Warner Music Group (WMG) Q3 2026 earnings call transcript

Good afternoon and welcome to Warner Music Group's fiscal third quarter earnings call. Please note that our earnings press release, earnings snapshot, and form 10 Q are available on our website. On today's call, we have our CEO, Robert Kinsell, and our acting CFO, Lou Dickler, who will take you through our results and then answer your questions. Before our prepared remarks, I would like 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-gap results, including metrics that are adjusted for notable items during this conference call and in our earnings materials, and have provided schedules reconciling these results to our gap 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 that 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 as they are subject to a variety of risks, uncertainties, and other factors that can cause actual results that differ materially from our expectations.

Information concerning these risk factors is contained in our filings with the SEC, and with that, I'll turn over to Robert.

Hello everyone, and thank you for joining us today. We have remained focused on execution against our strategic goals, and we're proud to have delivered or over-delivered against our targets for the fifth quarter in a row.

As you will have already seen in the preliminary financial results released on Monday, this was yet another quarter of healthy top and bottom line growth, led by robust 12% increase in recorded music subscriptions streaming revenue on an adjusted basis.

We also saw continued progress on our cost savings initiatives, and our operating leverage resulted in margin improvement and strong cash flow generation in the quarter.

Highlights include a 9% increase in total revenue rising to 11% on an adjusted basis, 15% growth in adjusted Oiberda, which led to 100 basis points of margin expansion, and a 209% increase in operating cash flow that resulted in a roughly 100 million increase in our cash balance.

These impressive results are a testament to the hard work of our global teams and a culture that celebrates human creativity while embracing technology shifts to future-proof our business.

Before diving deeper into performance and strategy, I'd like to provide an update on recent management changes. As you know, Armensezza has stepped down from his position for personal reasons, and I'd like to thank him for the last in contributions he has made to WMG.

Lou Dichler, our global controller and chief accounting officer, will serve as acting CFO as we conduct a search. Lou will walk you through the financial results later on.

As part of these management changes, Tom Corson, co-chairman and COO of Warner Records will step into the role of COO of Warner Music Group. Tom is one of the most dynamic, respected and effective executives in the music business and a fierce champion of talent. Together with Aaron Beyschak, he's helped architect Warner Records' resurgence and will leverage his vision, discipline, execution and deep experience across the entire company as we continue to deliver for our artists and songwriters. I want to reiterate our commitment to our previously articulated financial targets of high single-digit consolidated revenue growth, double-digit adjusted EPS growth and 50 to 60% operating cash flow conversion.

These targets are supported by our long-term strategy, enduring structural changes, a focused capital allocation framework and a disciplined execution already underway. Moving on, we continue to make great progress on our three strategic priorities, growing our share, increasing the value of music and becoming more efficient.

First, growing our share. We're focused on sustainable market share growth, an year to date our overall U. S. streaming share and our U. S. new release streaming share are up. We're achieving this through intensified focus across our portfolio. We're developing the next wave of talent like Bill O'Kay and Stella Lifty, who recently broke into the Billboard Hot 100, Top 3.

And we're amplifying breakthrough stars like Sombra, Bing Pathers and Alex Boren, as well as hitmakers like Gellani and Charlie XCX, who just became the first British female artist ever to land two U. K. number one albums in the same year.

We're also continuing to attract new superstar talent with Miley Cyrus recently signing to Atlantic Records and signaling that her next project is underway.

Under Elliot Grange's leadership, Atlantic's share of new releases has ballooned, jumping to the number two spot on Billboard Media Report up from the number four spot in 2024, reflecting on the label's creative renewal.

Globally, Dai Dai, Burna Boi's official World Cup collab with Shakira became the number one song in the world, topping both the Spotify and Billboard Global charts for multiple weeks.

Meanwhile, Madonna's new album, Confessions 2, debuted at number one in the U. S. and U. K. , leading the way for the 17th percent growth in our physical revenue in the quarter.

The successful release of her album is a true company effort, as she's signed to us for both recorded music and publishing. We're proud stewards of her amazing catalock, which is seeing record new audience growth, particularly with people under age 35, who now make up up to 60 percent of her Spotify streams.

In fact, leveraging our frontline approach to marketing our top 500 off-roster catalock artists is driving market share gains year over year. And as I've talked about before, our teams are also expertly using proprietary AI tools across our entire catalock of over one million songs to detect opportunities, to optimize all of our music for streaming services and using automated workflows to fuel long-tail performance.

So we're able to give all of our musical gems the care and attention they deserve, something that was humanly impossible a year ago.

More specifically, we're utilizing AI to create new marketing content derived from our catalock, like motion art, lyric videos and visualizers, to drive engagement. And we've built a proprietary marketing identification model that helps us prioritize opportunities to drive user engagement and revenue.

A quick example, using these tools, we were able to boost Chris Rainbow's 1979 recording, Be Like A Woman, from just 50,000 streams in all of 2025 to over 140 million streams so far this year.

Our ability to effectively deploy end-to-end automation across our catalock represents a tremendous untapped opportunity that we will continue to build towards.

We're proud of the fact that our share improvements to date have been largely organic, differentiating us from some of our peers.

But we're now taking steps to accelerate and fortify these gains through discipline, patient and return-focused M&A. For example, our joint venture with Bain has deployed 650 million in catalock acquisitions and is a strong pipeline for the future.

And we've expanded our distribution business through the acquisition of independent music platform revelator. Distribution is an important part of the ecosystem and we're taking a thoughtfully balanced build-and-buy approach which is driving profitable growth in this area.

Our ADA distribution business is already a large and growing and profitable. Under Alejandro Duque's leadership, we've exported the best practices from our successful business in Latin America where distribution deals are the norm and are applying these learnings to power our distribution across the globe. In addition, by embedding and integrating revelators cutting edge tools, ADA will enhance its value proposition for artists and labels with next-generation digital distribution, rights management, royalty accounting and real-time analytics.

Our momentum in this space is attracting new partners. We recently signed a global distribution deal with Go Digital Music and independent music group bringing over 85,000 new tracks into the ADA ecosystem.

We also aimed a distribution partnership with AIM Music, a newly founded Berlin-based independent label. Our publishing business continues its winning streak, growing 11% this quarter. Recent highlights include Ray releasing a self-bent UK number one album, superstar songwriter Amy Allen contributing to Olivia Rodrigo's number one global smash, Drop Dead, and Ilya contributing to Ariana Grande's Billboard Hot 100 number one single, Hate That I Made You Love Me.

We've renewed deals with Billboard's 2026 country hit maker of the year, Riley Greene, and Latin Grammy winning global Spanish superstar, Kevino, a testament to the best-in-class reputation that Warner Chappell has built over the years.

Next, turning to increasing the value of music. As you know, I've always championed the deal structures that better reflect the true value of music, and just over two years ago, we took much more proactive approach to pricing. Fast forward to today, we, along with our DSP partners, have evolved the industry standard to a contractual wholesale rate increases, occurring in much more regular cadence, providing us the rights holders with greater baseline certainty.

This also benefits the DSPs, which are taking the opportunity to increase subscription prices, while innovating to provide new offerings to their consumers, so is truly a win for everyone.

The latest proof point in this evolution is our renew deal with Apple, which completes alignment across all of our major DSP partners around contractual PSM increases, giving us better visibility into our outlook. The success of our strategy is evidenced by the marked acceleration in our subscription stream and growth, which we expect to be resilient for the years to come. AI creates a new incremental vector to increase the value of music, and we've taken a leadership role to capitalize on the new opportunities it is unlocking.

We've developed new monetization frameworks, like our partnerships with Suno, Stability AI, Clay, and UDO, and expect our licensing deals to contribute materially to our subscription streaming revenue growth starting in fiscal 27.

As we continue to explore opportunities to partner with traditional DSPs on AI tiers, we're thinking holistically about our relationships to ensure the right deal terms are in place, including guardrails and protections for our artists and songwriters. And this not only unlocks industry-wide growth, but also enables our partners to innovate, providing fans with new ways to engage with their favorite artists and songs.

On the regulatory front, we've been actively working with governments around the world to craft AI policies that protect free market licensing and resist weakening of copyright. And in the last quarter, we've seen some key wins. As a result of intense lobbying efforts at the highest levels of government, Chile again rejected the introduction of a new Texan data mining exception that would have allowed AI developers to use copyrighted content to train their systems without a license.

And in July, Australian Prime Minister Albanese rejected a proposal from AI developers that would have shielded them from liability for copyright infringement.

And now onto the third party of becoming more efficient. Our strategic reorganization, investments in technology, and the continued successful rollout of our financial transformation program have enabled us to consistently deliver strong growth while cutting costs and increasing margins.

We're integrating AI to optimize revenue growth and increase productivity while leveraging AI across our functional departments, including finance, legal, and HR, to streamline workflows, accelerate decision-making, and reduce our spend.

Our cost savings initiatives are progressing on schedule, and we have the organizational structure in place to continue transforming WMG into a more efficient and technology-enabled music company. We have an exciting release schedule ahead, including new music from Alex Warren, Sombre, David Geda, Raven Leney, Mike Towers, Teddy Swims, Tinasheh, Dan and Che, Miley Cyrus, and many more.

With strong momentum driven by our creative success and execution across our strategic, financial, and operational priorities, we have set ourselves up for sustainable growth that will continue to be supported by a capital allocation program with clearly defined return thresholds across organic and inorganic investments, driving the value of music across tiers and platforms, and discipline cost management that drives strong margin expansion and cash flow delivery.

I will now pass it over to Lou.

Thank you, Robert. For the fifth consecutive quarter, we have delivered growth in line with, or better than, our sustainable growth model targets of high single-digit revenue growth and double-digit adjusted way better growth. Q3 was another quarter of healthy top and bottom line performance anchored by the PSM increases and sustained global share progress that drove revenue growth. We also saw continued margin expansion as cost savings delivery and operating leverage resulted in margin improvement.

Our strong business momentum continued this quarter with the delivery of impressive results as total revenue grew 9%, or 11% on an adjusted basis. Recorded music revenue grew 9%, led by subscription streaming growth of 12% on an adjusted basis. Subscription growth reflects the benefit of PSM increases, stable global market share trends, and subscriber growth. Ad supported streaming revenue was very strong and grew 10% on an adjusted basis, driven by an overall healthy ad market supported by increased ad spending related to the World Cup and improved deal economics.

Physical revenue increased 17%, driven by strong releases in the quarter as well as catalog and carry over success. Artist services and expanded rights revenue increased 15%, driven by concert promotion revenue primarily in Japan as well as higher merchandising revenue while licensing revenue decreased 1%. Media music adjusted Eubita increased 16%, with a margin of 25.3%, an increase of 150 basis points.

Music publishing total revenue increased 11%, driven by 14% streaming growth due to continued market growth and the impact of new deals and renewals. Sync revenue increased 7%, and mechanical revenue increased 19%, while performance revenue decreased 2%.

Music publishing adjusted Eubita increased 14%, with a margin of 28.9%, an increase of 70 basis points. Total company adjusted Eubita growth was 15%, and margin expanded by 100 basis points. Adjusted for notable items, adjusted Eubita growth was 18%, and margin expanded 130 basis points. The increase reflects revenue mix, operating leverage, and cost savings delivery. Adjusted net income and adjusted EPS increased 21%. We generated operating cash flow growth of 209% in the third quarter, and for the last 9 months, our conversion ratio was 55% of adjusted Eubita.

As of June 30th, we had a cash balance of $618 million total debt of $4.7 billion and net debt of $4.1 billion. In conclusion, we are incredibly optimistic about the future, and laser focused on delivering on our targets of high single-digit revenue growth, double-digit adjusted Eubita and adjusted EPS growth, and 50% to 60% operating cash flow conversion.

We remain on track to deliver margin expansion at the high end of our 150 to 200 basis points target in fiscal 26, and we continue to target margins in the mid-20s in the short-term and high-20s over the long-term.

With that, we will take your questions.

Sure. Thank you, Clay. So, first, I want to say I appreciate Armand's contributions to the company, which are long-lasting, and particularly to the finance organization, where he helped sharpen our focus around capital allocation, improved our forecasting, and as you say, Clay, investor messaging.

But all of those are deeply institutionalized in our company now. And so I'm very confident about them continuing exactly as they are. In terms of our improved performance, it's a result of a multi-year strategy that really started in 2023. If you kind of look back, we've done two restructuring between fiscal 23 and 24, which total $300 million.

We took it out of business and promptly reinvested it into technology, but mostly into ANR. In order to drive growth. And we've seen the fruits of that labor starting to kick in mid fiscal 25.

Then in 24, we also started in fiscal 24, we started bold leadership changes. Good example is Eliot Grange taking over Atlantic, Kevin Gore taking over global catalog. And then last year Alejandro Duque taking over ADA in addition to his lifetime opportunity. And all of these leadership changes have contributed to rapid innovation and growth. And lastly, also in fiscal 24, Carlita and her team started to devise a strategy for changing our pricing with the DSPs. And that is something that we've obviously been talking about for quite some time.

And in my earlier remarks, I spoke about our Apple deal, which really is a really nice bookmark to having all of our major DSPs aligned to run this. So we had a strategy around these three points that we've been delivering on. And you're starting to see the fruit of that labor through continued strong performance over the last five quarters.

And it's providing us with better visibility, which then provides you with better visibility and power results. And I really have to say that this kind of progress, having the kind of strategy and the kind of progress is a result of an incredible roster of talent that we have, which is both artistic as well as executive. And our growth strategy and underlying momentum really remain really firmly intact.

Sure.

Sure. You're missing full visibility. That's what it is. We had a great quarter. You know, and we run a global business. So, so we first and foremost look at global metrics. However, those are not publicly available to you, which is why you can only look at the US ones.

Obviously, you know, we're seeing much more favorable impact in our global market share. And that is reflected in our results, as you say.

Furthermore, you know, we look at year to date, fiscal year to date. Impact. And if you look at the publicly discussed metrics on US streaming share, we're up point three percentage points. And on US streaming, new really share were up point eight percentage points. So, obviously, there's lumpness to the business, quarter to quarter. But we look at things more long term and make sure that we're trending in the right direction. And if you, and if you look at, you know, the last three years and global market share, we made a very significant improvement. And again, it's showing up in our business results.

But I think the more important message here is that we've been able to account all of this largely organically, which is different from our peers. And I would say the only acquisition that you can probably say that has played some impact was on our think acquisition, but actually most of the growth came after the acquisition. So it really counts more as organic as well.

So how do we do it? Really, there are four things that I think help us achieve this. One, capital allocation discipline across the entire portfolio.

Two, it was strong pipeline management for in our acquisitions. Three, driving audiences to our catalog with focus optimization, as I spoke about in my opening remarks. And four, building our distribution infrastructure, which which helps us scale the business. And now we can accelerate all of this through M&A together with our partners at Bain as well. So looking forward, I'm very confident due to our growth oriented culture that is humming across all cylinders.

And I'm confident in the direction, you know, for the growth of market share over the long term, into the future. And we have an exciting slide ahead of us with Alex Warren, Samberg, David, Gera, Raven, Lene, and many more.

Sure.

Yeah. So, um, one, again, it's like, it's so great to be able to look back and, you know, to the moment when we started to think about this and cook up the strategy, which was back in 2024 and started to work on it, put it in place, you know, in 25, then it started to kick in, you know, a year later. And, you know, sequencing, every time you make a big change like this, it's really hard to sequence things and make sure people feel it's done fairly.

And we've navigated all of these complexities to the extent that now we have some increases across 88% of our subscription streaming revenue, which I really feel proud of because two years ago it was zero. And big credit goes to Carlita Higgins and her team on this because they've done an incredible job. And big credit goes to our partners, our DSP partners are acting like partners, not adversaries. And it's a really sign of a healthy industry when you reach in that equilibrium between the supplier and the buyer in this case and in a mutually beneficial way, because we know, you know, we need each other for the future.

And we just need to find the right ways to drive value. And so I think we found it, I feel very grateful to our partners and to our teams. And, you know, when you think about the incredible value that music provides, it's all the music ever made in the past, as well as in the future for one low monthly fee. Of course, that fee once in a while should go up. It also goes up with added functionality, etc. We're working with our partners to increase all kinds of features that are added to delight consumers. So overall, I'm just delighted by our collaboration.

I'll let Blue take the other part of the question. Yeah, then on outlook, I'll just reiterate that we've got confidence in the targets. We've set out a high single digit top line growth. And obviously that that is anchored by a growth in paid streaming, the double digit adjusted oil, but an EPS growth. And then the on the cash side, the 50 to 60% operating cash flow conversion.

While we're not providing guidance as it relates to streaming, we do have high confidence in continued growth. And we believe we can do that in a few ways. We expect to continue to benefit from the growth in global subscribers, which will continue. We have delivered consistent market share performance. We are, we are very excited about the Q4 release schedule, which Robert alluded to. And we continue to see market share growth across global catalog. And then with the price increases, the contractual wholesale price increases across our largest DSPs. We believe that this contributed about 3.5% percentage point growth impact to subscription streaming within the quarter.

As far as outlook for Q4, we do expect the price increases to continue to flow through and are anticipating a slightly accelerated performance through Q4, which will include the impact of the Apple deal. In addition to that, we also have growth opportunities around both organic and inorganic investments in core. We've got the Beethoven joint venture with Bain that should, that has additional capacity and as we deploy more capital in that fund, we should expect revenue upside in future periods.

We've got the expanded distribution through our acquisition of revelator, which increases our capacity. And that should start to show up at the end of the calendar year. And then finally, we've got new licensing deals with AI companies, most notably SUNO, and we expect that to provide nice contributions starting next fiscal year. So through all of these areas, really, we're definitely excited about the opportunity ahead and we remain confident that we can continue to deliver growth consistent with the targets we've outlined.

Sure. So one on SUNO, the plan is remains exactly as it was, which is for them to transition to a licensed model later this year. And there's no change in the timing. Everything's on schedule, which is great. Lou just mentioned, we expect a material revenue contributions from our AI licensing sources and fiscal 27 year. And obviously, some of that is underpinned by SUNO.

There was also the Munich court decision last week, which effectively confirmed the Warner music group town tracking strategy, which has committed to transition to a licensed model. So we're very thankful to the court to confirm our strategy. And, you know, the, I want to pause on this a little bit and say one thing, which is the creative industry goes through transitions like this once in a while. And in mid 1950s, none of the movie studios have ever licensed anything or worked with the television industry, which was just rising, you know, NBC, CBS, the broadcast networks just came along.

And they wouldn't work with them because they feared there was entirely substituted to the movie industry until Walt Disney was a little bit over his keys, spending a lot of money trying to build what now is known as Disneyland, but at that time, it was just a plan. And, and they needed more capital. And at that time, they decided to go to ABC and strike a production deal for the world, wonderful world of Disney.

And that cash helped them complete Disneyland. And it's, and of course, through that, they uncovered one of the greatest sources of revenue and profits for the entertainment industry, which came from the television industry. And I thought it's such an incredible analogy to what we're going through with AI. And it's really important that we step back looking at things holistically and work towards a better future that respects artists, songwriters, and it delivers a lot of value to consumers and to to copyright holders and ultimately to investors. So overall.

I'm sorry. Okay. And anyway, so, so we're, we're excited by this. And I'm very, very happy that it's happening. And in terms of Spotify, as you know, I'm a huge champion of anything that is increasing the value of music and better reflecting value of music.

We're very happy that it's happening. We're very, you know, we don't comment on any negotiations in progress, but we're very supportive of Spotify efforts. I think what what Gustav and Alex are doing is is very thoughtful. And, and, you know, we'll, we'll, we'll share more once there's something to announce.

Yeah. Sure. I mean, as, as you know, both from my shareholder letter and our letter, my letter when we did AI deals and whatever will be called control and externally protecting artists and so on others is, you know, our top priority, right? Because it's obviously very sensitive and, and very personal and it's important, you know, our excitement around AI is underpinned by responsibility as well, right? It doesn't, it doesn't work without it, which means protecting them. And we are better suited to do this than any individual is on their own or any small organization on their own. So for instance, you know, we have agreements with our distributors to very effectively take down deep fakes.

They are not legally required to do that. Nevertheless, through our relationships, both contractual as well as personal, we, we have it in our, you know, we now have it in our contractual agreements that artists are protected this way, which is great. There are, you know, the DSPs are our partners, the social platforms, our partners.

We've also expanded the number of deals where fully gen AI content must be identified and removed from pro rata share, right? So we're getting at this from multiple angles and we're very, very focused on this because it is important and it's part of the duty that we have towards artists and songwriters.

You know, really the best way to also think about where the current state of this is, is these are who is most transparent with metrics, publicly with metrics around this. There's 90,000 tracks, AI generated tracks, uploaded every day, which is more than 50% of the daily uploads, but the consumption is somewhere between one and 3% and the monetization is a fraction of that.

So we're staying on top of it from metrics standpoint, from protection standpoint, from contractual standpoint, this is, you know, the core of what we do.

Absolutely. Thanks for the question, David. So we did have solid subscription and ad supported streaming growth in the quarter. If we went to deconstruct the growth of 12% on the subscription side, you'll see there really three main items. And this is consistent with what we've talked about in prior quarters. First is we saw roughly six to seven percent growth come from subscriber growth.

Second, pricing contributed a bit more this quarter at about 3.5%, which I alluded to earlier. And then third, we believe that market share contributed the difference of roughly 1%, which is steady on a global basis and really a testament to the discipline capital allocation approach that we've had across vintages, across both new release and catalog. We did see some slight deceleration of growth from prior quarter, which was due to a tough comp, which we called out in the last call.

We said it was approximately two to three percent. If you were to take that out, the equation, you would see that our growth was consistent quarter over quarter. But to reiterate, we're seeing a shift from volume led growth historically to now both volume and value led growth with price increases, and that's driving the strong performance in the quarter. And as Robert had alluded to, it's part of our successful strategy.

On the ad supported side, we did see an uplift in ad supported growth at 10%, which was incredibly healthy within the quarter. And that's on an adjusted basis. We are seeing great trends, healthy trends within ad supported market, and we've got to improve DSP deal economics, which certainly contributed to the strong growth. Q3 was elevated at 10% due to the benefit from ad spending around the World Cup within the quarter, which obviously is not recurring.

And then if you look back to the prior quarter, we also had some elevated growth due to an easier comp in the prior quarter. We expect that the ad supported growth will normalize in Q4 as we look back. And then if you look back to the end of the year, it's probably more in the mid single digit growth, which is more reflective of the underlying ad trends and more consistent with what we printed in Q1.

So I'll take the first part on margin outlook. So we obviously had very healthy margin delivery in the quarter. We had 130 basis point improvement on an adjusted basis. We're really happy with the progress we've made to date and over the last five quarters as we continue to grow the business in a more profitable way. The margin progression is really one of the key metrics that we're driving in and helping to drive shareholder value. And we've made a ton of progress on that front. There's really no change in the outlook. We set it in the prepared remarks. And again, we still expect to hit the high end of the range of 150 to 200 basis points for this year.

As far as the components of margin expansion, it really comes from several areas. First, we've continued to focus on profitable growth throughout the company. And the sustainable growth model is now, it's really institutionalized within the company and the operators appreciate the need to do that because it allows them to reinvest in the company to drive growth. Second is the continued benefit we've seen from the restructuring plan. Most recently, the 2025 plan. We are on track to realize the $200 million of savings this year and 300 million on an annualized basis in 2027.

So we'll see some uplift in margin next year for the effect of that restructuring plan and a significant portion of that, of course, goes to operating results in OPEX. Third is the growth in catalog. Catalog is a higher margin business for us. It's about two thirds of our overall revenue. So a significant driver of growth. We've seen market share gains in global catalog. And this business is one that we feel we can continue to grow.

So, and then finally, I guess also on the catalog front, we also expect to start seeing more of the benefit from the being joint venture. We clearly are focused on acquiring high value assets and catalogs that have growth potential. So we expect that to also contribute nicely to margin. And then sort of the final point that I'll bring up is just on expanded distribution. That's obviously, you know, in comparison, a lower margin business for us.

We are taking a more measured approach to build profitable business. We're not looking to do low margin deals. And to buy share, we're really taking a more measured approach and focused on driving the business to higher margins. So we think overall, we have a ton of confidence in sustaining our margin expansion, not only this year as we deliver and move towards the mid 20s margin, but also over the longer term as we drive to higher margins in the high 20s.

And before I answer your question, I just want to add something to Lou, which is what I think is entirely underappreciated is the fact that we've been growing at a very healthy clip while cutting costs. We've been in expanding margin, which is a very, very hard thing to do. Nevertheless, that's what we're doing. And it's part of a multi-year strategy that we set in place.

At that time, we don't have the clear conviction and confidence to tell you that's exactly what it's going to be, but definitely that was our plan. And now we have the confidence to say that's what it is and that's what it will be. So it's really great to be able to say that. On your question around the risks from something like the remix tier on Spotify.

So number one, this fits into my second priority, which is increasing the value of music. You know that you've heard it from a million times.

One lever, you know, different partners will execute differently. So we have to be obviously flexible as it relates to how our partner wants to execute on increasing the value and on AI because it fits their platform. That's number one. Our pool moving our pool up is generally one simple lever. And I think the way the way Alex and Gustav are thinking about it is thoughtful, we're supportive and this will be incremental. Our whole point of doing these deals is to drive incremental value, incremental art pool and greater user engagement and stickiness overall with subscriptions.

So we're laser focused on this. We're excited about the opportunity and it's great to have partners like that are engaging on this.

Sure. Thank you. So now we're, we're, you know, we're always ready and flexible to pivot when things don't work. Currently things are working and we have a. So we're, there's no change to our approach. We are very focused on our portfolio across organic and organic investments. And we've really institutionalized a global deal evaluation and investment process across both recorded music and publishing.

And I don't mean separately. I mean all together, together across those business lines and together across all labels and all countries. So we're truly evaluating our entire global portfolio and target the highest ROI opportunities. And if a budget is higher in one place and a lower in another one and the lower budget territory or label as a greater ROI opportunity, we rapidly shift dollars.

We're optimizing our spent in this way. And our, this, this approach so far has been able to generate us returns over roughly 20, 20% on our investments.

And that is really what we're targeting with Bain as well. So we don't deviate in our approach with Bain to our own internal one. It's one and the same process. And obviously I'm happy that we've been able to deploy 650 million against the 1.65 billion in capacity. And the focus is the same, which is iconic high margin catalogs with growth potential, return threshold is the same as the one I just mentioned.

And we also must have dedicated growth plans for each transaction, right? So that we add incremental value and de-risk for anything unexpected. So quite happy with all of this progress. Very confident in our pipeline, which will help us drive profitable growth and, you know, and continue on our amazing journey.

Sure. Thanks, Ruth. So first on your Spotify question. Yeah. By the way, as I mentioned earlier on the call, we're supportive of what Alex and Gustav and Spotify are working on and Charlie and we're happy. We're actually very happy that UNG and Merlin are on board. And I just can't comment on our, you know, on our negotiation, but we're supportive. So there is no philosophical disconnect here.

And on your other question, we are always, always interested in anything that is increasing the value of music, as I said before. And that can take on many different permutations, whether it's our poor increase, whether it's more engagement features, et cetera. So we just, you know, there's also a capacity, like we are doing so many things at this company in order to drive the results that we have.

We can't do everything all at once. So we prioritize on the highest ROI opportunities very quickly and we work through those. And it doesn't mean that our posture on some of the other ones is a negative one. We just might not have been able to get to it just yet. That's all. Well, let me just rephrase the clay question in a different way. The play hasn't launched either. And nor has Spotify's with universal and Merlin.

Is it just that artists are nervous to do this? Like, I'm just trying to figure out, like, what's the roadblock? Obviously, artists have to opt in. Are artists just not interested in opting in or is it just taking a lot longer than we should have normally expected? We just haven't done our agreement yet. That's all there is to it. No, I don't mean with Spotify. I mean, with clay. Like, clay hasn't launched their product either. Like, no one has launched this AI product yet. Is it just artists aren't ready for this?

No, it's, no, so what it takes is operationalizing the permissioning process. That's really what it is, right? And it's a bit complex and it's laborious and we're all working through it. But it's, you know, it is something that we all have to go through and we are going through. So, so again, it's not a statement on whether it's good or bad, positive or negative.

But it's just an operational activity that every content provider has to go through in order to enable its partners. That's it. And we're in the midst of it. So that's really, that's really all that's to it.

Yeah. So thank you. Thank you all for dialing in. I just want to reiterate that what I said in the beginning, which is our long-term strategy is working. We transformed the company over the last three years. We've done lots of difficult things, restructurings that got reinvested, restructurings that got dropped to the bottom line. Both leadership changes, restructuring our price and relationship with the DSPs. There's a strategy here that was set in motion, and it's delivering results.

And we have an amazing team of executives who are growing in the same direction, driving growth, driving efficiency. And our industry is like very resilient. So we're really excited about our output and our continued performance. And we look forward to speaking with you next quarter. Thank you very much.