Welcome to the Warner Music Group quarterly earnings call for the period ended June 30th, 2022. At the request of Warner Music Group, today's call is being recorded for replay purposes. If you object, you may disconnect at any time. Now I would like to turn today's call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin. Good morning, everyone. Welcome to Warner Music Group's Fiscal Third Quarter Earnings Conference Call. Please note that our earnings press release, earnings snapshot, and the Form 10-Q we filed this morning will be available on our website. On today's call, we have our CEO, Steve Cooper, and our CFO, Eric Levin, who will take you through our results, and then we will answer your questions. Before our prepared remarks, I'd like to refer you to the second slide of the earnings snapshot 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-GAAP results during this conference call and in our earnings snapshot slides and 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-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 there's 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're 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. With that, I'll turn it over to Steve. Thanks, Kareem. Good morning, everyone, and thanks for joining us today. Given these turbulent times, I'd like to start by reaffirming why we're so positive about WMG's future. As the pandemic proved, music is an essential need for humanity. This need has and will continue to make the music sector more resilient than many other industries. Streaming, our largest revenue source, has a long runway, and there's substantial headroom for both subscriber growth and subscription fee increases. We continue to see an explosion of new opportunities in sync, social media, gaming, and NFTs, as well as the resurgence of vinyl sales and a bounce back in touring-related revenue. Over the long term, we're no longer reliant on any single format. Today, music propels and monetizes across every form of entertainment. In the digital age, artists have more ways than ever to engage and excite fans, which magnifies the importance and value of music companies such as ours. Against this backdrop, we're uniquely positioned for long-term success. We have the scale, skill set, and agility to best capitalize on trends in artist development and drive the globalization and diversification of our business. It's from this position of strength that we wanna be clear about some challenges that we encountered in Q3. We've had to deal with very, very significant FX headwinds as we report in dollars, not euros or yen, the slippage of a number of key album releases into Q4, macro advertising trends resulting in a slowdown in ad-supported revenue, and the ongoing suspension of our Russian operations. In addition, our reported results were impacted by several previously disclosed one-time items that affect year-over-year comparisons. These include the deal renewal with one of our digital partners, which affects all four quarters of this fiscal year, but not beyond, and the benefit in the prior year quarter from a catch-up payment related to another of our digital partners. As always, our goal is to help you reconcile reported results to underlying performance. We're committed to making sure that these items are more clearly understood in the future. Eric will go into more detail about our normalized numbers shortly. Onto our results. Total revenue in the quarter was over $1.4 billion. This represents year-over-year growth of approximately 7% and 12% on an as reported and constant currency basis compared against an incredibly strong Q3 in 2021. Adjusted EBITDA declined 6.7% to $263 million, with a margin of 18.4% compared to 21% in the prior year quarter. The year-over-year adjusted EBITDA decline was driven primarily by FX headwinds. The margin decline was impacted by the strong resurgence of our lower-margin artist services offerings. In recorded music, our revenue was approximately $1.19 billion, an increase of 8.5% from the prior year quarter, with streaming revenue up 2.7%. As I mentioned, factors such as ad-supported streaming weakness impacted these results. However, these percentage increases do not accurately reflect the true strength of our streaming business. Normalizing for the previously discussed one-time items, recorded music streaming revenue grew by 9.2%. Artist services continued to show impressive recovery, with revenue growth of 55.7%, while licensing was up 8.7% and physical was up approximately 2%. Publishing had a very strong quarter with revenues of $245 million, approximately 35% more than the prior year quarter. I'd like to note we expect an uplift in our Q4 recorded music streaming revenue driven by a very strong release slate, including new music from Cardi B, Lizzo, Panic! at the Disco, Argentina's Paulo Londra, Nigeria's CKay, and South Korea's Aespa. In addition, we have recently signed new deals with Meta that will deliver additional revenue in Q4. Our new deals include an expanded revenue-sharing model that will open up additional opportunities for both frontline and catalog artists. Excuse me. With that in mind, I'd like to spend the rest of my remarks today picking up on the theme of why we're so confident about our future. Many of you have heard me talk before about the key pillars of our long-term strategy, music, globalization, innovation, and people. I'd like to explain how we're distinguishing ourselves in each of these areas and talk a bit about our ambitions. As always, let's start with the music. We often get asked whether all the major music companies are just tracking the same data and chasing the same artists. If you look at our biggest stars, you can see that that's not true for us. Long-term artist development has been a hallmark of WMG for decades, with stars like Madonna, Joni Mitchell, and Fleetwood Mac, among many others. Today, we remain absolutely committed to backing originality. Ed Sheeran, Cardi B, Anitta, Dua Lipa, Bruno Mars, and others are all extraordinary artists that were signed to our labels very early in their careers. It should be noted that last month, Ed Sheeran became the first artist to hit 100 million followers on Spotify. Q3 saw the return of Lizzo, one of our most talented new superstars. Her monster hit, About Damn Time, achieved number-one status in the U.S. while reaching the top 3 in Australia, Belgium, Canada, New Zealand, and the U.K. Released last month, her acclaimed new album, Special, hit the top 10 in key markets, including the U.S., U.K., Canada, and Australia. The sophisticated multi-platform campaign behind Lizzo's new release is a great example of what's possible when a true original is backed by our creative global team. By way of example, in April, Lizzo made her debut in the Metaverse by performing at Song Breaker Awards, the first music award show on Roblox. In July, she celebrated her album release with an exclusive light show experience and concert in New York, sponsored by American Express and live-streamed on Twitch. In the fall, a documentary about Lizzo's life is coming to HBO Max. The film is co-produced by Warner Music Entertainment and Atlantic Films. Around the world, we've had a string of smashes from some of our most exciting international stars, including Nigeria's Burna Boy, Japan's Tatsuro Yamashita, and the U.K.'s LF System. Back in the U.S., Jack Harlow celebrated his first solo single number one, while the Red Hot Chili Peppers' 12th studio album debuted at number one in the U.S., the U.K., Germany, and 13 other markets around the world. We also helped propel the explosive success of Kate Bush's Running Up That Hill in the new season of Netflix's Stranger Things. Originally released in 1985, the song returned to number one on Billboard's Global 200 and Spotify's daily global charts. This is a great example of the evergreen power of unique songs and recordings, as well as further proof that there are no barriers in the modern music business. Irrespective of genre, geography, or generation, a hit can emerge and reemerge from anywhere, from anyone at any time. Meanwhile, our publishing arm, Warner Chappell, is really humming. Our songwriters scored 86 songs on the Billboard Hot 100 in Q3. Our Nashville team was named Billboard's top country music publisher for an unprecedented 21 consecutive quarters. Culture-shifting songwriters welcome to Warner Chappell this quarter include 2Dope, who co-produced Drake's Way 2 Sexy, Puerto Rican rapper Villano Antillano, an influential figure in the queer Latin rap scene, and Tyson Yoshi, one of Hong Kong's top hip hop singer-songwriters and independent artists. We also signed a wide-ranging partnership with Hollywood star and popular comedian Kevin Hart and his media company, HARTBEAT. We're administering all of HARTBEAT's songs covering past and future works for film, TV, gaming, and Web3. Our shift to becoming a truly global music enterprise continues to pay off. We've taken a two-pronged approach, growing our local expertise and talent while making targeted investments and forging partnerships with local best-in-class operators. A case in point, back in 2014, we were first movers in China, taking two important steps that year. We acquired one of the largest independent catalogs, Gold Typhoon, and we were the first major music entertainment company to strike a wide-ranging partnership with Tencent. In 2014, China was the 19th-ranked music market in the world. Last year, it was in sixth position and climbing. Deals made a number of years ago have been critical to us being in the pole position to capitalize on continued growth in China, where our revenue is 7x what it was in 2014. We continue to spot the markets that are going to ignite and deploy a bespoke strategy for each one. We've spoken to you in the past about the launch of Warner Music in India and our organic growth, market share in Brazil. More recently, we've transacted with Qanawat and Rotana in the Middle East and Chocolate City and Africori in Nigeria and across Africa. This quarter, we launched Warner Music in Israel, which is a fast-growing market with real global potential. Our roster there already includes superstars Noa Kirel and Noga Erez, and we have some exciting plans to further turbocharge our growth in this market. As a company that thrives at the intersection of art and tech, our commitment to innovation is helping us create a bright future for our artists, our songwriters, and ourselves. We're constantly experimenting with ways to improve, expand, and diversify our revenue streams. Last month, we became the first major music entertainment company to adopt SoundCloud's fan-powered royalties model, which pays artists based on individual user streaming habits. This quarter, our in-house podcast network, Interval Presents, added shows to our portfolio, such as the acclaimed series Rap Radar and the Webby-nominated Holding Court. At the same time, we've established a reputation as the company to come to first if you wanna do anything really groundbreaking in music. We continue to harness the tools, tech, and protocols that collectively make up Web3. By constantly learning and evolving, we are simultaneously strengthening our role as the connective tissue between fans and artists by unlocking new opportunities in these rapidly changing environments. Here are just a few examples of our many recent initiatives. Two of our artists, Jason Derulo and TooTurntTony, teamed up with TerraZero to recreate real-life landmarks on the virtual platform, Decentraland. This partnership helped us expand our horizons across multiple metaverse worlds and tap into new promotional avenues. Warner Records UK partnered with Bose to offer a first-of-its-kind NFT collection called Stickmen Toys. Using a custom-built algorithm, visual art was mapped to audio stems, creating a set of unique collectible characters. Stickmen Toys has been extremely successful, peaking at number 2 on OpenSea, the world's largest NFT marketplace. Finally, through our participation in a funding round for Authentic Artists, we're helping to redefine communal music experiences for the metaverse. Authentic Artists is an industry-leading music platform powering virtual artists, digital collectibles, and interactive music experiences using cutting-edge AI. Before I move on, I'd like to mention that we were pleased by the July 1st remand decision by the U.S. Copyright Royalty Board, or CRB, in Phonorecords III, which covers streaming royalties for the 2018-2022 period. After a long, drawn-out appeals process, streaming services are finally being required to pay songwriters and publishers the percentage of revenue rates that were set by the CRB in February 2019. These rates escalate annually from 11.4% in 2018 to 15.1% in 2022. This marks a hard-won increase from the 10.5% rate previously set by the CRB for 2017 in Phonorecords II. Since many digital services were continuing to pay songwriters and publishers at that 10.5% rate during the appeals process, the remand decision will require them to make significant retroactive payments. It's an important step in the fight for fair compensation for songwriters. Before I talk a bit about our people, I wanna honor Mo Ostin, the legendary former Chairman and CEO of Warner Bros. Records. On August 1st, we announced that Mo had passed away peacefully at 95. There was an unbelievable outpouring of loving tributes from across the entire spectrum of artists and executives who had been part of our industry for decades. Mo was one of the greatest music executives ever. He was a driving force in shaping the Warner Music Group as we know it today. He will be hugely missed, and our deepest condolences go out to his family. I'll now give a few brief updates about our commitment to diversity, equity, and inclusion and the ways our people are impacting local communities. First, we're reinforcing our unique company culture through state-of-the-art headquarters in different territories. The latest example is our music station in Madrid, a creative hub housed in a renovated train station originally built in 1861. This facility includes recording studios, a content creation lab, and a live music venue. Providing round-the-clock access to spaces like this not only helps us attract and retain talented executives, artists, and songwriters, but also fosters creativity and collaboration in a post-COVID world. Second, our Warner Music Group / Blavatnik Family Foundation Social Justice Fund announced its fourth tranche of grantees this quarter and held its first grantee convening event. 56 leaders from 26 organizations came together to advance social reform across the arts, education, and criminal justice. Third, 300 Entertainment and Atlantic Records are leading the fight to prohibit prosecutors in the U.S. from using rap lyrics as confessional evidence in criminal trials. We're supporting the Protect Black Art initiative, whose mission is to end these racially discriminatory attacks on creative expression. Finally, in the wake of the Supreme Court's decision to overturn Roe v. Wade, our priority is keeping our people safe. We believe that everyone has the right to control their reproductive health. To that end, we've expanded our healthcare services, including financial and legal support, so our employees can exercise that right no matter where they live. In addition, we've matched employee donations supporting the important work of the Center for Reproductive Rights. To wrap up, I know that in this current macroeconomic climate, everyone is being inundated with information about short-term trends. While we're very focused on consistently delivering quarterly results, that's not the primary lens through which we look at our business. Over the past five years, we've grown revenue by 63% on an as-reported basis and adjusted EBITDA by almost 100% while generating about $2.5 billion of operating cash flow. In this industry, real success and real returns come from taking the long-term view. It's about setting the right trajectory that will take us to new heights. We believe that the Warner Music Group is absolutely on the right path, and we look forward to keeping you updated as we continue to build tomorrow's story. With that, I'll turn it over to Eric. Thank you, Steve, and good morning, everyone. Our Q3 results reflect the inherent resilience of our business that comes from our diverse portfolio of revenue streams. Even in a quarter where ad-supported streaming revenue came under pressure due to macro trends, we still grew most of our revenue lines and saw significant growth in operating and free cash flow. Total revenue increased by over 12% on a constant currency basis, reflecting growth in both recorded music and music publishing. Total company streaming revenue increased 6.5%, driven by growth across both segments. Adjusted for the one-time items that I will describe in a moment, total revenue and streaming growth were 14.9% and 10.3%, respectively. Company-wide streaming revenue from emerging platforms was sequentially flat at $345 million on an annualized basis. As Steve mentioned, this revenue will increase in Q4, driven by new deals with platforms, including our recently signed deals with Meta. Adjusted OIBDA declined 3%, with margins of 17.8% compared to 19.6% in the prior year quarter. On a constant currency basis, adjusted OIBDA increased 2.4%. The decline in margin was primarily due to revenue mix, driven by the growth in lower-margin artist services revenue and the impact of exchange rates. The impact to adjusted OIBDA growth and margins was magnified by the reduction in streaming revenue, which was primarily driven by one-time items. Normalizing for these items, consolidated adjusted OIBDA on a constant currency basis grew 13%, and margins would have declined by only 40 basis points. Adjusted EBITDA decreased 6.7%, with margins declining from 21% to 18.4% due to the same factors that impacted adjusted OIBDA. Recorded music revenue grew 8.5%, driven by growth across all revenue lines. Streaming revenue increased by 3% compared to a very strong prior year quarter that saw impressive growth of 27%. Our prior year quarter performance was driven by outsized growth in ad-supported streaming revenue that was recovering from COVID, new deals with emerging streaming platforms, and some especially successful releases. By comparison, our streaming growth in Q3 2022 was more muted due to deceleration in ad-supported streaming revenue, driven by the challenging macro environment and shifts in the timing of new releases. Normalized subscription streaming revenue grew in low double digits in line with the market. However, ad-supported streaming growth, which had been trending in the high teens, fell into the low single digits in Q3. Additionally, there were several previously disclosed items that impacted comparability for the quarter. A new deal with one of our digital partners, which commenced in Q1, created a $34 million Q3 headwind and an $11 million benefit in the prior year quarter due to a catch-up payment related to one of our digital partners. Adjusting for the impact of these one-time items, recorded music total revenue and streaming revenue grew 13.1% and 9.2% respectively. While the macro challenges to ad-supported streaming revenue may persist for some time, we expect streaming growth to improve for us in Q4, bolstered by a robust release schedule, a less challenging prior year comparison, and new deals with emerging streaming platforms. Artist Services and Expanded Rights revenue growth accelerated and increased by 56%, primarily reflecting a boost in concert promotion revenue as touring activity returned. Physical revenue grew by 2%, primarily driven by strong performance in Asia. Licensing revenue increased 9%, mainly due to higher synchronization revenue led by the U.S. and U.K. Adjusted OIBDA decreased 9% on an as-reported basis and 4% on a constant currency basis. Adjusted OIBDA margin declined from 22% in the prior year quarter to 19.4%, primarily due to revenue mix. Normalizing for the one-time items described above, adjusted OIBDA grew 7% on a constant currency basis, and the year-over-year margin decline would have only been 100 basis points. Music Publishing continues to deliver impressive results, posting 35% year-over-year growth. Digital revenue grew 32%, reflecting continued momentum in streaming, which increased 35% and was driven by strength across traditional and emerging streaming platforms. Additionally, digital revenue growth reflected a $17 million benefit resulting from the July 1 decision by the U.S. Copyright Royalty Board in Phonorecords III, which Steve mentioned earlier. Adjusted for the benefit from this decision, digital revenue increased 16.5%, and streaming revenue increased by 18.3%. Performance revenue increased by 80% as bars, restaurants, concerts, and live events continued to recover from COVID disruption. We saw a rebound in Germany, U.K., France, and the U.S. Sync revenue increased by over 20% due to higher television and commercial licensing activity. Mechanical revenue declined slightly. Music publishing adjusted OIBDA increased 30% to $57 million, while margin remained flat at 23%. On a constant currency basis, adjusted OIBDA increased 33%. Normalizing for the impact of the CRB rate benefit, adjusted OIBDA would have increased 23% on a constant currency basis, and margin would have been essentially flat. In line with our expectations, Q3 CapEx increased to $35 million as compared to $20 million in the prior year quarter, mainly due to IT investments in IT infrastructure and expansion of our EMP facilities. As a reminder, our financial transformation is expected to deliver annualized run rate savings of $35-$40 million once fully implemented. Operating and free cash flow growth in Q3 were very strong. Operating cash flow increased 79% to $163 million from $91 million in the prior year quarter. The increase was largely driven by the timing of A&R investment. Free cash flow increased 80% to $128 million from $71 million in the prior year quarter. We expect strong cash flow generation in Q4 as well, driven by the timing of deals that will be favorable to working capital. As of June 30th, we had a cash balance of $345 million, total debt of $3.8 billion, and net debt of $3.4 billion. Our weighted average cost of debt is 3.4%, and our nearest maturity date is 2028. Before we conclude our call, I want to mention that we recently settled a number of copyright infringement cases that will impact our Q4 results. We expect that the proceeds from these settlements, after netting litigation expenses and artist and songwriter royalties, will have an estimated favorable impact to consolidated OIBDA of at least $25 million. We are closely monitoring the rapidly changing macro environment and will adapt as we always have. We have full conviction in music's resilience and will aggressively pursue new opportunities for our artists and songwriters even during market dislocations. The fourth quarter is off to a strong start with our new releases performing well and new deals with emerging streaming platforms. We are on an upward trajectory and are positioning ourselves to take advantage of the opportunities for growth that lie ahead. Thank you for joining our call today, and we will now open the call for questions. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your touchtone telephone. We'll pause for a moment while I compile our Q&A roster. Our first question comes from Sebastiano Petti with JPMorgan. Your line is open. Hi. Thanks for taking the question. It's good to hear the confidence in the underlying growth in fiscal 4Q based on the Meta deal, other ESP deals and just the new release schedule. Could you perhaps update us on your outlook for or expectations for 2023, given, you know, concern about slowing growth industry-wide, the ad-supported slowdown that you kinda call out from the macro? Perhaps any one-time items that will affect comparability as we kinda go into next quarter and into 2023. Thank you. Yeah. Sebastiano, thank you so much. We've disclosed the one-time items. We don't have anything next quarter that we see that is meaningful that will affect the comparison. We do look forward to 2023 when we will lap the anniversary of the DSP renewal that has been creating challenging comparisons for the four quarters of fiscal 2022. Fundamentally, even though there's a challenging macro environment, we are very confident in the resilience of music and the effectiveness of Warner Music strategy. We have a strong release schedule for Q4 and are looking forward to further strong releases throughout fiscal 2023. We see subscription streaming growth continuing to grow double digits despite what's happening in the macro environment. Sync continues to grow. Artist Services and Recorded Music is now back to where it was pre-COVID, which obviously is low margin revenue, but delivers revenue and OIBDA and provides value-added services for our artists that we always look forward to providing them as part of our relationship. Warner Chappell has been going full guns. Their growth every quarter this year has been 20%+. The recovery of performance has allowed their stellar growth in areas like streaming and sync to shine through. We feel really good about our underlying business model. We feel really good about the resilience of music and our positioning for continued growth. I don't want to short-sell that it's a challenging environment. We've seen this quarter the impact on ad-supported. You know, we continue to make sure we do everything we can to support each line of revenue growth, but FX and ad-supported revenue both had challenges this quarter, and we'll continue to manage them, as best as we can. Fortunately, ad-supported is a minority of our streaming revenue and therefore is a contained portion of our revenue, and the larger portion of our revenue is continuing in strong growth mode. Hopefully that gives you a summary, and thank you for your question, Sebastiano. One quick follow-up there. With Artist Services recovering, obviously, you know, you've outlined low margin but still contributes to the OIBDA growth. Any perhaps update on or how should we be thinking about margins into fiscal 2023, particularly as, you know, maybe the financial transformation program kinda gets implemented? Yeah, totally. Thank you for that. One of the things we've been saying, quite frankly, for the past couple of years is when Artist Services recovered, 'cause it was so, it was basically put on hiatus for the first two years of COVID, that when it started to recover, that it would have an effect on margins downward. But we didn't know exactly how much 'cause we didn't know if Artist Services would recover over two years or recover fully in one year. Artist Services is now back to the revenue levels that it was pre-COVID. It's really fully recovered in a very, very short period of time. What this does is put margin, downward margin, pressure in 2022, but will then create comparisons for 2023, where we've got Artist Services full, you know, fully baked in 2022 compared to 2023. We expect to get back on our margin growth trajectory as we have comparisons that are gonna be more favorable with a fully recovered Artist Services in both numerator and denominator. We feel very good about the fundamental margin growth program that we have in place, growing our high margin digital revenue streams, managing costs, including our financial transformation and other technology initiatives that are in place to drive efficiency. We feel very good about our margin growth trajectory. Our financial transformation program remains on track to launch in fiscal 2023. We expect the benefits to start to roll in in 2023 and 2024 until it's fully rolled out and complete. I will say that the rollout of the financial transformation is always tied to meeting very specific and detailed standards that allow us to complete our statutory management reporting essentially perfectly. We are very close to that point, but there is work to do till we dot every i and cross every t, and we're working diligently to get there, and we fully expect to launch the program in 2023. Thanks for taking the questions. Thank you. Give me one moment for our next question. Our next question, Benjamin Black with Deutsche Bank. Your line is open. Benjamin Black with Deutsche Bank, your line is open. Hey, guys. Thank you. Thanks for taking my question. I have sort of two follow-ups really. After adjusting for the new deals and the catch-up payments, we've seen a few quarters of decelerating underlying recorded music streaming growth. The question here is really how should we be thinking about a good underlying growth rate going forward? I mean, are you seeing slowing subscriber growth, or are we just simply lapping difficult comps? On the advertising side, Spotify mentioned seeing a modest softening in the last two weeks and into the third quarter. Now you're mentioning it as well. Could you sort of elaborate on the softness that you're seeing? Is it platform specific? Is it region specific, for example? How are you thinking about sort of the tenor of advertising growth for the balance of the year in 2023? Thank you. Sure. I'll let me jump in on that. Thanks for the question. First thing I'd say is that subscription streaming growth still remains quite strong, remains in the double digits. In the short term, we see that as being a very strong sign despite a macro environment. Long term, we think subscription streaming growth has tremendous upside potential in front of it. Developed markets are roughly 30% penetrated in aggregate. We've seen both research studies but also market forecasts that show that growing into the 50s% or even 60s% over time. Emerging markets are still penetrated in the mid-single digits and are starting to show real improved growth, and we see enormous opportunity for emerging markets coming online with subscription streaming. The price per subscriber is still very low. We see real ARPU opportunity, and Spotify and Amazon that have done forms of price increases, I think, have proven to the market that it doesn't have an impact on churn, and that price increases are really available for distributors. We're very excited about subscriber growth opportunities. We did see an ad-supported slowdown. You've seen that in some of the companies that are distributors that reported lower ad-supported growth. Clearly, it was a difficult comp versus a year ago. A year ago, we had 27% streaming growth, and ad-supported growth was even faster than our total streaming growth because of the recovery from COVID. We do think the macro environment has had an impact on ad-supported businesses, and you know, we'll continue to monitor that. Again, ad-supported streaming is in the mid to high teens% of overall streaming, so it's a contained part of our business, and the much larger part of our business, the streaming business, continues to grow double digits. But that is something that we'll continue to monitor. Again, we have great confidence in the long-term potential of streaming. We think it's just getting started. We think the emerging streaming side continues to increase in the number of licenses. We've just concluded our new Meta deal. The opportunities of Web3, NFTs, communities, we think is just at the very, very early experimentation phase and has significant potential that we're focused on developing the business models to be able to monetize. We're excited as we look forward about the growth in streaming. In the short term, we're navigating tough macros, but still think the resilience of music and streaming gives us real opportunities to continue the growth vectors. Fantastic. Thank you for the color. Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your touchtone phone. One moment for our next question. Our next question comes from Matthew Thornton with Truist. Your line is open. Hey, good morning, Steve and Eric. Maybe one question and two housekeeping items, if I could. First, Eric, you talked a little bit about the margin progression as you see it over the next couple of years. How do you think about the conversion of adjusted OIBDA to free cash flow over the next couple of years? It was 50% in this quarter. It's kinda bounced around a bit, but I guess, you know, higher level, how do you think about that progressing over the next couple of years? And then just secondly, the housekeeping items, I think there was an adjustment to an earn-out liability that benefited the Recorded Music margin in the quarter, if you can quantify that. In the streaming portion, I think there was some language around timing of new deals. Again, anything worth quantifying there as well. Thanks, guys. Yeah. Sorry, there's three questions. I'm writing notes really fast. Three things. Adjusted OIBDA free cash flow. One thing I would encourage there, generally, our free cash flow to adjusted OIBDA conversion has been 50%-60%. We think that's a reasonable range to operate in. Every quarter will be different. The timing of spend on A&R is gonna vary based on deal activity and really challenging to look at quarter to quarter. A larger period of time, year to year, for example, is a better period. The 50%-60% has been a place we've been comfortable operating in. We think that's a fair place to look. I will make the comment, though, that we look at our waterfall of how to deploy excess cash, and the first stop at our waterfall is redeploying it into the business to drive future growth. We have grown our market share. If you look at over the past several years, call it a five-year period, and one of the ways we do that is by redeploying our operating cash flow back in the business with accretive deals to drive growth. Fundamentally, we are driving our operating and free cash flow in line with OIBDA with, call it a 50%-60% conversion rate. We then use our waterfall beyond that. Second question. We had made an investment in the business and had accrued about $10 million towards an earn-out that was part of the acquisition if certain metrics were achieved. Given the slowdown in the ad-supported market, we no longer forecast that that earn-out will be achieved and reversed a $10 million accrual. On the timing of deals, the one deal we called out here is the Meta deal, which we've closed in Q4, and that will be reflected in our Q4 results. We do expect our emerging streaming revenue and our streaming revenue because of that because of the timing of new emerging streaming deals to have a positive bump in Q4. We're still in the process of driving Q4, and we don't quantify individual deals, so I can't give you a number, but we do expect that to have a positive impact. Thank you, Matthew. One moment before our next question. Our next question comes from Michael Morris with Guggenheim. Your line is open. Thank you, guys. Good morning. Maybe one for Eric, just following up on digging in a bit to the recorded music streaming trend. You talked a bit about the advertising portion and the size there, which was helpful. Can you talk a bit about the release schedule, that album release slippage and the impact as we looked at kind of that core growth rate going from, you know, 15% or mid-teens in the second quarter, fiscal second quarter to the 9%, sort of core rate in the third quarter. How much of that sequential sort of slowdown was driven by that release slate timing, and how much of that kinda do you expect will come back in the fiscal fourth quarter? Maybe a bigger picture question for Steve, just on the CEO transition, which was announced late in the quarter and a little bit long dated with respect to the timing. Can you just give us your thoughts on that transition? You know, why the timing, what you guys are looking for? Would appreciate the color there. Thank you. I'll start. Thank you, Michael, for the questions. There was a few substantive releases that have slipped from Q3 to Q4. I'll focus the answer a little bit on Q4. We feel very good about Q4 overall for the reasons we talked about. On the release schedule, Lizzo, who already has a number one hit, the album came out in Q4, Special. Cardi B has an album coming out. Panic! at the Disco, Paulo Londra, and several other significant international artists. Our Q4 release schedule, we think is really set up nicely. Certainly we do see that as being an accelerator versus Q3. In addition to a strong release schedule, the close of several emerging streaming deals, including Meta, will be a positive, and we also mentioned that there were several legal settlements in Q4 that will bring approximately $25 million of OIBDA into Q4. There's a series of positive news in Q4 that we have already delivered and that will be impacting the results throughout the remainder of the quarter. On ad-supported, part of the slowdown was the market. You could look at the results of some of our larger distributors and see the rate at which they're slowed down. That affects our business. Again, our job is to maximize the performance of that area with great releases and great marketing campaigns. We're thrilled that the largest part, the lion's share of our subscription revenue, of our streaming revenue, which is subscriptions, continues to grow solidly in the double digits. Matthew, on the or Michael, sorry. On the CEO transition, I mean, it's, you know, it's really very straightforward. We decided to announce a change with a long lead time, which would allow us to have a very thorough, thoughtful, broad search, you know, a diverse group of candidates. I'm actively in the loop on that process, and I think that, you know, I expect that there will be an overlap with respect to the transition. We just wanna make sure that it's well thought out, that it's orderly, and that we continue focusing on business without missing a beat. Thank you. One moment for our next question. Our next question comes from Kutgun Maral with RBC. Your line is open. Cool. Good morning, and thanks for taking the questions. First, given the divergent trends across subscription, ad-supported, and emerging platforms, can you just update us on the mix of the three buckets across either Recorded Music or your overall digital revenue? Eric, I think you said earlier that advertising is about mid to high-teens%, but I wanted to confirm and maybe get a little bit more color on emerging platforms as well. I apologize if I missed it, but how much was emerging platform revenue in the quarter? Just lastly, you were asked earlier about the timing of emerging platform renewals. You know, emerging platform revenue growth had decelerated over the last year because you were kind of in a lull of activity, you know, with the Meta deal. As we move forward into fiscal 2023, are you entering a new cycle of renewals that could help accelerate the streaming revenue growth line? Thanks. Okay. Good. Thanks, Kutgun. So on streaming, rough ballpark, the mix of the components subscriber, ad-supported, and emerging, is roughly 70/20/10, which were 70 high teens/10. Think of subscriber as, the 70%, ad-supported is the high, very high teens, and emerging being the rest, call it roughly 10%. There are some cats and dogs in there like, you know, digital radio and things like that, but those are relatively small compared to the bigger pie. Your other question on emerging streaming and the growth components and the trending going forward, there's a few components to that. Obviously, as you stated, Kutgun, the renewals are a meaningful part of that. When you have a few, deals that have become relatively scaled in there, it becomes meaningful when those are renewed. We don't talk specifically to the renewal timing of individual deals. Obviously, Meta is a meaningful one. We usually do two to three -year deals. We had a slew of renewals, roughly a year ago that were actually reflected in our Q3 2021 results. So there will be some deals that come up in 2023, and we will see that in next year's results. What I will also say is it's not just about renewals, it's also about new vectors of growth. We look at areas like Web3 with NFTs and the ability to build, interactive communities, as having huge potential. The platforms and products that develop sustainable business models that really excite fans and monetize and connect fans and artists in ways that are, deep, rich, and exciting dynamic communities, is something that is being experimented with, developed. We're working very closely with a series of partners when we've talked about the different deals that we've done over the past year or so with best-in-class partners in NFTs, in building out mods with Roblox and others, that is all with an eye towards developing a model for music in this new world that can monetize. We see that as an area of growth that will show up over the next several years. You know, I would stay tuned and, you know, we look forward to having exciting news as our experiments get to the marketplace and yield results. That's great. Thanks, Eric. Thanks, Kutgun. One moment for our next question. Our next question comes from Matthew Thornton with Truist. Your line is open. Hey, thanks. Must be a busy morning. I didn't think I'd get a second question in here. Eric, the right way to think about streaming growth, just to put a fine point on this, you know, you guys reported 9.2% constant currency ex the two DSP items. You have some Russia headwind, you had some slate slippage that you talked about, and then probably most pronounced, you have the ad-supported pressure. Is it those three items that kind of bridge you up into that healthy double-digit growth? I just wanna make sure I'm understanding the bridge commentary correctly. Then maybe one for Steve. Steve, in this tougher macro, higher interest rates, how do you think about deal activity, whether it's small- Again, with our discipline, you know, remaining as a focal point, I would expect our activity to continue to be quite active. Thank you. Our next question comes from Benjamin Swinburne with Morgan Stanley. One moment. Your line, Benjamin. Hello? This is Ben. Can you hear me? Yep, we can hear you, Ben. Hey, guys. I didn't hear the last like eight minutes, so this could be repetitive. I apologize if it is. Anyway, Eric, a couple things. One, any way to help us think about currency in the fourth quarter as it relates to revenue, but also margin? I think there's a mismatch on OpEx and revenue on the currency front we should be thinking about. You mentioned 50%-60% cash flow conversion. I don't think you're gonna be there this year, just based on the nine months. I know you said strong Q4, but do you think 2023 you could be back in that zone? I know we talked about it a lot already on the emerging streaming, but, you know, I think part of the attraction to your business and your stock is the idea that over time there's more consumption of music, which drives more revenue for your company. What's your visibility in this emerging streaming bucket overall? I know it's a lot of different deals, but if you look out over the next year or two, does that start to play out more obviously to all of us that we're seeing consumption growth and then revenue growth? Or is it still too early to really make that call? Thank you. Okay, thanks, Ben. On currency, a few things. Looking at Q4, which I think is your question, I think nothing indicates that there's gonna be much difference between Q4 and Q3. It's still gonna have a similar headwind in Q4 as we convert to a strengthening dollar. The margin impact continues to flow through pretty organically. A fair amount of our costs are in local dollars, but some of our repertoire is international repertoire that's sent around the world, so there is an impact on margin as well. I will say that we do hedge against the U.S. dollar against the nine most major currencies that we work against. That doesn't necessarily flow through OIBDA, but when there's a negative currency impact affecting our business on a cash basis, we have hedged operating cash flows and do get a benefit there. We'll continue to manage to hedge currency impact, and obviously, when there's a negative currency impact on our operations, we also have, you know, roughly $1 billion worth of euro notes that there's a favorable impact as that becomes less expensive. That's one. Two is on the 50%-60% conversion, the first half of 2022, we spent a you know significant amount on A&R. We see the flow of the second half of the year being more moderate in investments and more favorable in working capital and a significant improvement in the second half of the year. We are now deep into evaluating fiscal 2023, and we do evaluate and look at our cash generation and cash conversion as part of the modeling, and we look at, you know, how we can achieve our goals in there, but also look at the growth opportunities investments. We're looking at that right now. In fiscal 2022, when we talk about, you know, cash conversion, I would say that we do expect to hit the low end of the cash conversion range that we've discussed, as we do have favorable working capital impacts coming up, not just in Q3, but also in Q4. On emerging streaming, it is clear that that is growing and growing in a variety of different ways. The number of licenses, which is now measured in the hundreds, is growing on a fairly regular basis. We've already talked about the new Meta deal and other deals that we're adding in Q4. There are new categories coming online. We've talked about Web3 and metaverses and those categories that really are at the very, very tip of developing product models and monetizing. We see this as an area which will have continued consumption growth as new digital products and platforms are evolving all the time, driving experimentation, consumer usage, consumption, the more integration of music in really what feels like a ubiquitous way with other forms of content in a blended way, all of which require music licenses. We expect to continue to see consumption and revenue of emerging streaming growing. It won't necessarily be linear, as we've said. It's both tied to the timing of renewals, development of new products and new product platforms, and we expect those to be building up over time. We continue to be innovative, leaning in, be an early adopter, be an early partner with some of these companies, helping them develop their products that integrate music in thoughtful ways that can turn on fans. We're really excited about the opportunities there, and we expect to see continued growth for years and years to come. Thank you. Thanks, Ben. I'm not showing any further questions at this time. I'd like to hand it back over to Steve Cooper for any closing remarks. Again, thanks everyone for joining us. We appreciate your ongoing interest and support of Warner Music. I hope everybody has a wonderful wrap-up to the summer and a very safe Labor Day. Stay well, everyone. We'll talk to you soon. Bye-bye. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.