- Revenue: Up 10% for the second quarter and 9% for the half year.
- Adjusted EBITDA: Increased by 11% for the second quarter and 13% for the half year.
- Adjusted EBITDA Margin: Expanded by 20 basis points to 22.1% for the second quarter and by 0.8 percentage points to 22.4% for the half year.
- Noncash Share-Based Compensation Expense: EUR69 million for the second quarter and EUR171 million for the half year.
- Earnings Per Share: EUR0.50 for the first half of 2024, up from EUR0.34 in the first half of 2023.
- Adjusted Earnings Per Share: EUR0.44 for the first half of 2024, up from EUR0.42 in the first half of 2023.
- Recorded Music Revenue: Grew 7% for the second quarter and 6% for the half year.
- Subscription Revenue Growth: Up 7% for the second quarter.
- Ad-Supported Streaming Revenue: Declined 4% for the second quarter.
- Physical Revenue: Grew 14% for the second quarter.
- Licensing and Other Revenue: Grew 18% for the second quarter.
- Music Publishing Revenue: Grew 10% for the second quarter and 14% for the half year.
- Merchandising Revenue: Grew 44% for the second quarter and 30% for the half year.
- Net Profit: EUR914 million for the first half of 2024, up from EUR625 million in the first half of 2023.
- Interim Dividend: EUR439 million or EUR0.24 per share for 2024.
- Net Cash Provided by Operating Activities: EUR436 million for the first half of 2024, a 38% decline year-over-year.
- Free Cash Flow Before Investing Activities: Positive EUR155 million for the first half of 2024.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew by 10% and adjusted EBITDA increased by 11% in the second quarter.
- UMGNF achieved its 12th consecutive quarter of high single-digit revenue growth and seventh consecutive quarter of double-digit adjusted EBITDA growth.
- Strong performance from artists like Taylor Swift, Billie Eilish, and Sabrina Carpenter contributed significantly to revenue.
- Diverse revenue streams, including physical sales, licensing, and direct-to-consumer sales, continue to grow.
- UMGNF is actively engaging with DSP partners for product innovation and exploring new revenue opportunities through AI and other technologies.
Negative Points
- Ad-supported streaming revenue declined by 4% in the quarter.
- Subscription revenue growth decelerated to 7%, impacted by slower subscriber growth at certain platforms.
- High noncash share-based compensation expenses, amounting to EUR69 million for the quarter.
- Increased net royalty advance payments, which negatively impacted cash flow.
- Merchandising adjusted EBITDA declined by 10% due to artist mix, despite a 44% increase in merchandising revenue.
Q & A Highlights
Q: Could you tell us if your growth rate with Spotify is consistent with the numbers they reported? Also, will the initiatives to reengage subscriber growth take a couple of quarters to show results?
A: Our growth rates with Spotify are broadly consistent with what they reported. The initiatives with partners in terms of product innovation will take some time, but we hope to see tangible results towards the end of this year. (Boyd Muir, CFO)
Q: What's your estimate for the current growth rate of paid subscribers in the market? Do you expect this growth rate to improve?
A: The IFPI reported 670 million subscribers last year, with an increase of 78 million subscribers, showing acceleration. We see sustained or accelerated growth across multiple markets and expect significant growth in emerging markets. We remain confident about the overall growth trajectory of the marketplace. (Michael Nash, Chief Digital Officer)
Q: Can you comment on Spotify's new audiobooks tier and whether it fundamentally represents a price increase?
A: We always negotiate licensing models to ensure we fully and fairly participate in the value our content brings to all product configurations, including bundled products. We are confident our revenue participation reflects the value our artists bring to Spotify's platform. (Boyd Muir, CFO)
Q: Are you seeing a structural slowdown globally in subscriber additions, or is this location-specific?
A: Subscription revenue growth reflects a complex interplay of subscriber growth, pricing, and market share across a broad range of global and regional streaming partners. The slowdown is largely due to subscriber growth at certain platforms, but we are in deep dialogue with partners about product and platform innovation to reignite growth. (Michael Nash, Chief Digital Officer)
Q: Could you help us understand the exit rate in ad streaming once the TikTok deal was resigned?
A: Excluding the impact of the Meta switch and the missed month of TikTok revenue, ad-supported streaming revenue actually grew in the second quarter. (Michael Nash, Chief Digital Officer)
Q: Could you confirm the mix of price and volume in subscription streaming trends and any factors that should drive acceleration in Q3?
A: Subscriber growth remains fundamentally important. We see opportunities in price increases and new product innovations, such as a super-premium tier, which could drive acceleration. (Michael Nash, Chief Digital Officer)
Q: Regarding net content investment, will the total for the full year be above EUR315 million, or will it be lower?
A: We expect the net content investment to step down materially in the second half of the year. Over the last three years, we've seen a range of EUR150 million to EUR250 million of net advance investment year-over-year. (Boyd Muir, CFO)
Q: Could you provide the constant FX contribution in first-half revenue from all the M&A you've done in the last 12 months?
A: The investments in Chord, Mavin, Complex, and NTWRK are long-term and have not yet had a meaningful impact on our financials. These topics will be discussed in more detail at our Capital Markets Day. (Boyd Muir, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
