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Item 1. Financial Statements

2024-08-07 compared with 2024-05-09 · 127 added, 112 removed, 592 unchanged (29% of the section changed)

36 unchanged sentences

Class A common stock, $ 0.001 par value;

1,000,000 shares authorized, 141,596 and 138,345 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively

1,000,000 shares authorized, 141,603 and 138,345 shares issued and outstanding as of June 30, 2024 and September 30, 2023, respectively

Class B common stock, $ 0.001 par value;

1,000,000 shares authorized, 376,315 and 377,650 issued and outstanding as of March 31, 2024 and September 30, 2023, respectively

1,000,000 shares authorized, 376,315 and 377,650 issued and outstanding as of June 30, 2024 and September 30, 2023, respectively

Additional paid-in capital 2,053 2,015

11 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

9 unchanged sentences

Operating income 207 189 680 578

Loss on extinguishment of debt — ( 4 ) — ( 4 )

Interest expense, net ( 40 ) ( 38 ) ( 121 ) ( 105 )

19 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

13 unchanged sentences

(In millions)

Six Months Ended

Nine Months Ended

Cash flows from operating activities

4 unchanged sentences

Deferred income taxes 29 ( 18 )

Loss on extinguishment of debt — 4

Net loss (gain) on investments

9 unchanged sentences

Other noncurrent assets

( 85 ) ( 10 )

Accounts payable and accrued liabilities ( 119 ) ( 93 )

Royalty payables 352 250

Accrued interest 8 12

Operating lease liabilities ( 4 ) ( 2 )

27 unchanged sentences

(In millions, except share amounts which are reflected in thousands, and per share data)

Six Months Ended March 31, 2024

Nine Months Ended June 30, 2024

Common Stock Class B

15 unchanged sentences

Distribution to noncontrolling interest holders — — — — — — — — ( 6 ) ( 6 )

Acquisition of noncontrolling interests — — — — — — — — ( 1 ) ( 1 )

Shares issued under the Plan 1,738 — — — — — — — — —

1 unchanged sentence

Shares issued under Omnibus Incentive Plan 185 — — — ( 5 ) — — ( 5 ) — ( 5 )

Balance at March 31, 2024 141,596 $ — 376,315 $ 1 $ 2,043 $ ( 1,310 ) $ ( 301 ) $ 433 $ 152 $ 585

Three Months Ended March 31, 2024

Balance at June 30, 2024 141,603 $ — 376,315 $ 1 $ 2,053 $ ( 1,260 ) $ ( 311 ) $ 483 $ 152 $ 635

Three Months Ended June 30, 2024

Common Stock Class B

6 unchanged sentences

Shares Value Shares Value

Balance at December 31, 2023 140,637 $ — 377,103 $ 1 $ 2,039 $ ( 1,317 ) $ ( 260 ) $ 463 $ 153 $ 616

Balance at March 31, 2024 141,596 $ — 376,315 $ 1 $ 2,043 $ ( 1,310 ) $ ( 301 ) $ 433 $ 152 $ 585

Net income — — — — — 139 — 139 2 141

6 unchanged sentences

Distribution to noncontrolling interest holders — — — — — — — — ( 1 ) ( 1 )

Shares issued under the Plan — — — — — — — — — —

Exchange of Class B shares for Class A shares 788 — ( 788 ) — — — — — — —

Acquisition of noncontrolling interests — — — — — — — — ( 1 ) ( 1 )

Shares issued under Omnibus Incentive Plan 7 — — — — — — — — —

Balance at March 31, 2024 141,596 $ — 376,315 $ 1 $ 2,043 $ ( 1,310 ) $ ( 301 ) $ 433 $ 152 $ 585

Six Months Ended March 31, 2023

Balance at June 30, 2024 141,603 $ — 376,315 $ 1 $ 2,053 $ ( 1,260 ) $ ( 311 ) $ 483 $ 152 $ 635

Nine Months Ended June 30, 2023

Common Stock Class B

16 unchanged sentences

Shares issued under Omnibus Incentive Plan 273 — — — — — — — — —

Balance at March 31, 2023 138,324 $ — 377,650 $ 1 $ 2,000 $ ( 1,488 ) $ ( 261 ) $ 252 $ 14 $ 266

Three Months Ended March 31, 2023

Balance at June 30, 2023 138,341 $ — 377,650 $ 1 $ 2,007 $ ( 1,450 ) $ ( 277 ) $ 281 $ 18 $ 299

Three Months Ended June 30, 2023

Common Stock Class B

6 unchanged sentences

Shares Value Shares Value

Balance at December 31, 2022 138,073 $ — 377,650 $ 1 $ 1,984 $ ( 1,439 ) $ ( 276 ) $ 270 $ 12 $ 282

Balance at March 31, 2023 138,324 $ — 377,650 $ 1 $ 2,000 $ ( 1,488 ) $ ( 261 ) $ 252 $ 14 $ 266

Net income — — — — — 122 — 122 2 124

Other comprehensive income, net of tax — — — — — — 15 15 — 15

Other comprehensive loss, net of tax — — — — — — ( 16 ) ( 16 ) — ( 16 )

Dividends ($ 0.16 per share)

4 unchanged sentences

Shares issued under Omnibus Incentive Plan 17 — — — — — — — — —

Balance at March 31, 2023 138,324 $ — 377,650 $ 1 $ 2,000 $ ( 1,488 ) $ ( 261 ) $ 252 $ 14 $ 266

Balance at June 30, 2023

138,341 $ — 377,650 $ 1 $ 2,007 $ ( 1,450 ) $ ( 277 ) $ 281 $ 18 $ 299

See accompanying notes

24 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024.

Operating results for the three and nine months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024.

The consolidated balance sheet at September 30, 2023 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by U.S.

7 unchanged sentences

If an entity is not deemed to be a VIE, the Company consolidates the entity if the Company has a controlling voting interest.

As of March 31, 2024 and September 30, 2023, there were approximately $ 73 million and $ 5 million of assets and $ 2 million and $ 2 million of liabilities, respectively, related to VIEs included in our condensed consolidated balance sheets.

As of June 30, 2024 and September 30, 2023, there were approximately $ 72 million and $ 5 million of assets and $ 2 million and $ 2 million of liabilities, respectively, related to VIEs included in our condensed consolidated balance sheets.

The Company has performed a review of all subsequent events through the date the financial statements were issued and has determined that no additional disclosures are necessary.

20 unchanged sentences

The Company utilizes the two-class method to report earnings per share.

Basic earnings per share is computed by dividing net income available to each class of stock by the weighted average number of outstanding common shares for each class of stock.

Diluted earnings per share is computed by dividing net income available to each class of stock by the weighted average number of outstanding common shares, plus dilutive potential common shares, which is calculated using the treasury-stock method.

The potentially dilutive common shares did not have a dilutive effect on the Company’s EPS calculation for the three and six months ended March 31, 2024 and 2023, respectively.

The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and six months ended March 31, 2024 and 2023 (in millions, except share amounts, which are reflected in thousands, and per share data):

Three Months Ended March 31,

Basic earnings per share is computed by dividing net income available to each class of stock, less earnings available to participating securities, divided by the weighted average number of outstanding common shares for each class of stock.

Diluted earnings per share is computed by dividing net income available to each class of stock, less earnings available to participating securities, divided by the weighted average number of outstanding common shares, plus dilutive potential common shares, which is calculated using the treasury-stock method.

The potentially dilutive common shares did not have a dilutive effect on the Company’s EPS calculation for the three and nine months ended June 30, 2024 and 2023, respectively.

The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and nine months ended June 30, 2024 and 2023 (in millions, except share amounts, which are reflected in thousands, and per share data):

Three Months Ended June 30,

Class A Class B Class A Class B

2 unchanged sentences

$ 39 $ 100 $ 34 $ 88

Net income attributable to participating securities ( 1 ) — ( 1 ) —

Net income attributable to participating securities (a)

( 2 ) — ( 2 ) —

Net income attributable to common stockholders $ 37 $ 100 $ 32 $ 88

1 unchanged sentence

Basic and Diluted EPS $ 0.27 $ 0.27 $ 0.23 $ 0.23

Six Months Ended March 31,

Nine Months Ended June 30,

Class A Class B Class A Class B

2 unchanged sentences

$ 111 $ 283 $ 77 $ 201

Net income attributable to participating securities ( 3 ) — ( 2 ) —

Net income attributable to participating securities (a)

( 5 ) — ( 4 ) —

Net income attributable to common stockholders $ 106 $ 283 $ 73 $ 201

1 unchanged sentence

Basic and Diluted EPS $ 0.75 $ 0.75 $ 0.53 $ 0.53

______________________________________

(a) Participating securities include unvested restricted stock units, which include the right to receive non-forfeitable dividend equivalents.

Revenue Recognition

2 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

29 unchanged sentences

Sales Returns and Uncollectible Accounts

Based on management’s analysis of sales returns, refund liabilities of $ 18 million and $ 19 million were established at March 31, 2024 and September 30, 2023, respectively.

Based on management’s analysis of estimated credit losses, reserves of $ 21 million and $ 19 million were established at March 31, 2024 and September 30, 2023, respectively.

Based on management’s analysis of sales returns, refund liabilities of $ 19 million and $ 19 million were established at June 30, 2024 and September 30, 2023, respectively.

Based on management’s analysis of estimated credit losses, reserves of $ 23 million and $ 19 million were established at June 30, 2024 and September 30, 2023, respectively.

Deferred Revenue

Deferred revenue increased by $ 306 million during the six months ended March 31, 2024 related to cash received from customers for fixed fees and minimum guarantees in advance of performance, including amounts recognized in the period.

Revenues of $ 261 million were recognized during the six months ended March 31, 2024 related to the balance of deferred revenue at September 30, 2023.

Deferred revenue increased by $ 391 million during the nine months ended June 30, 2024 related to cash received from customers for fixed fees and minimum guarantees in advance of performance, including amounts recognized in the period.

Revenues of $ 314 million were recognized during the nine months ended June 30, 2024 related to the balance of deferred revenue at September 30, 2023.

There were no other significant changes to deferred revenue during the reporting period.

Performance Obligations

For the six months ended March 31, 2024 and March 31, 2023, the Company recognized revenue of $ 74 million and $ 41 million, respectively, from performance obligations satisfied in previous periods.

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at March 31, 2024 are as follows:

For the three months ended June 30, 2024 and June 30, 2023, the Company recognized revenue of $ 35 million and $ 27 million, respectively, from performance obligations satisfied in previous periods.

For the nine months ended June 30, 2024 and June 30, 2023, the Company recognized revenue of $ 109 million and $ 68 million, respectively, from performance obligations satisfied in previous periods.

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at June 30, 2024 are as follows:

Thereafter Total

3 unchanged sentences

On August 25, 2023, the Company purchased 51 % of the issued and outstanding equity securities of TenThousand Projects Holdings LLC (“TenThousand Projects”), an independent U.S.

record label pursuant to the terms of the unit purchase agreement of the same date among Warner Music Inc., a wholly-owned subsidiary of the Company, TenThousand Projects LLC, and Ten Thousand Projects Holdings LLC (the “Unit Purchase Agreement”).

The consideration transferred on the acquisition date was approximately $ 98 million which was comprised of the base purchase price of $ 102 million and the preliminary working capital adjustments, primarily comprised of cash acquired, net of a deferred purchase price of $ 12 million which is payable on or prior to one year from the acquisition date.

At March 31, 2024, the Company updated the purchase price allocation recorded at September 30, 2023, which resulted in a decrease to intangible assets of approximately $ 1 million and a net increase to goodwill of approximately $ 1 million.

The acquisition accounting is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired, in addition to the determination of the final consideration, including the determination of the final working capital adjustment pursuant to the mechanism set forth in the Unit Purchase Agreement.

The deferred purchase was adjusted to $ 11 million after the finalization of purchase price adjustments, including working capital and other items.

At June 30, 2024, the Company updated the purchase price allocation recorded at September 30, 2023, which resulted in a net decrease to intangible assets of approximately $ 1 million, a net decrease to goodwill of approximately $ 1 million, a net increase to other acquired assets and liabilities of $ 1 million, and a net decrease to the fair value of noncontrolling interest in the acquiree of $ 1 million.

The acquisition accounting is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired.

See Note 5, “Acquisitions,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 for the preliminary purchase price allocation, valuation methodology, and other information related to the TenThousand Projects acquisition.

8 unchanged sentences

Other comprehensive income (loss) 13 ( 1 ) ( 1 ) 11

Balances at March 31, 2024 $ ( 299 ) $ ( 2 ) $ — $ ( 301 )

Balances at June 30, 2024 $ ( 309 ) $ ( 2 ) $ — $ ( 311 )

______________________________________

7 unchanged sentences

Other adjustments (a) 7 — 7

Balances at March 31, 2024 $ 1,543 $ 464 $ 2,007

Balances at June 30, 2024 $ 1,539 $ 464 $ 2,003

______________________________________

(a) Other adjustments during the six months ended March 31, 2024 represent foreign currency movements.

(a) Other adjustments during the nine months ended June 30, 2024 represent foreign currency movements.

The Company performs its annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”) during the fourth quarter of each fiscal year as of July 1.

3 unchanged sentences

Intangible assets consist of the following:

Weighted-Average Useful Life March 31,

Weighted-Average Useful Life June 30,

2024 September 30,

12 unchanged sentences

Total net intangible assets $ 2,459 $ 2,502

The decrease in net intangible assets during the six months ended March 31, 2024 is partially related to the write off of approximately $ 35 million of unamortized intangible assets within trademarks and other intangible assets in connection with the winding down of the Company’s O&O Media Properties.

The decrease in net intangible assets during the nine months ended June 30, 2024 is partially related to the write off of approximately $ 35 million of unamortized intangible assets within trademarks and other intangible assets in connection with the winding down of the Company’s O&O Media Properties.

Please refer to Note 9 of our condensed consolidated financial statements for further discussion.

15 unchanged sentences

______________________________________

(a) Reflects $ 350 million and $ 300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $ 2 million and $ 2 million as of March 31, 2024 and September 30, 2023, respectively.

There were no loans outstanding under the Revolving Credit Facility at March 31, 2024 or September 30, 2023.

(a) Reflects $ 350 million and $ 300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $ 2 million and $ 2 million as of June 30, 2024 and September 30, 2023, respectively.

There were no loans outstanding under the Revolving Credit Facility at June 30, 2024 or September 30, 2023.

The Company is the direct parent of Holdings, which is the direct parent of Acquisition Corp.

1 unchanged sentence

is party to a $ 1,295 million senior secured term loan credit facility, pursuant to a credit agreement dated November 1, 2012, as amended or supplemented (the “Senior Term Loan Credit Agreement”) with JPMorgan Chase Bank NA, as administrative agent and collateral agent, and the other financial institutions and lenders from time to time party thereto (the “Senior Term Loan Facility”).

Additionally, as of March 31, 2024 Acquisition Corp.

Additionally, as of June 30, 2024 Acquisition Corp.

had issued and outstanding the 2.750 % Senior Secured Notes due 2028, the 3.750 % Senior Secured Notes due 2029, the 3.875 % Senior Secured Notes due 2030, the 2.250 % Senior Secured Notes due 2031 and the 3.000 % Senior Secured Notes due 2031 (together, the “Acquisition Corp.

9 unchanged sentences

Senior Credit Facilities, including the Revolving Credit Facility (as defined below) and the Senior Term Loan Facility, should Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increase above 3.50 :1.00 and the term loans not achieve an investment grade rating, the covenants under the Revolving Credit Facility, which are currently suspended, will be reinstated and the ability of the Company and Holdings to obtain funds from their subsidiaries will be restricted by the Revolving Credit Facility.

The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of March 31, 2024 .

The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of June 30, 2024 .

Fiscal 2024 Transactions

28 unchanged sentences

provided that, in respect of 2020 Revolving Loans, the applicable margin with respect to such loans is subject to adjustment as set forth in the pricing grid in the Revolving Credit Agreement.

Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.44 x at March 31, 2024, the applicable margin for SOFR loans and RFR loans would be 1.375 % instead of 1.875 % and the applicable margin for ABR loans would be 0.375 % instead of 0.875 % in the case of 2020 Revolving Loans.

Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.41 x at June 30, 2024, the applicable margin for SOFR loans and RFR loans would be 1.375 % instead of 1.875 % and the applicable margin for ABR loans would be 0.375 % instead of 0.875 % in the case of 2020 Revolving Loans.

If there is a payment default at any time, then the interest rate applicable to overdue principal will be the rate otherwise applicable to such loan plus 2.0 % per annum.

11 unchanged sentences

Maturities of Senior Secured Notes

As of March 31, 2024, there are no scheduled maturities of notes until 2028, when $ 351 million is scheduled to mature.

As of June 30, 2024, there are no scheduled maturities of notes until 2028, when $ 348 million is scheduled to mature.

Thereafter, $ 2.352 billion is scheduled to mature.

2 unchanged sentences

Interest Expense, net

Total interest expense, net was $ 42 million and $ 35 million for the three months ended March 31, 2024 and 2023, respectively, and $ 81 million and $ 67 million for the six months ended March 31, 2024 and 2023, respectively.

Interest expense, net includes interest expense related to our outstanding indebtedness of $ 46 million and $ 38 million for the three months ended March 31, 2024 and 2023, respectively, and $ 91 million and $ 75 million for the six months ended March 31, 2024 and 2023, respectively.

The weighted-average interest rate of the Company’s total debt was 4.5 % at March 31, 2024, 4.1 % at September 30, 2023, and 4.0 % at March 31, 2023.

Total interest expense, net was $ 40 million and $ 38 million for the three months ended June 30, 2024 and 2023, respectively, and $ 121 million and $ 105 million for the nine months ended June 30, 2024 and 2023, respectively.

Interest expense, net includes interest expense related to our outstanding indebtedness of $ 46 million and $ 41 million for the three months ended June 30, 2024 and 2023, respectively, and $ 137 million and $ 115 million for the nine months ended June 30, 2024 and 2023, respectively.

The weighted-average interest rate of the Company’s total debt was 4.5 % at June 30, 2024, 4.1 % at September 30, 2023, and 4.1 % at June 30, 2023.

Restructuring and Impairments

5 unchanged sentences

The majority of the Strategic Restructuring Plan is expected to be completed by the end of fiscal year 2025.

For the three and six months ended March 31, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $ 46 million, of which, $ 42 million was recognized in our Recorded Music segment and $ 4 million was recognized in Corporate.

The below table sets forth the activity for the six months ended March 31, 2024 in the restructuring accrual associated with the Strategic Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets.

Additionally, for the three and six months ended March 31, 2024, the Company recognized $ 50 million of impairment losses on unamortized intangible assets and other assets of which $ 47 million was recognized in our Recorded Music segment and $ 3 million was recognized in Corporate.

For the three months ended June 30, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $ 1 million, all of which was recognized in our Recorded Music segment.

For the nine months ended June 30, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $ 47 million, of which, $ 43 million was recognized in our Recorded Music segment and $ 4 million was recognized in Corporate.

The below table sets forth the activity for the nine months ended June 30, 2024 in the restructuring accrual associated with the Strategic Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets.

Additionally, for the nine months ended June 30, 2024, the Company recognized $ 50 million of impairment losses on unamortized intangible assets and other assets of which $ 47 million was recognized in our Recorded Music segment and $ 3 million was recognized in Corporate.

Impairment charges recognized primarily relate to the winding down of the Company’s O&O Media Properties.

4 unchanged sentences

Cash payments ( 9 )

Balance at March 31, 2024 $ 45

Balance at June 30, 2024 $ 38

2023 Restructuring Plan

In March 2023, the Company announced a restructuring plan (the “2023 Restructuring Plan”) intended to drive the evolution of the Company and position the Company for long-term growth, primarily through headcount reductions.

The 2023 Restructuring Plan is substantially complete as of March 31, 2024 and the remaining associated cash payments are expected to be made by the end of fiscal year 2024.

There was a $ 1 million benefit associated with the 2023 Restructuring Plan recorded for the three and six months ended March 31, 2024 primarily associated with a change in estimate for costs previously recorded.

For the three and six months ended March 31, 2023, total restructuring costs were $ 41 million consisting entirely of severance costs.

The following table sets forth the activity for the six months ended March 31, 2024 in the restructuring accrual associated with the 2023 Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets:

The 2023 Restructuring Plan is substantially complete as of June 30, 2024 and the remaining associated cash payments are expected to be made by the end of fiscal year 2024.

There was a $ 1 million benefit associated with the 2023 Restructuring Plan recorded for the nine months ended June 30, 2024 primarily associated with a change in estimate for costs previously recorded.

The following table sets forth the activity for the nine months ended June 30, 2024 in the restructuring accrual associated with the 2023 Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets:

Severance Costs

3 unchanged sentences

Cash payments ( 15 )

Balance at March 31, 2024 $ 6

Balance at June 30, 2024 $ 3

Commitments and Contingencies

7 unchanged sentences

Stock-based compensation consists primarily of common stock, restricted stock units and market-based performance share units granted to eligible employees and executives under the Omnibus Incentive Plan.

For the three and six months ended March 31, 2024, the Company recognized a total of $ 9 million and $ 18 million of non-cash stock-based compensation expense, respectively, which was recorded to additional paid-in capital.

For the three and six months ended March 31, 2023, the Company recognized a total of $ 21 million and $ 35 million of non-cash stock-based compensation expense, respectively, of which $ 9 million and $ 20 million was recorded to additional paid-in capital, respectively, and $ 12 million and $ 15 million was recorded as a share-based compensation liability, respectively.

During the six months ended March 31, 2024, $ 15 million of share-based compensation liabilities were reclassified to additional paid-in capital.

During the three months ended March 31, 2023, a separation agreement between the Company and our previous Chief Executive Officer was executed.

For the three and nine months ended June 30, 2024, the Company recognized a total of $ 10 million and $ 28 million of non-cash stock-based compensation expense, respectively, which was recorded to additional paid-in capital.

For the three months ended June 30, 2023, the Company recognized a total of $ 7 million of non-cash stock-based compensation expense, all of which was recorded to additional paid-in capital.

For the nine months ended June 30, 2023, the Company recognized a total of $ 42 million of non-cash stock-based compensation expense, of which $ 27 million was recorded to additional paid-in capital and $ 15 million was recorded as a share-based compensation liability.

During the nine months ended June 30, 2024, $ 15 million of share-based compensation liabilities were reclassified to additional paid-in capital upon a certain number of awards being determinable.

During the nine months ended June 30, 2023 , a separation agreement between the Company and our previous Chief Executive Officer was executed.

In connection with the separation agreement, the Company recognized $ 12 million of non-cash stock-based compensation expense associated with restricted stock units (“RSUs”) and common stock as there was no remaining service required for vesting.

During the three months ended March 31, 2023, the Company issued market-based performance share units (“PSUs”) to our Chief Executive Officer whereby the PSU award payout is determined based on the Company’s total shareholder return compared to a designated peer group.

For the three and six months ended March 31, 2024, n on-cash stock-based compensation associated with these PSUs was approximately $ 1 million and $ 3 million, respectively.

For the six months ended March 31, 2023, n on-cash stock-based compensation associated with these PSUs was approximately $ 1 million.

During the three and six months ended March 31, 2023, in connection with the 2023 Restructuring Plan, the Company recognized $2 million of non-cash stock-based compensation related to the accelerated vesting of certain RSUs.

During the six months ended March 31, 2024, in connection with the Senior Management Free Cash Flow Plan (the “Plan”), the Company issued a total of 1,738,016 shares of Class A Common Stock to settle a portion of participants’ deferred equity units previously issued under the Plan.

During the nine months ended June 30, 2024 and 2023, the Company issued market-based performance share units (“PSUs”) to our Chief Executive Officer whereby the PSU award payout is determined based on the Company’s total shareholder return compared to a designated peer group.

For the three and nine months ended June 30, 2024, n on-cash stock-based compensation associated with these PSUs was approximately $ 3 million and $ 6 million , respectively.

For the three and nine months ended June 30, 2023, n on-cash stock-based compensation associated with these PSUs was approximately $ 1 million and $ 2 million , respectively.

During the nine months ended June 30, 2023 , in connection with the 2023 Restructuring Plan, the Company recognized $ 2 million of non-cash stock-based compensation related to the accelerated vesting of certain RSUs.

During the nine months ended June 30, 2024, in connection with the Senior Management Free Cash Flow Plan (the “Plan”), the Company issued a total of 1,738,016 shares of Class A Common Stock to settle a portion of participants’ deferred equity units previously issued under the Plan.

Additionally, a Plan participant redeemed a portion of their vested Class B equity units of WMG Management Holdings LLC in exchange for a total of 1,335,169 shares of Class B Common Stock which were converted to shares of Class A Common Stock upon the exchange.

During the three and six months ended March 31, 2024, the Company issued approximately 170,669 and 177,687 shares of Class A Common Stock, respectively, under the Omnibus Incentive Plan which were net of shares used to settle employee income tax obligations of approximately $ 5 million.

For the three and six months ended March 31, 2024, the Company recorded an income tax expense of $ 18 million and $ 90 million, respectively.

The income tax expense for the three and six months ended March 31, 2024 is higher than the expected tax expense at the statutory rate of 21% primarily due to withholding taxes, foreign income taxed at rates higher than the United States, U.S.

During the three and nine months ended June 30, 2024, the Company issued approximately 7,428 and 185,115 shares of Class A Common Stock, respectively, under the Omnibus Incentive Plan which were net of shares used to settle employee income tax obligations of approximately $ 5 million.

For the three and nine months ended June 30, 2024, the Company recorded an income tax expense of $ 30 million and $ 120 million, respectively.

The income tax expense for the three months ended June 30, 2024 is lower than the expected tax expense at the statutory rate of 21% primarily due to benefit related to updated allowable costs for reported foreign derived intangible income (“FDII”) , non-controlling interest, and the net impact of GILTI and FDII.

These benefits were partially offset by foreign income taxed at rates higher than the United States, withholding taxes, and U.S.

state and local taxes.

The income tax expense for the nine months ended June 30, 2024 is lower than the expected tax expense at the statutory rate of 21% primarily due to the tax benefit from the winding down of the Company’s O&O Media Properties, updated allowable costs for FDII, non-controlling interest, the net impact of GILTI and FDII and tax benefits associated with Research and Development (“R&D”) credits.

These benefits were partially offset by withholding taxes, foreign income taxed at rates higher than the United States, U.S.

state and local taxes, non-deductible executive compensation under IRC Section 162(m), and unrecognized tax benefit related to uncertain tax positions.

These charges were partially offset by the tax benefit from the winding down of the Company’s O&O Media Properties, non-controlling interest, the net impact of GILTI and foreign derived intangible income (“FDII”), and tax benefits associated with Research and Development (“R&D”) credits.

For the three and six months ended March 31, 2023, the Company recorded an income tax expense of $ 21 million and $ 69 million, respectively.

The income tax expense for the three and six months ended March 31, 2023 is higher than the expected tax benefit at the statutory tax rate of 21% primarily due to U.S.

state and local taxes, withholding taxes, foreign income taxed at rates higher than the U.S., and non-deductible executive compensation under IRC Section 162(m), offset by a deduction against FDII.

The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of March 31, 2024 could decrease by up to approximately $ 4 million related to various ongoing audits and settlement discussions in various jurisdictions during the next twelve months.

For the three and nine months ended June 30, 2023, the Company recorded an income tax expense of $ 43 million and $ 112 million, respectively.

The income tax expense for the three and nine months ended June 30, 2023 is higher than the expected tax benefit at the statutory tax rate of 21% primarily due to foreign income taxed at rates higher than the United States, including withholding taxes, U.S.

state and local taxes, unrecognized tax benefit related to uncertain tax positions, and non-deductible executive

compensation under IRC Section 162(m).

These charges were partially offset by tax benefits associated with R&D credits, release of U.S.

state valuation allowance, and the net impact of GILTI and FDII.

The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of June 30, 2024 could decrease by up to approximately $ 2 million related to various ongoing audits and settlement discussions in various jurisdictions during the next twelve months.

The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries, including European Union member

states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax rate by January 1, 2025.

Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax rate by January 1, 2025.

The Company is currently evaluating the potential impact of the rules.

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The ineffective portions of interest rate swaps are recognized in other income (expense) in the period measured.

As of March 31, 2024, the Company had outstanding foreign currency forward exchange contracts for the sale of $ 326 million and the purchase of $ 192 million of foreign currencies at fixed rates that will be settled by September 2024.

As of March 31, 2024, the Company had no outstanding interest rate swaps and no unrealized deferred gains or losses in comprehensive income related to the interest rate swaps.

As of June 30, 2024, the Company had outstanding foreign currency forward exchange contracts for the sale of $ 175 million and the purchase of $ 108 million of foreign currencies at fixed rates that will be settled by September 2024.

As of June 30, 2024, the Company had no outstanding interest rate swaps and no unrealized deferred gains or losses in comprehensive income related to the interest rate swaps.

As of September 30, 2023, the Company had outstanding $ 500 million in a pay-fixed receive-variable interest rate swap with $ 1 million of unrealized deferred gains in comprehensive income related to the interest rate swaps.

The Company recorded realized pre-tax losses of $ 1 million and no unrealized pre-tax gains or losses related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the six months ended March 31, 2024.

The Company recorded realized pre-tax losses of $ 2 million and unrealized pre-tax losses of $ 4 million related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the six months ended March 31, 2023.

The unrealized pre-tax losses of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the six months ended March 31, 2024 and March 31, 2023 were $ 1 million and $ 7 million, respectively.

The following is a summary of amounts recorded in the consolidated balance sheets pertaining to the Company’s derivative instruments at March 31, 2024 and September 30, 2023:

The Company recorded realized pre-tax losses of $ 1 million and unrealized pre-tax gains of $ 1 million related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the nine months ended June 30, 2024.

The Company recorded realized pre-tax losses of $ 6 million and unrealized pre-tax losses of $ 1 million related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the nine months ended June 30, 2023.

The unrealized pre-tax losses of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the nine months ended June 30, 2024 and June 30, 2023 were $ 1 million and $ 11 million, respectively.

The following is a summary of amounts recorded in the consolidated balance sheets pertaining to the Company’s derivative instruments at June 30, 2024 and September 30, 2023:

2024 September 30,

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Other Current Assets:

Interest rate swap

Other Current Liabilities:

Foreign currency forward exchange contracts (a)

Interest rate swap

______________________________________

(a) Includes $ 3 million and $ 4 million of foreign exchange derivative contracts in asset and liability positions, respectively, which net to $ 1 million of current liabilities.

(a) Includes $ 3 million and $ 2 million of foreign exchange derivative contracts in asset and liability positions, respectively, which net to $ 1 million of current assets.

Segment Information

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For these reasons, the Company believes that Adjusted OIBDA represents the most relevant measure of segment profit and loss.

All disclosures relating to segment profitability, including those for the three and six months ended March 31, 2023, have been revised as a result of this change.

All disclosures relating to segment profitability, including those for the three and nine months ended June 30, 2023, have been revised as a result of this change.

Hereafter, the Company will revise other prior quarterly and year-to-date periods for fiscal year 2023 when they are subsequently reported in later filings for comparative purposes.

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Three Months Ended (in millions)

March 31, 2024

June 30, 2024

Revenues $ 1,251 $ 305 $ ( 2 ) $ 1,554

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281 79 ( 44 ) 316

March 31, 2023

June 30, 2023

Revenues $ 1,282 $ 283 $ ( 1 ) $ 1,564

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eliminations Total

Six Months Ended (in millions)

March 31, 2024

Nine Months Ended (in millions)

June 30, 2024

Revenues $ 3,885 $ 915 $ ( 4 ) $ 4,796

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965 247 ( 133 ) 1,079

March 31, 2023

June 30, 2023

Revenues 3,664 790 ( 3 ) 4,451

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For the Three Months Ended

March 31, For the Six Months Ended

June 30, For the Nine Months Ended

2024 2023 2024 2023

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Supplemental Cash Flow Disclosures

The Company made interest payments of approximately $ 57 million and $ 50 million during the three months ended March 31, 2024 and 2023, respectively, and approximately $ 90 million and $ 75 million during the six months ended March 31, 2024 and 2023, respectively.

The Company paid approximately $ 33 million and $ 72 million of income and withholding taxes, net of refunds, for the three months ended March 31, 2024 and 2023, respectively, and approximately $ 72 million and $ 117 million of income and withholding taxes, net of refunds, for the six months ended March 31, 2024 and 2023, respectively.

Non-cash investing activities was approximately $ 18 million related to the acquisition of music publishing rights and music catalogs, net during the six months ended March 31, 2024.

The Company made interest payments of approximately $ 35 million and $ 29 million during the three months ended June 30, 2024 and 2023, respectively, and approximately $ 125 million and $ 104 million during the nine months ended June 30, 2024 and 2023, respectively.

The Company paid approximately $ 33 million and $ 49 million of income and withholding taxes, net of refunds, for the three months ended June 30, 2024 and 2023, respectively, and approximately $ 105 million and $ 166 million of income and withholding taxes, net of refunds, for the nine months ended June 30, 2024 and 2023, respectively.

Non-cash investing activities was approximately $ 18 million related to the acquisition of music publishing rights and music catalogs, net during the nine months ended June 30, 2024.

Net Gain on Divestitures

During the three months ended March 31, 2024 and 2023, the Company recognized a pre-tax gain of $ 14 million and no pre-tax gains or losses, respectively, in connection with the divestiture of certain publishing rights.

During the six months ended March 31, 2024 and 2023, the Company recognized a pre-tax gain of $ 31 million and $ 41 million, respectively, in connection with the divestiture of certain sound recording and publishing rights.

During the three months ended June 30, 2024 and 2023, the Company recognized a pre-tax gain of $ 1 million and no pre-tax gains or losses, respectively, in connection with the divestiture of one of its O&O Media Properties.

During the nine months ended June 30, 2024 and 2023, the Company recognized a pre-tax gain of $ 32 million and $ 41 million, respectively, in connection with the divestiture of certain sound recording and publishing rights and one of its O&O Media Properties.

For each period, the divestiture has been reflected as a net gain on divestiture in the accompanying condensed consolidated statement of operations.

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Therefore, there can be no assurance that the Company will pay any dividends to holders of the Company’s common stock, or as to the amount of any such dividends.

On February 12, 2024, the Company’s board of directors declared a cash dividend of $ 0.17 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on March 1, 2024.

The Company paid an aggregate of approximately $ 89 million and $ 178 million, or $ 0.17 and $ 0.34 per share, in cash dividends to stockholders and participating security holders for the three and six months ended March 31, 2024, respectively.

On May 13, 2024, the Company’s board of directors declared a cash dividend of $ 0.17 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on June 3, 2024.

The Company paid an aggregate of approximately $ 89 million and $ 267 million, or $ 0.17 and $ 0.51 per share, in cash dividends to stockholders and participating security holders for the three and nine months ended June 30, 2024, respectively.

Fair Value Measurements

The following tables show the fair value of the Company’s financial instruments that are required to be measured at fair value as of March 31, 2024 and September 30, 2023.

Fair Value Measurements as of March 31, 2024

The following tables show the fair value of the Company’s financial instruments that are required to be measured at fair value as of June 30, 2024 and September 30, 2023.

Fair Value Measurements as of June 30, 2024

(Level 1) (Level 2) (Level 3) Total

(in millions)

Other current liabilities:

Other Current Assets:

Foreign Currency Forward Exchange Contracts (a) $ — $ 1 $ — $ 1

$ — $ ( 1 ) $ — $ ( 1 )

Other noncurrent assets:

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Balance at September 30, 2023 $ ( 1 )

Balance at March 31, 2024 $ ( 1 )

Balance at June 30, 2024 $ ( 1 )

The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be re-measured to fair value on a recurring basis.

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The Company did not

record any impairment charges on these investments during the three months ended March 31, 2024 and recorded approximately $ 1 million of impairment charges on these investments during the six months ended March 31, 2024.

The Company did no t record any impairment charges on these investments during the three and six months ended March 31, 2023.

In addition, there were no observable price changes events that were completed during the three and six months ended March 31, 2024 and 2023.

record any impairment charges on these investments during the three months ended June 30, 2024 and recorded approximately $ 1 million of impairment charges on these investments during the nine months ended June 30, 2024.

The Company did no t record any impairment charges on these investments during the three and nine months ended June 30, 2023.

In addition, there were no observable price changes events that were completed during the three and nine months ended June 30, 2024 and 2023.

Fair Value of Debt

Based on the level of interest rates prevailing at March 31, 2024, the fair value of the Company’s debt was $ 3.696 billion.

Based on the level of interest rates prevailing at June 30, 2024, the fair value of the Company’s debt was $ 3.715 billion.

Based on the level of interest rates prevailing at September 30, 2023, the fair value of the Company’s debt was $ 3.525 billion.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements