Universal Music Group N.v. · EURONEXT:UMG
Universal Music — FY2022 Earnings Presentation
35 slides from Universal Music's earnings presentation, Mar 2, 2023
Slide 1: 4th Quarter & Full Year 2022 Results
4TH QUARTER & FULL YEAR 2022 RESULTS THURSDAY MARCH 2, 2023
Slide 2: Important Information
IMPORTANT INFORMATION FORWARD LOOKING STATEMENTS This presentation contains statements that may constitute forward-looking statements relating to the business, financial performance and results of Universal Music Group N.V. (the “Company”) and the industry in which the Company operates. These statem
Slide 3: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO 3
Slide 4: FY2022 Consolidated Results
FY2022 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA FREE CASH FLOW +13.6% +11.7% +70.2% € 1,086 € 10,340 € 2,135 € 8,504 € 1,788 € 638 FY21 FY22 FY21 FY22 FY21 FY22 Note: € in Millions; Revenue and Adjusted EBITDA growth shown in constant currency, Adjusted EBITDA margin change in percentage points,
Slide 5: Top 20 of the Top Global Artists in 2022
4 OF THE TOP 5 GLOBAL ARTISTS IN 2022 1 TAYLOR SWIFT 2 BTS AND 15 OF THE TOP 20 GLOBAL 3 DRAKE 5 THE WEEKND ARTISTS IN 2022 SOURCE: IFPI 5
Slide 6: 2022 Global Artist & Songwriter Success
2022 GLOBAL ARTIST & SONGWRITER SUCCESS SPOTIFY DEEZER APPLE MUSIC 4 OF THE TOP 5 THE TOP 2 UMPG SONGWRITERS IN GLOBAL ARTISTS OF 2022 & 9 OF THE TOP 10 TAYLOR SWIFT • DRAKE 5 OF THE TOP 10 GLOBALLY STREAMED SONGS GLOBAL ARTISTS OF 2022 THE WEEKND • BTS “STAY” IMAGINE DRAGONS THE WEEKND “As It Was”
Slide 7: 2022 U.S. Success
2022 U.S. SUCCESS SPOTIFY YOUTUBE BILLBOARD 7 OF THE TOP 10 THE NO. 1 4 OF THE TOP 5 SONGS IN THE U.S. SONG ON THE HOT 100 YEAR-END CHART ARTISTS OF 2022 IN THE U.S. GLASS ANIMALS “Heat Waves” DRAKE • TAYLOR SWIFT KANYE WEST • THE WEEKND & ENCANTO CAST “We Don’t Talk About Bruno” JESSICA DARROW “Sur
Slide 8: 2022 Regional Success
2022 REGIONAL SUCCESS UNITED KINGDOM GERMANY ITALY FRANCE JAPAN 6 OF THE 7 OF THE 7 OF THE THE THE TOP 10 TOP 10 TOP 10 TOP FEMALE #1 ARTIST ARTISTS OF THE YEAR MOST-STREAMED ARTISTS MOST-STREAMED ARTISTS ARTIST ON BILLBOARD’S ON SPOTIFY ON SPOTIFY YEAR-END CHART TAYLOR SWIFT SFERA EBBASTA LUCIANO D
Slide 9: Welcoming Future Stars & Established Artists
WELCOMING FUTURE STARS & ESTABLISHED ARTISTS SAMARA JOY FLO DJ KHALED 2023 BRITS 2023 GRAMMY AWARDS BEST NEW RISING ARTIST STAR BBC RADIO 1’S SOUND OF 2023 9
Slide 10: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO 10
Slide 11: Growth in Subscribers
GROWTH IN SUBSCRIBERS amazonmusic §@Music =ideezer =) Spotify: Clb ENTERTAINMENT © YouTube Music UNIVERSAL MUSIC GROUP
Slide 12: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO 12
Slide 13: Harnessing New Technology to Drive Value of Catalog
HARNESSING NEW TECHNOLOGY TO DRIVE VALUE OF CATALOG ELTON JOHN ELTON JOHN ABBA THE BEATLES x x VOYAGE x ROBLOX DISNEY+ DOLBY ATMOS Elton John Live “Beyond The Yellow Brick Road” Farewell From Dodger Stadium Digital Avatar Live Concert Revolver 13
Slide 14: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO 14
Slide 15: We Remain Highly Selective in Our Catalog Acquisition Strategy
WE REMAIN HIGHLY SELECTIVE IN OUR CATALOG ACQUISTION STRATEGY NEIL DIAMOND CASH MONEY BOB DYLAN STING (Recorded Music & RECORDED MUSIC PUBLISHING PUBLISHING Publishing, 100+ previously unreleased songs) >75 Artists including Nicki Minaj, Lil Wayne, CATALOG Birdman and multiple >600 songs >450 songs
Slide 16: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO 16
Slide 17: Boyd Muir, EVP, CFO & President of Operations
BOYD MUIR EVP, CFO & PRESIDENT OF OPERATIONS 17
Slide 18: FY2022 Consolidated Results
FY2022 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA ADJUSTED EBITDA FREE CASH FLOW MARGIN +13.6% +11.7% -0.4pp +70.2% € 1,086 € 10,340 € 2,135 21.0% 20.6% € 8,504 € 1,788 € 638 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 Note: € in Millions; Revenue and Adjusted EBITDA growth shown in constant currency,
Slide 19: Long-Term Growth and Margin Expansion
LONG-TERM GROWTH AND MARGIN EXPANSION SUSTAINED GROWTH IN REVENUE & ADJUSTED EBITDA MARGIN EXPANSION ADJUSTED EBITDA Revenue Adjusted EBITDA € 10,340 € 8,504 21.0% 20.6% € 7,432 20.1% € 7,159 17.8% € 2,135 € 1,788 € 1,272 € 1,497 2019 2020 2021 2022 2019 2020 2021 2022 Note: € in Millions; historica
Slide 20: 4Q22 Consolidated Results
4Q22 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA ADJUSTED EBITDA MARGIN +8.8% +15.5% +1.1pp € 2,942 € 620 21.1% 20.0% € 2,520 € 503 4Q21 4Q22 4Q21 4Q22 4Q21 4Q22 Note: € in Millions; Revenue and Adjusted EBITDA growth in constant currency 20
Slide 21: Equity Plan
EQUITY PLAN Following the successful listing of UMG, the NON-CASH SHARE-BASED Board and Shareholders agreed to finalize an COMPENSATION EXPENSE equity plan that would: • Reduce cash compensation costs Annualized Run-Rate Timing Impact One-Time Transition Grant • Align and incentivize executives and
Slide 22: Recorded Music
RECORDED MUSIC 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +5.6% +8.8% +9.7% +0.2pp € 2,235 € 7,937 € 1,900 23.7% 23.9% € 1,975 € 6,822 € 1,614 4Q21 4Q22 FY21 FY22 FY21 FY22 FY21 FY22 Note: € in Millions; All growth rates are in constant currency. 22
Slide 23: Recorded Music Revenue
RECORDED MUSIC REVENUE 4Q22 REVENUE BREAKDOWN 2022 REVENUE BREAKDOWN 4Q21 4Q22 FY21 FY22 +11.4% +1.8% -33.0% +3.1% +8.0% +10.0% +9.3% -2.9% +4.1% +13.4% € 1,044 € 3,901 € 400 € 404 € 1,420 € 324 € 1,207 € 1,072 € 63 € 337 Subscription Streaming Download & Physical License & Other Subscription Stream
Slide 24: Recorded Music Revenue Top Sellers
RECORDED MUSIC REVENUE TOP SELLERS 2022 FY2022 RECORDED MUSIC REGIONAL BREAKDOWN Taylor Swift BTS Encanto OST Olivia Rodrigo Morgan Wallen Europe € 2,191 +7.5% The Beatles The Weeknd Kendrick The Weeknd Imagine Dragons North America Dawn FM Lamar After Hours € 4,077 Asia 2021 +6.6% € 1,007 +14.0% La
Slide 25: Music Publishing
MUSIC PUBLISHING 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +22.1% +24.2%* +26.3% +18.3%* +25.0% +18.3%* -0.2pp +0.0pp* € 1,799 € 410 23.0% 22.8% € 530 € 408 € 1,335 € 307 4Q21 4Q22 FY21 FY22 FY21 FY22 FY21 FY22 Note: € in Millions; All growth rates are in co
Slide 26: Merchandising & Other
MERCHANDISING & OTHER 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +14.6% +54.1% +111.8% +1.4pp € 181 € 36 € 618 5.8% € 141 4.4% € 363 € 16 4Q21 4Q22 FY21 FY22 FY21 FY22 FY21 FY22 Note: € in Millions; All growth rates are in constant currency. 26
Slide 27: FY2022 Free Cash Flow
FY2022 FREE CASH FLOW • Dividend policy: 50% of net income • 2022 interim dividend: €435 million (€0.24/share) • Final dividend proposal 2022: €491 million (€0.27/share) +42% YoY • Total 2022 dividend: €926 million (€0.51/share) +15% (148) 74 YoY (255) 461 (359) +70% (161) YoY (100) (30) 4 1,987 1,6
Slide 28: Balance Sheet and Liquidity
BALANCE SHEET AND LIQUIDITY STRONG BALANCE SHEET TOTAL DEBT PROVIDES STRATEGIC FLEXIBILITY Net Debt € 2,595 Cash • Net Debt/Adjusted EBITDA of 0.9x € 2,250 • Investment grade rating € 585 • Average debt maturity: 5.2 years € 439 • Variable rate exposure halved in 2022 • Capital allocation priorities
Slide 29: Content Investment
CONTENT INVESTMENT CONTENT INVESTMENT ROYALTY ADVANCES, NET • Required / core to our business Royalty Advances, Net • Drives long-term growth / Grows our frontline IP Catalog Investments • Investing into a growing music market € 752 • Mix of new and established artists • Includes expanded relationsh
Slide 30: Catalog Acquisitions: Our Business Is Highly Cash Generative
CATALOG ACQUISITIONS: OUR BUSINESS IS HIGHLY CASH GENERATIVE UMG CASH GENERATION CAGR ’20-’22 Revenue: 18% Adjusted EBITDA: 19% Net cash from op. activities: 32% € 1,987 Net cash from operating € 1,395 activities before € 1,133 income taxes paid 2020 2021 2022 Net cash as % of Adj. EBITDA 76% 78% 93
Slide 31: Our Growth Is Overwhelmingly Organic
OUR GROWTH IS OVERWHELMINGLY ORGANIC € 2,135 Note: Excludes Corporate M&A which is immaterial in this time frame; *Reported 2019 EBITDA as no adjustments in this year; **Rights acquisitions includes all acquisitions over €10M. ***Based on 2022 EBITDA impact of rights acquisitions made between 2019 a
Slide 32: We Remain Highly Selective in Our Catalog Acquisition Strategy
WE REMAIN HIGHLY SELECTIVE IN OUR CATALOG ACQUISTION STRATEGY We see everything We understand what’s good A seat at every table ensures we see Unparalleled industry experience all available catalogs and can cherry- gives us unique insight into catalogs pick the best assets for our portfolio that off
Slide 33: We Bring a High Degree of Analytical Rigor to Catalog Investment Decisions
Proprietary bottom-up model of music industry drivers to inform outlook of major investments WE BRING A Advanced analytical analysis including detailed HIGH DEGREE financial analysis with multiple potential scenario outcomes OF ANALYTICAL RIGOR TO OUR Experience to know where to add value in frontli
Slide 34: Attractive Multiples for the Most Premium Assets
ATTRACTIVE MULTIPLES FOR THE MOST PREMIUM ASSETS - Catalog expenditure typically Deal multiples average ~16x, ~75% of acquisition is publishing represents ~30% of cash flows dropping to <13x with UMG rights - Have spent ~€1.6 billion 2019-22 improved monetization Composition of acquisition spend** U
Slide 35: Q&A
SIR LUCIAN GRAINGE CHAIRMAN AND CEO Q&A BOYD MUIR EVP, CFO & PRESIDENT OF OPERATIONS MICHAEL NASH EVP, CHIEF DIGITAL OFFICER 35