Welcome to Warner Music Group's Second Quarter Earnings Call for the period ended March 31, 2022. 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. 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 second 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 Executive Vice President and 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 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 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 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. And with that, I'll turn it over to Steve..

Fresh Pair with Katty Customs, a sneaker culture show co-hosted and executive produced by Just Blaze; Iconic Records, a visual podcast that will explore the legacy of Notorious B.I.G.; and Limited, a merch design competition featuring hot artists and emerging creators.

WMX already ranks as a top five video company in the U.S., and this exciting roster of programming will bring advertisers new opportunities to reach young, engaged and influential audiences. The other two areas of incremental revenue I'd like to highlight today are, first, digital fitness.

WMG was the music launch partner for Peloton's gaming-inspired fitness experience, Lanebreak. The first artist featured on Lanebreak were two Warner Legends, David Bowie and David Guetta. Second, podcasting. Following the success of shows like People's Party with Talib Kweli, we're continuing to build our presence in this space.

Last month, we announced the launch of Interval Presents, our in-house podcast network sitting at the crossroads of music, pop culture and social impact. We already have shows in the works from Oscar-winning actress Lupita Nyong'o, and Grammy-nominated singer Jason Derulo, among other major talents.

When we took the company public less than two years ago, many of these business models were only nascent. While we still have plenty of work to do, we've made great progress in a very short period. Our strategies are proving to be sound.

The universe of possibilities continues to expand in every direction and will enhance the growth of an already robust music entertainment industry. IFPI reported that the global recorded music industry grew by an impressive 18.5% in 2021.

We're proud to say that we outperformed this benchmark by almost 2.5 percentage points, a testament to our impact on global culture and our ability to create communities of fans across every medium. During our last call, we talked about our DEI commitments, which we unveiled as part of our first ESG report.

This quarter, we announced a new initiative designed to help us achieve those objectives, our DEI Institute, the first of its kind within the music industry. It will help us tap into a wide array of external expertise as we educate our employees and implement action plans across our company.

Before I hand it over to Eric, I would be remiss if I didn't talk about the situation in Ukraine. We pray that this conflict ends soon and that the people of Ukraine can live in peace. As it's done throughout history, music is playing an indispensable role in lifting spirits and giving hope during this terrible hardship.

We're committed to supporting relief efforts, both for the people in Ukraine and the refugee population. This includes contributions to the Red Cross, Polish Humanitarian Action and Project Hope. As we announced in early March, we suspended operations in Russia.

We're very excited about all the great new music and fresh initiatives that will be introduced through the balance of the year. We look forward to keeping you updated as we continue to build our momentum. And with that, I'll turn it over to Eric..

Thank you, Steve, and good morning, everyone. There is a lot to unpack within our Q2 results, but I will start with some high-level takeaways. Core streaming remains healthy -- remains incredibly healthy underpinned by strength in subscription streaming. All of our non-digital revenue lines continue to grow as well.

While publishing is firing on all cylinders posting impressive results yet again. . Over the last several quarters, we've seen elevated levels of investments in A&R and M&A, which have obvious impacts on our cash flow.

As expected, this has drawn attention from analysts, and shareholders who want to better understand how we view these investments, what the return thresholds are and how these investments will drive future growth. I will get into that in more detail shortly. Moving on to our results.

Total revenue increased by over 13% on a constant currency basis reflecting double-digit growth in both recorded music and music publishing. On an as-reported basis, total revenue grew 10%. Total streaming revenue increased 12%, driven by growth across both businesses, including revenue from emerging streaming platforms.

This strong operating performance translated to adjusted OIBDA growth of 7%, with margins of 19.9% compared to 20.4% in the prior year quarter.

The decline in margin reflects the continued recovery in lower-margin artist services revenue, as well as the reduction in high-margin streaming revenue resulting from the impact of the new deal with one of our digital partners we discussed on our last earnings call.

Adjusted EBITDA grew 5% with margins declining from 21.4% to 20.5% due to the same factors that impacted adjusted OIBDA. As a reminder, adjusted EBITDA includes the pro forma impact of future cost savings and certain specified transactions.

You can find the calculations and reconciliations related to adjusted OIBDA and adjusted EBITDA in our press release. Recorded music revenue grew 11% driven by growth across all revenue lines. Streaming revenue increased 10% due to growth in traditional and emerging streaming platforms.

As we mentioned, our results reflect the impact of the new deal with one of our digital partners, which began at the start of fiscal 2022. Adjusting for the impact of the new deal, which was $31 million in the quarter, our recorded music streaming revenue would have grown 15%.

I want to provide a bit more granularity so that everyone understands the underlying trends within recorded music streaming. Normalizing for the impact of the new deal, subscription streaming revenue was robust in the high-teens. Comparability in our ad-supported streaming growth was impacted by a true-up payment that benefited the prior year quarter.

As a result, ad-supported streaming, which generally grows in line with subscription streaming, grew in the high single digits. We fully expect to see a normalization in our recorded music streaming growth rate commencing in Q1 2023 once we lap the anniversary of the new digital deal.

Artist services and expanded rights revenue grew by 25%, reflecting an increase in merchandising revenue and touring activity. Physical revenue grew by 8%, primarily driven by an increased worldwide demand for vinyl. Licensing revenue increased by 23%, mainly due to higher synchronization revenue.

Adjusted OIBDA was $253 million, a 5% increase over prior year quarter. Margin declined from 22.9% in the prior year quarter to 22.1% due to revenue mix. Music publishing had another strong quarter as well, posting revenue of $230 million and a growth rate of 23%, reflecting increases across all revenue lines.

Digital delivered strong revenue growth of 26%, driven by streaming growth of 23%, with strength across traditional and emerging platforms, digital benefit from the timing of new digital deals. Sync revenue increased over 28% due to higher commercial licensing activity in the quarter.

Performance revenue increased by 9% as bars, restaurants, concerts and live events continue to recover from COVID disruption. And mechanical revenue increased 8%, benefiting from strong physical sales. Music publishing adjusted OIBDA increased 33% to $61 million, while margin increased 2.5 percentage points to 26.5% from 24%.

As I mentioned on our last call, we still expect to see elevated full year CapEx in the range of $130 million to $135 million. In Q2, CapEx increased to $28 million as compared to $20 million in the prior year quarter, mainly due to investments in IT infrastructure and expansion of our E&P facilities.

Our financial transformation program remains on track and is expected to deliver annualized run rate savings of $35 million to $40 million once fully implemented starting in fiscal year 2023. Operating cash flow decreased 71% to $44 million from $150 million.

The decline was largely driven by the timing of royalty payments and other movements within working capital. Free cash flow decreased 88% to $16 million from $130 million in the prior year quarter. As of December 31, we had a cash balance of $385 million, total debt of $3.8 billion and net debt of $3.4 billion.

Since our IPO, we have continued to actively manage our capital structure, further reducing our weighted average cost of debt from 4% to 3.3% and extending maturities, with our nearest maturity date now in 2028. There is no question that the optimal use of our capital is to invest alongside the music industry's tailwinds.

I'd like to clarify a few points around the financial characteristics of our A&R and M&A investments. The vast majority of our A&R advances to artists and songwriters are recoupable, with royalties -- from royalties, and we recoup the overwhelming majority of them. It's just a matter of timing.

Artist deals have become more expensive because music is worth more in the streaming era. We can pay more because we earn more. The overwhelming majority of our new artist deals provide us with substantial recording commitments and long-term rights.

When we make M&A investments, they are typically accretive on day one, incremental to growth and financed with debt. With our M&A investments, which are sometimes for once-in-a-lifetime rights and catalogs, we have the luxury of being an opportunistic strategic buyer that can maximize the value of acquired rights through our global infrastructure.

Whether investing in A&R or M&A, we rigorously analyze every transaction and have a high degree of conviction that our broad portfolio of investments will drive profitable growth and shareholder value for years to come.

As we look ahead, we feel great about the health of our business and how we are positioning ourselves to take advantage of the vast opportunities for growth that lie ahead. Thank you for joining our call today, and we will now open the call for questions..

[Operator Instructions] Our first question comes from Benjamin Black with Deutsche. Your line is open..

The first one is for Steve. As you mentioned, a lot has happened into your IPO between COVID, inflation, interest rates and obviously the war. So has your long-term outlook changed at all? I know the entire market has come under pressure, but your stock has actually been hit a lot harder.

So what do you think the market is missing? And then perhaps one for Eric on margins. How should we be thinking about the cadence of your margin expansion over the next couple of years? I understood that some of the lower-margin revenue streams are coming back this year, and you have the drag from a new DSP deal.

So should we anticipate sort of more modest margin trends this year before we see a more meaningful step-up in '23?.

War, inflation, rising interest rates. That being said, music has, and I believe will continue to prove its resilience because it is fundamental to human nature, whether it be in good times or bad times. I would remind everyone that at the height of the pandemic, music consumption continued to increase and new use cases emerged virtually every day.

So our long-term outlook remains unchanged. And if anything, we're even more optimistic. As Eric mentioned, streaming continues to be strong, both in established and emerging markets and new opportunities are coming online all the time.

Many of the emerging business models that we had talked about at the time of our IPO are now generating meaningful revenue and are growing faster than traditional revenue streams. I also believe that we're better positioned to capitalize on these opportunities because of our size and our innovative mindset.

We remain committed to long-term artist development. We were early to see opportunities in emerging markets, and we continue to seek out, find and seize those opportunities. We are clearly the market leader by way of innovation. We saw it with streaming. And now as we see the Web3 space, we've moved faster and in more agile ways than our competitors.

We've been the first to set precedent setting deals and we'll continue to do so. So I'm very confident despite all of the craziness and chaos in the world that music will continue to be a driving force in our lives and in business until the end of time. Hopefully, that answers your question number one, Ben..

Ben, let me tackle your second question. I'll hit a few key points, and thank you for the question on margins. So first, what we're seeing is something that we fully expected. Two is our recorded music margins actually increased once you adjust for the DSP renewal.

So on a fundamental operating basis we’re still seeing margin growth, but yes, your question in these results, as artist services recovers it is a lower margin business. It will cause a slowing or a flattening in margin in the short term.

Once artist services recovers, we fully expect to resume our margin expansion trajectory consistent with our plans at the time of the IPO and heading towards mid-20s margin. So everything we're seeing is what we expected and, operating basis, we're still very comfortable with our commitment towards margin expansion..

Our next question comes from Ben Swinburne with Morgan Stanley. Your line is open..

I guess I was hoping, Steve or Eric or both, could give us some more color on the emerging streaming business that you mentioned grew on a run rate basis this quarter.

What's happening at a high level with those deals in terms of fixed versus variable? And is there -- are there one or two areas, Steve, you would really highlight that you're particularly excited about as you look out over the next 12, 24 months? And then maybe for Eric, obviously, there's a lot of concern in the market about the economy than just sort of macro headwinds.

Could you just remind us, again, at a high level, how you think about your revenue base in terms of what might be exposed to the economic cycle versus just sort of underlying growth tied to subscriptions, et cetera?.

So I'll start on the emerging streaming fix versus variable question. So it is absolutely something that we've been working with our emerging streaming partners. Note that we literally have hundreds of licenses with many different categories of products and services.

So it's not a onetime thing, but we are -- and one thing just to set the table, emerging streaming platforms are generally services or products that are multimedia.

Music is incorporated into the product, critically essential to their products, but it can be music paired with video, music paired with a game, music paired with graphics or some other social or fitness multimedia product.

We have been encouraging and working with these partners for them to develop the systems and capabilities to report on music on a stream-by-stream, consumption-detailed basis that allows us to have truly variable deals.

As they develop those capabilities, it is our intent to negotiate variable deals tied to revenue or consumption, whatever the right variable is, and we're moving towards that. In this quarter, there were no major renewals, smaller renewals, but not major renewals. So we continue to work towards that end. What I will say is it will take some time.

Different companies are making different degrees of progress on developing the systems capabilities to track music on a stream-by-stream, consumption basis. So it's not going to be a moment but a process that we're working with over time. Hopefully, that answers your first question.

What I will say is that we are incredibly excited about what we're seeing, and you see this focus of our partnerships on Web3-type capabilities, whether it's NFTs, avatars, games that can be installed within metaverses. We think there's an extraordinary amount of opportunity to be developed there.

We want to develop long-term business models, not one-offs that come and go and can't be sustained. So we're working on a series of projects and experiments with various partners that we've talked about. And a lot of our artists are interested in exploring this field.

Steve mentioned several in his talking points like Kevin Gates, so we're very excited about this as a future and new avenue of growth, and we're really working very hard to be innovators in this space. On the macro economy side, what I would say is that music is a cornerstone of people's lives.

We think music is -- has the expectation -- we have the expectation it will be incredibly resilient even as macroeconomic challenges emerge. We think it's different than other forms of streaming, focusing on that for a second.

In other forms of streaming, people generally have like video, multiple streaming services, each of which have different content and people can decide which one they value more than another streaming service. In audio, people generally have one streaming service they subscribe to, which is all the music aggregated in one place.

We think it's a very, if you will, fairly priced, if not even low-priced, high-value service that's central to people's lives. And so we think what we've been seeing and what we expect is that it will be incredibly resilient there.

And so we think music and the innovation of new digital services represents a continued growth market for music as we look forward despite macroeconomic challenges, and we've been seeing that so far.

That said, we continue to monitor everything that's happening in the world and in the economy, to look at areas where we continue to get more efficient, areas where we should be focusing resources to drive the best revenue growth and value creation.

And so we continue to be mindful and focused on a changing and complex world, but we're still extremely optimistic about the growth vectors of music going forward..

Our next question comes from Kutgun Maral with RBC Capital Markets. Your line is open..

I was hoping to dig into streaming revenue trends and your expectations for the back half of the year. Underlying growth at recorded music of 15% in Q2 was fairly healthy.

I guess looking ahead, do you view the mid-teens growth rate as being sustainable? And is there a scope for a potential acceleration off of the 15%? Just for my end, looking at the different components it seems like subscription streaming revenue growth will presumably stay in the high teens range and that you just reported in Q2.

Ad-supported streaming growth should maybe normalize closer to that high teens increase at subscription as well as you shift away from that true-up payment comp from last year. And perhaps there are new deals with emerging streaming platforms as well after a relatively quiet few quarters, and maybe that could help bolster overall streaming growth.

So I know that you don't provide guidance, but is this the right way to think about the trajectory for the back half of the year? Or are there any other puts and takes that -- puts and takes that we should be mindful of?.

Thanks, Kutgun. I think that was a quite thoughtful kind of statement. Certainly, we don't give guidance. So what I would say is, this quarter, our fiscal Q2 subscription streaming continue to grow high teens, the fundamentals of that business, we see are incredibly healthy.

We see penetration growth opportunities in both developed and emerging markets around the world. Spotify has had success with their price increases. Their constant currency ARPU went up 3%, I believe, in this quarter. We continue to be encouraging of others to look at pricing as an opportunity to improve economic performance of streaming.

So we see streaming as being very strong, the emerging forms of streaming and what we're starting to see in Web 3.0 gives us a lot of enthusiasm as well going forward.

On the ad-supported side, you're right, there was that true-up in the accounting of that this quarter that have caused it to have lower growth for this individual quarter, but the fundamentals of ad-supported streaming growth remain very healthy and we have seen and fully expect to continue to see ad-supported streaming growing in line with subscription streaming on a fundamental basis.

So we feel very good about the streaming platforms, their growth and the opportunities going forward, absolutely..

Our next question comes from Andrew Uerkwitz with Jefferies. Your line is open..

Just -- could you talk a little bit more about the catalog environment and the impact interest rates could have there? Are there a lot of catalogs out there? Are there a lot of sellers, are there a lot of buyers? Can you just talk about the competition there and the impact of interest rates -- rising interest rates could have on sale and price to those catalogs?.

So Andrew, I appreciate the question. So look, there have been, and I think COVID's impact on artists' ability to tour certainly -- and low interest rates create an environment where a lot of artists were interested in exploring the sale of their catalogs.

As artists are able to tour again and additional revenue streams come back to artists, and as interest rates rise, which could cause potential buyers to just analyze the math with different discount rates and come up with lower values could cause things to change over time. Obviously, interest rates are projected to go up over time.

So we don't think there's a moment where either catalog values will change dramatically or artists' interest in selling will change dramatically. But over time, those changing dynamics could have changed the equation both for buyers and sellers. In the short term, we do expect more catalogs to come up for sale.

We will do what we have always done, which is we analyze them on an opportunistic basis. If it's a strategic fit and well priced, we will consider doing deals, but we don't feel any pressure to do deals. We have many ways to invest capital to drive growth, both organically through M&A, launching in new markets, acquiring labels and acquiring catalogs.

There's many different tools that we have, and we will continue to evaluate the market and do deals where appropriate, and work to make sure we're investing our capital with financial discipline to find the best returns for our investment and to drive the best growth profile going forward..

Our next question comes from Michael Morris with Guggenheim. Your line is open..

A couple of questions. One, Eric, you just touched on this, but I'm curious if you could expand on thoughts on the return of touring and the impact, or impacts that could have on the business. We know about the margin dynamic, but I'm thinking more like top line impact.

First of all, do you think it's just kind of a return to sort of the prior environment? Or are there any reasons to think that sort of touring and in-person interactivity could be something bigger in sort of a post-COVID world? I'm also curious whether you think that the ability to have live performances can impact streaming and just kind of appetite for music, enthusiasm, et cetera.

So that's the first question. And then the second question along the line of the acquisitions.

As you think about the geographic expansion that you've also been embarking on and supplementing with acquisitions, what are your thoughts on expanding the footprint further from here versus where you currently stand?.

Sure. Just writing down, there's a lot of question, Michael. So the return of touring, certainly it will be interesting. There'll certainly be some dynamics that change around the tour. So I would expect social to be a great promoter of tours around the world, artists and labels and partners using social applications to build buzz and momentum.

I would expect labels and artists to be working together to create surrounding opportunities around tours, where in the past, it be tours with merch, now it will be tours with merch, and there may be Web3 applications to create micro communities that are giving NFTs and special opportunities.

And those kinds of things, I think, are going to become one experimented with in the short term, what works, what the fans really love, what do they respond to, obviously, at some level, what monetizes. So I think we'll start to see experimentation in those areas, both around the release of new music but also around tours.

So I think there'll be new kind of dynamics that are explored and new norms that develop over time. For the Warner Music Group, obviously, our artist services business has a significant portion that's tied to touring. We have several concert promotion businesses in Europe, in France and Spain, for example. We have a tour merch business in the U.S.

And as touring comes back as we're seeing this quarter, those revenue streams start to come back, and that's a very healthy thing. Again, they are lower margin businesses, but they are positive to overall margin. Meaning not the margin percentage, but it's incremental dollars on revenue and OIBDA. So we're thrilled they're coming back.

It's an important part of the music equation, and it's healthy that artist services is recovering and show signs that obviously that the economy is starting to get back to something more normal post-COVID. On the M&A side, certainly, what we focus on when it comes to geographic expansion are the emerging markets.

We have always been a company that focuses on return on investment. We have been cautious not to overinvest in emerging markets before streaming and legitimate revenue streams are able to really drive growth. When those fundamentals are in place, or are starting to come into place, we start to focus on developing our capabilities in those markets.

And we've done it time and time again over and over again in the past few years, in Turkey, in the Middle East, in Vietnam before that in China, and Indonesia and Brazil and Mexico. We're now looking at a series of areas that we're really excited about. Steve mentioned MENA, Middle East, North Africa, which is the fastest-growing region in the world.

I think it grew 35% or so last year. We recently acquired Qanawat, the largest music distributor throughout the Middle East. We launched an organic label, an owned and operated label in the Mid-East roughly three years ago to get the start and build relationships.

We developed a partnership with Rotana, one of the largest labels throughout the Middle East. So our capabilities, our infrastructure our music that we're putting out and how we're monetizing in the Middle East is changing really rapidly. We're a significant player there.

And we've got a similar mindset in Africa where we acquired Africori, where we developed a partnership with Chocolate City, one of the most significant labels in Nigeria and have been releasing great music. And CK that came out of Africa had just had a global hit earlier this year.

So those are two areas in the world that we're starting to see, monetize, and we're leaning into heavily. But obviously, there's other markets in Asia, Latin America that we're continuing to lean into as well. And we're very excited about the continued globalization of music. We see it as one of the really meaningful growth vectors..

Our next question comes from Matthew Thornton with Truist. Your line is open..

Steve and Eric, maybe two quick ones, if I could. You touched on touring, but I was wondering maybe if you could touch a little bit on the E&P business. Obviously, I would assume that it had some benefits during the lockdowns and pandemic.

I'm curious how that's performing as we kind of have opened up and continue to open up any color there would be helpful. . And then just secondly, Eric, you talked about cash conversion effectively a little bit early.

I'm just kind of wondering if there's a number we should think about as you think about conversion from adjusted OIBDA to free cash flow, again, barring any deals. Is there a way to think about what a normalized number looks like there? Any color would be great..

One the pull forward of the prior year; but two, some of the supply chain disruptions in the world have created a challenge for E&P getting the products they've ordered on time, that they need, and that has caused a challenge. They have been incredible leaders in working through those challenges and getting those resolved.

But that has been a challenge with many companies around the world. E&P is not divorced from that. And quite frankly, the war in Ukraine has been a challenge as well. I think the climate in parts of Europe have been much more cautious, and there's just less of an environment for people to be shopping for, kind of, lifestyle goods.

So E&P continues to do fine, but its growth trajectory has definitely in the short term leveled off. But we're very excited about E&P in the longer term. We just have to get past this moment, which we will. And then on the cash side, what I would say is it's kind of two pieces. First and foremost, we're very focused on growing our business.

And as our revenue and OIBDA grow, our fundamental operating cash flow, we fully expect to grow with that. However, we have a waterfall of how we deploy our capital. The first part of our waterfall is evaluating ways to reinvest in music, to continue to drive future growth.

If we find opportunities that meet our return thresholds, our first priority is to deploy our operating capital, our operating cash flow into driving future growth if it meets the high return threshold that we have. Second, our second step in the waterfall is to return cash to shareholders. Third would be to pay down debt.

We haven't done that in quite some time because we have found ample opportunity to invest in music to drive future growth. When we invest in driving -- in music to drive growth, it's generally in the form of advances. Advances are recoupable.

So even if our cash flow in an individual quarter is down because we are laying out advances, please remember that's just timing. As our music performs, we recoup those advances. And so it really comes full circle. So we are opportunistic quarter-by-quarter based on the deals we see in the market.

If there are deals that are accretive to growth and meet our return thresholds. We are more than happy to deploy our capital to accelerate future growth, especially because our advances are recouped in time as music performs. Hopefully, that helps, Matthew..

Our next question is from Jason Bazinet with Citi. Your line is open..

I guess over the last couple of months, the market seems to have moved from rev multiples and gross profit multiples and EBITDA multiples down to earnings and free cash. And through that lens, I just wanted to ask a quick question about cash from operations.

It seemed like it was your cash generation is pretty muted, I guess, through the first half of the year. But it seems that working capital is almost always a drag in the first half and tends to reverse in the second half, not always.

But can you just -- maybe it's related to the topic you just talked about in advances, but can you just elaborate on that a bit? And is there anything different that you anticipate in this fiscal year versus the last few fiscal years where we've seen a reversal in the second half?.

No, there's no -- again, the deployment of capital for advances is really opportunistic. It doesn't necessarily have -- it's the timing of deals. There's not really a seasonality to that. There are parts of working capital that are seasonal. Bonuses are paid in the first half of the year, for example.

So you see that as a drag in the first half of each year, and then the benefit or recovery in the second half of the year. The timing of when DSP deals are renewed is not seasonal. It is just based on the timing of deals and when they're renewed.

So a lot of it is just based on the timing of deals, which is hard to predict, but there are a few things like bonuses that are more of a drag in the first half of the year than the second half, Jason..

This concludes the question-and-answer session. I would now like to turn the call back over to Steve Cooper for closing remarks..

Thanks again, everyone, for joining us today. We appreciate all of you taking the time. We hope you have a wonderful spring and summer, and we will talk again in a few months. Everybody stay well and stay safe. Thank you again. ..

This concludes today's conference call. Thank you for participating. You may now disconnect..