Universal Music Group N.v. · EURONEXT:UMG
Universal Music — Q3 2023 Earnings Presentation
32 slides from Universal Music's earnings presentation, Oct 27, 2023
Slide 1: Universal Music Group Fourth Quarter & Full Year 2023 Results
02 28 UNIVERSAL MUSIC GROUP FOURTH QUARTER & FULL YEAR 2023 RESULTS
Slide 2: Important Information
IMPORTANT INFORMATION FORWARD-LOOKING STATEMENTS THIS PRESENTATION MAY CONTAIN STATEMENTS THAT CONSTITUTE FORWARD-LOOKING STATEMENTS RELATING TO THE BUSINESS, FINANCIAL PERFORMANCE AND RESULTS OF UNIVERSAL MUSIC GROUP N.V. (THE “COMPANY” OR “UMG”) AND THE INDUSTRY IN WHICH THE COMPANY OPERATES. SUCH
Slide 3: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO UNIVERSAL MUSIC GROUP 3
Slide 4: FY2023 Consolidated Results
FY2023 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA +11.1% +12.4%* +14.6% +18.5%* € 11,108 € 10,340 € 2,369 € 2,135 2022 2023 2022 2023 *Excludes the CRB Phonorecords III Accrual and the Legal Provision from 2023; Excludes the Change in Society Accounting and the Legal Settlement from 2022. See Item
Slide 5: 9 of the Top 10 Global Recording Artists of 2023
9 OF THE TOP 10 GLOBAL RECORDING ARTISTS OF 2023 1 TAYLOR SWIFT* 6 MORGAN WALLEN 2 SEVENTEEN 7 TOMORROW X TOGETHER 3 STRAY KIDS 8 NEWJEANS 4 DRAKE* 9 BAD BUNNY* 5 THE WEEKND* 10 LANA DEL REY* SOURCE: IFPI *Universal Music Publishing Group Songwriter 5
Slide 6: 2023 Global Artist Success
2023 GLOBAL ARTIST SUCCESS SPOTIFY APPLE MUSIC YOUTUBE 6 OF THE TOP 10 13 OF THE TOP 20 3 OF THE TOP 5 GLOBAL ARTISTS GLOBAL SONGS GLOBAL SONGS #1 MORGAN WALLEN. #1 TAYLOR SWIFT “Last Night” #1 TOOSII THE WEEKND DRAKE & 21 SAVAGE “Rich Flex” “Favorite Song” TAYLOR SWIFT “Anti-Hero” DRAKE METRO BOOMI
Slide 7: 2023 U.S. Artist & Songwriters Success
2023 U.S. ARTIST & SONGWRITERS SUCCESS SPOTIFY APPLE MUSIC BILLBOARD THE TOP 4 5 OF THE TOP 7 6 OF THE TOP 10 ALBUMS ON THE U.S. BILLBOARD 200 ARTISTS IN THE U.S. SONGS IN THE U.S. YEAR-END CHART #1 MORGAN WALLEN “Last Night” #1 MORGAN WALLEN One Thing At A Time TAYLOR SWIFT Midnights #1 TAYLOR SWIF
Slide 8: 2023 Success in Industry's Top Music Markets
2023 SUCCESS IN INDUSTRY’S TOP MUSIC MARKETS UNITED KINGDOM JAPAN GERMANY 7 OF THE TOP 10 5 OF THE TOP 10 6 OF THE TOP 10 ARTISTS ALBUMS ALBUMS INCLUDING #1 KING & PRINCE Mr. 5 #1 THE ROLLING STONES SEVENTEEN FML Hackney Diamonds 3 OF THE TOP 5 SEVENTEEN ALWAYS YOURS SEVENTEENSEVENTEENTH HEAVEN META
Slide 9: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO UNIVERSAL MUSIC GROUP 9
Slide 10: Artist-Centric Model
ARTIST-CENTRIC MODEL BETTER VALUES GREATER ENHANCED USER PREMIUM TIERS ARTISTRY AND THE ALIGNMENT EXPERIENCES, AND PRODUCTS ARTIST / FAN BETWEEN ARTISTS ACCELERATED FOR SUPERFANS RELATIONSHIP AND PLATFORMS GROWTH, BETTER AND HIGH-VALUE SUBSCRIPTION CUSTOMERS ECONOMICS 10
Slide 11: Responsible AI Initiative
RESPONSIBLE AI INTIATIVE CENTER THE CONVERSATION ADVANCE ARTIST-CENTRIC ON ARTISTS APPROACHES TO DEPLOY AI TOOLS AND PRODUCTS IN INNOVATIVE WAYS DEFEND THEIR INTERESTS AND OUR RIGHTS LEAD INDUSTRY ADVOCACY AND CROSS-INDUSTRY COALITIONS FORGE NEW COMMERCIAL AND CREATIVE OPPORTUNITIES 11
Slide 12: Expanding Our Global Presence
EXPANDING OUR GLOBAL PRESENCE CHINA INDIA JAY CHOU EASON CHAN SOUTH ASIA AFRICA 12
Slide 13: Chord Music Partners
CHORD MUSIC PARTNERS THE WEEKEND KID CUDI LORDE JOHN LEGEND DAVID GUETTA DIPLO RYAN TEDDER ELLIE GOULDING 13
Slide 14: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO UNIVERSAL MUSIC GROUP 14
Slide 15: Redesigning Our Global Organization
REDESIGNING OUR GLOBAL ORGANIZATION EMPOWERS LABELS WITH NEW CAPABILITIES AND ADDITIONAL AGILITY PROVIDES LABELS WITH ENHANCED ACCESS TO HIGHEST-PERFORMING INTERNAL TEAMS AND RESOURCES ACHIEVES EFFICIENCIES IN TARGETED COST AREAS WHILE PROVIDING LABELS WITH CAPABILITIES TO DEEPEN ARTIST AND FAN CONN
Slide 16: Sir Lucian Grainge, Chairman & CEO
SIR LUCIAN GRAINGE CHAIRMAN & CEO UNIVERSAL MUSIC GROUP 16
Slide 17: Boyd Muir, EVP, CFO & President of Operations
BOYD MUIR EVP, CFO & PRESIDENT OF OPERATIONS UNIVERSAL MUSIC GROUP 17
Slide 18: FY2023 Consolidated Results
FY2023 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA ADJUSTED EBITDA ADJUSTED EPS - MARGIN DILUTED +11.1% +12.4%* +14.6% +18.5%* +0.7pp +1.2pp* +8.7% € 11,108 20.6% 21.3% € 0.87 € 10,340 € 2,369 € 0.80 € 2,135 2022 2023 2022 2023 2022 2023 2022 2023 *Excludes the CRB Phonorecords III Accrual and the
Slide 19: Healthy Growth & Cash Flow Generation Since Listing
HEALTHY GROWTH & CASH FLOW GENERATION SINCE LISTING SUSTAINED GROWTH IN REVENUE & STRONG FREE CASH FLOW GENERATION ADJUSTED EBITDA Revenue FCF before investing activities Adjusted EBITDA Free Cash Flow € 11,108 € 1,704 € 10,340 € 1,606 € 8,504 € 1,029 € 1,086 € 1,082 € 7,432 € 817 € 638 € 2,135 € 2,
Slide 20: 4Q23 Consolidated Results
4Q23 CONSOLIDATED RESULTS REVENUE ADJUSTED EBITDA ADJUSTED EBITDA MARGIN +15.6% +15.1% +17.7%* +0.0pp +0.5pp* € 3,208 € 677 21.1% 21.1% € 2,942 € 620 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 *Excludes the Legal Provision from 2023; See Items Impacting Comparability of Results in our earnings press release for
Slide 21: Recorded Music
RECORDED MUSIC 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +14.7% +10.2% +11.2%* +11.0% +14.8%* +0.2pp +0.8pp* € 8,461 23.9% 24.1% € 2,421 € 7,937 € 2,042 € 2,235 € 1,900 4Q22 4Q23 2022 2023 2022 2023 2022 2023 *Excludes the Legal Provision from 2023; Excludes
Slide 22: Recorded Music Revenue
RECORDED MUSIC REVENUE 4Q23 REVENUE BREAKDOWN 2023 REVENUE BREAKDOWN 4Q22 4Q23 FY22 FY23 +15.0% +5.6% -45.8% +17.0% +34.0% +12.8% +3.6% -35.7% +19.4% +13.6% € 4,275 € 1,137 € 447 € 410 € 395 € 1,425 € 1,380 € 1,174 € 32 € 207 Subscription Streaming Downloads & Physical License & Other Subscription S
Slide 23: Recorded Music Revenue Top Sellers
RECORDED MUSIC REVENUE TOP SELLERS 2023 FY2023 RECORDED MUSIC REGIONAL BREAKDOWN Morgan Wallen Taylor Swift Taylor Swift King & Prince Taylor Swift Midnights 1989 Mr. 5 Speak Now (Taylor’s Version) (Taylor’s Version) Europe € 2,392 +10.9% North America Taylor Swift King & Prince Taylor Swift Karol G
Slide 24: Music Publishing
MUSIC PUBLISHING 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +15.4% +12.3% +15.8%* +17.8% +20.2%* +1.2pp +1.0pp* € 470 € 1,956 € 576 € 1,799 € 410 24.0% € 530 22.8% 4Q22 4Q23 2022 2023 2022 2023 2022 2023 *Excludes the CRB Phonorecords III Accrual from 2023; E
Slide 25: Merchandising & Other
MERCHANDISING & OTHER 4Q REVENUE FULL YEAR FULL YEAR FULL YEAR ADJ. REVENUE ADJUSTED EBITDA EBITDA MARGIN +26.5% +17.9% +38.2% +0.9pp € 47 6.7% € 706 € 215 5.8% € 181 € 36 € 618 4Q22 4Q23 2022 2023 2022 2023 2022 2023 Note: € in Millions; All growth rates are in constant currency. 25
Slide 26: Net Profit and EPS
NET PROFIT AND EPS NET PROFIT ADJUSTED NET EPS - BASIC ADJUSTED EPS - PROFIT DILUTED +61.0% +9.7% +60.5% +8.7% € 1,595 € 1,454 € 0.87 € 1,259 € 0.80 € 0.69 € 782 € 0.43 2022 2023 2022 2023 2022 2023 2022 2023 Note: Net Profit € Millions; All growth rates are YoY as reported. 26
Slide 27: Organizational Redesign
STRATEGIC ORGANIZATIONAL REDESIGN STRATEGY • Empowers labels with new capabilities and additional agility 2024 2025 2026 • Provides labels with enhanced access to highest- performing internal teams and resources • Achieves efficiencies in targeted cost areas while Achieve providing labels with capab
Slide 28: FY2023 Free Cash Flow
• €132m tax paid to cover employee withholding largely on transition grants; lessens dilutive impact of equity plan FY2023 FREE CASH FLOW • Dividend policy: 50% of adjusted net income • FY23 final dividend proposal: €492m (€0.27/share) • Total 2023 dividend proposal: €929 million (€0.51/share) +14.6
Slide 29: Investing Activity
INVESTING ACTIVITY CATALOG INVESTMENTS • Not required investment, opportunistic like M&A Financial Assets • Multiple ways to finance: Chord Music Partners, Equity Affiliates operating cash flow, balance sheet capacity M&A less cash acquired • 2023 catalog investments include acquiring the catalogs o
Slide 30: Balance Sheet and Liquidity
BALANCE SHEET AND LIQUIDITY TOTAL DEBT STRONG BALANCE SHEET PROVIDES STRATEGIC FLEXIBILITY Net Debt € 2,250 Cash € 2,104 • Net Debt/EBITDA of 0.9x € 439 € 413 • Investment grade rating • Average debt maturity: 4.9 years • 85% of gross debt at fixed rate • Capital allocation priorities: € 1,810 € 1,6
Slide 31: Strategic Investment in Chord Music Partners
STRATEGIC INVESTMENT IN CHORD MUSIC PARTNERS DEAL HIGHLIGHTS • UMG invests $240m (~€223m) at an effective multiple of 17x EBITDA for a 25.8% stake in Chord Music Partners • 17x multiple includes interest in Chord as well as income from distribution/administration rights, but does not include anticip
Slide 32: Q&A
SIR LUCIAN GRAINGE CHAIRMAN AND CEO Q&A BOYD MUIR EVP, CFO & PRESIDENT OF OPERATIONS MICHAEL NASH EVP, CHIEF DIGITAL OFFICER 32
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