Warner Music Group Corp. (WMG) Earnings Call Transcript & Summary

Welcome back, everybody. I'm Jessica Reif Ehrlich, Senior Media and Entertainment Analyst at BofA Securities and I'm thrilled to be joined by Eric Levin, CFO of Warner Music Group. So, welcome Eric, thank you for joining.

Thank you, Jessica. Thank you for hosting. Really happy to be here. Appreciate everyone else joining us well.

Great to see you. So, let's start big picture. It's been quite of a crazy 1.5 years or so with the pandemic. How has -- how do you think your business has changed over the past 1.5 years? And what are you most excited about either for the company or the industry as you kind of look ahead?

There's so much. I mean, we went public 15 months ago, just as the pandemic really hit. And our business model was evolving in real time. Our business is now 70% of our revenue is digital. There are significant revenue streams that have accelerated. We talk now fairly frequently about the emerging forms of streaming, whether it's social, fitness or gaming and meta verses and even other forms of digital like NFT that are up and coming that may not even be streaming per se, but it's still digital. So, the acceleration of the diversified portfolio of streaming use cases for music and their monetization has been meaningful. And there are areas that have been really -- had been really negatively affected by COVID like sync, licensing and ad-supported streaming and those have fully rebounded as has physical. The areas that we continue to monitor closely are generally related to actually live performance, tour-related merch, concert promotion of which we have some relatively modest businesses in Europe, performance revenue and publishing. And those businesses we expect to start to rebound, although recovery from COVID is going to be a little bit more uneven, given delta variants and others than originally anticipated, but it's all starting to really come back to where it was before, plus the acceleration of digital. And the emerging markets are coming online, pricing is now a discussion, price increases on developed market streaming. So, there's so many different growth vectors that we're really excited about it. And as we look forward, it's really managing each of those opportunities, adding an amazing release schedule, which we have Bruno Mars with Silk Sonic, Ed Sheeran, [ L3 Music ], Cardi B, Lizzo, Cold Play, that's kind of an extraordinary time. And all at the same time, we continue to manage cost and margins. So, we're pretty excited about what's going forward, and we're really pleased that the vast majority of the revenues have fully recovered and are growing very nicely kind of as we've come through 1.5 years of COVID.

So, let's cover as much of this as we can. I'll start with one of the smaller [ cases ]. And there's a lot to cover. Let's start with part of the small areas because it's actually one of the pieces that's grown the fastest, and that's the newer digital platform, not the streaming part, but the digital part. It's $235 million annualized as of your last earnings call, and it's just grown like constantly surprised every quarter on the upside. What do you think the key driver is -- of this? Is it increased engagement on some of these existing platforms or is it new clients or new use cases that you continue to add? You know, everything -- it just seems to be coming from different areas.

Yes. And that's right. The first thing I want to just clarify or qualify that 235 is recorded music only. There's a piece that would be kind of in Warner Chappell as well in addition to that. And it does not include sync licensing to gaming. So, it is really a fairly narrowly defined definition, one. Two is -- I would say we have to talk a little bit about both short-term and then long term. Short term, the increases are going to primarily come from renewals of some of the more scaled deals and platforms that are streaming music. And so, those generally come from social and fitness categories. Note that our deals are often relatively short term and in this category, are often fixed deals and are not variable, just given the uniquenesses of music being paired with another form of content, which really is the case in virtually all of these use cases. But as we look -- so you'll see growth shorter-term as we renew those deals, which means it will be somewhat lumpy tied to the renewals as opposed to underlying growth of the actual consumption of music. Longer term, we're really excited because every quarter, we are licensing more and more innovative use cases, more platforms within existing use cases, which increased the competition and innovation and customer choice within those types of platforms. And that diversification of licensees also allows us to increase our revenue and allows for new categories to potentially emerge over time. We like to say 3 years ago, who thought that TikTok was going to be as substantial as it is, and it's done extraordinarily well and become a real user of music. We think there'll be platforms that become the next-generation of TikTok and whether it's in social or meta versus or somewhere else, we'll see where the consumer will decide which ones. But we're excited that such a diversified set of licenses, literally hundreds, that allow it to grow and diversify over time.

So given that diversification, it doesn't sound like you're concerned that with the reopening of the economy as hopefully, COVID starts to go away or dissipate at least. But given that diversification, it doesn't sound like you're expecting any kind of a real slowdown. Is that correct?

Look, we see -- this is -- we absolutely think we're extremely early in this year. We think these categories are just getting started. So do we expect this to continue to grow and grow at a very strong rate? We absolutely do. When we went public, we said this was $100 million on an annualized basis. Now, 5 quarters later, it's $235 million. So, we continue to see this as growing both within the categories, social, fitness, but also across new categories that continue to emerge as use cases get diversified. So, we're really excited about this. And we think the emerging markets coming online isn't just going to benefit kind of subscription ad-supported streaming, but really represents an opportunity in these categories as well.

Right. I mean, it's just incredible really. Peloton now has this -- that's not a promotion, but it's just -- I think gives something now with Ed Sheeran starting today, which is your artist. So --

Yes. Look, one of the things that's come out of the pandemic with the kind of inability for artists to tour is the openness to innovating on using new platforms and experimenting with that as a way to reach consumers, both to promote their music and also monetize. So, we love -- Ed Sheeran launched his new single with a TikTok live stream. And we're seeing so many amazing things happening. It's really extraordinary. 21 Pilots is doing a Roblox live stream as well. So, some of our artists, big and small in all over the world, are really now integrating these platforms into their ecosystem of how to build the following around the world. And it's really exciting.

Absolutely. So as you mentioned digital is roughly 70% of your total company revenue and the bulk of that comes from streaming, how large do you think this pool of revenue can be over time? Do you think that streaming could be a mid to high-teen grower? Is that the way to think about that?

Well, I mean, we don't give guidance numerically, so I can do it qualitatively. And I think part of what we're excited about, I think I mentioned earlier, is that the growth vectors, we think are just increasing, not decreasing. In developed markets, which say, are about 30% penetrated on average of subscription streaming. We think that number could double or more potentially or I should say, we've seen research that indicates customer interest, so it could double or more, somewhere potentially the 70% over time. And that's exciting numbers to see. Emerging markets are mid-single-digit penetrated. We think it's just the very early days for emerging markets to come online. And we all know that Spotify has started to integrate price increases as well. And all indications are that, that has been received well and hasn't had an impact on churn. And we suspect the other DSPs will take notice of that. And we would certainly encourage them to consider pricing as well. We've been very vocal about that for years that we think there's incredible value brought in the music subscription and there's significant pricing opportunities that we certainly encourage everyone to call the DSPs to consider to make sure they're not leaving value on the table.

Right. But I used to spend on albums growing up versus what we pay now. It's a traction now to your point.

Yes. Yes, it just indicates it's early innings and people's appetite to consume music and willingness to pay is there. It's just about the use cases and the pricing to get the industry to where it was historically, which we don't know exactly how long it will take, we don't provide those forecasts, but we think that opportunity is clearly there.

Right. Can you talk about the impact of emerging market growth and ARPU? How can you ensure that Warner Music receives fair value for its music and that the economics make sense for you?

Yes. Well, obviously we negotiate very carefully. When we negotiate deals, it's not just one blanket deal with one standard ARPU. Globally, there are pricing that is considered around the world and we fully understand that different markets around the world, especially emerging markets, will have different and lower price points than developed markets. Some are priced in the $1.50 range, if you put it in the dollar terms, some more in the $3.50 range. And based on the economics of each market and the per capita GDP, those things are considered and we make sure that there are levers in our deal to make sure that each market is properly valued, certainly from what we get as a wholesale. So, that's all considered in the deal and obviously carefully thought through, and we think the deals are working quite well. I mean our perspective generally on emerging markets is, we view -- the vast majority of emerging markets in the past has been very poorly monetized, often with piracy and streaming represents a real opportunity, which is already happening in key markets like China, India, et cetera, and coming into so many more markets, an opportunity to really make a legitimate, monetize, sustainable, economic model of which both the distributors and the labels and the publishers all sharing. And so that's all -- we're excited about this. We see it as real incremental revenue and incremental growth and we think as we look forward as an opportunity to really be a meaningful part of the growth trajectory.

And one of the areas of contention or conflict was as the DSPs expand their offers beyond music into things like podcasting -- you've gone through a couple of [indiscernible] rounds of negotiations with them after that. Could you talk about how do you preserve the favorable payer terms for music when it's combined with other kinds of content?

Well, look, music has been sold in a subscription form well over a decade. The value to the consumer of the music subscription is well established. The relative economics with us and our partners, we think is also well established. So, if there's other forms of content that they are distributing, which, by the way, we welcome, we have been -- again, we produce podcast, we have partnerships with various DSPs to produce and distribute podcasts, about 20% -- close to 20% podcast involved music and therefore, promoting music. So, we're highly supportive, specifically at podcast, but of incremental content on platforms in general. What I would say is none of that devalues the value of music to the consumer. There's additional forms of content that are valuable to the consumer. They could be monetized in ways that reflect that value tied to that content and shouldn't be diluting any monetization to music, of which the value is well established. So, we feel very comfortable about that, and we put guardrails in our deals as well to make sure that our -- that the value of music is protected, and it's been working quite well.

And then one more question on the revenue side of this for the DSP related, but how big of an opportunity do you think air support streaming could become for a company like Warner? I mean, several of the DSPs are now focused on improving monetization within advertising and it's also the advertising market averaging opportunity in emerging markets. So, how large can those opportunities be deal?

So, what I'd say is pre-COVID. Because COVID has really disrupted the ad-supported stream. And so the last, call it, year, 15 months of data is not indicative of necessarily of a sustainable curve, first to decline than a rapid recovery. What I would say is pre-COVID, as supported streaming and subscription streaming were growing roughly in line with each other, with ad-supported streaming being kind of mid to high-teens of total streaming. As we come out of COVID and just you said, and I think you're right, we would expect something -- first, we'd say, fundamentals -- we'd expect something that looks potentially like that going forward. What could affect that over time, it wouldn't necessarily happen all at once, would be the impact of emerging markets as they start to scale. Emerging markets potentially monetize in somewhat of a different mix than developed markets. In emerging markets, you may have a combination of not just subscription and ads, but subscription, micro pay/social capabilities and ad-supported. And so the potential for ad-supported to potentially even be a somewhat bigger portion of the mix in emerging markets is a real possibility. Not an assurance, but a possibility. So, we have to continue to watch that closely. We think it will be different market by market. Russia doesn't operate like China, it doesn't operate like Chile, doesn't operate like Indonesia. So, I think we have to learn how each market is engaging. Going forward, the consumers are engaging with content and what they're willing to pay for versus not pay for, that's monetized with ads. But I'd say, generally, in the shorter term, we would expect to see ad-supported continuing to grow roughly in line with subscription. And as ad-supported becomes a bigger part of the pie, we have to analyze how the markets are interacting with music and whether it affects the curve, which it certainly has the potential to do over time.

Right. So you kind of touched on this at the very beginning. But in terms of growth from streaming, but there are several buckets here. You've got developed markets, developing markets and emerging markets, markets that we never monetized before. How do you think each of these areas will evolve? You touched on developed, which is actually a really great number, 30% penetration going to possibly 70%. It's very encouraging. Do you see that's the same thing for developing markets and emerging? Is it too early to even have a pity note?

Look, I think emerging markets are a generation behind developed markets, if we can kind of think of it that way. Whereas if we were looking at this 5, 8 years ago, we were looking at developed markets in single digits and growing and growing quickly, we'd be talking about can they get to 30%. And now they're at 30%, we look at research and say, does the research show it getting towards potentially 70%, we've seen research that indicates that's certainly possible. Emerging markets are now in the single digits. And so the ability and for those to grow in the next wave into double digits and then how far, how fast I wouldn't want to prognosticate upon. But I think there's an opportunity for emerging markets to really substantially deepen their penetration. What the ultimate penetration can be? I haven't seen research market-by-market from that in emerging markets. But obviously, we're excited about where it can go, and it's very, very early days, with Spotify just launching in 85 markets within the last year. So, really, a lot of this is just getting started in so many markets.

Of those 85 markets, are there any event really stands out, in particular, for growth? We did a deep dive on music a year ago for this conference. And one of the things when we were talking to people in the industry over the summer, a lot of people mentioned the potential of Africa. I think it came up many times. So is there anything -- any region or any country, I mean, South Korea is included in those 85 countries? Anything that you would highlight as particularly interesting?

Well, what I would say is we do see the emerging markets as being really, really diverse set of opportunities. We have been -- and I'm not going to specifically target the 85%. But on emerging markets, we've been focused on China for a good long time and started with a nice acquisition. And I think 2014 with Gold Typhoon catalog and have invested in both from there. In Russia, we have a label that we acquired in the same rough vintage as Gold Typhoon and just acquired another label Zhara this year and are really building very strong share in Russia. When you look at the markets that are kind of next-gen and you look at Africa, which we agree has huge potential, we've done some investments in acquisitions in Africa; Chocolate  City, a label in Nigeria as a company, we built a very strong affiliation with. And there's others that we're moving forward with there. And same thing in the Middle East, where we are building a relationship with Rotana and there's other -- and we've also launched the label in Turkey as well as a pan mid-East label that's headquartered in Beirut. So, we are very excited about those regions as well and are really putting a lot of resource into finding the right investments in growing those markets. But part of what's exciting about emerging markets is there's so many of them and so many markets, some which are modest in size, but have potential because you aggregate a region, they become substantial. But if you look at markets like Vietnam that has close to 100 million population. And again, we launched the label there 2 years ago and are making great progress there. So, we think part of emerging markets is just really looking at the streaming growth curve and investing into that growth. And it's nothing to necessarily be one, 2 or 3 markets, but the aggregation of dozens of markets that really make that compelling and scaled. And we see that coming. So, we've been putting in that investment and building that broader and broader geographic footprint, really every year. We're expanding every quarter almost. It's moving that quickly, and we're really excited about.

I mean, that's an interesting point as you expand into all these years there's like truly ways to monetize music label in many of these areas that were kind of had a reach before. How do you think about the build versus buy?

So, we're very opportunistic about it. So, the first thing we do is look at markets and look at what project what we think the potential timing of the revenue growth is, we look at the robustness and availability of local music, local music in many of these markets is really important, is there a robust local scene of creating new content. We look at whether there's existing independent labels there that have quality catalogs and/or run existing labels and genres that we stream well. And if those things exist, we evaluate that. That is definitely one thing we're evaluating by market, often also looking at their management team to see us as a management team that could be a fit with the Warner Music Group. At the same time, we're also looking at the ability to build the label from the ground floor and what we need to do that, whether it's the team, whether it is the outlets to distribute and our ability to tap into them. And then we just look at the challenges or opportunities to execute and the financial analysis of the cost payback and market by market, we pursue a customized strategy. And so in some markets like Turkey and Vietnam, we have launched by building labels from the ground floor. In other markets like Nigeria and Russia, we've done it through the acquisition route. So, we're very opportunistic and take advantage of the opportunities there. But regardless of whether we buy or build, when we enter a market, we're looking to have a real impact when we come in on the ground, both distributing our international repertoire, but also investing in our design local reperform. We've seen a lot of successes, and it's become a bit of -- I don't want to say a formula because every market is different, but an expertise that we feel comfortable that we have and specifically our emerging markets teams have as they're looking at the next markets to pursue around the world.

Right. So that brings us to A&R in general. Can you talk about how that function has changed over the last several years and how do you see it changing over the next foreseeable future?

Well, I think there's a couple of ways to answer that. But I think we have to start with -- few years ago, it was very manual, meaning, it was human beings going out, finding artists, building a relationship with artists, understanding their seriousness of their craft and building their career and willingness to collaborate. Now, it's a combination of that A&R skill set that we have with technology and tools. So, we have tools that help our A&R staff identify artists very early in their career that may have one video that's just starting to flicker on one platform. And so we use that to be able to accelerate our ability to identify artists that have some initial followings and maybe some music worth noticing. And then we build it from there with the same A&R team and relationships. The ability to use tools to accelerate our ability to identify and sign artists very early has been a meaningful change that we're using in both recorded music and Warner Chappell everywhere around the world. So that kind of hybrid technology team has changed it a lot. Some of the things that haven't changed is we've always invested in talent at different stages of their career. We invest in artists who are unknown and have talent that we think we can break. We invest in artists that are well-established and may be coming on to the market. We invest in catalogs that may be coming up, and we invest in -- and we also have ADA, which distributes independent labels. So we really were throughout the [ food ] chain, and we're very financially oriented. So we make our investments where we think we'll have the best return for the capital we deploy, and we follow the opportunity. And so we invest in all of those categories and pursuing all of them and by the way, in dozens of geographies and more geographies around the world every year over and over again. And it's really a battle for the best deployment of capital that can develop the best return and drive the growth of our business.

So as the market increasingly shifts towards streaming, what are the applications for A&R, so the cost they at our costs?

Well, A&R costs are definitely going up, but that's because the market is growing. And the market is growing, which means that the forecast for revenue for artists and for their music. So long as it's in the genres that are growing, specifically streaming, as you call out, Jessica, means that the value of an artist goes up and that the value of an artist goes up and our -- in our ability to deploy capital and still get a really strong return goes up. So, we think everyone wins when the industry grows, and we're really excited about continuing to identify, sign, invest in artists, both with capital but also with resources, helping them develop their best music, helping them develop their best campaigns to get their music noticed, helping them develop skills across social media and other ways to promote their music. And so we think there's a real kind of diversification and growth of the ecosystem, some of that is clearly financial as the opportunity to drive revenue from a broader and broader array of artists grows every year.

Right. So let's switch guess a little bit to life. It felt like things are really beginning to come back and then delta aware that we had how do you think that it can -- this can precisely delay or return to full-scale LIBOR are you seeing that acing? I mean there are life events, but do you think before we get back to kind of why effective scale? Do you have the rise last summer with your goal?

So I want to be a little cautious because live is not our primary business. And so we're not necessarily the primary driver of when lives come to that. We clearly have businesses that are affected by live and that are in the live business. We have concept promotion business in a couple of markets in Europe, like Spain. We have a tour merch business, primarily in the US. So those businesses clearly are affected by it. What I can say from our perspective, the first thing is that we are ready to take advantage of the opportunities when they -- as the market opens. But we've also kind of restricted our deployment of capital until the market comes back. So we've got of tried to find the balance between not overinvesting in a market that's not monetizing, but still maintaining our infrastructure when it does monetize, we can move very quickly. But I do think this is going to be staged. The timing, I can't say exactly, but I do think touring is starting to come back, but not as robustly as it might if the delta variant wasn't there. So I suspect this is going to come back over a year or 2 in steps. The exact speed of the steps I wouldn't want to speculate on.

Are there any long-term implications for the music industry, having been shut down on such an extensive unusually extended period of time?

Well, I think some of the implications are coming back to some of the things we've talked about. I think as live shutdown, other forms of contents that allow artists to connect directly with fans really took hold. And so social became a really meaningful way. Live streaming became a meaningful way for artists to interact with fans. And so the ability or the market to flex so that music could still be released and artists can still build a relationship with their audience has just evolved using digital platforms, and we think it will continue to be a meaningful part of the system going forward. So we've seen a lot of things that have accelerated because of the lack of live. We think when live comes back, all of those things will continue to evolve, how they're deployed. When you see someone like 21 Pilots using Roblox to do a live stream, that helps promote not just their recorded music but it also helps promote their tour. And so you see opportunities to use some of these digital platforms that have become now part of the -- much more part of the norm over the past 1.5 years, will continue to be, we believe, I believe, part of the norm and will be deployed as live comes back as part of promoting live. So, I just think we'll see this continue to evolve, but a lot of the tools that have come to be important parts of the equation, while live was taking a rest if you will, will continue to be important part of the equation. It's just been proven how effective they are.

All right. And just maybe switch gears a little bit. You mentioned a few times how financially disciplined Warner Music Group as a company. Can you kind of talk to us about how you see your margin profile changing over the medium to long term? I mean, obviously, streaming should be a tailwind. Is there anything else that would be a big driver of margin improvement or vice versa of anything that would hurt?

Yes. Well, we see 2 drivers for margin improvement. The first one is exactly as you said, the continued transition of the industry from historical physical formats, which we think we've grown in the past couple of quarters, physical formats, but we think long term, that continues -- will continue to be in decline as people move from physical formats to digital streaming formats. So, we think that will be a tailwind. We also have a series of cost management initiatives in place. I've talked about over the past year, our transformation office, which reports directly to our CEO that's actively working on a series of initiatives across recorded across Warner Chappell across corporate, to continue to build automation, standardization, best practices into our business and continue to manage costs. And we've also, as I love to talk about, we talk about our financial transformation initiative, which is scheduled to come live by 2023, and we expect in '23 to start realizing savings that we've sized in the $35 million to $40 million annual range. And so that cost management plan plus the shift from physical to streaming, which is ongoing, plus our continued revenue growth, which we think has a real opportunity to continue to grow faster than even the underlying run rate before those cost management programs that's the revenue streams, our gross margin have a real opportunity to grow faster than the run rate of our overhead costs, creates a natural margin uplift environment that we're working on cost to continue to find additional opportunities to drive that. And we're pretty excited about our ability to continue to move margin upward. I think we said when we went public, we saw ourselves in kind of low to mid-teen -- low to mid-20s margin in kind of 4 years out is 3 years to 5 years out from when we went public. We're now 1.5 years past that roughly, and we continue to see that trend of increasing margins step-by-step every year and getting to now that 1.5 years, how I'd probably move low to mid-20s to mid-20s just by the nature of time moving forward and that we've already moved margins. Adjusted EBITDA margin when we went public was 19%. It's now 21%. So we've moved margins up over the past year, 1.5 years, and we think we continue to make progress there. The one caveat, I would say, is that some of the live-related business that we've talked about come back like constant promotion, like tour merch, those are low-margin businesses. So when that revenue comes back, that will slightly moderate our margin. So as they come back, our margin growth might be a little more moderate than when it was on it is, if you will, because of COVID. But long term, we expect to be on the same trajectory that we indicated at the time we went public, all of those plans are moving forward consistent with our expectations.

Right. And one of the most surprising things that we've seen in the music industry, in general, in the last, I don't know, year or maybe a little bit more than a year, is how many catalogs have changed counts. It almost feels like there's a deal a day. I mean in one way it's very positive because it's an endorsement of the value of music and music rights. But if you're not the buyer or you're not the owner, it could be more and more expensive. So it's like if you build it, it takes years and buying is quicker. Can you just talk about, I guess, generally, how do you view music publishing? And then kind of -- sort of getting out of time, but then just expand that beyond music publishing to just talk about capital allocation priorities as a company?

Yes. So okay, let me hit the 2. So, the first thing we'd say on catalogs is where we think in -- not unique to just ourselves, but only a few companies have the ability to do what we can do. And I mean that from a couple of different angles. One is we have the ability to build catalogs. We're not reliant on buying catalogs. We have the ability to sign artists, both on the publishing side and the recorded side early in their career to long-term deals and really work with them to build what will be the catalog of their catalog of the future. And so we have the ability to build as well as buy. Two is we're an operating company. So when we do look at deals to potentially buy catalogs, we don't look at it from a passive financial investor perspective. We look at it in terms of what we can do as an operating company to improve the performance of those catalogs as that catalog fully taking advantage of the opportunities of geographic expansion has it taken advantage of the full array of digital licenses that we can deploy that catalog for, has it been aggressive in the sync markets. And so we see an opportunity, we look for opportunities where we can add value to catalog. So that said, we're financially disciplined. So we look at catalogs quite frequently. As you said, a deal a day kind of a thing. But we don't look at a catalog with a sense that we feel pressure to have to do any individual deal. We look at it and say, can we meet our financial returns, can we add value so that we get in a meaningful value-added position because it's part of the Warner Music Group. When left plus the strategic fit either into the markets, it's part of or the genres as part of when we see the right fit, we'll pursue them and pursue them aggressively. And we've got a series of deals over the past year. We've acquired Bruno Mars' publishing rights. We've acquired David Guetta's master rights. We've done a series of other deals, and we'll continue to look for those deals. But we'll do it with a perspective of what makes sense for us, not just chasing a deal because it is in the market. We work with a fair amount of discipline, knowing we can deploy our capital to build as well as buy, and we do both in balance. And then capital allocation question number 2. Look, we first and foremost look at growing our business. And we think there are -- we have found there are opportunities to invest in the growth of our business, whether it's acquiring catalogs, whether it's signing more artists in genres or markets that we think are high-growth and artists that we believe in, whether it's investing in technology that can help us optimize our cost structure and infrastructure. So we invest in our own growth. And so long as we see opportunities to do that in a way that is financially accretive, we'll continue to make that our first priority. The second priority is returning capital to our shareholders. We have a fixed dividend policy. We've recently raised that, consistent with the growth of our business. We'll continue to look at our dividend policy as our business grows, not our policy, but the payout rate as we grow. And so those are our first priorities. Obviously, we could look at other things such as debt paydown with our excess cash flow, but quite frankly, the ability to invest in our own growth has looked sufficiently attractive and available to us that we haven't paid down that in several years. And what we're seeing continues to show us a real opportunity to invest in the growth of our business, and we continue to pursue that aggressively.

Great. With that, we are out of time. I cannot thank you enough Eric for joining us today and for everybody else, we will reconvene at Tuesday with Spotify.

Thank you, Jessica. Really appreciate it. Thanks, everyone, for joining.