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Item 7. Management’s Discussion and Analysis

2024-11-21 compared with 2023-11-21 · 328 added, 264 removed, 741 unchanged (44% of the section changed)

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The Company’s significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 2 to the accompanying consolidated financial statements.

We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses.

However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses.

Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp.

Use of Adjusted OIBDA

We evaluate our operating performance based on several factors, including our primary financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets adjusted to exclude the impact of non-cash stock-based compensation and other related expenses and certain items that affect comparability including but not limited to gains or losses on divestitures and expenses related to restructuring and transformation initiatives (“Adjusted OIBDA”).

For further details regarding the components of the Company’s Adjusted OIBDA performance measure, see Note 18 to our consolidated financial statements included elsewhere herein.

We consider Adjusted OIBDA to be an important indicator of the operational strengths and performance of our businesses.

However, a limitation of the use of Adjusted OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses.

Accordingly, Adjusted OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp.

and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S.

In addition, our definition of OIBDA may differ from similarly titled measures used by other companies.

A reconciliation of consolidated OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp.

In addition, our definition of Adjusted OIBDA may differ from similarly titled measures used by other companies.

A reconciliation of consolidated Adjusted OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp.

is provided in our “Results of Operations.”

Use of Constant Currency

As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods.

Constant-currency information compares revenue and OIBDA between periods as if exchange rates had remained constant period over period.

We use revenue on a constant-currency basis as one measure to evaluate our performance.

We calculate constant currency by calculating prior-year revenue using current-year foreign currency exchange rates.

We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” This revenue should be considered in addition to, not as a substitute for, revenue reported in accordance with U.S.

Revenue on a constant-currency basis, as we present it, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S.

As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and Adjusted OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our

operating results and evaluate our performance in comparison to prior periods.

Constant-currency information compares revenue and Adjusted OIBDA between periods as if exchange rates had remained constant period over period.

We use revenue and Adjusted OIBDA on a constant-currency basis as one measure to evaluate our performance.

We calculate constant-currency by calculating prior-year revenue and Adjusted OIBDA using current-year foreign currency exchange rates.

We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” Revenue and Adjusted OIBDA on a constant-currency basis should be considered in addition to, not as a substitute for, revenue and Adjusted OIBDA reported in accordance with U.S.

Revenue and Adjusted OIBDA on a constant-currency basis, as we present it, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S.

BUSINESS OVERVIEW

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Our renowned family of iconic record labels, including Atlantic Records, Warner Records, Elektra Records and Parlophone Records, is home to many of the world’s most popular and influential recording artists.

In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 150,000 songwriters and composers, with a global collection of more than one million musical compositions.

In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 180,000 songwriters and composers, with a global collection of more than one and a half million musical compositions.

We classify our business interests into two fundamental operations:

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Our Recorded Music business’ operations include WMX, a next generation services division that connects artists with fans and amplifies brands in creative, immersive, and engaging ways.

This division includes a rebranded WEA commercial services and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm.

Our business’ distribution operations also includes ADA, which markets, distributes and sells the products of independent labels to retail and wholesale distributors;

Our business’ distribution operations also include Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors;

and various distribution centers and ventures operated internationally.

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We have integrated the marketing of digital content into all aspects of our business, including A&R and distribution.

Our business development executives work closely with A&R departments to ensure that while music is being produced, digital assets are also created with all distribution channels in mind, including streaming services, social networking sites, online portals and music-

centered destinations.

We also work side-by-side with our online and mobile partners to test new concepts.

We believe existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize our assets and create new revenue streams.

We believe existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize our assets

and create new revenue streams.

The proportion of digital revenues attributable to each distribution channel varies by region and proportions may change as the introduction of new technologies continues.

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The operations of our Music Publishing business are conducted principally through Warner Chappell Music, our global music publishing company headquartered in Los Angeles, with operations in over 70 countries through various subsidiaries, affiliates, and non-affiliated licensees and sub-publishers.

We own or control rights to more than one million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.

We own or control rights to more than one and a half million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.

Assembled over decades, our award-winning catalog includes over 180,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel.

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Starting with the 2023 fiscal year, the Company transitioned to a reporting calendar in which the reporting periods end on the last day of the calendar quarter.

Accordingly, the results of operations for the fiscal year ended September 30, 2023 reflect 365 days, compared to 371 days for the fiscal year ended September 30, 2022 and 364 days for the fiscal year ended September 30, 2021.

Accordingly, the results of operations for the fiscal year ended for September 30, 2024 and September 30, 2023 reflect 366 and 365 days, respectively, compared to 371 days for the fiscal year ended September 30, 2022.

For the fiscal year ended September 30, 2022, the revenue benefit of the additional week was approximately $73 million, primarily reflected in Recorded Music streaming revenue.

Restructuring

Strategic Restructuring Plan

In February 2024, the Company announced a strategic restructuring plan (the “Strategic Restructuring Plan”) designed to free up additional funds to invest in music and accelerate the Company’s growth for the next decade.

Under the Strategic Restructuring Plan, the Company expects a reduction in headcount of approximately 13% of the Company’s overall headcount.

The Company expects to incur total non-recurring restructuring charges of approximately $210 million or approximately $135 million of total non-recurring after tax charges.

The expected pre-tax charges include approximately $148 million of severance and other termination costs and $7 million of other non-cash charges, along with approximately $55 million of non-cash impairment charges primarily in connection with the disposal or winding down of the Company’s non-core owned and operated media properties including the Company’s O&O Media Properties.

The majority of severance payments and other termination costs are expected to be paid by the end of fiscal year 2026.

The cost savings under the Strategic Restructuring Plan will be achieved through a combination of the disposal or winding down of the O&O Media Properties, continuing to manage overhead, sharpening focus, expanding shared services, and implementing previously disclosed expected operational efficiencies made possible by the Company’s financial transformative initiative.

The Company expects allocating a majority of the costs savings to increase investment in the Company’s core Recorded Music and Music Publishing businesses, new skill sets and tech capabilities.

For the fiscal year ended September 30, 2024, the Company recognized a total of $178 million of restructuring and impairments in connection with the Strategic Restructuring Plan.

Total severance and other termination costs were $121 million, of which, $113 million was recognized in our Recorded Music segment and $8 million was recognized in Corporate.

Additionally, for the fiscal year ended September 30, 2024, the Company recognized $57 million of non-cash restructuring and impairments which was comprised of $50 million of impairment losses on unamortized intangible assets and $7 million of non-cash restructuring related to future equity awards to be granted, of which, $54 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.

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.

Under the Restructuring Plan, the Company expects to reduce headcount by approximately 270 people, or approximately 4% of the Company’s overall headcount.

During the fiscal year ended September 30, 2023, the Company recognized restructuring charges of approximately $40 million for severance costs, all of which will be paid in cash.

All restructuring expenses were recorded in the Recorded Music segment.

The Restructuring Plan is substantially complete as of September 30, 2023, with related cash expenditures expected to be made by the end of fiscal 2024.

The headcount reductions generated pre-tax cost savings of approximately $19 million in fiscal year 2023 and the Company expects to generate pre-tax costs savings of approximately $50 million on an annualized run-rate basis in fiscal year 2024.

The Company anticipates investing a portion of the cost savings from the headcount reductions for targeted hires, to add new skill sets and for other initiatives intended to position the Company for long-term growth.

During the fiscal year ended September 30, 2023, in connection with the Restructuring Plan, the Company recognized $2 million of non-cash stock-based compensation related to the accelerated vesting of certain Restricted Stock Units (“RSUs”).

The 2023 Restructuring Plan is substantially complete as of September 30, 2024.

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

All restructuring costs were recorded in the Recorded Music segment in the prior year.

BMG Termination

In September 2023, the Company terminated its distribution agreement with BMG as BMG began to bring digital distribution in-house and license directly with digital service partners in fiscal 2024 (the “BMG Termination”).

ADA, which is part of our Recorded Music business, had previously been distributing BMG’s recorded music catalog and revenues are reported within our Recorded Music segment.

The shift to direct deals by BMG will be a phased in-sourcing of distribution, which we expect to be largely completed by the end of fiscal 2025.

During the fiscal year ended September 30, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music digital revenue of $86 million, of which $81 million was streaming revenue.

The impact to Recorded Music’s Adjusted OIBDA was immaterial for the fiscal year ended September 30, 2024.

Executive Transition Costs

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Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Russia-Ukraine Conflict

On February 24, 2022, the geopolitical situation in Eastern Europe intensified with Russia's invasion of Ukraine, and the sanctions and other measures imposed in response to this conflict have increased global economic and political uncertainty.

WMG operates both its Recorded Music and Music Publishing businesses within Russia and, on March 10, 2022, the Company announced a suspension of these operations in Russia.

While our operations in Russia do not constitute a material portion of our business, a significant escalation or expansion of the conflict's current scope, increased or sustained economic disruption, sanctions or countersanctions, further devaluation of the local currency or increased cyber-related disruptions could make it difficult to deliver our content, broaden inflationary costs, and have an adverse effect on our results of operations.

RESULTS OF OPERATIONS

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Total revenues increased by $389 million, or 6%, to $6,426 million for the fiscal year ended September 30, 2024 from $6,037 million for the fiscal year ended September 30, 2023.

The current year included $68 million of Recorded Music licensing revenue from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”).

In addition, revenue growth was unfavorably impacted by the BMG Termination which resulted in $86 million of lower Recorded Music digital revenue, partially offset by $16 million incremental Recorded Music streaming revenue resulting from the Digital License Renewal in the fiscal year ended September 30, 2024 compared to the prior year.

Music Publishing digital revenue growth was also impacted by a $24 million benefit in the prior year due to a ruling by the Copyright Royalty Board in Phonorecords III upholding higher percentage of revenue U.S.

mechanical royalty rates (the “CRB Rate Benefit”).

Adjusted for these items, total revenues increased by 7%, which includes a decrease in revenue related to the divestiture of the owned and operated media businesses in connection with the Strategic Restructuring Plan, and includes $4 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 81% and 19% of total revenues for the fiscal year ended September 30, 2024, respectively, and 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively.

Prior to intersegment eliminations, U.S.

and international revenues represented 45% and 55% of total revenues for the fiscal year ended September 30, 2024, respectively.

In the prior year, U.S.

and international revenues represented 46% and 54% of total revenues prior to intersegment eliminations, respectively.

Total digital revenues after intersegment eliminations increased by $291 million, or 7%, to $4,280 million for the fiscal year ended September 30, 2024 from $3,989 million for the fiscal year ended September 30, 2023.

Excluding the BMG Termination, the Digital License Renewal and the CRB Rate Benefit in the prior year, total digital revenues increased by 10%.

Total streaming revenue increased by 8% driven by growth across Recorded Music and Music Publishing, including growth in both subscription streaming and ad-supported streaming revenue.

Total digital revenues represented 67% of consolidated revenues for the fiscal year ended September 30, 2024, from 66% for the fiscal year ended September 30, 2023.

Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2024 were composed of U.S.

revenues of $2,039 million and international revenues of $2,243 million, or 48% and 52% of total digital revenues, respectively.

Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2023 were composed of U.S.

revenues of $1,993 million and international revenues of $1,998 million, or 50% of total digital revenues for both U.S.

and international revenues.

Recorded Music revenues increased by $268 million, or 5%, to $5,223 million for the fiscal year ended September 30, 2024 from $4,955 million for the fiscal year ended September 30, 2023.

The increase includes $7 million of unfavorable currency exchange fluctuations.

Recorded Music revenues were $2,210 million and $2,184 million, or 42% and 44% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

International Recorded Music revenues were $3,013 million and $2,771 million, or 58% and 56% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

The overall increase in Recorded Music revenue was driven by increases in digital, licensing, and physical revenues, partially offset by a decrease in artist services and expanded-rights revenues.

Digital revenue increased by $197 million, or 6%, primarily due to growth in streaming revenue as a result of the continued growth in streaming services, including growth in both subscription streaming and ad-supported streaming revenue.

Revenue from streaming services increased by $221 million, or 7%, to $3,444 million for the fiscal year ended September 30, 2024 from $3,223 million for the fiscal year ended September 30, 2023.

Adjusted for the impacts of the BMG Termination and the Digital License Renewal, Recorded Music streaming revenue grew by 9%.

The current year included successful releases from Zach Bryan, Benson Boone, Teddy Swims and Dua Lipa.

Download and other digital revenues decreased by $24 million, or 24%, to $75 million for the fiscal year ended September 30, 2024 from $99 million for the fiscal year ended September 30, 2023, which includes the unfavorable impact of the BMG Termination of $5 million compared to the prior year.

Licensing revenue increased by $119 million, or 31%, driven by $68 million from the Licensing Extension and growth across broadcast fees, synchronization and other licensing revenue, and a favorable impact of foreign currency exchange rates of $3 million.

Physical revenue increased by $12 million, or 2%, driven by strength of new releases primarily in Japan, and a favorable impact of foreign currency exchange rates of $1 million.

Artist services and expanded-rights revenue decreased by $60 million primarily due to lower merchandising revenue, a decrease in revenue related to the exit of the Company’s O&O Media Properties announced as part of the Strategic Restructuring Plan, partially offset by higher concert promotion revenue primarily in Japan.

Music Publishing revenues increased by $122 million, or 11%, to $1,210 million for the fiscal year ended September 30, 2024 from $1,088 million for the fiscal year ended September 30, 2023.

Music Publishing revenues were $660 million and $582 million, or 55% and 53% of consolidated Music Publishing revenues, for the fiscal year ended September 30, 2024 and September 30, 2023, respectively.

International Music Publishing revenues were $550 million and $506 million, or 45% and 47% of Music Publishing revenues, for the fiscal year ended September 30, 2024 and September 30, 2023, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital revenue of $94 million, or 14%, performance revenue of $25 million, or 14%, and synchronization revenue of $8 million, or 5%, partially offset by a decrease in mechanical revenue of $5 million, or 8%.

The increase in digital revenue is primarily due to continued growth in streaming revenue.

Revenue from streaming services increased by $96 million, or 15%, to $752 million for the fiscal year ended September 30, 2024 from $656 million for the fiscal year ended September 30, 2023, which includes the impact of the CRB Rate Benefit of $24 million in the prior year.

Excluding the impact of the CRB Rate Benefit, Music Publishing revenue from streaming services grew 19%, reflecting the continued market growth and timing of payments, and the favorable impact of foreign currency exchange rates of $3 million.

Performance revenue increased primarily due to an increase in touring activity primarily in Europe and the timing of payments from collection societies in the United States, and synchronization revenue increased driven by higher commercial licensing activity and an increase in copyright infringement settlements primarily in the United States.

The decrease in mechanical revenue was driven by lower physical sales and timing of distributions.

Total revenues increased by $118 million, or 2%, to $6,037 million for the fiscal year ended September 30, 2023 from $5,919 million for the fiscal year ended September 30, 2022.

The prior fiscal year included an additional week, primarily reflected in Recorded Music streaming revenue, and $38 million in Recorded Music and Music Publishing downloads and other digital revenue from the settlement of certain copyright infringement cases (the “Copyright Settlement”).

The increase includes $111 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively, and 84% and 16% of total revenues for the fiscal year ended September 30, 2022, respectively.

revenues for the fiscal year ended September 30, 2022, respectively.

Prior to intersegment eliminations, U.S.

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Total streaming revenue increased 5% driven by growth across Recorded Music and Music Publishing.

The growth in Music Publishing includes the impact in the year and the prior year of $24 million and $20 million, respectively, resulting from a ruling by the Copyright Royalty Board in Phonorecords III upholding higher percentage revenue of U.S.

mechanical royalty rates (the “CRB Rate Benefit”).

The growth in Music Publishing includes the impact in the year and the prior year of $24 million and $20 million, respectively, due to the CRB Rate Benefit.

Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2023 were composed of U.S.

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Adjusted for the impact of an additional week in the prior year, Recorded Music streaming revenue increased by 4%.

The current year included successful releases from Ed Sheeran, Zach Bryan, Dua Lipa and Bailey Zimmerman.

The fiscal year ended September 30, 2023 included successful releases from Ed Sheeran, Zach Bryan, Dua Lipa and Bailey Zimmerman.

Downloads and other digital revenue decreased by $47 million, or 32%, to $99 million for the fiscal year ended September 30, 2023 from $146 million for the fiscal year ended September 30, 2022 due to the Copyright Settlement in the prior year and continued shift to streaming services.

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The decrease in synchronization revenue is attributable to lower commercial licensing activity and an unfavorable impact of foreign currency exchange rates of $2 million, partially offset by copyright infringement settlements.

Total revenues increased by $618 million, or 12%, to $5,919 million for the fiscal year ended September 30, 2022 from $5,301 million for the fiscal year ended September 30, 2021.

The 2022 fiscal year included an additional week, primarily reflected in

Recorded Music streaming revenue and $38 million in Recorded Music and Music Publishing downloads and other digital revenue from the Copyright Settlement.

Additionally, the 2022 fiscal year included the impact of a new deal with one of the Company’s digital partners affecting Recorded Music streaming revenue.

The increase includes $198 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 84% and 16% of total revenues for the fiscal year ended September 30, 2022, respectively, and 86% and 14% of total revenues for the fiscal year ended September 30, 2021, respectively.

Prior to intersegment eliminations, U.S.

and international revenues represented 46% and 54% for the fiscal year ended September 30, 2022, respectively, and 45% and 55% for the fiscal year ended September 30, 2021, respectively.

Total digital revenues after intersegment eliminations increased by $327 million, or 9%, to $3,866 million for the fiscal year ended September 30, 2022 from $3,539 million for the fiscal year ended September 30, 2021, which includes $38 million in downloads and other digital revenue from the Copyright Settlement.

Total streaming revenue increased 9% driven by growth across Recorded Music and Music Publishing.

Recorded Music streaming revenue included the impact of a new deal with one of the Company’s digital partners.

The growth in Music Publishing includes the impact of $20 million resulting from the CRB Rate Benefit.

Total digital revenues represented 65% and 67% of consolidated revenues for the fiscal years ended September 30, 2022 and September 30, 2021, respectively.

The decrease in digital revenues as a percentage of total revenue is primarily due to the growth of artist services and expanded-rights revenue.

Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2022 were composed of U.S.

revenues of $1,983 million and international revenues of $1,885 million, or 51% and 49% of total digital revenues, respectively.

Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2021 were composed of U.S.

revenues of $1,769 million and international revenues of $1,772 million, or 50% of total digital revenues for each of U.S.

and international revenues.

Recorded Music revenues increased by $422 million, or 9%, to $4,966 million for the fiscal year ended September 30, 2022 from $4,544 million for the fiscal year ended September 30, 2021.

The increase includes $172 million of unfavorable currency exchange fluctuations.

Recorded Music revenues were $2,231 million and $1,985 million, or 45% and 44% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2022 and September 30, 2021, respectively.

International Recorded Music revenues were $2,735 million and $2,559 million, or 55% and 56% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2022 and September 30, 2021, respectively.

The overall increase in Recorded Music revenue was driven by increases in digital, artist services and expanded-rights, licensing and physical revenues.

Digital revenue increased by $200 million, or 6%, as a result of the continued growth in streaming services, which was affected by the market-related slowdown in ad-supported revenue, $31 million in downloads and other digital revenue from the Copyright Settlement, strength of releases including current year releases from Ed Sheeran and Silk Sonic as well as carryover success from Dua Lipa, Ed Sheeran and Bruno Mars.

Revenue from streaming services grew by $187 million, or 6%, to $3,159 million for the fiscal year ended September 30, 2022 from $2,972 million for the fiscal year ended September 30, 2021.

Streaming revenue growth was partially offset by an unfavorable impact of foreign currency exchange rates of $88 million, or 3%.

Downloads and other digital revenue increased by $13 million, or 10%, to $146 million for the fiscal year ended September 30, 2022 from $133 million for the fiscal year ended September 30, 2021 due to the Copyright Settlement, partially offset by continued shift to streaming services.

Artist services and expanded-rights revenue increased by $168 million primarily due to higher touring activity, which was disrupted by COVID in the prior year, and merchandising revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $37 million.

Licensing revenue increased by $40 million, mainly due to higher synchronization and other licensing revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $15 million.

Physical revenue increased by $14 million, or 3%, primarily from higher sales due to the success of new releases and an increased demand for vinyl products, partially offset by an unfavorable impact of foreign currency exchange rates of $28 million.

Music Publishing revenues increased by $197 million, or 26%, to $958 million for the fiscal year ended September 30, 2022 from $761 million for the fiscal year ended September 30, 2021.

Music Publishing revenues were $513 million and $378 million, or 54% and 50% of consolidated Music Publishing revenues, for the fiscal year ended September 30, 2022 and September 30, 2021, respectively.

International Music Publishing revenues were $445 million and $383 million, or 46% and 50% of Music Publishing revenues, for the fiscal year ended September 30, 2022 and September 30, 2021, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital revenue of $127 million, or 29%, performance revenue of $37 million, synchronization revenue of $28 million and mechanical revenue of $1 million.

The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services, the CRB Rate Benefit of $20 million, $7 million in downloads and other digital revenue from the Copyright Settlement and timing of new digital deals, partially offset by a shift in the collection of certain writers’ share income from certain digital service providers.

This change has no impact on Music Publishing OIBDA, but results in a slight improvement to OIBDA margin.

Revenue from streaming services grew by $121 million, or 29%, to $539 million for the fiscal year ended September 30, 2022 from $418 million for the fiscal year ended September 30, 2021.

Performance revenue increased as bars, restaurants, concerts and live events continued to recover from COVID disruption.

The increase in synchronization revenue is attributable to higher television and commercial income.

Mechanical revenue increase was partially offset by an unfavorable impact of foreign currency exchange rates of $3 million.

Revenue by Geographical Location

revenue increased by $104 million, or 4%, to $2,870 million for the fiscal year ended September 30, 2024 from $2,766 million for the fiscal year ended September 30, 2023.

Recorded Music revenue increased by $26 million, or 1%, primarily driven by growth in licensing revenue of $92 million due to $68 million from the Licensing Extension.

Recorded Music growth was also attributable to higher physical revenue, partially offset by lower U.S.

Recorded Music digital and artist services and expanded-rights revenues.

U.S Recorded Music physical revenue increased by $1 million compared to the prior year.

Recorded Music digital revenue decreased by $17 million, or 1%, which includes a decrease in U.S.

Recorded Music streaming revenue of $4 million, and a decrease in download and other digital revenue of $13 million.

The decrease in U.S.

Recorded Music digital revenue is primarily due to the impact of the BMG Termination of $48 million.

Recorded Music artist services and expanded-rights revenue decreased by $50 million due to lower merchandising revenue of $15 million and a decrease in revenue related to the exit of the Company’s O&O Media Properties announced as part of the Strategic Restructuring Plan.

Music Publishing revenue increased by $78 million, or 13%, to $660 million for the fiscal year ended September 30, 2024 from $582 million for the fiscal year ended September 30, 2023.

Music Publishing digital revenue increased by $63 million, or 16%, attributable to continued growth in streaming revenue.

Music Publishing streaming revenue increased by $62 million, or 16%, reflecting continued market growth and timing of payments, partially offset by the CRB Rate Benefit of $24 million in the prior year.

Music Publishing synchronization revenue increased by $3 million, primarily driven by an increase in copyright infringement settlements, higher commercial and video game licensing activity, partially offset by lower film and television licensing activity.

Music Publishing performance revenue increased by $11 million, or 18% due to timing of payments from collection societies.

Music Publishing mechanical revenue remained flat to prior year.

International revenue increased by $286 million, or 9%, to $3,563 million for the fiscal year ended September 30, 2024 from $3,277 million for the fiscal year ended September 30, 2023.

Excluding the unfavorable impact of foreign currency exchange rates of $5 million, international revenue increased by $291 million, or 9%.

International Recorded Music revenue increased by $242 million, or 9%, primarily due to increases in digital revenue of $214 million, licensing revenue of $27 million, and physical revenue of $11 million, partially offset by lower artist services and expanded-rights revenue of $10 million.

International Recorded Music digital revenue increased largely due to an increase in streaming revenue of $225 million, or 13%.

Streaming revenue growth includes the impact of the Digital Licensing Renewal of $16 million, partially offset by the impact of the BMG Termination of $38 million and an unfavorable impact of foreign currency exchange rates of $14 million.

Download and other digital revenues decreased by $11 million due to the continued shift to streaming services.

International Recorded Music licensing revenue increased by $27 million, which includes the impact of copyright infringement settlements, growth in broadcast fees and other licensing revenue, and the favorable impact of foreign currency exchange rates of $3 million.

International Recorded Music physical revenue increased by $11 million, driven by strength of new releases primarily in Japan, and a favorable impact of foreign currency exchange rates of $1 million.

International Recorded Music artist services and expanded-rights revenue decreased by $10 million primarily due to lower direct-to-consumer merchandising revenue, partially offset by higher concert promotion revenue primarily in Japan and France, and a favorable impact of foreign currency exchange rates of $3 million.

International Music Publishing revenue increased by $44 million, or 9%, to $550 million for the fiscal year ended September 30, 2024, from $506 million for the fiscal year ended September 30, 2023.

This was primarily driven by increases in digital revenue of $31 million, performance revenue of $14 million, and synchronization revenue of $5 million, partially offset by lower mechanical revenue of $5 million and other publishing revenue of $1 million.

International Music Publishing streaming revenue increased by $34 million, or 13%, which includes a favorable impact of foreign currency exchange rates of $3 million, partially offset by a revenue true up of $9 million in the prior year.

Performance revenue increased by $14 million or 13% due to strong artist touring activity primarily in Europe and Latin America.

International Music Publishing synchronization revenue increased by $5 million due to higher commercial licensing activity primarily in Brazil, France and Germany.

International Music Publishing mechanical revenue decreased by $5 million largely due to lower physical sales and timing of distributions.

revenue increased by $22 million, or 1%, to $2,766 million for the fiscal year ended September 30, 2023 from $2,744 million for the fiscal year ended September 30, 2022.

Recorded Music revenue decreased by $47 million, or 2%.

The primary driver was the decrease of U.S.

Recorded Music digital revenue of $58 million, or 4%.

which includes the Copyright Settlement and the impact of an additional week in the prior year.

Recorded Music digital revenue of $58 million, or 4%, which includes the Copyright Settlement and the impact of an additional week in the prior year.

Recorded Music streaming revenue decreased by $19 million, or 1%, as a result of a lighter release schedule and the market-related slowdown in ad-supported revenue, as well as the impact of an additional week in the prior year.

24 unchanged sentences

Synchronization revenue decreased by $1 million primarily due to an unfavorable impact of foreign currency exchange rates.

revenue increased by $381 million, or 16%, to $2,744 million for the fiscal year ended September 30, 2022 from $2,363 million for the fiscal year ended September 30, 2021.

Recorded Music revenue increased by $246 million, or 12%.

The primary driver was the increase of U.S.

Recorded Music digital revenue of $118 million driven by the continued growth in streaming services and the Copyright Settlement.

Recorded Music streaming revenue increased by $99 million, or 7%.

Download and other digital revenue increased by $19 million due to the Copyright Settlement, partially offset by the continued shift to streaming services.

Recorded Music artist services and expanded-rights revenue increased by $66 million, primarily driven by higher merchandising revenues.

Increases are also attributable to the increase in U.S.

Recorded Music physical revenue of $34 million from higher sales due to the success of new releases and an increased demand for vinyl products.

The increase in licensing revenue of $28 million is primarily due to higher synchronization activity.

Music Publishing revenue increased by $135 million, or 36%, to $513 million for the fiscal year ended September 30, 2022 from $378 million for the fiscal year ended September 30, 2021.

This was primarily driven by the increase in U.S.

Music Publishing of $96 million in digital revenue due to the continued growth in streaming services, the CRB Rate Benefit, the Copyright Settlement and timing of new digital deals, partially offset by a shift in the collection of writer’s share of U.S.

digital performance income from certain digital service providers.

Music Publishing streaming revenue increased by $90 million, or 39%.

The increase in synchronization revenue of $19 million is due to higher commercial and television income.

Performance revenue increased by $18 million driven by recovery from COVID disruption and mechanical revenue increased by $1 million.

International revenue increased by $238 million, or 8%, to $3,180 million for the fiscal year ended September 30, 2022 from $2,942 million for the fiscal year ended September 30, 2021.

Excluding the unfavorable impact of foreign currency exchange rates, International revenue increased by $436 million, or 16%.

International Recorded Music revenue increased by $176 million primarily due to increases in artist services and expanded-rights revenue of $102 million, digital revenue of $82 million and licensing revenue of $12 million, partially offset by the decrease in physical revenue of $20 million.

International Recorded Music artist services and expanded-rights revenue increased by $102 million primarily due to an increase in concert promotion which was disrupted by COVID in the prior year, partially offset by the unfavorable impact of foreign currency exchange rates of $37 million.

International Recorded Music digital revenue increased due to an $88 million, or 6%, increase in streaming services, which was partially offset by an unfavorable impact of foreign currency exchange rates of $88 million.

International Recorded Music licensing revenue increased by $12 million due to higher synchronization and other licensing revenue, partially offset by the unfavorable impact of foreign currency exchange rates.

International Recorded Music physical revenue decreased by $20 million, primarily driven by an unfavorable impact of foreign currency exchange rates, which offset higher sales.

International Music Publishing revenue increased by $62 million, or 16%, to $445 million for the fiscal year ended September 30, 2022 from $383 million for the fiscal year ended September 30, 2021.

This was primarily driven by the increase in digital revenue of $31 million, performance revenue of $19 million and synchronization revenue of $9 million.

International Music Publishing streaming revenue increased by $31 million, or 17%.

Performance revenue increased as businesses continued to recover from COVID disruption.

Higher synchronization revenue is primarily driven by higher television and commercial income.

Mechanical revenue remained constant due an unfavorable impact of foreign currency exchange rates, which offset higher sales.

Cost of revenues

8 unchanged sentences

Our cost of revenues increased by $178 million, or 6%, to $3,355 million for the fiscal year ended September 30, 2024 from $3,177 million for the fiscal year ended September 30, 2023.

Expressed as a percentage of revenues, cost of revenues increased to 53% for the fiscal year ended September 30, 2023 from 52% for the fiscal year ended September 30, 2022.

Expressed as a percentage of revenues, cost of revenues decreased to 52% for the fiscal year ended September 30, 2024 from 53% for the fiscal year ended September 30, 2023.

Artist and repertoire costs increased by $169 million, to $2,167 million for the fiscal year ended September 30, 2024 from $1,998 million for the fiscal year ended September 30, 2023.

Artist and repertoire costs as a percentage of revenue remained constant at 33% for each of the fiscal years ended September 30, 2023 and September 30, 2022, primarily due to the favorable impact of foreign currency exchange rates, offset by revenue mix.

Artist and repertoire costs as a percentage of revenue increased to 34% for the fiscal year ended September 30, 2024, from 33% for the fiscal year ended September 30, 2023, primarily due to revenue mix,

timing of artist and repertoire investments, partially offset by the impact of the Licensing Extension which had minimal associated cost of revenues.

Product costs increased by $9 million, to $1,188 million for the fiscal year ended September 30, 2024 from $1,179 million for the fiscal year ended September 30, 2023.

Product costs as a percentage of revenue increased to 20% for the fiscal year ended September 30, 2023 from 19% for the fiscal year ended September 30, 2022 due to revenue mix from higher third-party distributed label revenue.

Product costs as a percentage of revenue decreased to 18% for the fiscal year ended September 30, 2024 from 20% for the fiscal year ended September 30, 2023 due to revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue.

Our cost of revenues increased by $97 million, or 3%, to $3,177 million for the fiscal year ended September 30, 2023 from $3,080 million for the fiscal year ended September 30, 2022.

Expressed as a percentage of revenues, cost of revenues remained constant at 52% for each of the fiscal years ended September 30, 2022 and September 30, 2021.

Expressed as a percentage of revenues, cost of revenues increased to 53% for the fiscal year ended September 30, 2023 from 52% for the fiscal year ended September 30, 2022.

Artist and repertoire costs increased by $38 million, to $1,998 million for the fiscal year ended September 30, 2023 from $1,960 million for the fiscal year ended September 30, 2022.

Artist and repertoire costs as a percentage of revenue decreased to 33% for the fiscal year ended September 30, 2022 from 34% for the fiscal year ended September 30, 2021, primarily due to revenue mix and timing of artist and repertoire investments.

Product costs increased by $59 million, to $1,179 million for the fiscal year ended September 30, 2023 from $1,120 million for the fiscal year ended September 30, 2022.

Product costs as a percentage of revenue increased to 19% for the fiscal year ended

September 30, 2022 from 18% for the fiscal year ended September 30, 2021 due to revenue mix, primarily increases in artist services and expanded-rights revenue.

Selling, general and administrative expenses

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(1) Includes depreciation expense of $103 million, $87 million and $76 million for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively.

Total selling, general and administrative expense decreased by $36 million, or 2%, to $1,826 million for the fiscal year ended September 30, 2023 from $1,862 million for the fiscal year ended September 30, 2022.

Total selling, general and administrative expense increased by $53 million, or 3%, to $1,879 million for the fiscal year ended September 30, 2024 from $1,826 million for the fiscal year ended September 30, 2023.

Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2024 from 30% for the fiscal year ended September 30, 2023.

General and administrative expense increased by $98 million to $1,089 million for the fiscal year ended September 30, 2024 from $991 million for the fiscal year ended September 30, 2023.

The increase in general and administrative expense was mainly due to higher employee related costs, net of savings from the Restructuring Plan, which includes incremental non-cash stock-based compensation and other related expenses of $10 million, the Executive Transition Costs of $7 million, incremental investment in technology of $17 million, the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition, higher depreciation of $11 million, and expenses related to transformation initiatives of $7 million, partially offset by lower acquisition transaction costs, lower severance costs, the impact of an additional week in the prior year and favorable movements in foreign currency exchange rates of $14 million.

Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

The increase in general and administrative expense was driven by higher expenses related to transformation initiatives of $23 million, higher depreciation expense related to IT assets being placed in service of $16 million, higher non-cash stock-based compensation expense of $9 million, the impact of acquisitions of approximately $7 million, and unfavorable movements in foreign currency exchange rates of $1 million.

These expenses are partially offset by savings from the Company’s restructuring plans, the majority of which has been reinvested into the business, including incremental investment in technology of $28 million, and lower Executive Transition Costs of $7 million related to severance for our previous CEO and CFO in the prior year.

Expressed as a percentage of revenue, general and administrative expense increased to 17% for the fiscal year ended September 30, 2024, from 16% for the fiscal year ended September 30, 2023.

Selling and marketing expense decreased by $25 million, or 4%, to $685 million for the fiscal year ended September 30, 2024 from $710 million for the fiscal year ended September 30, 2023.

Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the fiscal year ended September 30, 2023 from 13% for the fiscal year ended September 30, 2022 due to lower variable marketing spend and savings from the Restructuring Plan.

Distribution expense was $125 million for the fiscal year ended September 30, 2023 and $131 million for the fiscal year ended September 30, 2022.

Expressed as a percentage of revenue, selling and marketing expense decreased to 11% for the fiscal year ended September 30, 2024 from 12% for the fiscal year ended September 30, 2023 due to lower variable marketing spend and an increase in savings from the Company’s restructuring plans.

Distribution expense decreased by $20 million, to $105 million for the fiscal year ended September 30, 2024 from $125 million for the fiscal year ended September 30, 2023 driven by revenue mix.

Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

Total selling, general and administrative expense increased by $141 million, or 8%, to $1,862 million for the fiscal year ended September 30, 2022 from $1,721 million for the fiscal year ended September 30, 2021.

Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 30% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022.

General and administrative expense increased by $52 million to $991 million for the fiscal year ended September 30, 2023 from $939 million for the fiscal year ended September 30, 2022.

The increase in general and administrative expense was mainly due to increased employee related costs, including the impact of an additional week, the impact of acquisitions, unfavorable movements in foreign currency exchange rates of $11 million and increased expenses related to transformation initiatives, partially offset by the impact of the mark-to-market adjustment of an earn-out liability related to an acquisition and lower restructuring.

Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

Selling and marketing expense increased by $54 million, or 7%, to $792 million for the fiscal year ended September 30, 2022 from $738 million for the fiscal year ended September 30, 2021.

Expressed as a percentage of revenue, selling and marketing expense decreased to 13% for the fiscal year ended September 30, 2022 from 14% for the fiscal year ended September 30, 2021.

Selling and marketing expense decreased by $82 million, or 10%, to $710 million for the fiscal year ended September 30, 2023 from $792 million for the fiscal year ended September 30, 2022.

Distribution expense was $125 million for the fiscal year ended September 30, 2023 and $131 million for the fiscal year ended September 30, 2022.

Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

Restructuring

Restructuring and Impairments

For the fiscal year ended September 30, 2024, total restructuring and impairment costs were $177 million consisting of approximately $128 million of restructuring charges and approximately $50 million of non-cash impairment losses related to the Strategic Restructuring Plan.

Restructuring costs in the prior year are attributed to the 2023 Restructuring Plan.

For the fiscal year ended September 30, 2023, total restructuring costs were $40 million consisting of severance costs for the 2023 Restructuring Plan.

Net gain on divestiture

Net gain on divestitures

During the fiscal year ended September 30, 2024, the Company recorded a pre-tax gain of $32 million in connection with the divestiture of certain sound recording and publishing rights and the divestitures of certain non-core O&O Media Properties.

During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying consolidated statement of operations.

There was no net gain or loss on divestiture recorded during the fiscal year ended September 30, 2022.

Reconciliation of Net Income Attributable to Warner Music Group Corp.

and Operating Income to Consolidated OIBDA

As previously described, we use OIBDA as our primary measure of financial performance.

The following table reconciles operating income to OIBDA, and further provides the components from net income attributable to Warner Music Group Corp.

and Operating Income to Consolidated Adjusted OIBDA

As previously described, we use Adjusted OIBDA as our primary measure of financial performance.

The following table reconciles operating income to Adjusted OIBDA, and further provides the components from net income attributable to Warner Music Group Corp.

to operating income for purposes of the discussion that follows (in millions):

15 unchanged sentences

Depreciation expense 103 87 76 16 18 % 11 15 %

OIBDA $ 1,122 $ 1,053 $ 915 $ 69 7 % $ 138 15 %

OIBDA increased by $69 million to $1,122 million for the fiscal year ended September 30, 2023 as compared to $1,053 million for the fiscal year ended September 30, 2022 as a result of higher revenues, lower selling, general and administrative expenses and $41 million of net gain on sale of the Company’s interest in certain sound recording rights, partially offset by costs related to the Restructuring Plan of $40 million and higher cost of revenues.

Expressed as a percentage of total revenue, OIBDA margin increased to 19% for the fiscal year ended September 30, 2023 from 18% for the fiscal year ended September 30, 2022 due to the factors that led to the increase in OIBDA noted above.

OIBDA increased by $138 million to $1,053 million for the fiscal year ended September 30, 2022 as compared to $915 million for the fiscal year ended September 30, 2021 as a result of higher revenues, partially offset by higher cost of revenues and selling, general and administrative expenses.

Expressed as a percentage of total revenue, OIBDA margin increased to 18% for the fiscal year ended September 30, 2022 from 17% for the fiscal year ended September 30, 2021 due to strong operating performance, partially offset by unfavorable foreign currency exchange rates.

Restructuring and impairments 177 42 8 135 — % 34 — %

Transformation initiative costs

76 53 46 23 43 % 7 15 %

Executive transition costs — 7 — (7) -100 % 7 — %

Net gain on divestitures (32) (41) — 9 -22 % (41) — %

Non-cash stock-based compensation and other related costs 61 52 42 9 17 % 10 24 %

Adjusted OIBDA

$ 1,432 $ 1,235 $ 1,149 $ 197 16 % $ 86 7 %

Adjusted OIBDA

Adjusted OIBDA increased by $197 million to $1,432 million for the fiscal year ended September 30, 2024, from $1,235 million for the fiscal year ended September 30, 2023 as a result of strong operating performance, the favorable impacts of the

Licensing Extension of $67 million and the Digital License Renewal of $6 million year-over-year, savings from the Company’s restructuring plans, the majority of which was reinvested in the Company’s business, and the impact of the CRB Rate Benefit of $6 million in the prior year.

Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 22% for the fiscal year ended September 30, 2024 from 20% for the fiscal year ended September 30, 2023, due to strong operating performance, the Licensing Extension, the Digital License Renewal, and savings from the Company’s restructuring plans, the majority of which was reinvested in the Company’s business.

Adjusted OIBDA increased by $86 million to $1,235 million for the fiscal year ended September 30, 2023, from $1,149 million for the fiscal year ended September 30, 2022 as a result of strong operating performance, partially offset by the benefit of the Copyright Settlement and the extra week in the fiscal year ended September 30, 2022.

Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 20% for the fiscal year ended September 30, 2023 from 19% for the fiscal year ended September 30, 2022 due to strong operating performance.

Non-cash stock-based compensation and other related costs

Our non-cash stock-based compensation and other related costs increased by $9 million to $61 million for the fiscal year ended September 30, 2024 from $52 million for the fiscal year ended September 30, 2023, primarily related to issuance of additional restricted stock units and market-based performance stock units, in addition to the acceleration of expense related to awards associated with certain employees that were terminated under the Strategic Restructuring Plan.

Our non-cash stock-based compensation and other related costs increased by $10 million to $52 million for the fiscal year ended September 30, 2023 from $42 million for the fiscal year ended September 30, 2022, primarily related to the separation agreement with our previous Chief Executive Officer during the fiscal year ended September 30, 2023.

Net gain on divestitures

Net gain on divestitures during the fiscal year ended September 30, 2024 includes a pre-tax gain of $32 million in connection with the divestitures of certain sound recording and publishing rights, including a divestiture of certain non-core O&O Media Properties in connection with the Strategic Restructuring Plan.

This compares to a pre-tax gain of $41 million during the fiscal year ended September 30, 2023.

During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million.

There was no net gain or loss on divestiture recorded during the fiscal year ended September 30, 2022.

Executive transition costs

There were no executive transition costs recorded during the fiscal year ended September 30, 2024.

During the fiscal year ended September 30, 2023, the Company incurred Executive Transition Costs of $7 million, which mainly consisted of severance for our previous CEO and CFO.

There were no executive transition costs recorded during the fiscal year ended September 30, 2022.

Transformation initiative costs

Our transformation initiative costs increased by $23 million to $76 million for the fiscal year ended September 30, 2024 from $53 million for the fiscal year ended September 30, 2023 due to an increase in costs associated with our finance transformation.

Our transformation initiative costs increased by $7 million to $53 million for the fiscal year ended September 30, 2023 from $46 million for the fiscal year ended September 30, 2022 due to an increase in costs associated with our finance transformation.

Restructuring and Impairments

Our restructuring and impairment charges increased to $177 million for the fiscal year ended September 30, 2024, from $42 million for the fiscal year ended September 30, 2023.

The increase is primarily driven by costs recorded in connection with the Strategic Restructuring Plan which include non-cash impairment charges of approximately $50 million and restructuring costs of approximately $128 million.

Restructuring costs in the prior year are attributed to the 2023 Restructuring Plan.

Our restructuring and impairment charges increased to $42 million for the fiscal year ended September 30, 2023 primarily related to the 2023 Restructuring Plan.

This compares to restructuring costs of $8 million for the fiscal year ended September 30, 2022.

Depreciation expense

Our depreciation expense increased by $16 million to $103 million for the fiscal year ended September 30, 2024 from $87 million for the fiscal year ended September 30, 2023.

This increase is primarily due to an increase in IT assets being placed into service.

Our depreciation expense increased by $11 million to $87 million for the fiscal year ended September 30, 2023 from $76 million for the fiscal year ended September 30, 2022.

This increase is primarily due to an increase in technology capital spend and assets being placed into service.

Our depreciation expense decreased by $1 million to $76 million for the fiscal year ended September 30, 2022 from $77 million for the fiscal year ended September 30, 2021.

Amortization expense

Our amortization expense decreased by $21 million, or 9%, to $224 million for the fiscal year ended September 30, 2024 from $245 million for the fiscal year ended September 30, 2023.

The decrease is primarily due to certain intangible assets becoming fully amortized, partially offset by incremental amortization related to acquisitions of music-related assets.

Our amortization expense decreased by $18 million, or 7%, to $245 million for the fiscal year ended September 30, 2023 from $263 million for the fiscal year ended September 30, 2022.

The decrease is primarily due to certain intangible assets becoming fully amortized.

Our amortization expense increased by $34 million, or 15%, to $263 million for the fiscal year ended September 30, 2022 from $229 million for the fiscal year ended September 30, 2021.

The increase is primarily due to an increase in amortizable intangible assets primarily related to the acquisition of music-related assets.

Operating income

Our operating income increased by $33 million to $823 million for the fiscal year ended September 30, 2024 from $790 million for the fiscal year ended September 30, 2023.

The increase in operating income was due to the factors that led to the increase in OIBDA and lower amortization, partially offset by higher depreciation as noted above.

The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA noted above, as well as lower amortization expense, partially offset by higher restructuring and non-cash impairment charges, higher depreciation expense and a decrease in net gain on divestitures as noted above.

Our operating income increased by $76 million to $790 million for the fiscal year ended September 30, 2023 from $714 million for the fiscal year ended September 30, 2022.

The increase in operating income was due to the factors that led to the increase in OIBDA, partially offset by higher amortization as noted above.

The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA noted above, and lower amortization, partially offset by higher depreciation expense as noted above.

Loss on extinguishment of debt

We recorded a loss on extinguishment of debt in the amount of $4 million for the fiscal year ended September 30, 2023, which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans.

There was no loss on extinguishment of debt for the fiscal year ended September 30, 2024.

For the fiscal year ended September 30, 2023, we recorded a loss on extinguishment of debt in the amount of $4 million related to the repayment of Senior Term Loan Facility Tranche H loans.

There was no loss on extinguishment of debt for the fiscal year ended September 30, 2022.

We recorded a loss on extinguishment of debt in the amount of $22 million for the fiscal year ended September 30, 2021 which represents the premiums paid

for early redemption and unamortized deferred financing costs in connection with the redemption of the 5.500% Senior Notes and the 3.625% Senior Secured Notes (as defined later in this Annual Report).

Interest expense, net

Our interest expense, net, increased to $161 million for the fiscal year ended September 30, 2024 from $141 million for the fiscal year ended September 30, 2023 due to the maturity of the interest rate swaps and higher interest rates on variable rate debt, partially offset by increased interest income.

Our interest expense, net, increased to $141 million for the fiscal year ended September 30, 2023 from $125 million for the fiscal year ended September 30, 2022 due to higher principal balance related to the issuance of incremental Senior Term Loan Facility and higher interest rates, partially offset by interest income.

Our interest expense, net, increased to $125 million for the fiscal year ended September 30, 2022 from $122 million for the fiscal year ended September 30, 2021 due to higher principal balance due to the issuance of senior secured notes to partially fund the acquisition of a business and music-related assets.

Other expense (income)

Other expense for the fiscal year ended September 30, 2024 primarily includes foreign currency losses on our Euro-denominated debt of $47 million, and currency exchange losses on our intercompany loans of $26 million, partially offset by income earned on equity method investments of $8 million.

Other expense for the fiscal year ended September 30, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $61 million, partially offset by currency exchange gains on the Company’s intercompany loans of $24 million.

Other income for the fiscal year ended September 30, 2022 primarily includes foreign currency gains on our Euro-denominated debt of $151 million, currency exchange gains on our intercompany loans of $34 million and unrealized gains on hedging activity of $10 million, partially offset by aggregate realized and unrealized losses of $49 million related to equity investments.

Other expense for the fiscal year ended September 30, 2021 primarily includes foreign currency losses on our Euro-denominated debt of $5 million and unrealized loss of $4 million on the mark-to-market of equity investments.

Income tax expense

Our income tax expense decreased by $47 million to $123 million for the fiscal year ended September 30, 2024 from $170 million for the fiscal year ended September 30, 2023.

The decrease of $15 million in income tax expense is primarily due to the impact of lower pre-tax income in the current year and benefit of R&D credits.

These benefits were partially offset by an increase in unrecognized tax benefit related to uncertain tax positions, higher withholding taxes and higher portion of the pre-tax income being earned outside of the United States in the current year.

Our income tax expense increased by $36 million to $185 million for the fiscal year ended September 30, 2022 from $149 million for the fiscal year ended September 30, 2021.

The increase of $36 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year, partially offset by the impact of a higher proportion of the pre-tax income being earned in the United States in the current year and the change in the UK statutory tax rate recognized in the prior year.

The decrease of $47 million in income tax expense is primarily due to the impact from winding down of the Company’s O&O Media Properties, return to provision adjustments, and nontaxable income from partnerships.

Our income tax expense decreased by $15 million to $170 million for the fiscal year ended September 30, 2023 from $185 million for the fiscal year ended September 30, 2022.

The decrease of $15 million in income tax expense is primarily due to the impact of lower pre-tax income in the fiscal year ended September 30, 2023 and benefit of R&D credits.

Net income decreased by $39 million to $478 million for the fiscal year ended September 30, 2024 from $439 million for the fiscal year ended September 30, 2023 as a result of the factors described above.

Net income increased by $248 million to $555 million for the fiscal year ended September 30, 2022 from $307 million for the fiscal year ended September 30, 2021 as a result of the factors described above.

Net income decreased by $116 million to $439 million for the fiscal year ended September 30, 2023 from $555 million for the fiscal year ended September 30, 2022 as a result of the factors described above.

Noncontrolling interest

There was $9 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2023, an increase from $4 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2022, driven by higher income from non-wholly-owned subsidiaries in the current year.

There was $4 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2022 and $3 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2021.

There was $43 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2024, an increase of $34 million, from $9 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2023, driven by higher income from non-wholly-owned subsidiaries in the current year, primarily due to the impact of the Licensing Extension.

Business Segment Results

Revenues, operating income (loss) and OIBDA by business segment were as follows (in millions):

Revenues, operating income (loss) and Adjusted OIBDA by business segment were as follows (in millions):

For the Fiscal Year Ended

5 unchanged sentences

Operating income 916 875 796 41 5 % 79 10 %

OIBDA 1,080 1,023 936 57 6 % 87 9 %

Adjusted OIBDA

1,282 1,094 1,046 188 17 % 48 5 %

Music Publishing

1 unchanged sentence

Operating income 238 200 139 38 19 % 61 44 %

OIBDA 293 231 174 62 27 % 57 33 %

Adjusted OIBDA

330 296 233 34 11 % 63 27 %

Corporate expenses and eliminations

1 unchanged sentence

Operating loss (331) (285) (221) (46) 16 % (64) 29 %

OIBDA (251) (201) (195) (50) 25 % (6) 3 %

Adjusted OIBDA loss

(180) (155) (130) (25) 16 % (25) 19 %

Revenues 6,426 6,037 5,919 389 6 % 118 2 %

Operating income 823 790 714 33 4 % 76 11 %

OIBDA 1,122 1,053 915 69 7 % 138 15 %

Adjusted OIBDA

1,432 1,235 1,149 197 16 % 86 7 %

Recorded Music

Recorded Music revenue increased by $268 million to $5,223 million for the fiscal year ended September 30, 2024 from $4,955 million for the fiscal year ended September 30, 2023.

The overall increase in Recorded Music revenue was driven by increases in digital, licensing and physical revenues, partially offset by lower artist services and expanded-rights revenues, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

Recorded Music revenue decreased by $11 million to $4,955 million for the fiscal year ended September 30, 2023 from $4,966 million for the fiscal year ended September 30, 2022.

2 unchanged sentences

The overall decrease in Recorded Music revenue was driven by decreases in physical and artist services and expanded-rights revenues, partially offset by growth in licensing and digital revenues, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

Recorded Music revenue increased by $422 million, or 9%, to $4,966 million for the fiscal year ended September 30, 2022 from $4,544 million for the fiscal year ended September 30, 2021.

International Recorded Music revenues were $2,735 million and $2,559 million, or 55% and 56% of consolidated Recorded Music revenues, for the fiscal year ended September 30, 2022 and September 30, 2021, respectively.

The overall increase in Recorded Music revenue was driven by growth across all revenue types, including digital, artist services and expanded-rights, licensing and physical revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

Cost of revenues

9 unchanged sentences

Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

Artist and repertoire costs as a percentage of revenue remained constant at 27% for each of the fiscal years ended September 30, 2023 and September 30, 2022, primarily due to the favorable impact of foreign currency exchange rates, offset by revenue mix.

Product costs as a percentage of revenue increased to 24% for the fiscal year ended September 30, 2023 from 23% for the fiscal year ended September 30, 2022.

The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.

Artist and repertoire costs as a percentage of revenue remained constant at 27% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

Product costs as a percentage of revenue decreased to 23% for the fiscal year ended September 30, 2024 from 24% for the fiscal year ended September 30, 2023.

The overall decrease as a percentage of revenue is primarily due to the impact of the Licensing Extension and revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue.

Recorded Music cost of revenues increased by $37 million, or 2%, to $2,502 million for the fiscal year ended September 30, 2023 from $2,465 million for the fiscal year ended September 30, 2022.

Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

Artist and repertoire costs as a percentage of revenue decreased to 27% for the fiscal year ended September 30, 2022 from 28% for the fiscal year ended September 30, 2021.

The decrease is primarily attributable to revenue mix and timing of artist and repertoire investments.

Product costs as a percentage of revenue increased to 24% for the fiscal year ended September 30, 2023 from 23% for the fiscal year ended September 30, 2022.

The overall increase as a percentage of revenue primarily relates to revenue mix due to an increase in lower-margin artist services and expanded-rights revenue.

The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.

Selling, general and administrative expense

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(1) Includes depreciation expense of $52 million, $50 million and $51 million for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively.

Recorded Music selling, general and administrative expense increased by $8 million, or 1%, to $1,432 million for the fiscal year ended September 30, 2024 from $1,424 million for the fiscal year ended September 30, 2023.

General and administrative expenses increased by $60 million, primarily due to higher non-cash stock-based compensation and other related expenses of $23 million, the impact of acquisitions of approximately $7 million, unfavorable movements in foreign currency exchange rates of $3 million, partially offset by incremental savings from the Company’s restructuring plans, the majority of which has been reinvested into the Company’s business, including incremental investment in technology of $18 million.

The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Company’s restructuring plans.

The decrease in distribution expense was primarily due to revenue mix and lower merchandising revenue.

Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 27% for the fiscal year ended September 30, 2024 from 29% for the fiscal year ended September 30, 2023.

Recorded Music selling, general and administrative expense decreased by $105 million, or 7%, to $1,424 million for the fiscal year ended September 30, 2023 from $1,529 million for the fiscal year ended September 30, 2022.

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Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022.

Recorded Music selling, general and administrative expense increased by $121 million, or 9%, to $1,529 million for the fiscal year ended September 30, 2022 from $1,408 million for the fiscal year ended September 30, 2021.

The increase in general and administrative expense was primarily due to the impact of acquisitions, increased employee related costs, the unfavorable movements in foreign currency exchange rates of $14 million and legal expenses for the Copyright Settlement, partially offset by the impact of the mark-to-market adjustment of an earn-out liability related to an acquisition, lower non-cash stock-based compensation and other related expenses of $9 million, as a result of equity awards becoming fully vested, and lower restructuring.

The increase in selling and marketing expense was primarily due to increased variable marketing spend on higher revenues and new releases, increased employee related costs and higher travel expenses as limited travel resumed.

The increase in distribution expense was primarily due to higher artist services and expanded-rights revenue.

Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense remained constant at 31% for each of the fiscal years ended September 30, 2022 and September 30, 2021.

Restructuring

For the fiscal year ended September 30, 2023, total restructuring costs were $40 million consisting of severance costs for the Restructuring Plan.

Net gain on divestiture

Operating income and OIBDA

Recorded Music OIBDA included the following amounts (in millions):

For the Fiscal Year Ended

September 30, 2023 vs.

2022 2022 vs.

2023 2022 2021 $ Change % Change $ Change % Change

Operating income $ 875 $ 796 $ 733 $ 79 10 % $ 63 9 %

Depreciation and amortization 205 227 203 (22) -10 % 24 12 %

OIBDA $ 1,080 $ 1,023 $ 936 $ 57 6 % $ 87 9 %

Recorded Music operating income increased by $79 million to $875 million for the fiscal year ended September 30, 2023 from $796 million for the fiscal year ended September 30, 2022 as a result of lower selling, general and administrative expense, the net gain on sale of the Company’s interest in certain sound recording rights and a decrease in amortization due to certain intangible assets becoming fully amortized, partially offset by lower revenues, higher cost of revenues and costs related to the Restructuring Plan of $40 million.

Recorded Music OIBDA increased by $57 million, to $1,080 million for the fiscal year ended September 30, 2023 from $1,023 million for the fiscal year ended September 30, 2022 due to the factors that led to the increase in Recorded Music operating income noted above, partially offset by lower depreciation and amortization.

Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin increased to 22% for the fiscal year ended September 30, 2023 from 21% for the fiscal year ended September 30, 2022 due to the factors that led to the increase in OIBDA noted above.

Recorded Music operating income increased by $63 million to $796 million for the fiscal year ended September 30, 2022 from $733 million for the fiscal year ended September 30, 2021 as a result of higher revenues, partially offset by higher cost of revenues and selling, general and administrative expenses.

Recorded Music OIBDA increased by $87 million, to $1,023 million for the fiscal year ended September 30, 2022 from $936 million for the fiscal year ended September 30, 2021 due to the factors that led to the increase in Recorded Music operating income noted above and an increase in amortizable intangible assets related to the acquisition of music-related assets.

Expressed as a percentage of Recorded Music revenue, Recorded Music OIBDA margin remained constant at 21% for each of the fiscal years ended September 30, 2022 and September 30, 2021 due to strong operating performance, which was offset by revenue mix resulting from the growth of lower-margin revenue streams and an unfavorable impact of foreign currency exchange rates.

Operating income and Adjusted OIBDA

Recorded Music operating income increased by $41 million to $916 million for the fiscal year ended September 30, 2024 from $875 million for the fiscal year ended September 30, 2023 due to the factors that led to the increase in Recorded Music Adjusted OIBDA noted below, as well as lower amortization expense of $28 million, partially offset by a $24 million year-over-year decrease in net gain on divestitures, $166 million of restructuring and non-cash impairment charges primarily related to the Strategic Restructuring Plan compared to $40 million of restructuring charges in the prior year related to the 2023 Restructuring Plan, and higher non-cash stock-based compensation expense and other related costs of $23 million.

Recorded Music Adjusted OIBDA increased by $188 million, to $1,282 million for the fiscal year ended September 30, 2024 from $1,094 million for the fiscal year ended September 30, 2023.

The increase in Adjusted OIBDA is primarily driven by strong operating performance, $67 million year-over-year increase from the Licensing Extension, $6 million year-over-year increase from the Digital License Renewal, and savings from the Company’s restructuring plans, the majority of which has been reinvested in the Company’s business.

Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 25% for the fiscal year ended September 30, 2024 from 22% for the fiscal year ended September 30, 2023, which includes the impact from the Licensing Extension and Digital License Renewal.

Recorded Music operating income increased by $79 million to $875 million for the fiscal year ended September 30, 2023 from $796 million for the fiscal year ended September 30, 2022 driven by the factors affecting Adjusted OIBDA discussed below, as well as lower selling, general and administrative expense, the net gain on sale of the Company’s interest in certain sound recording rights and a decrease in amortization due to certain intangible assets becoming fully amortized, partially offset by lower revenues, higher cost of revenues and costs related to the 2023 Restructuring Plan of $40 million.

Recorded Music Adjusted OIBDA increased by $48 million, to $1,094 million for the fiscal year ended September 30, 2023 from $1,046 million for the fiscal year ended September 30, 2022 due to strong operating performance, the favorable impact of foreign exchange rates, savings from the 2023 Restructuring Plan, partially offset by revenue mix and the impact of an additional week during the fiscal year ended September 30, 2022.

Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 22% for the fiscal year ended September 30, 2023 from 21% for the fiscal year ended September 30, 2022 due to the factors that led to the increase in Adjusted OIBDA noted above.

Music Publishing

Music Publishing revenues increased by $122 million, or 11%, to $1,210 million for the fiscal year ended September 30, 2024 from $1,088 million for the fiscal year ended September 30, 2023.

Music Publishing revenues were $582 million and $513 million, or 53% and 54% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and

September 30, 2022, respectively.

Music Publishing revenues were $660 million and $582 million, or 55% and 53% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

International Music Publishing revenues were $550 million and $506 million, or 45% and 47% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

The overall increase in Music Publishing revenue was driven by growth in digital, performance and mechanical revenue, partially offset by lower synchronization revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

The overall increase in Music Publishing revenue was driven by growth in digital, performance and synchronization revenue, partially offset by lower mechanical revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

Music Publishing revenues increased by $130 million, or 14%, to $1,088 million for the fiscal year ended September 30, 2023 from $958 million for the fiscal year ended September 30, 2022.

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International Music Publishing revenues were $506 million and $445 million, or 47% and 46% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively.

The overall increase in Music Publishing revenue was driven by growth across all revenue types, including digital, performance, synchronization and mechanical revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.

Cost of revenues

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Music Publishing cost of revenues increased by $82 million, or 12%, to $763 million for the fiscal year ended September 30, 2024 from $681 million for the fiscal year ended September 30, 2023.

Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 63% for the fiscal year ended September 30, 2023 from 65% for the fiscal year ended September 30, 2022, primarily attributable to the favorable impact of foreign currency exchange rates, partially offset by revenue mix.

Music Publishing cost of revenues increased by $127 million, or 26%, to $620 million for the fiscal year ended September 30, 2022 from $493 million for the fiscal year ended September 30, 2021.

Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues remained constant at 63% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

Music Publishing cost of revenues increased by $61 million, or 10%, to $681 million for the fiscal year ended September 30, 2023 from $620 million for the fiscal year ended September 30, 2022.

Selling, general and administrative expense

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Music Publishing selling, general and administrative expense increased to $125 million for the fiscal year ended September 30, 2024 from $117 million for the fiscal year ended September 30, 2023.

The increase in general and administrative expense was primarily due to higher employee-related costs.

The increase was primarily due to higher compensation and employee-related costs, partially offset by a decrease in selling and marketing expense due to lower variable marketing spend.

Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the fiscal year ended September 30, 2024 from 11% for the fiscal year ended September 30, 2023.

Music Publishing selling, general and administrative expense increased to $117 million for the fiscal year ended September 30, 2023 from $112 million for the fiscal year ended September 30, 2022.

The increase in general and administrative expense was primarily due to higher variable compensation expense related to strong operating performance, employee-related costs and legal expenses for the Copyright Settlement, partially offset by lower restructuring costs.

The increase in general and administrative expense was primarily due to higher employee-related costs.

Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 11% for the fiscal year ended September 30, 2023 from 12% for the fiscal year ended September 30, 2022.

Operating income and OIBDA

Music Publishing OIBDA included the following amounts (in millions):

For the Fiscal Year Ended

September 30, 2023 vs.

2022 2022 vs.

2023 2022 2021 $ Change % Change $ Change % Change

Operating income $ 200 $ 139 $ 89 $ 61 44 % $ 50 56 %

Depreciation and amortization 93 92 85 1 1 % 7 8 %

OIBDA $ 293 $ 231 $ 174 $ 62 27 % $ 57 33 %

Music Publishing operating income increased by $61 million to $200 million for the fiscal year ended September 30, 2023 from $139 million for the fiscal year ended September 30, 2022 as a result of higher revenues, partially offset by higher cost of revenues and selling, general and administrative expense.

Music Publishing OIBDA increased by $62 million, or 27%, to $293 million for the fiscal year ended September 30, 2023 from $231 million for the fiscal year ended September 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.

Expressed as a percentage of Music Publishing revenue, Music Publishing OIBDA margin increased to 27% for the fiscal year ended September 30, 2023 from 24% for the fiscal year ended September 30, 2022 due to strong operating performance and the favorable impact of foreign currency exchange rates, partially offset by revenue mix.

Operating income and Adjusted OIBDA

Music Publishing operating income increased by $38 million to $238 million for the fiscal year ended September 30, 2024 from $200 million for the fiscal year ended September 30, 2023, driven by the same factors affecting Adjusted OIBDA discussed below as well as a $14 million net gain on a divestiture recognized for the fiscal year ended September 30, 2024, partially offset by an increase in amortization expense of $8 million, and higher non-cash stock-based compensation and other related costs of $1 million.

Music Publishing Adjusted OIBDA increased by $34 million, or 11%, to $330 million for the fiscal year ended September 30, 2024 from $296 million for the fiscal year ended September 30, 2023.

Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin remained constant at 27% for each of the fiscal years ended September 30, 2024 and September 30, 2023, driven by strong operating performance, partially offset by the CRB Rate Benefit in the prior year of $6 million.

Music Publishing OIBDA increased by $57 million, or 33%, to $231 million for the fiscal year ended September 30, 2022 from $174 million for the fiscal year ended September 30, 2021 largely due to the factors that led to the increase in Music Publishing OIBDA noted above and an increase in amortizable intangible assets related to the acquisition of music-related assets.

Expressed as a percentage of Music Publishing revenue, Music Publishing OIBDA margin increased to 24% for the fiscal year ended September 30, 2022 from 23% for the fiscal year ended September 30, 2021 due to strong operating performance, partially offset by the unfavorable impact of foreign currency exchange rates.

Music Publishing Adjusted OIBDA increased by $63 million, or 27%, to $296 million for the fiscal year ended September 30, 2023 from $233 million for the fiscal year ended September 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.

Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin increased to 27% for the fiscal year ended September 30, 2023 from 24% for the fiscal year ended September 30, 2022 due to strong operating performance and the favorable impact of foreign currency exchange rates, partially offset by revenue mix.

Corporate Expenses and Eliminations

Our operating loss from corporate expenses and eliminations increased by $46 million to $331 million for the fiscal year ended September 30, 2024 from $285 million for the fiscal year ended September 30, 2023.

The increase is primarily due to an increase in depreciation of $13 million, incremental investment in technology of $5 million, restructuring and non-cash impairment charges associated with the Strategic Restructuring Plan of $11 million, and higher expenses related to transformation initiatives of $23 million, partially offset by the Executive Transition Costs of $7 million in the prior year and lower non-cash stock-based compensation and other related costs of $15 million.

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $25 million to $180 million for the fiscal year ended September 30, 2024 from $155 million for the fiscal year ended September 30, 2023 primarily due to the operating loss factors noted above.

Our operating loss from corporate expenses and eliminations increased by $64 million to $285 million for the fiscal year ended September 30, 2023 from $221 million for the fiscal year ended September 30, 2022, primarily due to incremental investment in technology of $12 million, higher depreciation of $14 million, recovery of legal expenses for the Copyright Settlement in the prior year of $13 million, higher non-cash stock-based compensation and other related expenses of $10 million, the Executive Transition Costs of $7 million and higher expenses related to transformation initiatives of $7 million, partially offset by the impact of an additional week in the prior year.

Our OIBDA loss from corporate expenses and eliminations increased by $50 million to $251 million for the fiscal year ended September 30, 2023 from $201 million for the fiscal year ended September 30, 2022 due to the operating loss factors noted above.

Our operating loss from corporate expenses and eliminations increased by $8 million to $221 million for the fiscal year ended September 30, 2022 from $213 million for the fiscal year ended September 30, 2021, which primarily includes increased expenses related to transformation initiatives and employee related costs, including the impact of an additional week, partially offset by recovery of previously incurred legal expenses for the Copyright Settlement.

Our OIBDA loss from corporate expenses and eliminations increased by $6 million to $201 million for the fiscal year ended September 30, 2022 from $195 million for the fiscal year ended September 30, 2021 primarily due to the operating loss factors noted above.

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $25 million to $155 million for the fiscal year ended September 30, 2023 from $130 million for the fiscal year ended September 30, 2022 due to the operating loss factors noted above.

FINANCIAL CONDITION AND LIQUIDITY

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Cash provided by operating activities was $754 million for the fiscal year ended September 30, 2024 compared to $687 million for the fiscal year ended September 30, 2023 and $742 million for the fiscal year ended September 30, 2022.

The $55 million, or 7%, decrease in cash provided by operating activities during the current year was primarily due to timing of working capital, higher cash interest payments due to higher debt balance and higher interest on variable rate debt and higher cash taxes due to lower available foreign tax credits to shield U.S.

The $67 million, or 10%, increase in cash provided by operating activities during the current year was primarily due to timing of working capital largely driven by a higher restructuring liability due to the timing of severance payments related to the Strategic Restructuring Plan.

The decrease in cash provided by operating activities for the fiscal year ended September 30, 2023 compared to the fiscal year ended September 30, 2022 was primarily due to timing of working capital, higher cash interest payments due to higher debt balance and higher interest on variable rate debt and higher cash taxes due to lower available foreign tax credits to shield U.S.

taxable income coupled with higher forecasted taxable income.

The increase in cash provided by operating activities for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021 was primarily due to strong operating performance and timing of working capital.

Investing Activities

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Cash used in investing activities of $311 million for the fiscal year ended September 30, 2024 consisted of $40 million relating to investments and acquisitions of businesses, $187 million to acquire music-related assets, and $116 million relating to capital expenditures, partially offset by $19 million of proceeds from divestitures and $13 million of proceeds from the sale of investments.

Cash used in investing activities of $300 million for the fiscal year ended September 30, 2023 consisted of $126 million relating to investments and acquisitions of businesses, $114 million to acquire music-related assets, and $127 million relating to capital expenditures, partially offset by $45 million of proceeds from divestitures and $22 million of proceeds from the sale of investments.

Cash used in investing activities of $824 million for the fiscal year ended September 30, 2022 consisted of $509 million relating to investments and acquisitions of businesses, a portion of which was debt-financed, $191 million to acquire music-related assets, a portion of which was debt-financed, and $135 million relating to capital expenditures, partially offset by $11 million of proceeds from the sale of investments.

Cash used in investing activities of $638 million for the fiscal year ended September 30, 2021 consisted of $64 million relating to investments and acquisitions of businesses, $93 million relating to capital expenditures and $481 million to acquire music-related assets, a portion of which was debt-financed.

Financing Activities

Cash used in financing activities was $325 million for the fiscal year ended September 30, 2023 compared to cash provided by financing activities of $188 million for the fiscal year ended September 30, 2022 and cash used in financing activities of $61 million for the fiscal year ended September 30, 2021.

Cash used in financing activities was $396 million for the fiscal year ended September 30, 2024 compared to cash used in financing activities of $325 million for the fiscal year ended September 30, 2023 and cash provided by financing activities of $188 million for the fiscal year ended September 30, 2022.

The $396 million of cash used in financing activities for the fiscal year ended September 30, 2024 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $20 million, dividends paid of $361 million, deferred financing costs of $2 million, distributions to noncontrolling interest holders of $8 million, and taxes paid to net share settle restricted stock units and Class A common shares of $5 million.

The $325 million of cash used in financing activities for the fiscal year ended September 30, 2023 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $133 million, repayment of Senior Term Loan Facility Tranche H loans of $150 million, dividends paid of $340 million, deferred financing costs of $3 million, distributions to noncontrolling interest holders of $12 million, redemption of noncontrolling interest of $1 million and repayment of Term Loan Mortgage of $1 million, partially offset by proceeds from the Senior Term Loan Facility Tranche G loans of $149 million, proceeds from the Senior Term Loan Facility Tranche H loans of $147 million and proceeds from the Term Loan Mortgage of $19 million.

The $188 million of cash provided by financing activities for the fiscal year ended September 30, 2022 consisted of proceeds from debt issuance of $535 million, which was used to fund the acquisition of a business and music-related assets, partially offset by dividends paid of $318 million, taxes paid related to net share settlement of restricted stock units of $6 million, deferred financing costs of $5 million, cash paid to settle deferred and contingent consideration of $7 million, distributions to noncontrolling interest holders of $6 million and other for $5 million.

The $61 million of cash used in financing activities for the fiscal year ended September 30, 2021 consisted of the redemption of the outstanding aggregate principal amount of $325 million of the 5.500% Senior Notes due 2026, the redemption of the 3.625% Senior Secured Notes due 2026 of $524 million, dividends paid of $265 million, call premiums paid on early redemption of debt of $21 million, deferred financing costs of $12 million and distributions to noncontrolling interest holders of $7 million, partially offset by the proceeds from the issuance of the 3.000% Senior Secured Notes due 2031 of $244 million which was used to fund the acquisition of music-related assets, proceeds from the issuance of the 2.250% Senior Secured Notes due 2031 of $524 million, and proceeds from the increase supplement to the Senior Term Loan Facility of $325 million.

There were no drawdowns on the Revolving Credit Facility during the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022.

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We believe that our primary sources of liquidity will be sufficient to support our existing operations over the next twelve months.

We are continuing our financial transformation initiative, launched in August 2019, to upgrade our information technology and finance infrastructure, including related systems and processes, for which we currently expect upfront costs to be approximately $235 million, which includes capital expenditures of approximately $100 million.

The timing of global deployment has been delayed as the size and scale of this global system implementation requires rigorous system testing and data validation to ensure go-live readiness.

To address these implementation requirements, we are deploying our new technology platform in a wave-based approach.

In 2023, we successfully launched certain components of our new technology platform in select territories in two successful waves in April and August and will continue to deploy the platform to remaining territories through fiscal year 2024 and into fiscal year 2025.

Annualized run-rate savings from the financial transformation initiative are expected to be between approximately $35 million and $40 million, once fully implemented and we expect to achieve benefits through the implementation of the platform including process and data standardization, improved security and compliance, operational efficiencies and enhanced productivity.

We expect that our primary sources of liquidity will be sufficient to fund these expenditures.

Debt Capital Structure

Since Access acquired us in 2011, we have sought to extend the maturity dates on our outstanding indebtedness, reduce interest expense and improve our debt ratings.

For example, our S&P corporate credit rating improved from B in 2017 to BB+ in July 2021 with a stable outlook, and our Moody’s corporate family rating improved from B1 in 2016 to Ba2 in April 2023.

For example, our S&P corporate credit rating improved from B in 2017 to BBB- in August 2024 with a stable outlook, and our Moody’s corporate family rating improved from B1 in 2016 to Ba2 in April 2023 with a positive outlook updated in April 2024.

In September 2024, Fitch assigned us a BBB- long-term credit rating with a stable outlook.

In addition, our weighted-average interest rate on our outstanding indebtedness has decreased from 10.5% in 2011 to 4.3% as of September 30, 2024.

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Equal principal installments and interest are due monthly.

The outstanding balance for the Term Loan Mortgage as of September 30, 2024 was $18 million.

Revolving Credit Facility

On January 31, 2018, Acquisition Corp.

entered into the revolving credit agreement (as amended by the amendment dated October 9, 2019 and as further amended, amended and restated or otherwise modified from time to time, the “Revolving Credit Agreement”) for a senior secured revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto (the “Revolving Credit Facility”).

Agreement”) for a senior secured revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto (the “Revolving Credit Facility”).

On April 3, 2020, Acquisition Corp.

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This transition does not result in a financial impact to our consolidated financial statements.

On November 30, 2023, Acquisition Corp.

entered into an amendment (the “Fifth Revolving Credit Agreement Amendment”) to the revolving credit agreement, dated January 31, 2018, as amended, among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent, governing Acquisition Corp.’s revolving credit facility (the “Revolving Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto.

The Fifth Revolving Credit Agreement Amendment (among other changes):

(i) increased the commitments under the Fifth Revolving Credit Agreement Amendment from an aggregate principal amount of $300 million to an aggregate principal amount of $350 million, (ii) extended the final maturity date of the Revolving Credit Facility from April 3, 2025 to November 30, 2028, (iii) appointed JPMorgan Chase Bank, N.A.

as administrative agent in the place of Credit Suisse AG, Cayman Islands Branch, (iv) modified the existing springing Secured Indebtedness to EBITDA Ratio financial maintenance covenant by increasing the springing threshold from $105,000,000 to $140,000,000, and (v) included provisions that allow Acquisition Corp.

to terminate the security interests securing the obligations under the Revolving Credit Facility upon the satisfaction of certain conditions and, in the event that the security interests are so terminated, the existing springing Secured Indebtedness to EBITDA Ratio financial maintenance covenant (which is calculated net of up to $250 million of cash and cash equivalents held by Acquisition Corp.

and its restricted subsidiaries) shall automatically be replaced with a new financial maintenance covenant prohibiting Acquisition Corp.

from permitting the Total Indebtedness to EBITDA Ratio to be greater than 3.60:1.00 (calculated net of all cash and cash equivalents held by Acquisition Corp.

and its restricted subsidiaries) as of the end of any fiscal quarter.

On September 20, 2024, Acquisition Corp.

entered into an amendment (the “Sixth Revolving Credit Agreement Amendment”) to the revolving credit agreement, dated January 31, 2018, as amended, among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent, governing the Revolving Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto.

The Sixth Revolving Credit Agreement Amendment amended the First Lien Indebtedness to EBITDA Ratio, the Senior Secured Indebtedness to EBITDA Ratio and the Total Indebtedness to EBITDA Ratio, in each case so that the applicable ratio is calculated net of up to $750 million of cash and cash equivalents held by Acquisition Corp.

and its restricted subsidiaries as of the date of determination.

Acquisition Corp.

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The Revolving Credit Agreement permits loans for general corporate purposes and may also be utilized to issue letters of credit.

Borrowings under the Revolving Credit Agreement bear interest at Acquisition Corp.’s election at a rate equal to (i) the rate for deposits in the borrowing currency in the London interbank market (adjusted for maximum reserves) for the applicable interest period (“Revolving SOFR”) plus 1.875% per annum, or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) the overnight federal funds rate plus 0.5% and (z) the one-month Revolving SOFR plus 1.00% per annum, plus, in each case, 0.875% per annum;

provided that, for each of clauses (i) and (ii), the applicable margin with respect to such loans is subject to adjustment upon achievement of certain leverage ratios as set forth in a leverage-based pricing grid in the Revolving Credit Agreement.

Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.84x at September 30, 2023, the applicable margin for Eurodollar 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 (as defined in the Revolving Credit Agreement).

The loans under the Revolving Credit Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable interest period (“Revolving Term SOFR”), and other rates for alternate currencies, such as EURIBOR and SONIA, as provided in the Revolving Credit Agreement, subject to a zero floor, plus 1.75% per annum in the case of Initial Revolving Loans (as defined in the Revolving Credit Agreement), or 1.875% per annum in the case of 2020 Revolving Loans (as defined in the Revolving Credit Agreement), or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent from

time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the one-month Revolving Term SOFR plus 1.0% per annum, plus, in each case, 0.75% per annum in the case of Initial Revolving Loans, or 0.875% per annum in the case of 2020 Revolving Loans;

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 2.05x at September 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 (as defined in the Revolving Credit Agreement).

If, at any time, the aggregate amount of outstanding loans (including letters of credit outstanding thereunder) exceeds the commitments under the Revolving Credit Facility, prepayments of the loans (and after giving effect to such prepayment the cash collateralization of letters of credit) will be required in an amount equal to such excess.

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The Company recorded a loss on extinguishment of debt of approximately $4 million for the fiscal year ended September 30, 2024, which represents the remaining unamortized discount and deferred financing costs of the Tranche H term loan.

On December 29, 2023, Acquisition Corp.

entered into an amendment (the “Thirteenth Amendment”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the other loan parties, Holdings, each lender party hereto, Credit Suisse AG, Cayman Islands Branch as the resigning administrative agent, and JPMorgan Chase Bank, N.A, as the successor administrative agent.

The Thirteenth Amendment appointed JPMorgan Chase Bank, N.A.

as administrative agent in the place of Credit Suisse AG, Cayman Islands Branch.

On January 24, 2024, Acquisition Corp entered into an amendment (the “Fourteenth Amendment”) to the credit agreement, dated November 1, 2012 (as amended by the amendments dated as of May 9, 2013, July 15, 2016, November 21, 2016, May 22, 2017, December 6, 2017, March 14, 2018, June 7, 2018, January 20, 2021, March 8, 2021, November 1, 2022, May 10, 2023, June 30, 2023 and December 29, 2023), among Acquisition Corp., the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, governing Acquisition Corp.’s senior secured term loan facility with JPMorgan Chase Bank N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto.

The Fourteenth Amendment (among other changes) extends the maturity date of its outstanding term loans from January 20, 2028 to January 24, 2031 through the issuance of tranche I term loans and refinancing of the existing tranche G term loans.

The tranche I term loans shall bear interest at a rate equal to, at Acquisition Corp.’s election (i) the forward-looking term rate based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable interest period (“Term SOFR”) subject to a zero floor, plus 2.00% per annum or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) one-month Term SOFR, plus 1.00% per annum, in each case, subject to a 1.00% floor, plus 1.00% per annum.

In connection with the Fourteenth Amendment, the Company recognized approximately $3 million of expenses associated with fees paid to third parties and capitalized approximately $2 million in fees paid to creditors.

Certain participating lenders were repaid and replaced by new lenders.

The proceeds and repayments of $42 million have been presented in the accompanying consolidated statement of cash flows.

On September 17, 2024, Acquisition Corp.

entered into an amendment (the “Fifteenth Amendment”) to the credit agreement, dated November 1, 2012 (as amended by the amendments dated as of May 9, 2013, July 15, 2016, November 21, 2016, May 22, 2017, December 6, 2017, March 14, 2018, June 7, 2018, January 20, 2021, March 8, 2021, November 1, 2022, May 10, 2023, June 30, 2023, December 29, 2023 and January 24, 2024), among Acquisition Corp., the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, governing Acquisition Corp.’s senior secured term loan facility with JPMorgan Chase Bank N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto.

The Fifteenth Amendment (among other changes) reprices the term loans through the issuance of tranche J term loans and the refinancing of the existing tranche I term loans.

The tranche J term loans shall bear interest at a rate equal to, at Acquisition Corp.’s election (i) Term SOFR subject to a zero floor, plus 1.75% per annum or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) one-month Term SOFR, plus 1.00% per annum, in each case, subject to a 1.00% floor, plus 1.00% per annum.

In connection with the Fifteenth Amendment, the Company recognized approximately $2 million of expenses associated with fees paid to third parties.

Certain participating lenders were repaid and replaced by new lenders.

The proceeds and repayments of $62 million have been presented in the accompanying consolidated statement of cash flows.

Acquisition Corp.

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Interest Rates and Fees

Term loan borrowings under the Senior Term Loan Credit Agreement bear interest at a floating rate measured by reference to, at Acquisition Corp.’s option, either (i) an adjusted scheduled overnight financing rate, SOFR, not less than 0.00% per annum plus a borrowing margin of 2.125% per annum or (ii) an alternative base rate plus a borrowing margin of 1.125% per annum.

Term loan borrowings under the Senior Term Loan Credit Agreement bear interest at a floating rate measured by reference to, at Acquisition Corp.’s option, either (i) the forward-looking term rate based on Term SOFR subject to a zero floor, plus 1.75% per annum or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) one-month Term SOFR, plus 1.00% per annum, subject to a 1.00% floor, plus, in each case, 1.00% per annum.

If there is a payment default at any time, then the interest rate applicable to overdue principal and interest will be the rate otherwise applicable to such loan

plus 2.00% per annum.

Default interest will also be payable on other overdue amounts at a rate of 2.00% per annum above the amount that would apply to an alternative base rate loan.

The Senior Term Loan Facility is subject to mandatory prepayment and reduction in an amount equal to (a) 50% of excess cash flow (as defined in the Senior Term Loan Credit Agreement), with reductions to 25% and zero based upon achievement of a net senior secured leverage ratio of less than or equal to 4.50:1.00 or 4.00:1.00, respectively, (b) 100% of the net cash proceeds received from the incurrence of indebtedness by the Term Loan Borrower or any of its restricted subsidiaries (other than indebtedness permitted under the Senior Term Loan Facility) and (c) 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by the Term Loan Borrower and its restricted subsidiaries (including certain insurance and condemnation proceeds) in excess of $75 million and subject to the right of the Term Loan Borrower and its restricted subsidiaries to reinvest such proceeds within a specified period of time, and other exceptions.

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3.000% Senior Secured Notes due 2031

Term Loan Mortgage

Mortgage Term Loan due 2033 18

Total long-term debt, including the current portion $ 4,048

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______________________________________

(a) Reflects $300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $2 million at September 30, 2023.

(a) Reflects $350 million of commitments under the Revolving Credit Facility with no letters of credit outstanding at September 30, 2024.

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

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On August 15, 2024, the Company’s board of directors declared a cash dividend of $0.18 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 on September 4, 2024.

On November 8, 2024, the Company’s board of directors declared a cash dividend of $0.18 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, payable on December 3, 2024 to stockholders of record as of the close of business on November 19, 2024.

The Company paid cash dividends to stockholders and participating security holders of $361 million, $340 million and $318 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

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The Revolving Credit Facility contains a springing leverage ratio that is tied to a ratio based on EBITDA, which is defined under the Revolving Credit Agreement.

Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability

to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans.

Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans.

On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.

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Net hedging and foreign exchange (gains) losses (d) 74 43 54 (37)

Transaction costs (e) 3 8 3 —

Business optimization expenses (f) 68 54 24 11

Non-cash stock-based compensation expense (g) 49 39 8 5

Other non-cash charges (h) — 23 (1) 11

Pro forma impact of cost savings initiatives and specified transactions (i) 46 32 7 5

Transaction costs

Business optimization expenses (e)

Non-cash stock-based compensation expense (f)

Other non-cash charges (g)

Pro forma impact of cost savings initiatives and specified transactions (h)

Adjusted EBITDA $ 1,619 $ 1,311 $ 395 $ 340

Senior Secured Indebtedness (j) $ 3,726

Leverage Ratio (k) 2.84x

Senior Secured Indebtedness (i)

Leverage Ratio (j)

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(a) Reflects loss on extinguishment of debt, primarily including tender fees and unamortized deferred financing costs.

(b) Reflects net losses (gains) on sale of securities and divestitures.

(d) Reflects unrealized losses (gains) due to foreign exchange on our Euro-denominated debt, losses (gains) from hedging activities and intercompany transactions.

(e) Reflects mainly transaction related costs.

(f) Reflects costs associated with our transformation initiatives and IT system updates, which includes costs of $14 million and $48 million related to our finance transformation and other related costs for the three and twelve months ended September 30, 2023, respectively, as well as $9 million and $40 million for the three and twelve months ended September 30, 2022, respectively.

(g) Reflects non-cash stock-based compensation expense related to the Omnibus Incentive Plan and the Warner Music Group Corp.

Senior Management Free Cash Flow Plan.

(h) Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market adjustment of equity investments, investment losses (gains), mark-to-market adjustments of an earn-out liability in 2022 and other non-cash impairments.

(i) Reflects expected savings resulting from transformation initiatives and the pro forma impact of certain specified transactions for the three and twelve months ended September 30, 2023.

(b) Reflects net gains on sale of securities and divestitures.

(c) Reflects severance costs and other restructuring related expenses, including those related to the Strategic Restructuring Plan and 2023 Restructuring Plan as well as the Executive Transition Costs in the prior year.

(d) Reflects unrealized losses (gains) due to foreign exchange on our Euro-denominated debt, losses (gains) from foreign currency forward exchange contracts and intercompany transactions.

(e) Reflects costs associated with our transformation initiatives and IT system updates, which includes costs of $20 million and $76 million related to our finance transformation for the three and twelve months ended September 30, 2024, respectively, as well as $14 million and $53 million for the three and twelve months ended September 30, 2023, respectively.

(f) Reflects non-cash stock-based compensation expense related to the Omnibus Incentive Plan and the Warner Music Group Corp.

Senior Management Free Cash Flow Plan in the prior year.

(g) Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market adjustment of equity investments, investment losses (gains) and $50 million of non-cash impairment losses resulting from the Strategic Restructuring Plan in the current year.

(h) Reflects expected savings resulting from transformation initiatives, including the Strategic Restructuring Plan and the 2023 Restructuring Plan, and the pro forma impact of certain specified transactions for the three and twelve months ended September 30, 2024.

Certain of these cost savings initiatives and transactions impacted quarters prior to the quarter during which they were identified within the last twelve-month period.

The pro forma impact of these specified transactions and initiatives resulted in a $59 million increase in the twelve months ended September 30, 2024 Adjusted EBITDA.

(j) Reflects primarily the balance of senior secured debt at Acquisition Corp.

of approximately $3.964 billion and less cash of $250 million.

(k) Reflects the ratio of Senior Secured Indebtedness, including Revolving Credit Agreement Indebtedness, to Adjusted EBITDA.

This is calculated net of cash and equivalents of the Company as of September 30, 2023 not exceeding $250 million.

(i) Reflects the balance of senior secured debt at Acquisition Corp.

of approximately $4.014 billion less cash of $694 million.

(j) Reflects the ratio of Senior Secured Indebtedness, including Revolving Credit Agreement Indebtedness, to Adjusted EBITDA.

This is calculated net of cash and equivalents of the Company as of September 30, 2024 not exceeding $750 million in accordance with the Sixth Revolving Credit Agreement Amendment as described further in Note 10.

If the outstanding aggregate principal amount of borrowings and drawings under letters of credit which have not been reimbursed under our Revolving Credit Facility is greater than $140 million at the end of a fiscal quarter, the maximum leverage ratio permitted under the Revolving Credit Facility is 5.00:1.00.

The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $140 million at the end of a fiscal quarter.

On May 4, 2021, certain covenants set forth in our Revolving Credit

Facility were suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.

On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were

suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.

Management believes that funds generated from our operations and borrowings under the Revolving Credit Facility and available cash and equivalents will be sufficient to fund our debt service requirements, working capital requirements and capital expenditure requirements for the foreseeable future.

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However, our ability to continue to fund these items and to reduce debt may be affected by general economic, financial, competitive, legislative and regulatory factors, as well as other industry-specific factors such as the ability to control music piracy and the continued transition from physical to digital formats in the recorded music and music publishing industries.

It could also be affected by the severity and duration of geopolitical conflicts or natural or man-made disasters, including pandemics such as COVID-19.

It could also be affected by the severity and duration of geopolitical conflicts or natural or man-made disasters, including pandemics.

We and our affiliates continue to evaluate opportunities to, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to pay dividends or prepay outstanding debt or repurchase or retire Acquisition Corp.’s outstanding debt or debt securities or repurchase our outstanding equity securities in open market purchases, privately negotiated purchases or otherwise.

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Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Accounting for Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

We account for our goodwill and other indefinite-lived intangible assets as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”).

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See Note 9 to the consolidated financial statements for a further discussion of our goodwill and intangible assets.

Revenue and Cost Recognition

Revenue Recognition

Recorded Music

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Synchronization revenue is typically recognized as revenue when control of the license is transferred to the customer in accordance with ASC 606.

Accounting for Royalty Costs and Royalty Advances

Royalty Costs and Royalty Advances

The Company incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our Recorded Music catalog and Music Publishing copyrights.

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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-K

Item 7. Management’s Discussion and Analysis