Warner Music Group — Earnings Call Q3 2025

Operator: Non-GAAP results during this conference call and in our earnings snapshot slides 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 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 Robert. Robert Kyncl: Thanks, Kareem, and hello, everyone. If you hopped on the call early, you just got a taste of the range of our artist roster. From the massive breakout track from Somber to the latest chart toppers from Cardi B and Twenty One Pilots, to the resurgent Goo Goo Dolls' 1998 hit "Iris," which currently sits in the global top 15 on Spotify. It's an incredibly exciting time to be at Warner Music Group Corp. Against the backdrop of a rapidly changing landscape, we've improved our market share and delivered profitable growth all while realigning our company to capitalize on the tremendous set of opportunities we have ahead. Our growth plan continues to bear fruit; we've seen steady global market share gains over the past year. In the United States, we're up 0.6 percentage points over the prior year quarter according to Luminate. Globally, our share of the Spotify top 200 has jumped by around six percentage points versus fiscal 2024. And for the entire quarter, we had the number two market check. Importantly, carrying this momentum into fiscal 2026 as we continue to execute on our strategy. I'll dig into this in more depth but first, let's cover our Q4 highlights. I'm pleased to say we've seen acceleration on the top and bottom lines, driven by impressive performance across the company. Total revenue grew 13% and on an adjusted basis recorded music subscription streaming increased 8.4%. These results prove that our strategy is working. Let me paint you a picture from just a year ago when both the industry and Warner Music Group Corp. were in a much different place. A year ago, Warner Music Group Corp. was facing market share pressure. Today, we've laser-focused our resources and investment on the highest return areas of our core music business. This has led to market share gains that have translated into strong measurable improvement in our financial performance. A year ago, the music industry was navigating the transition from just volume-driven streaming growth to growth that is driven by volume and wholesale price increases. Today, our new agreements with key DSP partners better reflect music's ever-growing value and provide greater certainty around our economics. A year ago, our operational structure wasn't optimized to navigate a more globalized and digital environment. Today, we focus and simplified our organization to deliver greater intensity and impact. I'm pleased with the progress that we've made and I'm truly grateful to our leadership team, our operators across the globe, and our amazing artists and songwriters for pushing Warner Music Group Corp. to new heights. All of these actions have better positioned us to execute quickly and effectively on the opportunities we see ahead, and to maximize the value we deliver to artists, songwriters, fans, and shareholders. Let's turn to the impressive run of hits we've been seeing with our new releases as well as our catalog successes. On new releases, in September alone, we had back-to-back number one albums in two of the world's biggest music markets. Thanks to Cardi B and Twenty One Pilots in the United States and Ed Sheeran and Biffy Clyro in the UK. On the international front, we had number ones in China, India, Finland, Italy, and Spain. And on Billboard's Latin Airplay chart. And in a terrific vote of confidence, our legendary superstar Madonna has returned to where it all began for her, Warner Records, with a new album coming in 2026. Kareem Chin: The performance of our global catalog division in Q4 showcased our ability to revitalize our timeless legacy. Robert Kyncl: Making it relevant to a range of new audiences. A major highlight was the release of the 1973 album by Fleetwood Mac's "Tusk" featuring Lindsey Buckingham. A targeted marketing campaign capitalized on fan demand sending it to number 11 on the main Billboard album chart and number six in the UK. A remarkable achievement for an album more than a half-century old. Warner Chappell continued its resurgence with our songwriters contributing to seven of Luminate's mid-year top 10 most streamed songs in the world. And in the United States. And multi-Grammy winner Amy Allen held the top spot on the Billboard Hot 100 songwriters chart for nine weeks in 2025. These Q4 success stories capped off a year of achievements. During fiscal 2025, our recording artists sat atop the Billboard Global 200 for twenty-two weeks. That's a 42% share of the number one spot on the chart. With Atlantic, Warner Records, and Warner Chappell hotter than ever, we're delivering success across geographies and genres. Next, I'd like to cover our focus on increasing the value of Streaming's growth formula is made up of three components: market share, global subscriber growth, and wholesale price. Against the backdrop of healthy subscriber growth and a market share improvement, we've also made progress on wholesale price. Since the beginning of 2025, we've signed renewals with four of the largest DSPs. All of these deals have wholesale price increases, providing certainty around economics setting up monetization models for the future use cases. A critical component of ensuring we grow the value of music is addressing the promise as well as the potential risks of generative AI. First, we need to acknowledge the reality that generative AI technology has arrived and it is not going away. So we need to be proactive and lean into the future. The music industry is no stranger to disruption. From the invention of the phonograph, to the Napster era, to the rise of the day streaming ecosystem, the introduction of new technologies over many decades has posed both challenges and opportunities. AI represents another defining moment and as always, our focus remains on protecting the rights of our artists and songwriters, while simultaneously growing new revenue streams on our behalf. With this in mind, we've developed a set of principles that will govern how we engage with AI platforms. We will only make agreements with partners who commit to licensed models, while securing economic terms that properly reflect the value of music. Crucially, our artists and songwriters will have a choice to opt in to any use of their name, image, likeness, or voice in new AI-generated songs. We believe that the combined power of our music with innovative technology drives greater engagement and interactivity for fans, and will result in significant incremental revenue over time. I'm pleased to say we've already done deals with partners like Oudio, Stability AI, and Clay, that are consistent with these principles that I just outlined. Our ability to sign three deals with three new companies in quick succession highlights the attractiveness of the music business, and the opportunity to create value through new technology. These agreements enable us to get ahead of the game ensuring that our artists and participate fairly in the AI revolution. As I mentioned earlier, we've taken major steps to optimize our organization to drive efficiency and effectiveness. All while reaccelerating growth and gaining market share. Among our recent changes, are some moves designed to foster closer collaboration. We've directly aligned Atlantic and Warner Records in the UK with their counterparts in the US. Creating a more seamless transatlantic approach to breaking artists globally. In Italy, we organized our operations into two frontline labels, Atlantic and Warner Records, mirroring the label structure in the US and the UK. We've also unified our Australasia and Southeast Asia businesses to create bigger opportunities in this region. Additionally, we streamlined operations and strengthened the impact for artists in Central Europe, by merging Benelux with Germany, Switzerland, and Austria. On the tech front, we've continued to modernize our infrastructure including strengthening our global digital supply chain to position the company for further scale and growth. We've implemented tools to help artists and songwriters make faster, smarter data-driven decisions about their careers, as well as tools for employees to be better informed and more effective. Our emerging stars are building the catalogs of tomorrow laying the foundation for future stability. While our recent superstar releases have set us up well for 2026. In Q1, we have highly anticipated new albums from Fred Again, FKA Twigs, Not For Radio, Ayanna Kamura, and Robert Plant, along with deluxe album additions from Ed Sheeran, Cardi B, and Pink Panthers. We also have new singles from Charlie XCX, Charlie Puth, Jisoo, Hilary Duff, Tiesto, Alex Warren, David Guetta, and Teddy Swims, and many, many more. We're proud of the progress we've made in 2025 and I look forward to carrying this momentum into 2026 and beyond. And now I'll pass it over to Armin. Armin Zerza: Thank you, Robert, and good morning, everyone. First, I'd like to thank our teams around the world for the tremendous work they have been doing to accelerate top and bottom line growth while we organize our company for the future. As Robert mentioned, Q4 has been a quarter of acceleration as we delivered record high quarterly revenue as well as our highest year-over-year growth in nearly two years. This reflects steady progress on market share, with notable improvement in the second half of the fiscal year. In quarter four, total revenue growth of 13% reflects double-digit growth across recorded music and music publishing. This was highlighted by a sequential improvement recorded music streaming and 64% growth in artist services SWMX led merch campaigns for Oasis, and My Chemical Romance. These projects demonstrate our capabilities to support our artists capitalize on the opportunities grow revenue streams beyond core music. More on that to come. Recorded music subscription streaming grew 8.4%, underpinned by global subscriber growth and supported by a strong market and charge share performance. As a reminder, calendar year 2026, will start to see the impact of wholesale price increases from our new DSP deals. Which should provide incremental tailwinds. Ad support streaming grew 3% on an adjusted basis by the performance of our music, and the timing of certain DSP payments. Music publishing grew 13% driven by double-digit growth across performance mechanical, and sync. Adjusted OIBDA rose by 12% and our margins declined slightly due to revenue mix. As a significant growth in artist service revenue carries a lower margin profile. For full year 2025, we delivered total revenue and adjusted OIBDA growth of 8% on an adjusted basis reflecting our impressive recovery from the first half. This was spot added by high single-digit recorded music subscription streaming growth. Also achieved operating cash flow conversion of 47% we increased our A and R investments. We remain committed to delivering our target conversion range of 50% to 60% over the long term. As of September 30, we had a cash balance of $532 million, total debt of $4.4 billion, and net debt of $3.8 billion. Our weighted average cost of debt was 4.1%, and our nearest maturity date remains 2028. With our strategy in place, a clear road map to deliver higher, more consistent growth, and drive shareholder value, we are extremely excited about the opportunities ahead. We're operationalizing the strategic pillars that Robert laid out, through several key priorities and initiatives. Which I shared on our last earnings call. I'd like to provide an update on our progress. Robert Kyncl: First, Armin Zerza: On investing into core music to accelerate growth, we're making progress across geographies and vintages. Recall, we prioritized investments in markets with the most attractive return profiles. As a result, we are now growing market share in every key region. Including the US, the largest music market of the world. Additionally, our balanced approach to driving performance across vintages, has resulted in higher new release market share than by Atlantic, as well as a jump in global catalog share. As Robert mentioned, this has improved our Spotify top 200 share by six percentage points. In addition to these investments in our core, we see tremendous opportunity to accelerate growth in distribution and direct to consumer. We have a large and growing distribution business today, And under new leadership, we have been building or acquiring new capabilities to accelerate profitable growth in 2026. We also see tremendous opportunities to capitalize on the passionate demand from fans all over the world for physical music direct to consumer offerings. Areas adjacent to our core music business. More on this in upcoming quarters. Second, on our commitment to driving efficiency to free up more capital to invest, and enhance our margins, we are on track to deliver against our reorganization and related cost savings program of $200 million in annualized savings in 2026 increasing to $300 million in 2027. Third, we committed to driving incremental growth and value creation through accretive M&A. We have developed a robust deal pipeline, and look forward to sharing updates in the near future. These efforts will be turbocharged in a capital efficient manner through our joint venture with Bain, but also through organic investments as we improve free cash flow. Finally, our focus on thoughtful capital allocation is delivering. As the investments we are making in the highest repertoire markets which include the US, UK, Mexico, China and Japan, are delivering share growth. In addition, we're improving capital spend efficiency And with the bulk of our major tech investments behind us, we should see an improvement in our free cash flow starting in 2026. Looking forward, we see an attractive formula for us to drive shareholder value and are excited to be operating in a healthy industry with an immense set of opportunities. Macro factors that underpin our outlook include robust global subscriber growth, a rising wholesale price environment, underpinned by contracts that better reflect music's increasing value, new premium offerings from DSPs, and AI emerging as an incremental top and bottom line opportunity for the music industry and our artists and songwriters. We are poised to capitalize on this environment with a strategy will see us intensify our investments to deliver more consistent higher growth improve margin and drive shareholder value. For 2026, we expect to see strong top line growth which we look to bolster through focused organic investments initiatives in our core music business and high impact accretive M&A. As well as contribution from adjacent areas such as distribution, and direct to consumer offerings. In addition, we will drive bottom line growth via operating leverage and our cost savings plan. Which will contribute 150 to 200 basis points of adjusted OIBDA margin improvement. We expect savings to increase sequentially as we progress through the year. And finally, we see tremendous potential in new incremental growth areas particularly in AI licensing deals which we plan to discuss in future calls. In conclusion, we are proud of how we rebounded from a challenging first half in 2025 to deliver solid top and bottom line growth in the second half. With strong momentum as we head into 2026. We look forward to providing regular updates as we meet our milestones. With that, take your questions. Kareem Chin: Thank you. Operator: Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Kutgun Maral with Evercore ISI. Your line is open. Kutgun Maral: Great. Good morning and thanks for taking the question. There's a lot to unpack, but one area that I'd love to get your updated outlook on is with rights monetization, especially in the context of rising music engagement across platforms? We've seen the pace of innovation and product rollouts across the DSPs accelerate meaningfully everyone from the streaming services to artists to even a ticketing platforms like Ticketmaster is exploring new ways to leverage AI. All with the goal of driving deeper engagement. That said, there's an ongoing debate between those who see the labels as uniquely positioned to benefit from these innovations and those who believe that the labels will remain maybe more passive beneficiaries and therefore not necessarily see upside. So Robert, you've already touched on parts of this, but as you've gone through the latest round of DSP renewals, clearly continue to engage with other partners across the ecosystem, how are you thinking about Warner Music Group Corp.'s role in capturing incremental value this next chapter of industry growth? Thank you. Robert Kyncl: Thank you. I will start with the word incremental that you just mentioned. We see this as an incremental sorry. We see this as an incremental opportunity for not just for Warner Music Group Corp., but for the music industry as a whole. Armin Zerza: Secondly, Robert Kyncl: We are determined and have decided that we're the drivers, not the passengers, of this incremental opportunity. The reason for that is the space is moving lightning fast. There's a great demand for IP. There's a great demand for stardom. And companies like ours who are working to represent both of those need to drive this change. That's exactly what we decided to do. I posted a blog post last night in case not all of you got a chance to read it, please do. It's listed on our website. It outlines our principles under which we focus and and guide our deal making in the age of AI. There are three simple principles. We'll do agreements with partners commit licensed models. We'll do it on economic terms that properly reflect the value of music, what I mean by that is that our deal terms are tied to usage and revenue growth. And importantly, that artists and songwriters have the opportunity and right to opt in for any any new songs that implicate their name. Image. Likeness, and voice. We see this as an incremental opportunity because the past has shown us that changes like this create one. If you go back twenty, twenty-five years, with the democratizational distribution, It has unlocked unlimited shelf space. Which has unlocked deep personalization of music for users, which has unlocked growth and volume of people signing up for subscription services. Enjoying them. And it has unlocked tremendous value in catalogs and music IP overall for all of us. It has been a net positive force that has that has created a lot of value. See AI as the the the marketization of creation. And we we believe that it brings what we've lacked. Which is interactivity which is generally correlated with value creation. If you look at across all kinds of media industries, Armin Zerza: The more Robert Kyncl: Forward you are with your content, you focused on it and watching it or whether you're interacting with your hands and your fingers, or whether you go in person and engage, the value per hour goes up. That's why we're focused on it. That's why I believe this is a tremendous incremental opportunity for us. And, and we are going to be in the driver's seat. In terms of our approach, in addition to our three principles. Our strategy is simple. We have three l's. Legislate, litigate, and license. And you you're familiar with our legislation efforts like the no pics app, that we're working on in DC. On the litigation front. We're also familiar with various lawsuits which have been out there. But we use those first two in order to achieve the third, which is license, because that is the most powerful lever chart the path for the future for our artists and songwriters. To drive the incremental value and to make sure that we have our fair and correlated share of the usage and revenue driving. So we're really excited about this. Company is energized. And Armin Zerza: Yeah, Robert Kyncl: Onward. Kutgun Maral: Very helpful. Thank you. Operator: The next question comes from Benjamin Black with Deutsche Bank. Your line is open. Benjamin Black: Great. Good morning. Thank you for taking my questions. Two for Armin. Armin, could you talk about the building blocks behind your expectation for top line growth in 2026? Maybe dig into how you're thinking about paid streaming growth, just given the broader expectation for wholesale or per sub minimum increases beginning in calendar 2026? And then secondly, on margins, cost savings aside, how much margin expansion do you expect to deliver organically next year? And I mean, what's your longer-term margin target? Perhaps talk us through the puts and takes in achieving that as you look to drive incremental revenue growth in lower margin areas like distribution and DTC? Thank you very much. Armin Zerza: Well, first of all, Ben, Robert Kyncl: We are, first, very, very happy with the results we delivered Armin Zerza: In the last two quarters, not just the last quarter. And as it relates to streaming, we believe that we results are pretty much reflective of what we should expect in the '26. Now to your question on additional growth building blocks, starting in calendar year '27, sorry, '26. There are a few that I'd like to mention. The first one is that in addition to their market share momentum that we have seen in global subscriber growth, we will, of course, benefit from the contractual wholesale price increases that we have agreed now with several top ESPs. As Robert mentioned, we have actually agreements now with four of the five top ESPs in 2026. Start to to start to increase wholesale price prices starting in calendar year '26. Second area is that in addition to the investments that we have been doing on high ROI markets and projects, we have a very robust pipeline of accretive M&A that will start to materialize in 2026. Including on many projects that we have been working on, throughout joint venture with Bain. The third area is that we are working or have been working on expanding adjacent areas. One area I'd like to mention is distribution. You know, we have a new leader there, and we've done a lot of work to better understand how we can accelerate growth in this area. We do not feel confident that we can accelerate growth in that area starting in Colombia at '26. And last but not least, there are many upside opportunities that are not included in our guide, like premium offerings from DSPs. And, obviously, AI is an opportunity as Robert just discussed. Finally, from a leadership perspective, we are very confident that we have now leadership in place across the company that will help us deliver and accelerate growth. Now to your margin question, Ben, we have a very strong program to improve margin over time. The first program we are implementing is a big strategic reorganization. And as you have seen, why we're doing this over a reorganization, we're actually accelerating growth. That program will deliver $100 million of savings in fiscal year twenty-six and up to $300 million in fiscal year twenty-seven. So we're actually very, very comfortable with our guide of margin expansion of hundred and fifty two twelve basis points next fiscal year. In addition to that, we will improve margin through operating leverage. There are a few areas which we are leveraging. The first one is as we accelerate our high margin streaming business, margin will improve The second one is through our work on on accretive M&A, especially catalog M&A, which is higher margin accretive businesses will improve margin. And last but not least, is repricing with float. Through the margin. So net, we're really, really confident in our margin building book, not just from cost savings perspective, but also overall from our organic perspective. In fact, in the mid to long term, we are targeting margins in the mid to high 20s. And you shouldn't be surprised about that when you look at our EBITDA margins in fiscal year twenty twenty-five. Closed '25 with an EBITDA margin of about 25%. As you know, EBITDA includes our normalized cost savings, We're now basically delivering over the next couple of years. And so you should expect over time that our adjusted OIBDA will approach our adjusted EBITDA margins in the mid-20s, and then we'll start build on that to continue to grow margin. Benjamin Black: Thank you. Very, very helpful. Operator: The next question comes from Peter Supino with Wolfe Research. Your line is open. Peter Lawler Supino: Good morning. I wondered if you would talk about your successful market share gains over the last year Maybe discuss what you're doing differently Benjamin Black: And if you could provide any context on how each of your flagship Peter Lawler Supino: Frontline labels are performing. Thank you. Sure. Thank you. So first, Robert Kyncl: I'm just pleased to say and keep on reiterating that our strategy is working. It's great for it to show up in the results and and see the progress that we're making You know, our market share hasn't grown just in one or two places. It's really been broad based. Across both our flagship labels as well as all of our regions. In the US, we've increased by 0.6% The U. S. Year on year in Q4 twenty twenty-five. This is according to Eliminate. And we had similar improvement around the world in EMEA, LatAm, and APAC. And then and plus six percentage points on Spotify top 200 in fiscal twenty-five And notably, we've occupied the number two spot for nearly half the year there. Which is incredible. So it it is really great to see the the company firing on all cylinders creatively. As well as financially. And, it really has come come down to a lot of focus on artist development, which obviously has been there. You know, for for a long time. It's it's in our DNA, and we continue to lean lean into it. But we also focus on our distribution business, focus on our catalog, We've had a lot of success in terms of revitalizing our catalogs, seeing excess of Buckingham Mix, which was originally released in 1973. Being 11 on Billboard Album chart and six in The US, it's incredible to see the power of IP and what it is that we can do with it. In terms of our returning artists, Cardi B and Twenty One Pilots being number one our albums in The US, and Ed Sheeran and Biffy Claro in The UK. And, obviously, with know, I mentioned our our development stories with Alex Warren you know, spending ten weeks on number one. At number one on Billboard Hot 100 and Global 200 and Somber. Number one on Spotify Global Chart, and set there for three set in the top three for over ten weeks. So it's it's just broad based. Know, artist opened, returning artists, catalogs, all regions. All divisions. So it's just been lot of work that really started to hit together. And and we just we have really focused on our operations, making sure that we're making the right decisions. Around capital allocation. And and that we have strong pipelines both for our artist releases as well as for M&A, as Armen mentioned. So our playbook is working and our investment as our investment is a key priority in markets, and it's really bearing fruit. Operator: The next question comes from Michael Morris with Guggenheim Securities. Your line is open. Michael C. Morris: Thank you. Thanks for the details and for taking my questions. Wanted to follow-up on some of the growth components that you highlighted as we look into 2026 and beyond. Benjamin Black: First, on your M&A plans, Armen, you alluded to M&A as a potential accelerant to growth in the coming year. And can you share more detail on what we can look forward to and how much of an incremental growth driver this can be for you? And then also you just mentioned distribution as a strategic focus area. And a potential driver of growth as early as 2026 as well. So can you expand on this a bit? What changed about your strategy if anything? And what gives you confidence that this can be a bigger contributor to growth in the coming year? Thanks. Armin Zerza: Thank you. So on the M&A side, we have a very strong pipeline in place. Which as I mentioned, we expect to start the materialize starting in calendar year '26. As you probably know, we are focused on a few, large opportunities. Where we, as a publisher, can add value in a way that creates value not just for artists and songwriters, but also in a way that delivers a strong return for us. The key focus simply is our capital of business. Or couple of businesses out there in the market. Why? Because they are highly accretive and therefore deliver top and bottom line growth. We'll do this in a very capital efficient way, as we mentioned before by our joint venture with Bain. Which will provide us with more than more than a billion dollars of funding. And it's obviously a key neighborhood accelerate growth in this area. Now from a status perspective, we've been working very well with Bain as a partner. We are very pleased with the progress that we have been making So we'll hear from us soon starting in 2026 about some of those acquisitions, which gives us confidence that this can accelerate growth, in addition to the other billing box I discussed before. From a distribution perspective, distribution is a significant part of our industry. And very often a source of new talent. And in fact, we haven't talked too much about this, but actually have a large growing and profitable distribution business today. And as we have announced before, we have recently appointed a new leader with Alejandro as you know, has been leading our Latin America business for many years. And as you probably know, this business is heavily distribution focused, yet Alejandro and his team grew this business double digit. And, frankly, at attractive margins for a long time now. So really encouraged by what he has done with his business, and, therefore, he is the perfect leader for distribution business. We spent a lot of time with him to better what we need to win in this marketplace. Not just in Latin America and in The US, but also globally. And we have spent quite some time now to build capabilities that allow us to provide better customer service on the one hand, but also to integrate clients faster and more efficiently so we can grow this business profitably. So we're now at a point where we are really, really confident with that we can accelerate growth on this business. Particularly starting in 2026. Now having said all of this, you know, as I talked before many times, we're looking at our from a portfolio planning perspective. So we do this in a way that grows our business on the one hand, but also enhances margin. So net, both these strategies are really for our portfolio strategy to accelerate growth and enhance marketing over time. Michael C. Morris: Thank you. Appreciate it. Operator: The next question comes from Douglas Creutz with TD Cowen. Your line is open. Douglas Lippl Creutz: Hey, thank you. Robert, I know one of your priorities has been to make sure that company is investing in the right technologies to position for future growth. And Benjamin Black: Wondered if you could share some color on how those investments are contributing Douglas Lippl Creutz: To the growth outlook you laid out today? And then also Benjamin Black: Whether some of those priorities might be changing given the rapidly evolving landscape? Thank you. Robert Kyncl: Sure. Douglas Lippl Creutz: You. Robert Kyncl: Yeah. The priorities are not changing. They remain the same. We're focused on you know, as you think about our business, it's a large scale business with lots of SKUs lots of albums, lots of songs, lots of artists. And and they have to be managed across large number of DSPs. And so we're in a high volume business. And it requires infrastructure solid, strong infrastructure that is scalable. And so we focused on that strengthened our digital supply chain. Sped up our songwriter payments, more transparent accounting, In publishing, we stabilized and upgraded our core systems, which would include royalty processing and sync licensing systems. And we're nearly fully live with our financial transformation initiative, which unlocks whole host of benefits and a better and more insightful p and l. More transparent for artists and songwriters, etcetera. So so we've really focused a lot on core infrastructure. So that can accelerate the business handle the volume Armen mentioned, you know, the deal pipelines that we have. Whether it's organic ones or M&A. All of that requires infrastructure. So we've been focusing on that, preparing the company for growth. And and that will continue. And we've made a lot of progress in that area, so that's why we feel confident about our acceleration. Armin Zerza: I just wanna add to that. Obviously, this also helps us scale many of our services globally. There's a key enabler also for the cost savings program. We're implementing that discussed last time. Operator: The next question comes from Cameron Manson Perron with Morgan Stanley. Your line is open. Cameron Manson Perron: Thank you and good morning. You highlighted having deals with four of the top Benjamin Black: Five DSPs and having secured kind of wholesale rate increases across all of those platforms. I'm wondering, Robert, you've talked in the past about kind of the benefits of variability in licensing terms across platform partners and that being positive with regard to facilitating experimentation. Is that still would you say that's still the case across the new platforms that you've locked in deals with? Or have we reached kind of more of a a standardized type of deal structure at this point in time? Thanks. Robert Kyncl: Sorry. Can I just clarify your question? Are you talk you were talking about existing DSPs or new platform? Douglas Lippl Creutz: Like, DSPs existing, the four of the five larger existing ones? Robert Kyncl: Right. And the and the question is on sorry. I couldn't really fully understand the question. I really just trying to Cameron Manson Perron: Yeah. Really just trying to clarify you know, in the past, you've talked about the benefits of having kind of variation in your DSP deals. I'm wondering if that's still the case or if there is more standardization kind in conjunction with locking in wholesale rate increases. Robert Kyncl: Got it. Thank you, sir. Thank you for the clarification. Look. We generally, when you when you begin you have different partners. Which are different objectives, and you strike slightly different deals. As time goes by, businesses grow, things standardize more. So do the deal terms. Obviously, different platforms are slightly different. Some have free funnels. Some don't, etcetera. So that kind of variability. However, we strive for a fair marketplace where people where our partners pay the same prices for the content that we license to them. So consistency is very important for us. And making sure that no partner feels disadvantaged versus another one. And that we have a very healthy competition on fair and square term. So there's much more standardization in place. It was in the in the past. Cameron Manson Perron: Got it. And then if I could follow-up on the market share gains that you've hadn't been able to deliver on this year. How do you think with regard to the savings initiatives, like how do you balance those two in terms of trying to deliver on your savings initiatives, but and reinvesting to continue to drive market share gains in the future? Thanks. Armin Zerza: Yeah. Maybe I can take that. We we are we are very focused on ensuring that we actually invest more in our core repertoire markets and key genres. As well as in the most promising projects So from a savings perspective, we are not cutting our spending on the front line as we call it. So we're actually increasing in in our investments. Savings are mostly reflective of us becoming more efficient on the back office side. Robert mentioned technology as a key enabler. So I'll give you a few example. In finance, we have just introduced SAP. We're obviously dealing with millions of transactions. This will enable us to become more efficient as a finance organization. In marketing, as we kind of organize our data, we are leveraging more and more the you know, standard dataset we have to drive marketing efficiencies. Making, you know, we're now introducing AI. We actually have introduced the deal office globally and working with an AI company to help us optimize our deal making. So think about the savings really coming from becoming more operationally efficient as a company and back office savings. Which we leverage to invest more in the most promising markets more in the most promising artists, more in the most promising genres. And that's really how we balance this. Cameron Manson Perron: Got it. That's helpful. Thank you. Operator: The next question comes from Ian Moore with Bernstein. Your line is open. Ian Moore: Hi, thank you. Benjamin Black: So looking through the AI licensing announcements that have come out in the past, you know, couple weeks, looks like these, these services kind of point to different Ian Moore: Very different parts of the value chain. Benjamin Black: We got some professional grade production tools in there, some more like list Ian Moore: Discovery platforms. Benjamin Black: I was wondering how you could you know, if you could maybe bucket the commercial opportunity Ian Moore: You see across, like, the spectrum of, of new services that you're licensing to? Thank you. Douglas Lippl Creutz: Sure. Robert Kyncl: So first, I'd like to say it's it's a it's a very energizing moment. In the industry. When you see so many new companies popping up attracting venture capital. You know, we have not had this in the last to fifteen years. All of the players, they have been established in the first decade, really. And now there's a crop of new companies new investment, new excitement, new talent, just tremendous momentum. So we decided that we are going to seize this opportunity not going to be a passenger. We're going to be the driver. Because it is important to get in early. Set the terms, define the future for us rather than let other people define it for us. That means that this will cut across all the different segments that you highlighted. There may be professional content. There may be user content. There's all kinds of consumption, creation, It's it's certainly a lot of work for our teams, but it's it's very exciting and energizing. And the opportunity that we see is one of interactivity. Interactivity is something that drives value It's been proven over and over, whether it's in the video gaming industry, even going to a concert is interactive. You know, the revenue per hour is always higher. Somebody is looking at something with their eyes and using their fingers and their hands, create something. So the value gets created and and we'll capture it. And what happens is also that there's a very, very high correlation between interactivity and iconic familiarity. It thrives on it. What does that mean? It means that stars will get bigger. That will be they'll benefit from this trend. And that iconic IP. Benefit from this trend. So we're focusing on all of the elements here we want to make sure that that we capture this incremental and expensive opportunity. And I I think of it a bit more like user generated content early on on YouTube. That started, and it was seen as a threat. And in fact, it has actually developed in something that was very, very positive. And commercially successful. For all parties involved. So very excited about this, and we're open for business. Kareem Chin: Thank you. Operator: Your next question comes from Kannan Venkateswar with Barclays. Your line is open. Kannan Venkateswar: Thank you. Benjamin Black: Robert, maybe just Kannan Venkateswar: Following up on that point and maybe Richard Scott Greenfield: Presenting a little bit of a pushback to see what your reaction would be. But why isn't AI a threat to an equal measure? That you know, obviously, your content can be used yours and other label content can be used to to create new forms of content or at least the models can be trained on it. And over the longer time horizon, that could completely bypass you know, content creators theoretically. And that's obviously a big debate. So I would love to get your reaction on that. Then more on the financials. I mean, if you look at the guidance for next year in terms of margin expansion, I think the growth in EBITDA that's implied by that is roughly equal to or most of the growth seems to be coming from the cost cuts. And so in terms of operating leverage, would be great to understand, I mean, underlying trends excluding things like M&A for instance, or cost savings? How you guys are trending? If you could just get some more details, that would be Thank you. Robert Kyncl: Sounds good. I'll take the first part and Armin will take the second. So of course, with every change, every technolog technology could technology change, there's always a threat and an opportunity. The market position of distribution was a threat. Everybody was predicting our demise. And, you know, sidestepping the the major music companies And, obviously, opposite has proven to be true over time. And we believe the same happens here. Of course, we look at the threat, that this could pose in terms of dilution, etcetera. But at the same time, need to focus on how do we actually turn this into an advantage for all of us and drive the value of the industry. And the value that we provide. It's also important to to know that and I've said this many times before. The value of the large music companies and the contribution that we have to the inter industry. Is rising. Not declining. With all of these challenges, is becoming a much more of a big business to big business interaction. It is very hard for individual creators to deal with large technology companies. That is much better for these matters to be handled by large music companies, large IT companies who have the capabilities know how, technology, the scale, to ensure the right outcomes. So we view this as this is our role. This is our role is to shape the industry. And make sure that it benefits artists and songwriters. As well as us and our shareholder. Richard Scott Greenfield: Armen? Armin Zerza: On the margin, I think it's important to note that our guide is, of course, after investments we make into the business. It's really a net margin guide. The guide is also mostly focused on two areas. One is the cost savings program that we deliver, two is the organic margin growth that we planted River and definitely three drivers that will help us do that. One is as we start to accelerate our streaming business, that is a higher margin business that is actually margin growth already for us. Two, PSM price increases will go to the bottom line and will help us improve margin. And three, there are certain inner value areas. So think about this as a net margin guide. But the biggest organic drivers for us will be one, streaming growth, and two, the PSM price increases that we'll see. Richard Scott Greenfield: Thank you. Operator: That is all the time we have for questions. I will turn the call to Robert Kyncl for closing remarks. Robert Kyncl: So thank you. Thank you for your attention today. Just wanna reiterate that evident from our results that our strategy is working. It's a labor of quite a few years of work. Both on the technology front on the investment front, on artist development, administration. It's really all divisions at the company. Have been, firing on all cylinders. And it's great to to see it all come together. Through a sustained growth, mark market share expansion, Richard Scott Greenfield: And Robert Kyncl: On top of it now us accelerating and seizing the opportunity to shape the AI future. And create new incremental business that will be set up the right way for the future to capture the right possibilities both creative and economic for artists and songwriters. And our shareholders. Thank you so much for being here. Talk to you in Kareem Chin: Ninety days. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.