to 17.2% in the prior year quarter. These results were driven by growth across all revenue lines, as well as the benefit from settling certain copyright infringement cases, as we discussed on our last earnings call. Recorded music revenue was $1.24 billion, an increase of 13%. Streaming revenue grew 10.4% when adjusted for the one-time impact of the DSP renewal we've been discussing since Q1. I'd like to remind everyone that Q4 was the final quarter impacted by this renewal. Q4’s uptick in subscription streaming growth, and the benefit from emerging streaming platform deal renewals, more than offset the decline in ad-supported revenue. Artist services continued to recover in Q4, increasing by 33%, while licensing and physical were up by 38% and 6%, respectively. Publishing had another impressive quarter, with revenue of $254 million, reflecting exceptional growth of 32% plus. Digital and performance revenue stood out, growing 39% and 48%, respectively.