What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-21 compared with 2023-11-21 · 233 added, 201 removed, 1121 unchanged (28% of the section changed)

138 unchanged sentences

Selling, general and administrative expenses (a) ( 1,879 ) ( 1,826 ) ( 1,862 )

Restructuring

Restructuring and impairments

( 177 ) ( 40 ) —

Amortization expense ( 224 ) ( 245 ) ( 263 )

Total costs and expenses ( 5,635 ) ( 5,288 ) ( 5,205 )

Net gain on divestiture

Net gain on divestitures

Operating income 823 790 714

45 unchanged sentences

Loss on extinguishment of debt — 4 —

Net loss (gain) on divestitures and investments ( 45 ) 46 4

Net loss (gain) on investments

( 6 ) ( 3 ) 46

Net loss (gain) on divestitures

( 32 ) ( 42 ) —

Non-cash interest expense 6 2 6

Non-cash stock-based compensation expense 52 49 39

Non-cash impairments and restructuring

Changes in operating assets and liabilities:

2 unchanged sentences

Royalty advances ( 222 ) ( 191 ) ( 94 )

Other noncurrent assets ( 85 ) ( 10 ) ( 12 )

Accounts payable and accrued liabilities 86 77 ( 21 )

6 unchanged sentences

Cash flows from investing activities

Acquisition of music publishing rights and music catalogs, net ( 114 ) ( 191 ) ( 481 )

Acquisition of music publishing rights and music catalogs

( 187 ) ( 114 ) ( 191 )

Capital expenditures ( 116 ) ( 127 ) ( 135 )

1 unchanged sentence

Proceeds from the sale of investments 13 22 11

Proceeds from divestitures, net

Proceeds from divestitures

Net cash used in investing activities ( 311 ) ( 300 ) ( 824 )

Cash flows from financing activities

Proceeds from incremental Senior Term Loan Facility - Tranche G 149 — —

Proceeds from incremental Senior Term Loan Facility - Tranche H 147 — 325

Repayment of Senior Term Loan Facility - Tranche H ( 150 ) — —

Proceeds from Nashville Term Loan Mortgage 19 — —

Partial proceeds from Senior Term Loan Facility refinancing

Partial repayment of Senior Term Loan Facility refinancing

Proceeds from Term Loan Mortgage — 19 —

Repayment of Term Loan Mortgage — ( 1 ) —

Proceeds from issuance of 3.750 % Senior Secured Notes due 2029

Proceeds from issuance of 3.000 % Senior Secured Notes due 2031

Proceeds from issuance of 2.250 % Senior Secured Notes due 2031

Repayment of 5.500 % Senior Notes due 2026

Repayment of 3.625 % Senior Secured Notes due 2026

Deferred financing costs paid ( 2 ) ( 3 ) ( 5 )

Call premiums paid on early redemption of debt — — ( 21 )

Distribution to noncontrolling interest holders ( 8 ) ( 12 ) ( 6 )

1 unchanged sentence

Payment of deferred and contingent consideration ( 20 ) ( 133 ) ( 7 )

Taxes paid related to net share settlement of restricted stock units — ( 6 ) —

Taxes paid related to net share settlement of restricted stock units and common stock

( 5 ) — ( 6 )

Other — ( 1 ) ( 5 )

1 unchanged sentence

Effect of exchange rate changes on cash and equivalents 6 ( 5 ) ( 21 )

Net increase (decrease) in cash and equivalents 57 85 ( 54 )

Net increase in cash and equivalents 53 57 85

Cash and equivalents at beginning of period 641 584 499

13 unchanged sentences

— — — — — 551 — 551 4 555

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

— — — — — — ( 145 ) ( 145 ) — ( 145 )

3 unchanged sentences

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

Exchange of Class B shares for Class A shares

19,234 — ( 19,234 ) — — — — — — —

Shares issued under the Plan

Vesting of restricted stock units, net of shares withheld for employee taxes

277 — — — ( 6 ) — — ( 6 ) — ( 6 )

5 unchanged sentences

Net income — — — — — 430 — 430 9 439

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

— — — — — — 25 25 — 25

3 unchanged sentences

Distribution to noncontrolling interest holders — — — — — — — — ( 12 ) ( 12 )

Vesting of restricted stock units, net of shares withheld for employee taxes

Acquisition of noncontrolling interests

— — — — — — — — 112 112

Conversion of Class B shares to Class A shares

Shares issued under the Plan

869 — — — — — — — — —

12 unchanged sentences

1,738 — — — — — — — — —

Exchange of Class B shares for Class A shares

2,270 — ( 2,270 ) — — — — — — —

Shares issued under Omnibus Incentive Plan 206 — — — ( 5 ) — — ( 5 ) — ( 5 )

Other — — — — 1 — — 1 ( 2 ) ( 1 )

Balances at September 30, 2024 142,559 $ — 375,380 $ 1 $ 2,077 $ ( 1,313 ) $ ( 247 ) $ 518 $ 157 $ 675

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As a result, the Company is a “controlled company” within the meaning of the corporate governance standards of NASDAQ.

Risk Factors — Risks Related to Our Controlling Stockholder.

Recorded Music Operations

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Prior to the start of the 2023 fiscal year, the Company maintained a 52-53 week fiscal year ending on the last Friday in each reporting period.

The 2022 fiscal year ended on September 30, 2022 and the 2021 fiscal year ended on September 24, 2021.

For convenience purposes, the Company dates its financial statements as of September 30 for these periods.

The 2022 fiscal year included 53 weeks, and the 2021 fiscal year included 52 weeks.

The additional week in fiscal year 2022 fell in the fiscal quarter ended December 31, 2021.

Accordingly, the results of operations for the 2022 fiscal year reflect 53 weeks compared to 52 weeks for the 2021 fiscal year.

The 2022 fiscal year ended on September 30, 2022 and included 53 weeks.

Accordingly, the results of operations for the 2022 fiscal year reflect 53 weeks compared to 52 weeks for the 2023 and 2024 fiscal years.

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.

The Company’s fiscal year begins on October 1 and ends on September 30 of each year.

The Company is not required to file a transition report because this change is not deemed to be a change in fiscal year for purposes of reporting under the Exchange Act pursuant to relevant Securities and Exchange Commission guidance.

Basis of Consolidation

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

As of September 30, 2024 and 2023, there were approximately $ 77 million and $ 5 million of assets, respectively, and $ 2 million and $ 2 million of liabilities, respectively, related to VIEs included in our consolidated balance sheets.

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

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On an ongoing basis, the Company tracks customer exposure based on news reports, ratings agency information, reviews of customer financial data and direct dialogue with customers.

Counterparties that are determined to be of a higher risk are evaluated to assess whether the payment terms previously granted to them should be modified.

larger accounts, analyses of specific risks per customer, and reasonable and supportable forecasts of the economic and geopolitical conditions that may exist through the contractual life of the receivable.

Counterparties that are determined to be of a higher risk are evaluated to assess whether the payment terms previously granted to them

should be modified.

The Company also monitors payment levels from customers, and an allowance for estimated credit losses is maintained based on such payment levels, historical experience, management’s views on trends in the overall receivable aging, for larger accounts, analyses of specific risks per customer, and reasonable and supportable forecasts of the economic and geopolitical conditions that may exist through the contractual life of the receivable.

The Company will write off receivables only when they are deemed no longer collectible.

1 unchanged sentence

Customer credit risk represents the potential for financial loss if a customer is unwilling or unable to meet its agreed upon contractual payment obligations.

As of September 30, 2023 and September 30, 2022, Spotify AB represented 18 % and 17 %, respectively, of the Company’s accounts receivable balance.

As of both September 30, 2024 and September 30, 2023, Spotify AB represented 18 % of the Company’s accounts receivable balance.

No other single customer accounted for more than 10% of accounts receivable in either period.

50 unchanged sentences

Foreign currency transaction gains and losses arise from exchange rate fluctuations on transactions denominated in a foreign currency other than the functional currency.

The Company recorded foreign currency transaction gains of $ 4 million, losses of $ 11 million and losses of $ 0 million within operating income on the consolidated statement of operations during the years ended September 30, 2023, 2022 and 2021, respectively.

The Company recorded foreign currency transaction losses of $ 37 million, gains of $ 185 million and losses of $ 8 million within other (expense) income, net on the consolidated statement of operations during the years ended September 30, 2023, 2022 and 2021, respectively.

The Company recorded foreign currency transaction gains of $ 2 million, gains of $ 4 million and losses of $ 11 million within operating income on the consolidated statement of operations during the years ended September 30, 2024, 2023 and 2022, respectively.

Furthermore, the Company recorded foreign currency transaction losses of $ 72 million, losses of $ 37 million and gains of $ 185 million within other (expense) income, net on the consolidated statement of operations during the years ended September 30, 2024, 2023 and 2022, respectively.

Recorded Music

61 unchanged sentences

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

The amendment provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope, which clarified that certain optional expedients and exceptions in ASC Topic 848, Reference Rate Reform (“ASC 848”) apply to derivative instruments that are affected by the discounting transition due to reference rate reform.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date, which extended the period in which ASC 848 may be applied until December 31, 2024.

These ASUs were effective upon issuance and may be applied prospectively to contract modifications and hedging relationships

entered into or evaluated through December 31, 2024.

The Revolving Credit Facility and Senior Term Loan Facility were amended during the fiscal year ended September 30, 2023 as further described in Note 10.

Accounting Pronouncements Not Yet Adopted

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The amendments in this ASU are effective for fiscal years beginning after December 15, 2023.

The Company will adopt this guidance for the fiscal year beginning October 1, 2024 on a prospective basis for all new leasehold

improvements recognized on or after that date.

The adoption will not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendment enhances reportable segment disclosure requirements, primarily by requiring enhanced disclosures about significant segment expenses, reporting for interim periods, and Chief Operating Decision Maker (“CODM”) related information.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The Company is in the process of evaluating the effect that the adoption of these standards will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendment enhances income tax disclosure requirements, by requiring enhanced disclosures on the income tax rate reconciliation and income taxes paid.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2024.

The Company is in the process of evaluating the effect that the adoption of these standards will have on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The amendment requires new financial statement disclosures to provide disaggregated information for certain types of expenses, including purchases of inventory, employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue and selling, general and administrative expenses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The Company is in the process of evaluating the effect that the adoption of these standards will have on its consolidated financial statements.

Earnings per Share

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

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

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

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

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

Under the treasury-stock method, potential common shares are excluded from the computation of EPS in periods in which they have an anti-dilutive effect.

8 unchanged sentences

$ 122 $ 313 $ 119 $ 311 $ 149 $ 402

Net income attributable to participating securities ( 6 ) — ( 7 ) — ( 4 ) —

Net income attributable to participating securities (a)

( 6 ) — ( 6 ) — ( 7 ) —

Net income attributable to common stockholders

2 unchanged sentences

Basic and Diluted EPS $ 0.83 $ 0.83 $ 0.82 $ 0.82 $ 1.06 $ 1.06

______________________________________

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

Revenue Recognition

4 unchanged sentences

Certain of the Company’s arrangements include licenses of intellectual property with consideration in the form of sales- and usage-based royalties.

Royalty revenue is recognized when the subsequent sale or usage

occurs using the best estimates available of the amounts that will be received by the Company.

Royalty revenue is recognized when the subsequent sale or usage occurs using the best estimates available of the amounts that will be received by the Company.

Within revenues, there may be settlements related to past infringements of our intellectual property.

33 unchanged sentences

These licenses typically contain a single performance obligation, which is ongoing access to all intellectual property in an evolving content library, predicated on:

(1) the business practice and contractual ability to remove specific content without a requirement to replace the content and without impact to minimum royalty guarantees and (2) the contracts not containing a specific listing of content subject to the license.

(1) the business practice and contractual ability to remove specific content

without a requirement to replace the content and without impact to minimum royalty guarantees and (2) the contracts not containing a specific listing of content subject to the license.

Digital licensing contracts are generally long-term with consideration in the form of sales- and usage-based royalties that are typically received monthly.

2 unchanged sentences

For fixed fee contracts and minimum guarantee contracts where breakage is expected, the total transaction price (fixed fee or minimum guarantee) is recognized proportionately over the contract term using an appropriate measure of progress which is based on the Company’s digital partner’s subscribers or streaming activity as these are measures of access to an evolving catalog, or on a straight-line basis.

The Company updates its assessment of the transaction price each reporting period to see if anticipated royalty

earnings exceed the minimum guarantee.

The Company updates its assessment of the transaction price each reporting period to see if anticipated royalty earnings exceed the minimum guarantee.

For contracts where breakage is not expected, royalties are recognized as revenue as sales or usage occurs based upon the licensee’s usage reports and, when these reports are not available, revenue is based on historical data, industry information and other relevant trends.

70 unchanged sentences

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

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

Cash consideration paid was $ 110 million which was comprised of the base purchase price of $ 102 million, as adjusted for final working capital, and cash acquired.

The base purchase price included $ 11 million, which was deferred at the time of acquisition and paid during the fiscal year ended September 30, 2024

The acquisition of TenThousand Projects was accounted for as a business combination in accordance with ASC 805, Business Combinations, using the acquisition method of accounting, as the Company had acquired a controlling financial interest in TenThousand Projects.

The results of operations of TenThousand Projects have been included in the Company’s results of operations from the date of the acquisition.

The preliminary estimate of the fair value of the net assets acquired was approximately $ 21 million and primarily consisted of royalty advances.

The preliminary estimate of the fair value of identifiable intangible assets subject to amortization was approximately $ 153 million and consists of a recorded music catalog, artist and songwriting contracts, and trademarks which have a preliminary fair value of $ 99 million, $ 49 million, and $ 5 million, respectively.

The fair value of the net assets acquired was approximately $ 19 million and primarily consisted of royalty advances.

The fair value of identifiable intangible assets subject to amortization was approximately $ 152 million and consists of a recorded music catalog, artist and songwriting contracts, and trademarks which have a fair value of $ 99 million, $ 48 million, and $ 5 million, respectively.

The weighted-average useful lives of these intangible assets identified are consistent with the average remaining useful lives of such intangible assets previously acquired by the Company as disclosed in Note 9.

The preliminary estimate of the fair value of the noncontrolling interest in the acquiree was approximately $ 106 million and was determined using the implied enterprise value of the business based on the purchase price.

The excess of the purchase price over the preliminary estimate of the fair value of net assets acquired, including the amount assigned to identifiable intangibles assets, was approximately $ 43 million and has been recorded as goodwill.

The fair value of the noncontrolling interest in the acquiree was approximately $ 105 million and was determined using the implied enterprise value of the business based on the purchase price.

The excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangibles assets, was approximately $ 44 million and has been recorded as goodwill.

The resulting goodwill has been included in our Recorded Music reportable segment and the Company’s 51 % share will be deductible for income tax purposes.

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

For the fiscal year ended September 30, 2023, the Company incurred costs related to this acquisition of approximately $ 3 million, which were expensed as incurred and recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations.

The unaudited pro forma revenue and operating income as if the acquisition occurred on October 1, 2021 was not material to the Company’s reported results for the fiscal years ended September 30, 2023 and September 30, 2022.

300 Entertainment

On December 16, 2021, the Company purchased all outstanding shares of Theory Entertainment LLC d/b/a 300 Entertainment (“300 Entertainment”), an independent U.S.

record label, pursuant to the terms and conditions of the merger agreement of the same date among Warner Music Inc.

and MM Investment LLC, both wholly-owned subsidiaries of the Company, the Buyer Representative, Trifecta Merger Subsidiary LLC, Theory Entertainment LLC d/b/a 300 Entertainment and the Seller Representative (the “Merger Agreement”).

Cash consideration paid was $ 394 million, which reflects the base purchase price of $ 400 million, adjusted for, among other items, working capital.

The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations , using the acquisition method of accounting.

The excess of the purchase price over the fair value of the net assets acquired, including the amount assigned to identifiable intangible assets, has been recorded as goodwill.

The resulting goodwill has been included in our Recorded Music reportable segment.

The recognized goodwill will be deductible for income tax purposes.

Any impairment charges made in future periods associated with goodwill, if any, will not be tax-deductible.

The table below presents (i) the acquisition consideration as it relates to the acquisition of 300 Entertainment and (ii) the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of December 16, 2021 (in millions):

Purchase Price Allocation

Cash and equivalents $ 2

Accounts receivable 5

Royalty advances 13

Property, plant and equipment, net 1

Operating lease right-of-use assets, net 3

Intangible assets subject to amortization, net (a) 259

Other assets 1

Accounts payable ( 5 )

Accrued royalties ( 19 )

Accrued liabilities ( 1 )

Operating lease liabilities, noncurrent ( 3 )

Total purchase price allocated $ 394

______________________________________

(a) Identifiable intangible assets are composed of the following (in millions):

Recorded music catalog $ 154

Artist and songwriter contracts 90

Trademarks 12

Music publishing copyrights 3

Total intangible assets acquired $ 259

At December 31, 2022, the Company updated and finalized the purchase price allocation recorded at September 30, 2022, which resulted in a decrease to intangible assets of approximately $ 1 million and a net decrease to other acquired assets and liabilities of approximately $ 2 million, with a corresponding net increase to goodwill of approximately $ 3 million.

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

Prior to the acquisition, the Company had a distribution arrangement with 300 Entertainment.

3 unchanged sentences

For the Company, the components of other comprehensive income primarily consist of foreign currency translation gains and losses, minimum pension liabilities, and deferred gains and losses on financial instruments designated as hedges under ASC 815, Derivatives and Hedging .

The following summary sets forth the changes in the components of accumulated other comprehensive loss, net of related tax benefit of $ 5 million:

The following summary sets forth the changes in the components of accumulated other comprehensive loss, net of a related tax benefit of $ 2 million:

Foreign Currency Translation Gains (Losses) (a)

3 unchanged sentences

Balances at September 30, 2021 $ ( 174 ) $ ( 11 ) $ ( 17 ) $ ( 202 )

Other comprehensive income 7 1 12 20

Balances at September 30, 2021 $ ( 174 ) $ ( 11 ) $ ( 17 ) $ ( 202 )

Other comprehensive loss ( 184 ) 9 30 ( 145 )

2 unchanged sentences

Balances at September 30, 2023 $ ( 322 ) $ ( 1 ) $ 1 $ ( 322 )

Other comprehensive income 78 ( 2 ) ( 1 ) 75

Balances at September 30, 2024 $ ( 244 ) $ ( 3 ) $ — $ ( 247 )

______________________________________

15 unchanged sentences

The Company’s lease portfolio consists of operating real estate leases for its corporate offices and, to a lesser extent, storage and other equipment.

The Company adopted FASB ASC Topic 842, Leases (“ASC 842”), on October 1, 2019 using the modified retrospective transition method.

Under ASC 842, a contract is or contains a lease when (1) an explicitly or implicitly identified asset has been deployed in the contract and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.

Under FASB ASC Topic 842, Leases (“ASC 842”), a contract is or contains a lease when (1) an explicitly or implicitly identified asset has been deployed in the contract and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.

The Company determines if an arrangement is or contains a lease at inception of the contract.

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The landlord for both leases is an affiliate of Access.

As of September 30, 2023, the aggregate lease liability related to these leases was $ 110 million.

As of September 30, 2024 and September 30, 2023, the aggregate lease liability related to these leases was $ 99 million and $ 110 million, respectively.

See also Note 15, Related Party Transactions.

32 unchanged sentences

Imputed interest ( 54 )

As of September 30, 2023, we have an additional operating lease for facilities that has not yet commenced with a lease obligation of $ 1 million and a lease term of 7 years .

As of September 30, 2024, we have additional operating leases for facilities that have not yet commenced with total lease obligations of $ 7 million and a weighted average lease term of 5 years.

Goodwill and Intangible Assets

9 unchanged sentences

Balances at September 30, 2024 $ 1,557 $ 464 $ 2,021

The increase in goodwill during the fiscal year ended September 30, 2024 primarily relates to an acquisition entered into during the fiscal year.

The increase in goodwill during the fiscal year ended September 30, 2023 primarily relates to the acquisition of TenThousand Projects as described in Note 5.

The increase in goodwill during the fiscal year ended September 30, 2022 primarily relates to the acquisition of 300 Entertainment as described in Note 5.

The other adjustments during both the fiscal years ended September 30, 2024 and September 30, 2023 primarily represent foreign currency movements.

19 unchanged sentences

Total net intangible assets $ 2,511 $ 2,502

The increase in intangible assets during the fiscal year ended September 30, 2023 primarily relates to the acquisition of TenThousand Projects, which resulted in an increase in intangible assets as described in Note 5, as well as foreign currency movements.

The increase in intangible assets during the fiscal year ended September 30, 2024 primarily relates to various music publishing copyright acquisitions, as well as foreign currency movements.

The Company performs its annual indefinite-lived intangible assets impairment test in accordance with ASC 350 during the fourth quarter of each fiscal year as of July 1.

23 unchanged sentences

______________________________________

(a) Reflects $ 300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $ 2 million and $ 4 million at September 30, 2023 and September 30, 2022, respectively.

(a) Reflects $ 350 million of commitments under the Revolving Credit Facility with no letters of credit outstanding at September 30, 2024 and less letters of credit outstanding of approximately $ 2 million at September 30, 2023, respectively.

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

16 unchanged sentences

Fiscal 2024 Transactions

November 2023 Revolving Credit Agreement Amendment

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.

December 2023 Senior Term Loan Credit Agreement Amendment

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.

January 2024 Senior Term Loan Credit Agreement Amendment

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.

September 2024 Senior Term Loan Credit Agreement Amendment

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.

September 2024 Revolving Credit Agreement Amendment

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 leverage ratios so that

the leverage ratios are 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.

Historical Transactions

Senior Term Loan Facility Amendment

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The Company recorded a loss on extinguishment of debt of approximately $ 4 million for the fiscal year ended September 30, 2023, which represents the remaining unamortized discount and deferred financing costs of the Tranche H term loan.

Historical Transactions

3.750 % Senior Secured Notes Offering

On November 24, 2021, Acquisition Corp.

issued and sold $ 540 million of its 3.750 % Senior Secured Notes due 2029 (the “ 3.750 % Senior Secured Notes”).

Interest on the Notes will accrue at the rate of 3.750 % per annum and will be payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022.

The 3.750 % Senior Secured Notes are fully and unconditionally guaranteed on a senior secured basis by each of Acquisition Corp.’s existing direct or indirect wholly-owned domestic restricted subsidiaries and by any such subsidiaries that guarantee obligations of Acquisition Corp.

under its existing credit facilities, subject to customary exceptions.

The indenture governing the 3.750 % Senior Secured Notes contains covenants limiting, among other things, Acquisition Corp.’s ability and the ability of most of its subsidiaries to create liens and consolidate, merge, sell or otherwise dispose of all or substantially all of its assets.

Interest Rates

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Default interest will also be payable on other overdue amounts at a rate of 2.0 % per annum above the amount that would apply to an alternative base rate loan.

The Tranche G loans under the Senior Term Loan Facility bear interest at Acquisition Corp.’s election at a rate equal to (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”) plus an adjustment based on the applicable interest period subject to a zero floor, plus 2.125 % 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, 1.125 % per annum.

The loans under the Senior Term Loan Facility bear interest at Acquisition Corp.’s election at a rate equal to (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 Tranche H loans under the Senior Term Loan Facility, which were repaid in full on June 30, 2023, bore interest at Acquisition Corp.’s election at a rate equal to (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 0.50 % floor, plus 3.00 % 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, subject to a 1.50 % floor, plus, in each case, 2.00 % per annum.

If there was a payment default at any time, then the interest rate applicable to overdue principal and interest would have been the rate otherwise applicable to such loan plus 2.0 % per annum.

Default interest was also payable on other overdue amounts at a rate of 2.0 % per annum above the amount that would apply to an alternative base rate loan.

The Term Loan Mortgage bears interest at a rate of 30-day SOFR plus the applicable margin of 1.40 %, subject to a zero floor.

The term loan entered into on January 27, 2023 (the “Term Loan Mortgage”) bears interest at a rate of 30-day SOFR plus the applicable margin of 1.40 %, subject to a zero floor.

The Company has entered into, and in the future may enter into, interest rate swaps to manage interest rate risk.

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Maturity of Revolving Credit Facility

The maturity date of the Revolving Credit Facility is April 3, 2025.

The maturity date of the Revolving Credit Facility is November 30, 2028.

Maturities of Senior Secured Notes

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Non-deductible compensation

Wind down of O&O media properties

Return to provision adjustments

( 15 ) 4 ( 4 )

Nontaxable income from partnerships

( 9 ) ( 1 ) ( 1 )

Other 3 ( 4 ) ( 1 )

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$ 123 $ 170 $ 185

During the fiscal year ended September 30, 2023, the Company recognized a tax benefit of $ 8 million related to Federal research and development credits, which was partially offset by $ 7 million of income tax expense arising from an increase in uncertain

tax positions in various jurisdictions.

During the fiscal year ended September 30, 2024, the Company recognized a tax benefit of $ 15 million primarily related to change in prior year estimate for allowable costs for reported foreign derived intangible income.

During the fiscal year ended September 30, 2022, the Company recognized a tax benefit of $ 8 million for the release of valuation allowances in various foreign jurisdictions.

During the fiscal year ended September 30, 2021, the Company recognized $ 10 million of income tax expense arising from an increase in our net UK deferred tax liability due to the change in the UK future statutory tax rate, which was offset by $ 4 million of excess tax benefits from long term incentive plan, and $ 6 million for the release of valuation allowances in Mexico and various foreign jurisdictions.

For the fiscal years ended September 30, 2024 and September 30, 2023, the Company incurred losses in certain foreign territories and has offset the tax benefit associated with these losses with a valuation allowance as the Company has determined that it is more likely than not that these losses will not be utilized.

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Net deferred tax liabilities $ ( 143 ) $ ( 184 )

During the fiscal year ended September 30, 2023, the Company utilized the remaining foreign tax credit carryforwards in the U.S.

At September 30, 2024, the Company has no remaining U.S.

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state and local jurisdictions that expire in various periods.

The Company also has tax net operating loss carryforwards, with no expiration date, in France and Spain of $ 30 million and $ 18 million, respectively, and other tax net operating loss carryforwards in foreign jurisdictions that expire in various periods.

The Company also has tax net operating loss carryforwards, with no expiration date, in France, Spain, and the United Kingdom of $ 11 million, $ 5 million, and $ 5 million, respectively, and other tax net operating loss carryforwards in foreign jurisdictions that expire in various periods.

Deferred income taxes have not been recorded on indefinitely reinvested earnings of certain foreign subsidiaries of approximately $ 456 million at September 30, 2024.

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Subtractions for prior year tax positions ( 3 ) ( 7 ) ( 5 )

Settlements ( 2 ) — —

Gross unrecognized tax benefits - end of period $ 10 $ 13 $ 8

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

We are currently evaluating the potential impact on our consolidated financial statements and related disclosures.

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

Employee Benefit Plans

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The Company’s defined contribution plan expense amounted to approximately $ 16 million for the fiscal year ended September 30, 2024, $ 14 million for the fiscal year ended September 30, 2023 and $ 12 million for the fiscal year ended September 30, 2022.

Restructuring

Restructuring and Impairments

Strategic Restructuring Plan

In 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.

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.

The below table sets

forth the activity for the fiscal year ended September 30, 2024 for restructuring liabilities associated with the Strategic Restructuring Plan which are expected to be paid in cash and are included within accrued liabilities in the accompanying consolidated balance sheets.

Severance Costs Contract Termination Costs Total

(in millions)

Balance at September 30, 2023 $ — $ — $ —

Restructuring charges 116 5 121

Cash payments ( 17 ) — ( 17 )

Balance at September 30, 2024 $ 99 $ 5 $ 104

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 equity awards approved but not yet 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 following table sets forth the activity in the restructuring accrual included within accrued liabilities in the accompanying consolidated balance sheets:

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.

During the fiscal year ended September 30, 2023, the Company recognized restructuring charges of approximately $ 40 million for severance costs.

Amounts for both periods were recorded in the Recorded Music segment.

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

Severance Costs

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2020 Omnibus Incentive Plan, or the “Omnibus Incentive Plan.” The Omnibus Incentive Plan provides for the grant of incentive common stock, stock options, restricted stock, RSUs, performance awards and stock appreciation rights to employees, consultants and directors.

The aggregate number of shares of common stock available for issuance under the Omnibus Incentive Plan is 31,169,099 shares of Class A Common Stock over the 10-year period from the date of adoption, including up to 1,000,000 shares of our Class A Common Stock in connection with the IPO.

To date, the Company has issued common stock, RSUs restricted stock, and performance awards under the Omnibus Incentive Plan.

The RSUs were granted to eligible employees and executives, common stock and restricted stock was granted to members of the Company’s Board of Directors, and a performance share award was granted to our CEO.

The aggregate number of shares of common stock available for issuance under the Omnibus Incentive Plan is 31,169,099 shares of Class A Common Stock over the 10-year period from the date of adoption.

To date, the Company has issued common stock, RSUs restricted stock, and PSUs under the Omnibus Incentive Plan.

The RSUs were granted to eligible employees and executives, common stock and restricted stock was granted to members of the Company’s Board of Directors, and PSUs were granted to our CEO.

Except in the case of certain awards issued in connection with the IPO, holders of RSUs and restricted stock are entitled to dividends during the vesting period.

During the fiscal years ended September 30, 2024, 2023 and 2022, shares of Class A Common Stock issued under the Omnibus Incentive Plan were 206,298 , 276,516 , and 463,826 , respectively.

During the fiscal year ended September 30, 2022, the Company satisfied the vesting of RSUs issued to employees for the fiscal year ended September 30, 2021 in connection with the IPO by issuing 276,565 shares of Class A Common Stock under the Omnibus Incentive Plan, which is net of shares used to settle employee income tax obligations.

During the fiscal years ended September 30, 2024, 2023, and 2022, shares of Class A Common Stock issued which were net of shares used to settle employee income tax obligations of approximately $ 5 million, $ 0 million , and $ 6 million, respectively.

As of September 30, 2024, a total of 1,011,333 shares of Class A Common Stock were issued under the Omnibus Incentive Plan.

As of September 30, 2024, there were 30,157,766 shares of Class A Common Stock available to be issued.

Restricted Stock Units and Performance Share Units

The following table summarizes the activity for the Company’s unvested RSUs and PSUs:

Restricted Stock Units

The following table summarizes the activity for the Company’s unvested RSUs:

Performance Share Units

Share Units Weighted-Average Grant

Date Fair Value Number of

Share Units Weighted-Average Grant

Date Fair Value

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The total intrinsic value of RSUs vested during the fiscal years ended September 30, 2024, 2023 and 2022 was $ 4 million, $ 1 million and $ 18 million, respectively, computed as of the date of vesting.

The weighted-average grant date fair value of PSUs granted during the fiscal years ended September 30, 2024 and 2023 was $ 43.49 and $ 60.25 , respectively.

As of September 30, 2024, total unrecognized compensation cost related to RSUs was approximately $ 37 million, which is expected to be recognized over a weighted-average period of approximately 2.7 years.

The Company satisfies the vesting of RSUs by issuing new shares of its Class A Common Stock.

As of September 30, 2024, total unrecognized compensation cost related to PSUs was approximately $ 16 million, which is expected to be recognized over a weighted-average period of approximately 1.6 years.

The Company satisfies the vesting of PSUs by issuing new shares of its Class A Common Stock.

Prior to the IPO, certain eligible employees elected to participate in our Senior Management Free Cash Flow Plan (the “Plan”) which offered them the opportunity to share in the appreciation of the value of our common stock.

During the fiscal year ended September 30, 2024, in connection with the Plan, the Company issued a total of 1,738,016 shares of Class A Common Stock to settle a portion of participants’ deferred equity units previously issued under the Plan.

Additionally, remaining Plan participants redeemed the remaining portions of their vested Class B equity units of WMG Management Holdings LLC in exchange for a total of 2,270,136 shares of Class B Common Stock which were converted to shares of Class A Common Stock upon the exchange.

During the fiscal year ended September 30, 2023, in connection with the Plan, the Company issued a total of 869,008 shares of Class A Common Stock to settle a portion of a participant’s deferred equity units previously issued under the Plan.

During the fiscal year ended September 30, 2022, an aggregate of 14,320,547 shares of Class B Common Stock were converted to Class A Common Stock.

In connection with the Plan, a remaining Plan participant redeemed a portion of vested Class B equity units of the LLC holding company, WMG Management Holdings, LLC (“Management LLC”).

These Class B equity units were redeemed in exchange for a total of 510,165 shares of Class B Common Stock, which shares of Class B Common Stock converted to shares of Class A Common Stock upon the exchange.

During the fiscal year ended September 30, 2022, Access converted 13,810,382 shares of Class B Common Stock to the same number of shares of Class A Common Stock, which is reflected as a conversion of Class B Common Stock in the consolidated statements of equity.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the consolidated statements of operations as selling, general and administrative expenses.

The Company recognized non-cash stock-based compensation expense of $ 49 million, $ 39 million and $ 45 million for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

In connection with the departure of our Chief Executive Officer and Chief Financial Officer, the Company recognized approximately $ 13 million of non-cash stock-based compensation expense associated with RSUs and common stock as there is no remaining service required for vesting.

The Company recognized total non-cash stock-based compensation expense of $ 52 million, $ 49 million and $ 39 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

During the fiscal years ended September 30, 2024 and 2023, the Company issued PSUs to our Chief Executive Officer whereby the PSU award payout is determined based on the Company’s total shareholder return compared to a designated peer group.

For the fiscal years ended September 30, 2024, and September 30, 2023, n on-cash stock-based compensation associated with these PSUs was approximately $ 8 million and $ 4 million, respectively which is a component of total non-cash stock-based compensation recognized for each respective period.

This amount is reflected as a share-based compensation liability as of September 30, 2023.

During the fiscal year ended September 30, 2023, the Company issued market-based performance share units to our newly appointed Chief Executive Officer whereby the award payout is determined based on the Company’s total shareholder return compared to a designated peer group.

Non-cash stock-based compensation associated with this award was approximately $ 4 million for the fiscal year ended September 30, 2023.

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 RSUs.

Refer to Note 13 for further discussion.

During the fiscal year ended September 30, 2024, the Company recognized $ 14 million of non-cash stock-based compensation related to the accelerated vesting of certain RSUs in connection with the Strategic Restructuring Plan.

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

Both amounts are a component of total non-cash stock-based compensation recognized for each respective period.

Repurchase Program

On November 14, 2024, the Company’s board of directors authorized a new $ 100 million share repurchase program, which is intended to offset dilution from the Omnibus Incentive Plan.

Under this authorization, the Company may, from time to time, purchase shares of its Class A Common Stock through open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase transactions, tender offers or otherwise, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act.

The $ 100 million share repurchase authorization does not obligate the Company to purchase any shares.

We may commence such repurchases immediately, subject to compliance with applicable securities laws.

We may enter into a pre-arranged stock trading plan in accordance with the guidelines specified under Rule 10b5-1 to effectuate all or a portion of the share repurchase program.

We expect to finance any repurchases from a combination of cash on hand and cash provided by operating activities.

The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to our results of operations, financial condition, liquidity and other factors.

The authorization for the share repurchase program may be suspended, terminated, increased or decreased by the board of directors at any time.

Related Party Transactions

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Deezer paid to the Company an aggregate amount of approximately $ 41 million, $ 40 million and $ 36 million in connection with the foregoing arrangements during the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

In addition, in connection with these arrangements, (i) the Company was issued warrants to purchase shares of Deezer S.A.

and (ii) the Company purchased a small number of shares of Deezer S.A.

In addition, in connection with these arrangements, (i) the Company was issued warrants to purchase shares of Deezer S.A., which it exercised in October 2024 for a small number of shares, and (ii) the Company purchased a small number of preferred shares of Deezer S.A.

The Company also has various publishing agreements with Deezer.

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are recorded at fair value in accordance with ASC 321, Investments—Equity Securities based on quoted prices in active markets.

As of September 30, 2023, the fair value of these equity interests was approximately $ 14 million.

Investment in Tencent Music Entertainment Group

On October 1, 2018, WMG China LLC (“WMG China”), an affiliate of the Company, entered into a share subscription agreement with Tencent Music Entertainment Group pursuant to which WMG China purchased 37,162,288 ordinary shares of Tencent Music Entertainment Group for $ 100 million.

WMG China was 80 % owned by AI New Holdings 5 LLC, an affiliate of Access, and 20 % owned by the Company.

On November 4, 2021, WMG China distributed to the Company, the Company’s pro-rata share of the Tencent Music Entertainment Group equity held by WMG China.

WMG China was dissolved on May 9, 2022.

As of September 30, 2024 and September 30, 2023, the fair value of these equity interests was approximately $ 8 million and $ 14 million, respectively.

Commitments and Contingencies

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The Company records these contracts at fair value on its balance sheet and the related gains and losses are immediately recognized in the consolidated statement of operations where there is an offsetting entry related to the underlying exposure.

The Company has entered into, and in the future may enter into, interest rate swaps to manage interest rate risk.

These instruments may offset a portion of changes in income or expense, or changes in fair value of the Company’s long-term debt.

The interest rate swap instruments were designated and qualify as cash flow hedges under the criteria prescribed in ASC 815 until the discontinuation of LIBOR.

The Company recorded these contracts at fair value on its balance sheet and gains or losses on these contracts are deferred in equity (as a component of comprehensive income).

Subsequent to the discontinuation of LIBOR, the Company dedesignated the remaining interest rate swap as a cash flow hedge given the SOFR benchmark rates for the interest rate swap and the Senior Term Loan Facility no longer perfectly match and the expiration of the swap in the first quarter of 2024.

Upon dedesignation, the unrealized gains recognized in equity were fixed and reclassified into the consolidated statement of operations over the remaining term and changes in fair value of the swap from the dedesignation date being recognized within the consolidated statement of operations.

The fair value of foreign currency forward exchange contracts is determined by using observable market transactions of spot and forward rates (i.e., Level 2 inputs) which is discussed further in Note 20.

Additionally, netting provisions are provided for in existing International Swap and Derivative Association Inc.

agreements in situations where the Company executes multiple contracts with the same counterparty.

agreements in situations where the Company executes multiple contracts

with the same counterparty.

As a result, net assets or liabilities resulting from foreign exchange derivatives subject to these netting agreements are classified within other current assets or other current liabilities in the Company’s consolidated balance sheets.

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As of September 30, 2024 and September 30, 2023, the Company had no outstanding hedge contracts and no deferred gains or losses in comprehensive income related to foreign exchange hedging.

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

As of September 30, 2024, the Company had no outstanding pay-fixed receive-variable interest rate swaps and no unrealized deferred gains in comprehensive income related to the interest rate swaps.

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

The Company recorded realized pre-tax losses of $ 1 million related to its foreign currency forward exchange contracts in the consolidated statement of operations as other expense for the fiscal year ended September 30, 2024.

The Company recorded realized pre-tax gains of $ 10 million related to its foreign currency forward exchange contracts in the consolidated statement of operations as other income for the fiscal year ended September 30, 2022.

The unrealized pre-tax losses of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the fiscal year ended September 30, 2023 were $ 16 million.

The unrealized pre-tax gains of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the fiscal year ended September 30, 2022 were $ 40 million.

The Company recorded realized pre-tax losses of $ 6 million related to its foreign currency forward exchange contracts in the consolidated statement of operations as other income for the fiscal year ended September 30, 2023.

The unrealized pre-tax losses of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the fiscal years ended September 30, 2024 and September 30, 2023 were $ 1 million and $ 16 million, respectively.

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

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Interest Rate Swap $ — $ 2

Other Noncurrent Assets:

Interest Rate Swap — 16

Segment Information

As discussed more fully in Note 1, based on the nature of its products and services, the Company classifies its business interests into two fundamental operations:

Based on the nature of its products and services, the Company classifies its business interests into two fundamental operations:

Recorded Music and Music Publishing, which also represent the reportable segments of the Company.

Information as to each of these operations is set forth below.

The Company has supplemented its analysis of OIBDA results by segment with an analysis of operating income (loss) by segment.

The Company evaluates performance based on several factors, of which the primary financial measure is 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, which includes costs associated with the Company’s financial transformation initiative to design and implement new information technology and upgrade our finance infrastructure (“Adjusted OIBDA”).

Items excluded are not viewed to contribute directly to management’s evaluation of operating results.

During the three months ended December 31, 2023, the Company changed the measure used to evaluate segment profitability from OIBDA to Adjusted OIBDA which is consistent with how the Company's CODM evaluates the results of operations and makes strategic decisions about the business.

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

All disclosures relating to segment profitability, including those for the fiscal years ended September 30, 2023 and 2022, have been revised as a result of this change.

The accounting policies of the Company’s business segments are the same as those described in the summary of significant accounting policies included elsewhere herein.

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Revenues $ 5,223 $ 1,210 $ ( 7 ) $ 6,426

Operating income (loss) 875 200 ( 285 ) 790

Amortization of intangible assets 155 90 — 245

Depreciation of property, plant and equipment 50 3 34 87

OIBDA 1,080 293 ( 251 ) 1,122

Adjusted OIBDA

1,282 330 ( 180 ) 1,432

Total assets 4,945 3,017 1,193 9,155

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Revenues $ 4,955 $ 1,088 $ ( 6 ) $ 6,037

Operating income (loss) 796 139 ( 221 ) 714

Amortization of intangible assets 176 87 — 263

Depreciation of property, plant and equipment 51 5 20 76

OIBDA 1,023 231 ( 201 ) 1,053

Adjusted OIBDA

1,093 296 ( 154 ) 1,235

Total assets 4,677 2,781 1,087 8,545

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Revenues $ 4,966 $ 958 $ ( 5 ) $ 5,919

Operating income (loss) 733 89 ( 213 ) 609

Amortization of intangible assets 150 79 — 229

Depreciation of property, plant and equipment 53 6 18 77

OIBDA 936 174 ( 195 ) 915

Adjusted OIBDA

1,046 233 ( 130 ) 1,149

Capital expenditures 52 1 82 135

Adjusted OIBDA is not a measure defined by U.S.

GAAP but is computed using amounts that are determined in accordance with U.S.

A reconciliation of the Company’s Adjusted OIBDA to operating income is presented below.

For the year ended September 30,

2024 2023 2022

Operating income $ 823 $ 790 $ 714

Amortization expense 224 245 263

Depreciation expense 103 87 76

Restructuring and impairments 177 42 8

Transformation initiative costs 76 53 46

Executive transition costs — 7 —

Net gain on divestitures ( 32 ) ( 41 ) —

Non-cash stock-based compensation and other related costs 61 52 42

Adjusted OIBDA $ 1,432 $ 1,235 $ 1,149

Revenues relating to operations in different geographical areas are set forth below for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022.

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In the fiscal year ended September 30, 2024, the Company had three customers, Spotify, YouTube and Apple, that individually represented 10% or more of total revenues, whereby Spotify AB represented 18 %, YouTube represented 12 % and Apple represented 11 % of total revenues.

In the fiscal year ended September 30, 2022, the Company had three customers, Spotify, Apple and YouTube, that individually represented 10% or more of total revenues, whereby Spotify represented 17 %, YouTube represented 12 % and Apple represented 11 % of total revenues.

In the fiscal year ended September 30, 2021, the Company had three customers, Spotify, Apple and YouTube that individually represented 10% or more of total revenues, whereby Spotify represented 18 %, Apple represented 13 % and YouTube represented 11 % of total revenues.

In the fiscal year ended September 30, 2023, the Company had three customers, Spotify, YouTube, and Apple, that individually represented 10% or more of total revenues, whereby Spotify represented 18 %, YouTube represented 12 %

and Apple represented 11 % of total revenues.

In the fiscal year ended September 30, 2022, the Company had three customers, Spotify, YouTube and Apple that individually represented 10% or more of total revenues, whereby Spotify represented 17 %, YouTube represented 12 % and Apple represented 11 % of total revenues.

These customers’ revenues are included in both the Company’s Recorded Music and Music Publishing segments and the Company expects that the Company’s license agreements with these customers will be renewed in the normal course of business.

Additional Financial Information

Cash Interest and Taxes

Supplemental Cash Flow Disclosures

The Company made interest payments of approximately $ 183 million, $ 157 million and $ 122 million during the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively.

The Company paid approximately $ 135 million, $ 219 million and $ 141 million of income and withholding taxes, net of refunds, for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively.

Gain on Divestiture

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.

Noncash investing activities were approximately $ 30 million related to the acquisition of music publishing rights and music catalogs, net during the fiscal year ended September 30, 2024.

Net Gain on Divestiture

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

During the fiscal year ended September 30, 2023, the Company recognized a pre-tax gain of $ 41 million in connection with the divestiture of certain sound recording rights.

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

The Company’s ability to pay dividends may be restricted by covenants in the credit agreement for the Revolving Credit Facility which are currently suspended but which will be reinstated if Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increases above 3.50 :1.00 and the term loans do not achieve an investment grade rating.

The Company intends to pay quarterly cash dividends to holders of its Class A Common Stock and Class B Common Stock.

As of September 30, 2024, Acquisition Corp.’s Total Indebtedness to EBITDA Ratio is 2.05 x and the term loans achieved a corporate credit rating of BBB- from both S&P and Fitch.

The Company has been paying quarterly cash dividends to holders of its Class A Common Stock and Class B Common Stock.

The declaration of each dividend will continue to be at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, earnings, liquidity and capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by Delaware law, general business conditions and any other factors that the Company’s board of directors deems relevant in making such a determination.

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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.

Noncash Investment Activity

Noncash investing activities was approximately $ 125 million related to the acquisition of music publishing rights and music catalogs, net during the fiscal year ended September 30, 2022.

Fair Value Measurements

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• Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

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(in millions)

Other Current Assets:

Interest Rate Swap (c)

$ — $ 2 $ — $ 2

Other Noncurrent Assets:

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Other Noncurrent Assets:

Interest Rate Swap (c)

Equity Investment with Readily Determinable Fair Value (b)

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The Company evaluates its equity investments without readily determinable fair values for impairment if factors indicate that a significant decrease in value has occurred.

The Company has elected to use the measurement alternative to fair value that will allow these investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes.

The Company recorded approximately $ 1 million of impairment charges on these investments during the fiscal year ended September 30, 2023.

addition, observable price changes events that were completed during the fiscal year ended September 30, 2023 resulted in a unrealized gain of $ 2 million.

The Company has elected to use the measurement alternative to fair value that will allow

these investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes.

The Company recorded no impairment charges and $ 1 million of impairment charges on these investments during the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

In addition, observable price changes events that were completed during the fiscal years ended September 30, 2024 and September 30, 2023 resulted in an unrealized gain of $ 4 million and $ 2 million, respectively.

Fair Value of Debt

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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 8. Financial Statements and Supplementary Data