Welcome to Warner Music Group’s Q3 2014 Earnings Call for the period ended June 30, 2014. At the request of Warner Music Group today’s call is being recorded for replay purposes and if you object you may disconnect at any time. (Operator instructions.) Now I would like to turn today’s call over to your host, Mr. James Stephens, Senior Vice President Communications and Marketing. You may begin.

Good morning, everyone. Welcome to Warner Music Group’s F3Q 2014 conference call. Both our earnings press release and the Form 10(q) we filed this morning are available on our website. Today, our CEO Steve Cooper will update you on our business performance and strategy; our Executive Vice President and CFO Brian Roberts will discuss our financial condition and results; and then both of them will take your questions. Before Steve’s comments let me remind you that this communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. 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 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 because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results that 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 earnings press release and Form 10(q), and other SEC filings. We plan to present certain non-GAAP results during this conference call. We have provided schedules reconciling these results to our GAAP results in our earnings press release posted on our website. With that let me turn it over to Steve Cooper.

Good morning, everyone. Welcome to our F3Q 2014 earnings conference call. We’re delighted to be speaking to you for the first time from our new global headquarters at 1633 Broadway in New York. We had a great Q3, achieving double-digit revenue growth. As previously anticipated on these calls we are now seeing the benefits of the stronger release schedule, which is weighted toward the second half of the fiscal year and bolstered by our acquisition of Parlophone Label Group. Parlophone UK was responsible for two of our top-ten selling albums this quarter including Coldplay’s Ghost Stories and Lily Allen’s Sheezus. We released other global chart toppers from the Black Keys, Ed Sheeran, and Lincoln Park. Overall we are pleased with our performance this quarter, especially that the strategic moves we’ve made to expand and diversify our business are yielding positive metrics. Unless otherwise noted, I’ll be giving our figures in constant currency. We grew total revenue by 17%. We increased digital revenue by 25%, and we improved adjusted OIBDA by 38% and adjusted OIBDA margin by two percentage points. This accomplishments illustrate how our intensive focus on A&R, executive talent and global infrastructure are combining with first-class execution by our operators to deliver meaningful results. We remain on track with our PLG integration which is now in its final stages. By this time next year we anticipate realizing the benefits of previously disclosed annual cost savings of around $70 million. With carryover from this quarter’s releases and a solid Q4 release schedule we are well positioned to build on our momentum through the remainder of the fiscal year. Before going into further detail on our quarterly performance let’s take a brief look at the broader industry landscape to provide some context for our results. At its most basic level the…

Thank you, Steve, and good morning everyone. We had a robust Q3 in terms of our top line results driven by the strong release schedule and the inclusion of PLG, which we acquired on July 1, 2013. In line with the end of our fiscal year next quarter will be the final quarter we report earnings including and excluding PLG. From F1Q 2015 onwards we will report just our combined company earnings. I’m pleased to say that this quarter including PLG revenue rose 17% in constant currency. Excluding PLG, which contributed $102 million, our revenue rose 2%. This growth was due to a stronger release schedule, solid digital results and an improvement in our artists services and expanded rights revenues. As we outlined in our past two quarters our release schedule is weighted toward the second half of this fiscal year for both the total company as well as for PLG. We clearly see this in our Q3 results and expect the impact from our strong release schedule will continue into Q4. Year-to-date our total company revenue is up 7%. As we’ve discussed on prior calls from an OIBDA perspective, certain adjustments are necessary to make the year-over-year comparisons more meaningful. We’ve highlighted these in our press release but let me walk you through them. In the quarter we had $15 million in integration costs associated with the acquisition of PLG including IT and supply chain costs and professional fees; $18 million in restructuring expenses which were mostly employee-related in connection with the PLG integration; and $14 million in one-time costs associated with our move to our new global headquarters. This is compared with $10 million in costs related to the acquisition of PLG in the prior-year quarter. Adjusted OIBDA rose by 38% to $109 million and adjusted OIBDA margin…

Thank you. Our first question today is from Aaron Watts with Deutsche Bank.

Good morning, guys. I appreciate all the detail you’ve put in the release by the way, it’s extremely helpful.

Thanks, Aaron.

Brian, one quick one on the cost saves, $70 million target – where are you at relative to that bogey?

So to date we’ve realized about $30 million and we have a $40 million realization to go, Aaron.

Okay.

And we’re in line with what we had said when we first talked about the acquisition and the cost savings and the plans. We had a 24-month window to execute against and to get them out of the business, and we feel very comfortable with that.

Okay, so figure by this time next year the rest of those savings should kind of be flowing through and benefiting you?

Yes.

Okay, and any kind of material additional costs tied to those last bit of savings or have most of the costs already been kind of upfront-weighted?

Yeah, so we do have some costs yet to go but I think we’ve from a restructuring perspective, I think when you get a chance to take a look at the (q) you’ll see we’ve probably incurred about $64 million of what I think we have in there, sort of $84 million, $86 million. So most of it’s been incurred and we still have some to incur on the integration side as well, so the restructuring bucket and the integration bucket. Restructuring is primarily in place stuff, Aaron, and the integration is primarily IT and supply chain.

Okay, got it. And then obviously big new releases can move the numbers, and that helped in a good way this quarter. But maybe just some thoughts you have on the weight that catalog can have in today’s world where streaming is becoming a bigger presence versus maybe in the past – I guess thinking about catalog versus the new releases and the singles, and just some thoughts around that and how it impacts the business.

Aaron, it’s Steve. Catalog is a tremendous asset in the streaming world. When you think about you know, filling the streaming pipeline if you will with content, almost by definition the bulk of it has to come from catalog versus…. [coughs] Excuse me, my allergies are killing me – has to come from catalog versus current releases. And we’ve seen on a regular basis where streaming dollars have been more catalog-oriented than current release-oriented. So we continue to look at catalog as a critical, critical asset in the development and the successful monetization of streaming over time which is why we continue to invest heavily in it. In large part the PLG and EMI acquisition that we made was catalog-oriented. We just announced, I don’t know, several weeks ago the acquisition of one of the largest modern Mandarin catalogs in China, Hong Kong and Taiwan. We continue to evaluate catalog acquisition opportunities on a regular basis. And as you know, current releases after 18 months, which is somewhat of an arbitrary standard, flow into catalog and catalog continues to grow and be revitalized by the current release cycle. So while connected catalog is an integral part of the streaming world and an integral part of our strategy.

That’s helpful. Are the economics different on catalog versus new release for you in a streaming world?

With respect to the economics of revenue, no. I mean a stream is a stream.

Okay. And then last question from me: you mentioned some market share details from around the world. I’m curious in the US how you think about your market share position on the recorded music side. Is it something that you see as being stable, do you need to grow it? And then kind of also on the publishing side, is there more of a focus to grow that share via acquisitions and such? So I guess the overall theme on market share here in the US.

Well, we do want to grow market share but we want to grow market share intelligently. So whether it’s on the recorded music side, you know, typically we grow market share there by being thoughtful about the artists that we, new artists that we want to go to contract with as well as working with our established and global artists who continue to enhance and elongate their career – all of which contribute to market share. But it’s done within the context of thoughtful and rigorous financial discipline. We are not in the market so to speak of building market share with lack of solid economical thought and consideration, Aaron. So we just don’t buy market share to have market share, particularly if acquiring that market share is not profitable. We take the same approach on the music publishing side where both through a very thoughtful A&R policy and hopefully this earnings call provided you with a little flavor of the successes we’ve been having with our songwriters; and/or with the acquisition of catalogs, again, within the context of really rigorous financial boundaries, we continue to build market share. But again, I want to emphasize that while market share is important to us it’s not important to us at any cost. Again, it’s got to be from our perspective an intelligent investment. It’s got to meet or exceed baseline financial metrics and most importantly it’s pursued in the support of acquiring really great new talent and continuing to bolster our existing roster of very, very talented and legendary artists.

Okay, that makes sense. And one more if I could, let me see, just one last one – I think we’re at a little over three years since your current owners stepped into the picture here and bought the company. Any kind of thoughts you can give us on sort of what the strategic destiny is for Warner Music in the kind of intermediary team? Do you envision Warner as a public company again, remaining private, just any kind of broad thoughts on that?

Len has said publicly that he intends on holding this forever. I assume that means very, very, very, very long term and to the best of my knowledge that statement has and continues to be accurate.

Okay, I appreciate you taking all the questions.

Sure, thanks Aaron.

Thank you. (Operator instructions.)

Great, it looks like everything’s been answered. So listen, everybody, have a wonderful August and Labor Day holiday and keep safe. Talk to you in a few months, bye-bye.

Thank you. This does conclude today’s conference. Thank you for joining. You may disconnect at this time.