UNVGY - Pershing Square - Universal Music Group:  A High-Quality Capital-Light Business

2024-03-24 09:30:00 ET

Summary

• Universal Music Group is a high-quality, capital-light business rapidly growing royalty on greater global consumption and monetization of music.
• We believe that the long-term outlook for UMG is strong and that the company will continue to outperform its mid-term guidance.
• UMG is demonstrating its ability to harness AI's growth opportunities while also ensuring regulatory and legal protection for its artists.

The following segment was excerpted from this fund letter.

Universal Music Group ( OTCPK:UMGNF , "UMG")

Universal Music Group is the world's leading music entertainment company and a high-quality, capital-light business that can be best thought of as a rapidly growing royalty on greater global consumption and monetization of music. In 2023, UMG's organic revenues grew 12% while Adjusted EBITDA grew 19%, far in excess of the company's mid-term guidance. We generally prefer to follow the progress of an earnings-per-share driven metric of bottom-line financial performance rather than adjusted EBITDA when evaluating businesses. For 2023, however, UMG's Adjusted EBITDA is a reasonable method to judge the company's year-on-year progress in light of the large upfront option-grant expenses in 2023, a substantial portion of which are one-time in nature. We believe that the long-term outlook for UMG is strong and that the company will continue to outperform its mid-term guidance due to better monetization, cost rationalization, and continued development of new services....

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