What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2025-02-06 · 473 added, 191 removed, 445 unchanged (60% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our results of operations and financial condition with the unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024 (the “Quarterly Report”).

“SAFE HARBOR” STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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• the diversity and quality of our recording artists, songwriters and releases;

• trends, developments or other events in the United States and in some foreign countries in which we operate;

• trends, developments or other events in the United States and in some foreign countries in which we operate, including the impact of tariffs imposed or threatened by the U.S.

or foreign governments;

• risks associated with our non-U.S.

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• Results of operations.

This section provides an analysis of our results of operations for the three months ended December 31, 2024 and December 31, 2023.

This section provides an analysis of our results of operations for the three and six months ended March 31, 2025 and March 31, 2024.

This analysis is presented on both a consolidated and segment basis.

• Financial condition and liquidity.

This section provides an analysis of our cash flows for the three months ended December 31, 2024 and December 31, 2023, as well as a discussion of our financial condition and liquidity as of December 31, 2024.

This section provides an analysis of our cash flows for the six months ended March 31, 2025 and March 31, 2024, as well as a discussion of our financial condition and liquidity as of March 31, 2025.

The discussion of our financial condition and liquidity includes recent debt financings and a summary of the key debt covenant compliance measures under our debt agreements.

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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.

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.

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Under these agreements, we provide services to and participate in recording artists’ activities outside the traditional recorded music business such as touring, merchandising and sponsorships.

We have built and acquired artist services capabilities and platforms for marketing and distributing this broader set of

music-related rights and participating more widely in the monetization of the artist brands we help create.

We have built and acquired artist services capabilities and platforms for marketing and distributing this broader set of music-related rights and participating more widely in the monetization of the artist brands we help create.

We believe that entering into expanded-rights deals and enhancing our artist services capabilities in areas such as merchandising, VIP ticketing, fan clubs, concert promotion and management has permitted us to diversify revenue streams and capitalize on other revenue opportunities.

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• Performance :

the rightsholder receives revenues if the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations (e.g., bars and restaurants), live performance at a concert or other venue ( e.g.

concert or other venue ( e.g.

, arena concerts and nightclubs), and performance of music in staged theatrical productions;

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Strategic Restructuring Plan

In 2024, the Company announced the Strategic Restructuring Plan to free up additional funds to invest in music and accelerate the Company’s growth for the next decade.

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.

The Company expects to incur total non-recurring restructuring charges of approximately $240 million or approximately $160 million of total non-recurring after tax charges.

The expected pre-tax charges include approximately $154 million of severance and other termination costs, along with approximately $76 million of non-cash impairment charges recorded to date.

The expected pre-tax charges include approximately $158 million of severance and other contract termination costs, along with approximately $82 million of non-cash impairment charges.

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

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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 three months ended December 31, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $1 million, of which $2 million of expense was recognized in our Recorded Music segment while there was a $1 million benefit recognized at Corporate associated with a change in estimate for costs previously recorded.

Additionally, for the three months ended December 31, 2024, the Company recognized $26 million of impairment losses which were recognized in our Recorded Music segment.

Impairment charges recognized during the period primarily relate to the write-off of certain long-form audiovisual production assets and lease termination costs related to office closures.

For the three months ended March 31, 2025, total severance and other contract termination costs recorded in connection with the Strategic Restructuring Plan were $7 million, all of which was recognized in our Recorded Music segment.

For the six months ended March 31, 2025, total severance and other contract termination costs recorded in connection with the Strategic Restructuring Plan were $8 million, of which $9 million of expense was recognized in our Recorded Music segment while there was a $1 million benefit recognized at Corporate due to a change in estimate.

Additionally, for the three and six months ended March 31, 2025, the Company recognized $6 million and $32 million of impairment losses, respectively, all of which were recognized in our Recorded Music segment.

Impairment charges recognized during the period primarily relate to the write-off of certain long-form audiovisual production assets and lease termination costs for office closures.

The Company continues to review its operations for additional cost

savings and efficiencies.

Our ongoing review could result in additional costs and charges which may be significant.

BMG Termination

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Alternative Distribution Alliance (“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 during the current fiscal year and we expect BMG to be rolled off by the end of the fiscal year.

During the three months ended December 31, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music streaming revenue of $16 million and lower physical revenue of $16 million.

The impact to Recorded Music’s Adjusted OIBDA was immaterial for the three months ended December 31, 2024.

The shift to direct deals by BMG is a phased in-sourcing of distribution during the current fiscal year and we expect BMG to be rolled off by the end of the current fiscal year.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2024 Compared with Three Months Ended December 31, 2023

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Consolidated Results

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For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

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Total Revenues

Total revenues decreased by $82 million, or 5%, to $1,666 million for the three months ended December 31, 2024 from $1,748 million for the three months ended December 31, 2023.

Revenue growth was unfavorably impacted by the BMG Termination, which resulted in $32 million lower Recorded Music revenue compared to the three months ended December 31, 2023, of which $16 million was in streaming revenue and $16 million was in physical revenue.

The prior-year quarter also included $75 million from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”) in Recorded Music licensing revenue and $30 million of Recorded Music streaming revenue from a deal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in upfront revenue recognition for the three months ended December 31, 2023.

Excluding these items, total revenues increased by 3%, which includes $19 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 81% and 19% of total revenue for the three months ended December 31, 2024, respectively, and 83% and 17% of total revenue for the three months ended December 31, 2023, respectively.

Total revenues decreased by $10 million, or 1%, to $1,484 million for the three months ended March 31, 2025 from $1,494 million for the three months ended March 31, 2024.

The decrease includes $27 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 79% and 21% of total revenue for the three months ended March 31, 2025, respectively, and 80% and 20% of total revenue for the three months ended March 31, 2024, respectively.

Prior to intersegment eliminations, U.S.

and international revenues represented 42% and 58% of total revenues for the three months ended December 31, 2024 and 46% and 54% of total revenues for the three months ended December 31, 2023.

Total digital revenues after intersegment eliminations decreased by $22 million, or 2%, to $1,082 million for the three months ended December 31, 2024 from $1,104 million for the three months ended December 31, 2023.

Excluding the BMG Termination and the Digital License Renewal, total digital revenues increased 2%.

Total streaming revenue decreased 2% driven by Recorded Music, partially offset by growth in Music Publishing.

and international revenues represented 44% and 56% of total revenues for the three months ended March 31, 2025 and 45% and 55% of total revenues for the three months ended March 31, 2024.

Total digital revenues after intersegment eliminations decreased by $8 million, or 1%, to $1,027 million for the three months ended March 31, 2025 from $1,035 million for the three months ended March 31, 2024.

Total streaming revenue decreased by $3 million, primarily driven by Recorded Music, partially offset by growth in Music Publishing.

Total streaming revenue includes $19 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, total digital revenues for the three months ended December 31, 2024 were composed of U.S.

Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2025 were composed of U.S.

revenues of $490 million and international revenues of $539 million, or 48% and 52% of total digital revenues, respectively.

Prior to intersegment eliminations, total digital revenues for the three months ended December 31, 2023 were composed of U.S.

Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2024 were composed of U.S.

revenues of $511 million and international revenues of $524 million, or 49% and 51% of total digital revenues, respectively.

Recorded Music revenues decreased by $100 million, or 7%, to $1,345 million for the three months ended December 31, 2024 from $1,445 million for the three months ended December 31, 2023.

Recorded Music revenues decreased by $14 million, or 1%, to $1,175 million for the three months ended March 31, 2025 from $1,189 million for the three months ended March 31, 2024.

The decrease includes $22 million of unfavorable currency exchange fluctuations.

Excluding the impacts of the Licensing Extension of $75 million, the BMG Termination of $32 million, and the Digital License Renewal of $30 million, Recorded Music revenue increased 3%.

Recorded Music revenues were $532 million and $627 million, or 40% and 43% of consolidated Recorded Music revenues for each of the three months ended December 31, 2024 and December 31, 2023, respectively.

International Recorded Music revenues were $813 million and $818 million, or 60% and 57% of consolidated Recorded Music revenues for each of the three months ended December 31, 2024 and December 31, 2023, respectively.

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

Recorded Music revenues were $497 million and $508 million, or 42% and 43% of consolidated Recorded Music revenues for each of the three months ended March 31, 2025 and March 31, 2024, respectively.

International Recorded Music revenues were $678 million and $681 million, or 58% and 57%, of consolidated Recorded Music revenues for each of the three months ended March 31, 2025 and March 31, 2024, respectively.

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

Digital revenue decreased by $7 million, or 1%, which includes an unfavorable impact of currency exchange fluctuations of $17 million.

Revenue from streaming services decreased by $33 million, or 4%, to $854 million for the three months ended December 31, 2024 from $887 million for the three months ended December 31, 2023.

The decrease in streaming revenue reflects the unfavorable impact of the Digital License Renewal of $30 million, the BMG Termination of $16 million, and the unfavorable impact of foreign currency exchange rates of $13 million.

Excluding the BMG Termination and the Digital License Renewal, streaming revenue increased 2%, driven by the impact of price increases in the prior year, the timing of deal renewals, and content delivery with certain emerging streaming platforms in the prior-year quarter.

The quarter reflects carryover success from Benson Boone, Teddy Swims, Charli XCX, and Zach Bryan.

Download and other digital revenues decreased by $2 million, or 10%, to $19 million for the three months ended December 31, 2024 from $21 million for the three months ended December 31, 2023 due to the continued shift to streaming services.

Licensing revenue decreased by $69 million, or 39%, primarily driven by the impact of the Licensing Extension in the prior-year quarter of $75 million.

Artist services and expanded-rights revenue decreased by $8 million, or 4%, due to lower concert promotion revenue, lower direct-to-consumer merchandising revenue at EMP, a decrease in revenue related to the exit of the Company’s non-core owned and operated media properties in connection with the Strategic Restructuring Plan, and an unfavorable impact of foreign currency exchange rates of $2 million.

Physical revenue increased by $12 million, or 8%, which includes the unfavorable impact of the BMG Termination of $16 million.

Excluding the BMG Termination, physical revenue increased 20%, primarily driven by success of new releases from Linkin Park, Mariya Takeuchi, ROSÉ, and MISAMO, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.

Music Publishing revenues increased by $19 million, or 6%, to $323 million for the three months ended December 31, 2024 from $304 million for the three months ended December 31, 2023.

Music Publishing revenues were $173 million and $172 million, or 54% and 57% of consolidated Music Publishing revenues, for the three months ended December 31, 2024 and December 31, 2023, respectively.

International Music Publishing revenues were $150 million and $132 million, or 46% and 43% of consolidated Music Publishing revenues, for the three months ended December 31, 2024 and December 31, 2023, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital, performance, and other publishing revenues, partially offset by a decrease in mechanical revenue.

Synchronization revenue was flat compared to the prior year.

Digital revenue increased by $11 million, or 6%, primarily due to higher streaming revenue, partially offset by a decrease in downloads and other digital revenue.

Revenue from streaming services grew by $12 million, or 6%, to $205 million for the three months ended December 31, 2024 from $193 million for the three months ended December 31, 2023, reflecting continued market growth, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.

Performance revenue increased by $5 million, or 10%, driven by higher touring revenue outside of the U.S.

radio growth, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.

Mechanical revenue decreased by $1 million.

Revenue from streaming services decreased by $3 million, to $825 million for the three months ended March 31, 2025 from $828 million for the three months ended March 31, 2024.

The decrease in streaming revenue was impacted by a challenging year-over-year comparison, largely in subscription streaming revenue, and includes an unfavorable impact of foreign currency exchange rates of $16 million.

Top digital sellers in the quarter include ROSÉ, Bruno Mars, Teddy Swims, and Benson Boone.

Download and other digital revenues decreased by $4 million, or 20%, to $16 million for the three months ended March 31, 2025 from $20 million for the three months ended March 31, 2024 due to the continued shift to streaming services.

Licensing revenue increased by $1 million, or 1%, driven by higher licensing activity primarily in Japan and the U.S., partially offset by the timing of copyright infringement settlements.

Licensing revenue includes an unfavorable impact of foreign currency exchange rates of $2 million.

Artist services and expanded-rights revenue decreased by $9 million, or 7%, due to lower concert promotion revenue primarily in France, lower direct-to-consumer merchandising revenue at EMP, a decrease in revenue related to the exit of the Company’s non-core owned and operated media properties in connection with the Strategic Restructuring Plan, and an unfavorable impact of foreign currency exchange rates of $2 million.

Physical revenue increased by $1 million, or 1%, driven by growth in Japan and the impact of acquisitions, partially offset by the impact of the BMG Termination, and an unfavorable impact of foreign currency exchange rates of $1 million.

Top physical releases in the quarter include Mac Miller’s Balloonerism and new releases from ONE OK ROCK and TWICE.

Music Publishing revenues increased by $4 million, or 1%, to $310 million for the three months ended March 31, 2025 from $306 million for the three months ended March 31, 2024.

Music Publishing revenues were $161 million and $170 million, or 52% and 56% of consolidated Music Publishing revenues, for the three months ended March 31, 2025 and March 31, 2024, respectively.

International Music Publishing revenues were $149 million and $136 million, or 48% and 44% of consolidated Music Publishing revenues, for the three months ended March 31, 2025 and March 31, 2024, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital, performance, synchronization, and mechanical revenues.

Digital revenue increased by $1 million, or 1%, driven by an increase in downloads and other digital revenue of $1 million, while Music Publishing revenue from streaming services remained constant at $185 million for each of the three months ended March 31, 2025 and March 31, 2024, partially offset by an unfavorable impact of foreign currency exchange rates of $2 million.

Performance revenue increased by $1 million, or 2%, driven by higher concert revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $2 million.

Mechanical revenue increased by $1 million, or 7%, driven by higher physical sales, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.

Synchronization revenue increased by $1 million, or 2%, attributable to higher television and commercial licensing activity, partially offset by the timing of copyright infringement settlements.

Revenue by Geographical Location

revenue decreased by $94 million, or 12%, to $705 million for the three months ended December 31, 2024 from $799 million for the three months ended December 31, 2023.

revenue decreased by $20 million, or 3%, to $658 million for the three months ended March 31, 2025 from $678 million for the three months ended March 31, 2024.

Recorded Music revenue decreased by $11 million, or 2%.

The primary driver was the decrease in licensing revenue of $76 million, attributable to $75 million from the Licensing Extension in the prior-year quarter.

Recorded Music digital revenue decreased by $28 million, or 7%, which reflects lower streaming revenue of $26 million, or 7%, and lower download and other digital revenue of $2 million, or 18%.

The decrease in streaming revenue is largely attributable to the unfavorable impact of the BMG Termination compared to the prior-year quarter.

This was partially offset by increases in U.S.

Recorded Music physical revenue of $8 million, or 13%, and artist services and expanded-rights of $1 million, or 2%.

The increase in physical revenue is driven by strong releases in the current quarter as well as catalog and carryover success.

The increase in U.S.

Recorded Music artist services and expanded-rights revenue is driven by higher merchandising revenue, partially offset by a decrease in revenue related to the exit of the Company’s non-core owned and operated media properties in the prior year in connection with the Strategic Restructuring Plan .

Music Publishing revenue increased by $1 million, or 1%, to $173 million for the three months ended December 31, 2024 from $172 million for the three months ended December 31, 2023.

Music Publishing digital revenue remained constant, attributable to streaming growth of $1 million, or 1%, offset by a decrease in download and other digital revenue of $1 million.

Music Publishing streaming revenue reflects the continued market growth and the timing of payments.

Music Publishing performance revenue increased by $1 million, or 6%, due to an increase in U.S.

radio activity.

Music Publishing synchronization revenue and mechanical revenue remained constant for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

International revenue increased by $13 million, or 1%, to $963 million for the three months ended December 31, 2024 from $950 million for the three months ended December 31, 2023.

Recorded Music digital revenue decreased by $12 million, or 3%, driven by lower streaming revenue of $12 million, or 3%, while download and other digital revenue was flat to the prior-year quarter.

Recorded Music licensing revenue increased by $1 million, or 3%, driven by the timing of licensing settlements.

Recorded Music physical revenue and artist services and expanded-rights revenues remained constant .

Music Publishing revenue decreased by $9 million, or 5%, to $161 million for the three months ended March 31, 2025 from $170 million for the three months ended March 31, 2024.

Music Publishing digital revenue decreased by $9 million, or 8%, attributable to lower streaming revenue of $10 million, or 9%, partially offset by an increase in download and other digital revenue of $1 million.

Music Publishing streaming revenue reflects the impact of digital deal renewals compared to the prior-year quarter.

Music Publishing performance revenue decreased by $1 million, or 5%.

Music Publishing mechanical revenue increased by $2 million, or 67%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, and U.S.

Music Publishing synchronization revenue remained constant, driven by higher television and commercial licensing activity and the impact of acquisitions, partially offset by the timing of copyright infringement settlements.

International revenue increased by $10 million, or 1%, to $827 million for the three months ended March 31, 2025 from $817 million for the three months ended March 31, 2024.

Excluding the unfavorable impact of foreign currency exchange rates of $27 million, International revenue increased by $37 million, or 5%.

International Recorded Music revenue decreased by $5 million, or 1%, driven by decreases in artist services and expanded-rights revenue and digital revenues, partially offset by increases in licensing and physical revenues.

International Recorded Music revenue decreased by $3 million, which includes an unfavorable impact of foreign currency exchange rates of $22 million, driven by lower artist services and expanded rights revenue, partially offset by growth across digital and physical revenues.

International Recorded Music licensing revenue remained constant driven by licensing deals primarily in Japan, partially offset by the timing of copyright infringement settlements compared to the prior-year quarter.

International Recorded Music artist services and expanded-rights revenue decreased by $9 million due to lower direct-to-consumer merchandising revenue at EMP, lower concert promotion revenue primarily in France, and the unfavorable impact of foreign currency exchange rates of $2 million.

International Recorded Music digital revenue decreased by $7 million, attributable to lower streaming revenue of $7 million, or 1%, which reflects the unfavorable impact of the BMG Termination and the Digital License Renewal in the prior-year quarter, and an unfavorable impact of foreign currency exchange rates of $13 million.

International Recorded Music licensing revenue increased by $7 million driven by higher broadcast revenue and the impact of settlements, and physical revenue increased by $4 million driven by strong releases primarily in Japan, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million.

International Music Publishing revenue increased from the prior-year quarter by $18 million, or 14%, to $150 million for the three months ended December 31, 2024 from $132 million for the three months ended December 31, 2023.

International Music Publishing revenue growth was driven by increases in digital revenue of $11 million due to growth in streaming, performance revenue of $4 million due to higher touring revenue, and other revenue of $4 million.

This was partially offset by a decrease in mechanical revenue of $1 million.

International Music Publishing synchronization revenue remained constant for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

International Recorded Music digital revenue increased by $5 million, attributable to higher streaming revenue of $9 million, or 2%, which reflects an unfavorable impact of foreign currency exchange rates of $16 million, partially offset by lower download and other digital revenue of $4 million driven by the continued shift to streaming services.

Physical revenue increased by $1 million driven by new releases primarily in Japan, partially offset by lower revenue resulting from the BMG Termination and an unfavorable impact of foreign currency exchange rates of $1 million.

International Music Publishing revenue increased by $13 million, or 10%, to $149 million for the three months ended March 31, 2025 from $136 million for the three months ended March 31, 2024.

International Music Publishing revenue growth was driven by increases in digital revenue of $10 million attributable to growth in streaming, performance revenue of $2 million due to growth from concerts, radio and live events, synchronization revenue of $1 million due to higher television and commercial licensing activity, and other revenue of $1 million.

This was partially offset by a decrease in International Music Publishing mechanical revenue of $1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Cost of revenues

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For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

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Total cost of revenues $ 791 $ 791 $ — — %

Artist and repertoire costs increased by $34 million, to $574 million for the three months ended December 31, 2024 from $540 million for the three months ended December 31, 2023.

Artist and repertoire costs as a percentage of revenue increased to 34% during the three months ended December 31, 2024 from 31% for the three months ended December 31, 2023, primarily driven by revenue mix compared to the three months ended December 31, 2023, which included items with upfront revenue recognition without associated artist and repertoire costs, and unfavorable movements in currency exchange rates.

Product costs decreased by $20 million, to $320 million for the three months ended December 31, 2024 from $340 million for the three months ended December 31, 2023.

Product costs as a percentage of revenue remained constant at 19% for each of the three months ended December 31, 2024 and December 31, 2023.

Artist and repertoire costs decreased by $8 million, to $531 million for the three months ended March 31, 2025 from $539 million for the three months ended March 31, 2024.

Artist and repertoire costs as a percentage of revenue remained constant at 36% for each of the three months ended March 31, 2025 and March 31, 2024.

Product costs increased by $8 million, to $260 million for the three months ended March 31, 2025 from $252 million for the three months ended March 31, 2024.

Product costs as a percentage of revenue increased to 18% for the three months ended March 31, 2025 from 17% for the three months ended March 31, 2024 due to revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue and the impact of acquisitions.

Selling, general and administrative expenses

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For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

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______________________________________

(1) Includes depreciation expense of $29 million and $26 million for the three months ended December 31, 2024 and December 31, 2023, respectively.

Total selling, general and administrative expense decreased by $2 million, to $474 million for the three months ended December 31, 2024 from $476 million for the three months ended December 31, 2023.

Expressed as a percentage of revenue, total selling, general and administrative expense increased to 28% for the three months ended December 31, 2024 from 27% for the three months ended December 31, 2023 due to the factors noted below.

General and administrative expense increased by $15 million to $284 million for the three months ended December 31, 2024 from $269 million for the three months ended December 31, 2023.

The increase in general and administrative expense was largely due to the unfavorable movements in foreign currency exchange rates of approximately $11 million, higher depreciation expense driven by assets placed into service of $3 million, higher non-cash stock-based compensation costs of $5 million, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Expressed as a percentage of revenue, general and administrative expense increased to 17% for the three months ended December 31, 2024 from 15% for the three months ended December 31, 2023 largely driven by unfavorable movements in foreign currency exchange rates.

Selling and marketing expense decreased by $18 million, or 10%, to $158 million for the three months ended December 31, 2024 from $176 million for the three months ended December 31, 2023.

Expressed as a percentage of revenue, selling and marketing expense decreased to 9% for the three months ended December 31, 2024 from 10% for the three months ended December 31, 2023 due to lower variable marketing spend and savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Distribution expense increased by $1 million to $32 million for the three months ended December 31, 2024 from $31 million for the three months ended December 31, 2023.

Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended December 31, 2024 and the three months ended December 31, 2023.

(1) Includes depreciation expense of $28 million and $26 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Total selling, general and administrative expense increased by $4 million, to $450 million for the three months ended March 31, 2025 from $446 million for the three months ended March 31, 2024.

Expressed as a percentage of revenue, total selling, general and administrative expense remained constant at 30% for each of the three months ended March 31, 2025 and March 31, 2024 due to the factors noted below.

General and administrative expense increased by $18 million to $276 million for the three months ended March 31, 2025 from $258 million for the three months ended March 31, 2024.

The increase in general and administrative expense was largely due to higher non-cash stock-based compensation costs of $4 million, the impact of acquisitions of $3 million and higher depreciation expense driven by assets placed into service of $2 million, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Expressed as a percentage of revenue, general and administrative expense increased to 19% for the three months ended March 31, 2025 from 17% for the three months ended March 31, 2024.

Selling and marketing expense decreased by $12 million, or 7%, to $157 million for the three months ended March 31, 2025 from $169 million for the three months ended March 31, 2024.

Expressed as a percentage of revenue, selling and marketing expense remained constant at 11% for each of the three months ended March 31, 2025 and March 31, 2024 due to savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Distribution expense decreased by $2 million to $17 million for the three months ended March 31, 2025 from $19 million for the three months ended March 31, 2024.

Expressed as a percentage of revenue, distribution expense remained constant at 1% for each of the three months ended March 31, 2025 and March 31, 2024.

Reconciliation of Net Income Attributable to Warner Music Group Corp.

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For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

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Income before income taxes 65 114 (49) (43) %

Other (income) expense (153) 50 (203) — %

Other expense (income) 64 (37) 101 — %

Interest expense, net 39 42 (3) (7) %

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Adjusted OIBDA

Adjusted OIBDA decreased by $88 million to $363 million for the three months ended December 31, 2024 from $451 million for the three months ended December 31, 2023.

Expressed as a percentage of total revenue, Adjusted OIBDA margin decreased to 22% for the three months ended December 31, 2024 from 26% for the three months ended December 31, 2023.

The decreases in Adjusted OIBDA and Adjusted OIBDA margin are driven by the $74 million impact of the Licensing Extension in the prior-year quarter and the $12 million impact of the Digital License Renewal in the prior-year quarter, as well as revenue mix, unfavorable movements in currency exchange rates of approximately $36 million compared to the prior-year quarter, partially offset by savings from the Strategic Restructuring Plan, a portion of which has been reinvested in the Company’s business.

Adjusted OIBDA decreased by $9 million to $303 million for the three months ended March 31, 2025 from $312 million for the three months ended March 31, 2024.

Expressed as a percentage of total revenue, Adjusted OIBDA margin decreased to 20% for the three months ended March 31, 2025 from 21% for the three months ended March 31, 2024.

The decreases in Adjusted OIBDA and Adjusted OIBDA margin are driven by revenue mix, partially offset by the impact of acquisitions and savings from the Strategic Restructuring Plan, a portion of which has been reinvested in the Company’s business.

Non-cash stock-based compensation and other related costs

Our non-cash stock-based compensation and other related costs increased by $5 million to $19 million for the three months ended December 31, 2024 from $14 million for the three months ended December 31, 2023, primarily related to issuance of additional restricted stock units and market-based performance stock units.

Our non-cash stock-based compensation and other related costs increased by $4 million to $14 million for the three months ended March 31, 2025 from $10 million for the three months ended March 31, 2024, primarily related to issuance of additional restricted stock units and market-based performance stock units.

Net gain on divestitures

There was no net gain on divestitures during the three months ended December 31, 2024.

Net gain on divestitures during the three months ended December 31, 2023 includes a pre-tax gain of $17 million in connection with the divestiture of certain sound recording rights.

There was no net gain on divestitures during the three months ended March 31, 2025.

Net gain on divestitures during the three months ended March 31, 2024 includes a pre-tax gain of $14 million in connection with the divestiture of certain publishing rights.

Transformation initiative costs

Our transformation initiative costs decreased by $2 million to $17 million for the three months ended December 31, 2024 from $19 million for the three months ended December 31, 2023.

Our transformation initiative costs which include costs associated with our finance transformation decreased by $1 million to $18 million for the three months ended March 31, 2025 from $19 million for the three months ended March 31, 2024.

Restructuring and Impairments

Our restructuring and impairment charges increased to $27 million for the three months ended December 31, 2024, which includes severance costs related to the Strategic Restructuring Plan and impairment losses related to the write-off of certain long-form

audiovisual production assets as well as lease termination costs for office closures in connection with the Strategic Restructuring Plan.

There were no restructuring and impairment charges for the three months ended December 31, 2023.

Our restructuring and impairment charges decreased to $13 million for the three months ended March 31, 2025 from $95 million for the three months ended March 31, 2024.

The three months ended March 31, 2025 includes severance costs and impairment charges related to the write-off of certain long-form audiovisual production assets recognized in connection with the Strategic Restructuring Plan.

Depreciation expense

Our depreciation expense increased by $3 million to $29 million for the three months ended December 31, 2024 from $26 million for the three months ended December 31, 2023.

Our depreciation expense increased by $2 million to $28 million for the three months ended March 31, 2025 from $26 million for the three months ended March 31, 2024.

The increase is primarily due to technology assets being placed into service.

Amortization expense

Our amortization expense increased by $2 million, or 4%, to $57 million for the three months ended December 31, 2024 from $55 million for the three months ended December 31, 2023.

Our amortization expense increased by $5 million, to $62 million for the three months ended March 31, 2025 from $57 million for the three months ended March 31, 2024.

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

Operating income

Our operating income decreased by $140 million to $214 million for the three months ended December 31, 2024 from $354 million for the three months ended December 31, 2023.

In addition to the factors impacting Adjusted OIBDA described above, the decrease in operating income was driven by $27 million of restructuring and impairment charges for the three months ended December 31, 2024 related to the Strategic Restructuring Plan, $17 million net gain on a divestiture in the prior-year quarter, higher amortization expenses of $2 million, and higher non-cash stock-based compensation and other related costs of $5 million.

Our operating income increased by $49 million to $168 million for the three months ended March 31, 2025 from $119 million for the three months ended March 31, 2024.

In addition to the factors impacting Adjusted OIBDA described above, the increase in operating income was driven by a decrease in restructuring and impairment charges of $82 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 related to the Strategic Restructuring Plan, partially offset by a $14 million net gain on a divestiture in the prior-year quarter, higher amortization expenses of $5 million, and higher non-cash stock-based compensation and other related costs of $4 million.

Interest expense, net

Our interest expense, net, decreased to $37 million for the three months ended December 31, 2024 from $39 million for the three months ended December 31, 2023 due to lower interest rates on variable rate debt.

Other (income) expense

Other income for the three months ended December 31, 2024 primarily includes foreign currency gains on our Euro-denominated debt of $61 million, currency exchange gains on our intercompany loans of $46 million, realized gains on the sale of an investment of $29 million, and realized and unrealized gains on hedging activity of $15 million.

This compares to foreign currency losses on our Euro-denominated debt of $39 million, currency exchange losses on our intercompany loans of $9 million, and realized and unrealized losses on hedging activity of $6 million for the three months ended December 31, 2023.

Our interest expense, net, decreased to $39 million for the three months ended March 31, 2025 from $42 million for the three months ended March 31, 2024 due to lower interest rates on variable rate debt.

Other expense (income)

Other expense for the three months ended March 31, 2025 primarily includes foreign currency losses on our Euro-denominated debt of $34 million, currency exchange losses on our intercompany loans of $27 million, and realized and unrealized losses on hedging activity of $6 million.

This compares to foreign currency gains on our Euro-denominated debt of $21 million, currency exchange gains on our intercompany loans of $7 million, and realized and unrealized gains on hedging activity of $5 million for the three months ended March 31, 2024.

Income tax expense

Our income tax expense increased by $17 million to $89 million for the three months ended December 31, 2024 from $72 million for the three months ended December 31, 2023.

The increase of $17 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year, higher U.S.

state and local taxes, and higher portion of the pre-tax income earned outside of the United States and taxed at rates higher than in the United States.

Net income increased by $48 million to $241 million for the three months ended December 31, 2024 from $193 million for the three months ended December 31, 2023 as a result of the factors described above.

Our income tax expense increased by $11 million to $29 million for the three months ended March 31, 2025 from $18 million for the three months ended March 31, 2024.

The increase of $11 million in income tax expense is primarily due to the benefit from the winding down of the Company’s owned and operated media properties in the prior year, partially offset by the impact of lower pre-tax income in the current year.

Net income decreased by $60 million to $36 million for the three months ended March 31, 2025 from $96 million for the three months ended March 31, 2024 as a result of the factors described above.

Noncontrolling interest

Income attributable to noncontrolling interest decreased by $29 million to $5 million for the three months ended December 31, 2024 from $34 million for the three months ended December 31, 2023.

The decrease is due to lower income from non-wholly-owned subsidiaries, primarily due to the impact of the Licensing Extension in the prior-year quarter.

There was no income attributable to noncontrolling interest during the three months ended March 31, 2025 or the three months ended March 31, 2024.

Business Segment Results

1 unchanged sentence

For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

8 unchanged sentences

Adjusted OIBDA

83 86 (3) -3 %

Corporate expenses and eliminations

8 unchanged sentences

Recorded Music

Recorded Music revenue decreased by $100 million, or 7%, to $1,345 million for the three months ended December 31, 2024 from $1,445 million for the three months ended December 31, 2023.

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

Recorded Music revenue decreased by $14 million, or 1%, to $1,175 million for the three months ended March 31, 2025 from $1,189 million for the three months ended March 31, 2024.

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

Cost of revenues

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December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

2 unchanged sentences

Total cost of revenues $ 599 $ 598 $ 1 — %

Recorded Music cost of revenues decreased by $4 million, or 1%, to $686 million for the three months ended December 31, 2024 from $690 million for the three months ended December 31, 2023.

Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs increased to 27% for the three months ended December 31, 2024 from 24% for the three months ended December 31, 2023, primarily driven by revenue mix and the unfavorable movements in currency exchange rates.

Expressed as a percentage of Recorded Music revenue, Recorded Music product costs remained constant at 24% for each of the three months ended December 31, 2024 and December 31, 2023.

Recorded Music cost of revenues increased by $1 million, to $599 million for the three months ended March 31, 2025 from $598 million for the three months ended March 31, 2024.

Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 29% for each of the three months ended March 31, 2025 and March 31, 2024.

Expressed as a percentage of Recorded Music revenue, Recorded Music product costs increased to 22% for the three months ended March 31, 2025 from 21% for the three months ended March 31, 2024, driven by revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue and the impact of acquisitions.

Selling, general and administrative expense

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December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

4 unchanged sentences

______________________________________

(1) Includes depreciation expense of $15 million for the three months ended December 31, 2024 and $13 million for the three months ended December 31, 2023.

Recorded Music selling, general and administrative expense decreased by $1 million, to $363 million for the three months ended December 31, 2024 from $364 million for the three months ended December 31, 2023.

The increase in general and administrative expense was mainly driven by unfavorable movements in foreign currency exchange rates of approximately $11 million, higher non-cash stock-based compensation and other related costs of $4 million, and the impact of acquisitions of $1 million.

The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Strategic Restructuring Plan, a portion of which has been reinvested into the Company’s business.

The increase in distribution expense was primarily driven by revenue mix.

Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense increased to 27% for the three months ended December 31, 2024 from 25% for the three months ended December 31, 2023.

(1) Includes depreciation expense of $13 million for each of the three months ended March 31, 2025 and March 31, 2024.

Recorded Music selling, general and administrative expense decreased by $10 million, to $327 million for the three months ended March 31, 2025 from $337 million for the three months ended March 31, 2024.

The increase in general and administrative expense was largely driven by higher non-cash stock-based compensation and other related costs of $3 million, and the impact of acquisitions of $3 million.

The decrease in selling and marketing expense was driven by savings from the Strategic Restructuring Plan, a portion of which has been reinvested into the Company’s business.

The decrease in distribution expense was primarily driven by revenue mix.

Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense remained constant at 28% for each of the three months ended March 31, 2025 and March 31, 2024.

Operating Income and Adjusted OIBDA

Recorded Music operating income decreased by $136 million to $238 million for the three months ended December 31, 2024 from $374 million for the three months ended December 31, 2023.

In addition to the factors impacting Adjusted OIBDA described below, the decrease in operating income was driven by $28 million of restructuring and impairment charges which includes severance costs related to the Strategic Restructuring Plan and impairment losses related to the write-off of certain long-form audiovisual production assets and lease termination costs for office closures in connection with the Strategic Restructuring Plan in the current quarter.

The decrease is also driven by higher depreciation expenses of $2 million due to technology assets being placed into service, partially offset by lower amortization expenses of $4 million due to certain intangible assets becoming fully amortized.

Recorded Music Adjusted OIBDA decreased by $89 million to $323 million for the three months ended December 31, 2024 from $412 million for the three months ended December 31, 2023 largely driven by the impact of the Licensing Extension of $74 million in the prior-year quarter, the Digital License Renewal of $12 million in the prior-year quarter, and the impact of unfavorable movements in currency exchange rates of approximately $27 million compared to the prior-year quarter, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin decreased to 24% for the three months ended December 31, 2024 from 29% for the three months ended December 31, 2023 due to the factors noted above.

Recorded Music operating income increased by $69 million to $203 million for the three months ended March 31, 2025 from $134 million for the three months ended March 31, 2024.

In addition to the factors impacting Adjusted OIBDA described below, the increase in operating income was driven by a decrease in restructuring and impairment charges of $75 million compared to the prior-year quarter which includes severance costs and impairment losses recorded in connection with the Strategic Restructuring Plan, partially offset by higher amortization expenses of $1 million related to acquisitions of music-related assets.

Recorded Music Adjusted OIBDA decreased by $2 million to $270 million for the three months ended March 31, 2025 from $272 million for the three months ended March 31, 2024, largely driven by revenue mix and unfavorable movements in foreign currency exchange rates, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin remained constant at 23% for each of the three months ended March 31, 2025 and March 31, 2024 due to the factors noted above.

Music Publishing

Music Publishing revenues increased by $19 million, or 6%, to $323 million for the three months ended December 31, 2024 from $304 million for the three months ended December 31, 2023.

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

Music Publishing revenues increased by $4 million, or 1%, to $310 million for the three months ended March 31, 2025 from $306 million for the three months ended March 31, 2024.

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

Cost of revenues

1 unchanged sentence

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December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

1 unchanged sentence

Total cost of revenues $ 194 $ 195 $ (1) -1 %

Music Publishing cost of revenues increased by $19 million, or 10%, to $210 million for the three months ended December 31, 2024 from $191 million for the three months ended December 31, 2023.

Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues increased to 65% for the three months ended December 31, 2024 from 63% for the three months ended December 31, 2023, largely due to revenue mix and unfavorable movements in currency exchange rates.

Music Publishing cost of revenues decreased by $1 million, or 1%, to $194 million for the three months ended March 31, 2025 from $195 million for the three months ended March 31, 2024.

Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 63% for the three months ended March 31, 2025 from 64% for the three months ended March 31, 2024, largely due to revenue mix.

Selling, general and administrative expense

1 unchanged sentence

For the Three Months Ended

December 31, 2024 vs.

March 31, 2025 vs.

2025 2024 $ Change % Change

3 unchanged sentences

______________________________________

(1) Includes depreciation expense of $1 million for each of the three months ended December 31, 2024 and December 31, 2023.

Music Publishing selling, general and administrative expense increased by $3 million, or 10%, to $32 million for the three months ended December 31, 2024 from $29 million for the three months ended December 31, 2023.

Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense remained constant at 10% for each of the three months ended December 31, 2024 and December 31, 2023.

(1) Includes depreciation expense of $2 million and $1 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Music Publishing selling, general and administrative expense increased by $4 million, or 13%, to $35 million for the three months ended March 31, 2025 from $31 million for the three months ended March 31, 2024.

Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense increased to 11% for the three months ended March 31, 2025 from 10% for the three months ended March 31, 2024 driven by higher overhead and the impact of acquisitions.

Operating Income and Adjusted OIBDA

Music Publishing operating income decreased by $8 million to $55 million for the three months ended December 31, 2024 from $63 million for the three months ended December 31, 2023, driven by the same factors affecting Adjusted OIBDA discussed below, as well as an increase in amortization expense of $5 million.

Music Publishing Adjusted OIBDA decreased by $3 million, or 3%, to $83 million for the three months ended December 31, 2024 from $86 million for the three months ended December 31, 2023 due to revenue mix and the impact of unfavorable movements in foreign currency exchange rates of approximately $9 million.

Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin decreased to 26% for the three months ended December 31, 2024 from 28% for the three months ended December 31, 2023 due to revenue mix and the unfavorable movements in currency exchange rates.

Music Publishing operating income decreased by $17 million to $52 million for the three months ended March 31, 2025 from $69 million for the three months ended March 31, 2024, driven by the same factors affecting Adjusted OIBDA discussed below, partially offset by the gain on divestiture of $14 million in the prior-year quarter, as well as an increase in depreciation and amortization expense of $5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Music Publishing Adjusted OIBDA increased by $3 million, or 4%, to $85 million for the three months ended March 31, 2025 from $82 million for the three months ended March 31, 2024, driven by the impact of acquisitions of $3 million.

Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin remained constant at 27% for each of the three months ended March 31, 2025 and March 31, 2024.

Corporate Expenses and Eliminations

Our operating loss from corporate expenses and eliminations decreased by $4 million for the three months ended December 31, 2024 to $79 million from $83 million for the three months ended December 31, 2023, driven by lower expenses related to transformation initiatives of $2 million.

Our Adjusted OIBDA loss from corporate expenses and eliminations decreased by $4 million for the three months ended December 31, 2024 to $43 million from $47 million for the three months ended December 31, 2023, primarily due to the operating loss factors noted above.

Our operating loss from corporate expenses and eliminations increased by $3 million for the three months ended March 31, 2025 to $87 million from $84 million for the three months ended March 31, 2024, driven by incremental investment in technology and higher depreciation expense of $1 million, partially offset by restructuring and impairment charges of $7 million recorded in the prior-year quarter in connection with the Strategic Restructuring Plan, and lower expenses related to transformation initiatives of $1 million.

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $10 million for the three months ended March 31, 2025 to $52 million from $42 million for the three months ended March 31, 2024, primarily due to the operating loss factors noted above.

RESULTS OF OPERATIONS

Six Months Ended March 31, 2025 Compared with Six Months Ended March 31, 2024

Consolidated Results

Our revenues were composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Revenue by Type

Digital $ 1,714 $ 1,756 $ (42) -2 %

Physical 278 265 13 5 %

Total digital and physical

1,992 2,021 (29) -1 %

Artist services and expanded-rights 313 330 (17) -5 %

Licensing 215 283 (68) -24 %

Total Recorded Music 2,520 2,634 (114) -4 %

Performance 109 103 6 6 %

Digital 395 383 12 3 %

Mechanical 30 30 — — %

Synchronization 88 87 1 1 %

Other 11 7 4 57 %

Total Music Publishing 633 610 23 4 %

Intersegment eliminations (3) (2) (1) 50 %

Total revenues

$ 3,150 $ 3,242 $ (92) -3 %

Revenue by Geographical Location

Recorded Music $ 1,029 $ 1,135 $ (106) -9 %

Music Publishing 334 342 (8) -2 %

1,363 1,477 (114) -8 %

International Recorded Music 1,491 1,499 (8) -1 %

International Music Publishing 299 268 31 12 %

Total international

1,790 1,767 23 1 %

Intersegment eliminations (3) (2) (1) 50 %

Total revenues

$ 3,150 $ 3,242 $ (92) -3 %

Total Revenues

Total revenues decreased by $92 million, or 3%, to $3,150 million for the six months ended March 31, 2025 from $3,242 million for the six months ended March 31, 2024.

The prior year included $75 million from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”) in Recorded Music licensing revenue and $30 million of Recorded Music streaming revenue from a deal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in upfront revenue recognition for the six months ended March 31, 2024.

Revenue growth was also unfavorably impacted by the BMG Termination, which resulted in $32 million lower Recorded Music revenue compared to the six months ended March 31, 2024, of which $16 million was in streaming revenue and $16 million was in physical revenue.

Adjusted for these items, total revenues increased 1%, which includes $46 million of unfavorable currency exchange fluctuations.

Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 80% and 20% of total revenues for the six months ended March 31, 2025, respectively, and 81% and 19% of total revenues for the six months ended March 31, 2024, respectively.

Prior to intersegment eliminations, U.S.

and international revenues represented 43% and 57% for the six months ended March 31, 2025, respectively, and 46% and 54% for the six months ended March 31, 2024, respectively.

Total digital revenues after intersegment eliminations decreased by $30 million, or 1%, to $2,109 million for the six months ended March 31, 2025 from $2,139 million for the six months ended March 31, 2024.

Excluding the BMG Termination and the Digital License Renewal, total digital revenues increased 1%.

Total streaming revenue decreased 1% driven by Recorded Music, partially offset by growth in Music Publishing.

Total digital revenues represented 67% of consolidated revenues for the six months ended March 31, 2025, from 66% for the six months ended March 31, 2024.

Prior to intersegment eliminations, total digital revenues

for the six months ended March 31, 2025 were composed of U.S.

revenues of $998 million and international revenues of $1,111 million, or 47% and 53% of total digital revenues, respectively.

Prior to intersegment eliminations, total digital revenues for the six months ended March 31, 2024 were composed of U.S.

revenues of $1,047 million and international revenues of $1,092 million, or 49% and 51% of total digital revenues, respectively.

Recorded Music revenues decreased by $114 million, or 4%, to $2,520 million for the six months ended March 31, 2025 from $2,634 million for the six months ended March 31, 2024.

The decrease includes $38 million of unfavorable currency exchange fluctuations.

Recorded Music revenues were $1,029 million and $1,135 million, or 41% and 43% of consolidated Recorded Music revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

International Recorded Music revenues were $1,491 million and $1,499 million, or 59% and 57% of consolidated Recorded Music revenues for the six months ended March 31, 2025 and March 31, 2024, respectively.

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

Digital revenue decreased by $42 million, or 2%, which includes an unfavorable impact of currency exchange fluctuations of $30 million.

Revenue from streaming services fell by $36 million, or 2%, to $1,679 million for the six months ended March 31, 2025 from $1,715 million for the six months ended March 31, 2024.

Excluding the BMG Termination and the Digital License Renewal, streaming revenue increased 1%, driven by the impact of price increases in the prior year, the timing of deal renewals, and content delivery with certain emerging streaming platforms in the prior year.

Download and other digital revenues decreased by $6 million, or 15%, to $35 million for the six months ended March 31, 2025 from $41 million for the six months ended March 31, 2024 primarily due to the continued shift to streaming services.

Licensing revenue decreased by $68 million, or 24%, primarily driven by $75 million from the Licensing Extension in the prior year.

Artist services and expanded-rights revenue decreased by $17 million attributable to lower concert promotion revenue, lower direct-to-consumer merchandising revenue at EMP, and a decrease in revenue related to the exit of the Company’s non-core owned and operated media properties in connection with the Strategic Restructuring Plan.

Physical revenue increased by $13 million, or 5%, which includes the unfavorable impact of the BMG Termination of $16 million.

Excluding the BMG Termination, physical revenue increased 12%, driven by releases from Linkin Park, Mariya Takeuchi, Hwang Young Woong, ROSÉ, and MISAMO, and includes an unfavorable impact of foreign currency exchange rates of $2 million.

Music Publishing revenues increased by $23 million, or 4%, to $633 million for the six months ended March 31, 2025 from $610 million for the six months ended March 31, 2024.

Music Publishing revenues were $334 million and $342 million, or 53% and 56% of consolidated Music Publishing revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

International Music Publishing revenues were $299 million and $268 million, or 47% and 44% of Music Publishing revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

The overall increase in Music Publishing revenue was attributable to increases in digital revenue of $12 million, or 3%, performance revenue of $6 million, or 6%, other publishing revenue of $4 million, and synchronization revenue of $1 million.

Mechanical revenue remained constant.

The increase in digital revenue was primarily driven by continued growth in streaming revenue.

Revenue from streaming services grew by $12 million, or 3%, to $390 million for the six months ended March 31, 2025 from $378 million for the six months ended March 31, 2024, reflecting the continued market growth, partially offset by an unfavorable impact of foreign currency exchange rates of $4 million.

The growth in performance revenue is attributable to growth from concerts, radio and live events, and the growth in synchronization revenue is attributable to the timing of copyright infringement settlements.

Revenue by Geographical Location

revenue decreased by $114 million, or 8%, to $1,363 million for the six months ended March 31, 2025 from $1,477 million for the six months ended March 31, 2024.

Recorded Music revenue decreased by $106 million, or 9%, primarily driven by a decrease in licensing revenue of $68 million largely attributable to $75 million from the Licensing Extension in the prior year.

The decrease in U.S.

Recorded Music revenue was also attributable to lower digital revenues, partially offset by growth in U.S.

Recorded Music physical and artist services and expanded-rights revenue.

Recorded Music digital revenue decreased by $40 million, or 5%, which reflects lower streaming revenue of $38 million, or 5%, and lower download and other digital revenue of $2 million, or 10%.

The decrease in streaming revenue is largely attributable to the unfavorable impact of the BMG Termination compared to the prior year.

U.S Recorded Music physical revenue increased by $8 million, or 7%, driven by strong releases in the current year as well as catalog and carryover success.

Recorded Music artist services and expanded-rights revenue increased by $1 million, or 1%, driven by the impact of acquisitions, partially offset by a decrease in revenue related to the exit of the Company’s non-core owned and operated media properties in the prior year in connection with the Strategic Restructuring Plan.

Music Publishing revenue decreased by $8 million, or 2%, to $334 million for the six months ended March 31, 2025 from $342 million for the six months ended March 31, 2024.

Music Publishing digital revenue decreased by $9 million, attributable to lower streaming revenue of $9 million, or 4%, while download and other digital revenue remained constant.

This was partially offset by growth in U.S.

Music Publishing mechanical revenue of $2 million driven by higher physical revenue.

Music Publishing synchronization revenue and performance revenue remained constant for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

International revenue increased by $23 million, or 1%, to $1,790 million for the six months ended March 31, 2025 from $1,767 million for the six months ended March 31, 2024.

Excluding the unfavorable impact of foreign currency exchange rates of $45 million, International revenue increased by $68 million, or 4%.

International Recorded Music revenue decreased by $8 million, driven by decreases in artist services and expanded-rights revenue of $18 million and digital revenue of $2 million, partially offset by increases in licensing revenue of $7 million and physical revenue of $5 million.

International Recorded Music artist services and expanded-rights revenue decreased by $18 million due to lower direct-to-consumer merchandising revenue at EMP, lower concert promotion revenue primarily in France, and the unfavorable impact of foreign currency exchange rates of $4 million.

International Recorded Music digital revenue decreased by $2 million, attributable to lower download and other digital revenue of $4 million, partially offset by higher streaming revenue of $2 million, which reflects the unfavorable impacts of the BMG Termination and the Digital License Renewal in the prior year, and an unfavorable impact of foreign currency exchange rates of $29 million.

International Recorded Music licensing revenue increased by $7 million, driven by higher licensing activity primarily in Japan, the timing of copyright infringement settlements, and unfavorable foreign currency exchange rates of $2 million.

International Recorded Music physical revenue increased by $5 million, driven by strength of new releases primarily in Japan, partially offset by an unfavorable impact of foreign currency exchange rates of $2 million.

International Music Publishing revenue increased by $31 million, or 12%, to $299 million for the six months ended March 31, 2025 from $268 million for the six months ended March 31, 2024.

This was driven by increases in digital revenue of $21 million, performance revenue of $6 million driven by higher touring revenue, other publishing revenue of $5 million, and synchronization of $1 million, partially offset by lower mechanical revenue of $2 million.

International Music Publishing digital growth is primarily driven by streaming revenue growth of $21 million, or 15%, while International Music Publishing downloads and other digital revenue remained constant for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Cost of revenues

Our cost of revenues was composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Artist and repertoire costs $ 1,105 $ 1,079 $ 26 2 %

Product costs 580 592 (12) -2 %

Total cost of revenues $ 1,685 $ 1,671 $ 14 1 %

Artist and repertoire costs increased by $26 million, to $1,105 million for the six months ended March 31, 2025 from $1,079 million for the six months ended March 31, 2024.

Artist and repertoire costs as a percentage of revenue increased to 35% for the six months ended March 31, 2025 from 33% for the six months ended March 31, 2024, primarily due to revenue mix compared to the six months ended March 31, 2024, which included items with upfront revenue recognition without associated artist and repertoire costs, and unfavorable movements in currency exchange rates.

Product costs decreased by $12 million, to $580 million for the six months ended March 31, 2025 from $592 million for the six months ended March 31, 2024.

Product costs as a percentage of revenue remained constant at 18% for each of the six months ended March 31, 2025 and March 31, 2024, primarily due to the impact of the Licensing Extension, revenue mix and the BMG Termination.

Selling, general and administrative expenses

Our selling, general and administrative expenses were composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

General and administrative expense (1) $ 560 $ 527 $ 33 6 %

Selling and marketing expense 315 345 (30) -9 %

Distribution expense 49 50 (1) -2 %

Total selling, general and administrative expense $ 924 $ 922 $ 2 — %

______________________________________

(1) Includes depreciation expense of $57 million and $52 million for the six months ended March 31, 2025 and March 31, 2024, respectively.

Total selling, general and administrative expense increased by $2 million, to $924 million for the six months ended March 31, 2025 from $922 million for the six months ended March 31, 2024.

Expressed as a percentage of revenue, total selling, general and administrative expense increased to 29% for the six months ended March 31, 2025 from 28% for the six months ended March 31, 2024 due to the factors noted below.

General and administrative expense increased by $33 million to $560 million for the six months ended March 31, 2025 from $527 million for the six months ended March 31, 2024.

The increase in general and administrative expense was driven by higher non-cash stock-based compensation expense of $9 million, higher depreciation expense related to technology assets of $5 million, and unfavorable movements in foreign currency exchange rates of $8 million, offset by lower expenses related to transformation initiatives and related costs of $3 million, the impact of acquisitions, and savings from the Strategic Restructuring Plan, of which a portion has been reinvested into the Company’s business.

Expressed as a percentage of revenue, general and administrative expense increased to 18% for the six months ended March 31, 2025 from 16% for the six months ended March 31, 2024 due to the factors noted above.

Selling and marketing expense decreased by $30 million, or 9%, to $315 million for the six months ended March 31, 2025 from $345 million for the six months ended March 31, 2024.

Expressed as a percentage of revenue, selling and marketing expense decreased to 10% for the six months ended March 31, 2025, from 11% for the six months ended March 31, 2024 due to lower variable marketing spend and savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Distribution expense decreased by $1 million to $49 million for the six months ended March 31, 2025 from $50 million for the six months ended March 31, 2024.

Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the six months ended March 31, 2025 and March 31, 2024.

Reconciliation of 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):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Net income attributable to Warner Music Group Corp.

$ 272 $ 255 $ 17 7 %

Income attributable to noncontrolling interest 5 34 (29) -85 %

Net income 277 289 (12) -4 %

Income tax expense 118 90 28 31 %

Income before income taxes 395 379 16 4 %

Other (income) expense (89) 13 (102) — %

Interest expense, net 76 81 (5) -6 %

Operating income 382 473 (91) -19 %

Amortization expense 119 112 7 6 %

Depreciation expense 57 52 5 10 %

Restructuring and impairments 40 95 (55) -58 %

Transformation initiatives and other related costs 35 38 (3) -8 %

Net gain on divestitures — (31) 31 -100 %

Non-cash stock-based compensation and other related costs 33 24 9 38 %

Adjusted OIBDA $ 666 $ 763 $ (97) -13 %

Adjusted OIBDA

Adjusted OIBDA decreased by $97 million to $666 million for the six months ended March 31, 2025 as compared to $763 million for the six months ended March 31, 2024.

Expressed as a percentage of total revenue, Adjusted OIBDA margin decreased to 21% for the six months ended March 31, 2025 from 24% for the six months ended March 31, 2024.

The decreases in Adjusted OIBDA and Adjusted OIBDA margin are driven by the $74 million impact of the Licensing Extension in the prior year and the $12 million impact of the Digital License Renewal in the prior year, as well as revenue mix and unfavorable movements in currency exchange rates, partially offset by savings from the Strategic Restructuring Plan, a portion of which has been reinvested in the Company’s business.

Non-cash stock-based compensation and other related costs

Our non-cash stock-based compensation and other related costs increased by $9 million to $33 million for the six months ended March 31, 2025 from $24 million for the six months ended March 31, 2024, primarily related to issuance of additional restricted stock units and market-based performance stock units.

Net gain on divestitures

There was no net gain on divestitures during the six months ended March 31, 2025.

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

Transformation initiatives and other related costs

Our transformation initiatives and other related costs decreased by $3 million to $35 million for the six months ended March 31, 2025 from $38 million for the six months ended March 31, 2024.

Restructuring and Impairments

Our restructuring and impairment charges decreased by $55 million to $40 million for the six months ended March 31, 2025 from $95 million for the six months ended March 31, 2024.

The current year includes severance costs of approximately $8 million, and approximately $32 million of impairment losses related to the Strategic Restructuring Plan.

Impairment charges recognized during

the current year primarily relate to the write-off of certain long-form audiovisual production assets and lease termination costs for office closures.

The six months ended March 31, 2024 includes severance costs of approximately $45 million, and $50 million of impairment losses primarily related to the Strategic Restructuring Plan.

Depreciation expense

Our depreciation expense increased by $5 million to $57 million for the six months ended March 31, 2025 from $52 million for the six months ended March 31, 2024.

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

Amortization expense

Our amortization expense increased by $7 million, or 6%, to $119 million for the six months ended March 31, 2025 from $112 million for the six months ended March 31, 2024.

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

Operating income

Our operating income decreased by $91 million to $382 million for the six months ended March 31, 2025 from $473 million for the six months ended March 31, 2024.

The decrease in operating income was due to the same factors affecting Adjusted OIBDA discussed above, as well as higher depreciation expenses primarily due to an increase in technology assets being placed into service and a $31 million net gain on divestitures in the prior year, partially offset by lower restructuring and impairment charges as noted above.

Interest expense, net

Our interest expense, net, decreased to $76 million for the six months ended March 31, 2025 from $81 million for the six months ended March 31, 2024 due to lower interest rates on variable rate debt.

Other (income) expense

Other income for the six months ended March 31, 2025 primarily includes foreign currency gains on our Euro-denominated debt of $27 million, currency exchange gains on our intercompany loans of $19 million, realized gains on the sale of an investment of $29 million, and realized and unrealized gains on hedging activity of $9 million.

This compares to foreign currency losses on our Euro-denominated debt of $19 million and currency exchange losses on the Company’s intercompany loans of $2 million for the six months ended March 31, 2024.

Income tax expense

Our income tax expense increased by $28 million to $118 million for the six months ended March 31, 2025 from $90 million for the six months ended March 31, 2024.

The increase of $28 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year and benefit from the winding down of the Company’s owned and operated media properties in the prior year.

Net income decreased by $12 million to $277 million for the six months ended March 31, 2025 from $289 million for the six months ended March 31, 2024 as a result of the factors described above.

Noncontrolling interest

Income attributable to noncontrolling interest decreased by $29 million to $5 million for the six months ended March 31, 2025 from $34 million for the six months ended March 31, 2024, driven by lower income from non-wholly-owned subsidiaries in the current year, primarily due to the impact of the Licensing Extension in the prior year.

Business Segment Results

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

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Recorded Music

Revenues $ 2,520 $ 2,634 $ (114) -4 %

Operating income 441 508 (67) -13 %

Adjusted OIBDA

593 684 (91) -13 %

Music Publishing

Revenues $ 633 $ 610 $ 23 4 %

Operating income 107 132 (25) -19 %

Adjusted OIBDA

168 168 — — %

Corporate expenses and eliminations

Revenue eliminations $ (3) $ (2) $ (1) 50 %

Operating loss (166) (167) 1 -1 %

Adjusted OIBDA loss

(95) (89) (6) 7 %

Revenues $ 3,150 $ 3,242 $ (92) -3 %

Operating income 382 473 (91) -19 %

Adjusted OIBDA

666 763 (97) -13 %

Recorded Music

Recorded Music revenue decreased by $114 million, or 4%, to $2,520 million for the six months ended March 31, 2025 from $2,634 million for the six months ended March 31, 2024.

Recorded Music revenues were $1,029 million and $1,135 million, or 41% and 43% of consolidated Recorded Music revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

International Recorded Music revenues were $1,491 million and $1,499 million, or 59% and 57% of consolidated Recorded Music revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

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

Cost of revenues

Recorded Music cost of revenues was composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Artist and repertoire costs $ 705 $ 696 $ 9 1 %

Product costs 580 592 (12) -2 %

Total cost of revenues $ 1,285 $ 1,288 $ (3) — %

Recorded Music cost of revenues decreased by $3 million, to $1,285 million for the six months ended March 31, 2025 from $1,288 million for the six months ended March 31, 2024.

Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs increased to 28% for the six months ended March 31, 2025, from 26% for the six months ended March 31, 2024 primarily driven by revenue mix compared to the six months ended March 31, 2024, which included items with upfront revenue recognition without associated artist and repertoire costs, and unfavorable movements in currency exchange rates.

Expressed as a percentage of Recorded Music revenue, Recorded Music product costs increased to 23% for the six months ended March 31, 2025 from 22% for the six months ended March 31, 2024, primarily due to the impact of the Licensing Extension in the prior year and an unfavorable impact of foreign currency exchange rates in the current year.

Selling, general and administrative expense

Recorded Music selling, general and administrative expenses were composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

General and administrative expense (1) $ 341 $ 318 $ 23 7 %

Selling and marketing expense 300 333 (33) -10 %

Distribution expense 49 50 (1) -2 %

Total selling, general and administrative expense $ 690 $ 701 $ (11) -2 %

______________________________________

(1) Includes depreciation expense of $28 million and $26 million for the six months ended March 31, 2025 and March 31, 2024, respectively.

Recorded Music selling, general and administrative expense decreased by $11 million, to $690 million for the six months ended March 31, 2025 from $701 million for the six months ended March 31, 2024.

The increase in general and administrative expense was primarily due to unfavorable movements in foreign currency exchange rates of $7 million, the impact of acquisitions, and higher non-cash stock-based compensation and other related expenses of $7 million.

This is partially offset by savings from the Strategic Restructuring Plan, a portion of which has been reinvested into the Company’s business.

The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Strategic Restructuring Plan.

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

Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense remained constant at 27% for each of the six months ended March 31, 2025 and March 31, 2024.

Operating Income and Adjusted OIBDA

Recorded Music operating income decreased by $67 million to $441 million for the six months ended March 31, 2025 from $508 million for the six months ended March 31, 2024.

In addition to the factors impacting Recorded Music Adjusted OIBDA noted below, the decrease in operating income was driven by a $17 million net gain on divestitures recognized in the prior year, $41 million of restructuring and non-cash impairment charges related to the Strategic Restructuring Plan compared to $88 million recognized in the prior year, higher non-cash stock-based compensation expense and other related costs of $7 million and higher depreciation expense of $2 million, partially offset by lower amortization expense of $3 million.

Recorded Music Adjusted OIBDA decreased by $91 million, to $593 million for the six months ended March 31, 2025 from $684 million for the six months ended March 31, 2024, largely driven by the impact of the Licensing Extension of $74 million in the prior year, the Digital License Renewal of $12 million in the prior year, and the impact of unfavorable movements in foreign currency exchange rates, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin decreased to 24% for the six months ended March 31, 2025 from 26% for the six months ended March 31, 2024, due to the factors noted above.

Music Publishing

Music Publishing revenues increased by $23 million, or 4%, to $633 million for the six months ended March 31, 2025 from $610 million for the six months ended March 31, 2024.

Music Publishing revenues were $334 million and $342 million, or 53% and 56% of consolidated Music Publishing revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

International Music Publishing revenues were $299 million and $268 million, or 47% and 44% of consolidated Music Publishing revenues, for the six months ended March 31, 2025 and March 31, 2024, respectively.

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

Cost of revenues

Music Publishing cost of revenues were composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

Artist and repertoire costs $ 404 $ 386 $ 18 5 %

Total cost of revenues $ 404 $ 386 $ 18 5 %

Music Publishing cost of revenues increased by $18 million, or 5%, to $404 million for the six months ended March 31, 2025 from $386 million for the six months ended March 31, 2024.

Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues increased to 64% for the six months ended March 31, 2025 from 63% for the six months ended March 31, 2024 largely due to revenue mix and unfavorable movements in foreign currency exchange rates.

Selling, general and administrative expense

Music Publishing selling, general and administrative expenses were composed of the following amounts (in millions):

For the Six Months Ended

March 31, 2025 vs.

2025 2024 $ Change % Change

General and administrative expense (1) $ 65 $ 60 $ 5 8 %

Selling and marketing expense 2 — 2 — %

Total selling, general and administrative expense $ 67 $ 60 $ 7 12 %

______________________________________

(1) Includes depreciation expense of $3 million and $2 million for the six months ended March 31, 2025 and March 31, 2024, respectively.

Music Publishing selling, general and administrative expense increased to $67 million for the six months ended March 31, 2025 from $60 million for the six months ended March 31, 2024.

Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense increased to 11% for the six months ended March 31, 2025 from 10% for the six months ended March 31, 2024 largely due to revenue mix and the unfavorable movements in foreign currency exchange rates.

Operating Income and Adjusted OIBDA

Music Publishing operating income decreased by $25 million to $107 million for the six months ended March 31, 2025 from $132 million operating income for the six months ended March 31, 2024 largely due to the factors that impacted Music Publishing Adjusted OIBDA noted below, as well as a $14 million net gain on a divestiture recognized in the prior year.

Music Publishing Adjusted OIBDA remained constant for the six months ended March 31, 2025 and the six months ended March 31, 2024.

Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin decreased to 27% for the six months ended March 31, 2025 from 28% for the six months ended March 31, 2024, primarily driven by revenue mix and the unfavorable movements in foreign currency exchange rates.

Corporate Expenses and Eliminations

Our operating loss from corporate expenses and eliminations decreased by $1 million to $166 million for the six months ended March 31, 2025 from $167 million for the six months ended March 31, 2024, primarily due to lower expenses related to transformation initiatives and related costs of $3 million, lower restructuring and impairment charges associated with the Strategic Restructuring Plan of $8 million, partially offset by higher non-cash stock-based compensation and other related expenses of $1 million, incremental investment in technology and higher depreciation expense of $2 million.

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $6 million to $95 million for the six months ended March 31, 2025 from $89 million for the six months ended March 31, 2024 primarily due to the operating loss factors noted above.

FINANCIAL CONDITION AND LIQUIDITY

Financial Condition at December 31, 2024

At December 31, 2024, we had $3.955 billion of debt (which is net of $32 million of premiums, discounts and deferred financing costs), $802 million of cash and equivalents (net debt of $3.153 billion, defined as total debt, less cash and equivalents and premiums, discounts and deferred financing costs) and $545 million of Warner Music Group Corp.

Financial Condition at March 31, 2025

At March 31, 2025, we had $4.292 billion of debt (which is net of $39 million of premiums, discounts and deferred financing costs), $637 million of cash and equivalents (net debt of $3.655 billion, defined as total debt, less cash and equivalents and premiums, discounts and deferred financing costs) and $567 million of Warner Music Group Corp.

This compares to $4.014 billion of debt (which is net of $34 million of premiums, discounts and deferred financing costs), $694 million of cash and equivalents (net debt of $3.320 billion) and $518 million of Warner Music Group Corp.

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The following table summarizes our historical cash flows (in millions).

The financial data for the three months ended December 31, 2024 and December 31, 2023 are unaudited and have been derived from our condensed consolidated interim financial statements included elsewhere herein.

Three Months Ended

The financial data for the six months ended March 31, 2025 and March 31, 2024 are unaudited and have been derived from our condensed consolidated interim financial statements included elsewhere herein.

Six Months Ended

Cash provided by (used in):

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Operating Activities

Cash provided by operating activities was $332 million for the three months ended December 31, 2024 as compared with cash provided by operating activities of $293 million for the three months ended December 31, 2023.

The $39 million increase in cash provided by operating activities was largely a result of movement in deferred revenue due to timing of digital advances and other movements within working capital.

Cash provided by operating activities was $401 million for the six months ended March 31, 2025 as compared with cash provided by operating activities of $262 million for the six months ended March 31, 2024.

The $139 million increase in cash provided by operating activities was largely a result of movement in deferred revenue due to timing of digital advances and other movements within working capital, including the timing of variable compensation payments.

Investing Activities

Cash used in investing activities was $81 million for the three months ended December 31, 2024 as compared with cash used in investing activities of $92 million for the three months ended December 31, 2023.

The $81 million of cash used in investing activities in the three months ended December 31, 2024 consisted of $40 million relating to investments and acquisitions of businesses, $41 million to acquire music-related assets and $36 million relating to capital expenditures, partially offset by $36 million of proceeds from the sale of investments.

The $92 million of cash used in investing activities in the three months ended December 31, 2023 consisted of $17 million relating to investments and acquisitions of businesses, $59 million to acquire music-related assets, and $29 million relating to capital expenditures, partially offset by $4 million of proceeds from divestitures and $9 million of proceeds from the sale of investments.

Cash used in investing activities was $202 million for the six months ended March 31, 2025 as compared with cash used in investing activities of $125 million for the six months ended March 31, 2024.

The $202 million of cash used in investing activities in the six months ended March 31, 2025 consisted of $46 million relating to investments and acquisitions of businesses, $120 million to acquire music-related assets and $72 million relating to capital expenditures, partially offset by $36 million of proceeds from the sale of investments.

The $125 million of cash used in investing activities in the six months ended March 31, 2024 consisted of $17 million relating to investments and acquisitions of businesses, $82 million to acquire music-related assets, and $55 million relating to capital expenditures, partially offset by $17 million of proceeds from divestitures and $12 million of proceeds from the sale of investments.

Financing Activities

Cash used in financing activities was $127 million for the three months ended December 31, 2024 as compared with cash used in financing activities of $93 million for the three months ended December 31, 2023.

The $127 million of cash used in financing activities for the three months ended December 31, 2024 consisted of dividends paid of $94 million, payment of deferred consideration of $17 million, distributions to noncontrolling interest holders of $7 million, taxes paid related to net share settlement of restricted stock units and common stock of $2 million, common stock repurchased and retired of $2 million and other financing activity of $5 million.

The $93 million of cash used in financing activities for the three months ended December 31, 2023 consisted of dividends paid of $89 million and distributions to noncontrolling interest holders of $4 million.

Cash used in financing activities was $248 million for the six months ended March 31, 2025 as compared with cash used in financing activities of $190 million for the six months ended March 31, 2024.

The $248 million of cash used in financing activities for the six months ended March 31, 2025 consisted of dividends paid of $189 million, payment of deferred consideration of $23 million, distributions to noncontrolling interest holders of $8 million, taxes paid related to net share settlement of restricted stock units and common stock of $19 million, common stock repurchased and retired of $2 million and other financing activity of $7 million.

The $190 million of cash used in financing activities for the six months ended March 31, 2024 consisted of dividends paid of $178 million and distributions to noncontrolling interest holders of $5 million, taxes paid related to net share settlement of restricted stock units and common stock of $5 million and deferred financing costs paid of $2 million.

Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and equivalents and funds available for drawing under our Revolving Credit Facility.

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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 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.

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 Ba1 in March 2025 with a positive outlook updated in March 2025.

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 4.2% as of December 31, 2024.

In addition, our weighted-average interest rate on our outstanding indebtedness has decreased from 10.5% in 2011 to 4.1% as of March 31, 2025.

Our nearest-term maturity date is in 2028.

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The $100 million share repurchase authorization does not obligate the Company to purchase any shares and the Share Repurchase Program does not have a fixed expiration date.

The Company repurchased and retired 60,383 shares for $2 million during the three months ended December 31, 2024.

Existing Debt as of December 31, 2024

As of December 31, 2024, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions):

We did not repurchase any common shares during the three months ended March 31, 2025.

The Company repurchased and retired 60,383 shares for $2 million during the six months ended March 31, 2025.

Existing Debt as of March 31, 2025

As of March 31, 2025, our long-term debt was as follows (in millions):

Revolving Credit Facility (a) $ —

Senior Term Loan Facility due 2031 1,295

2.750% Senior Secured Notes due 2028 (€325 face amount) 337

2.750% Senior Secured Notes due 2028

3.750% Senior Secured Notes due 2029

2.250% Senior Secured Notes due 2031 (€445 face amount) 462

3.875% Senior Secured Notes due 2030

2.250% Senior Secured Notes due 2031

3.000% Senior Secured Notes due 2031

Mortgage Term Loan due 2033 17

Total long-term debt, including the current portion $ 3,987

Issuance premium less unamortized discount and unamortized deferred financing costs (32)

Total debt, including the current portion 4,020

Premium less unamortized discount and unamortized DFCs (30)

Total Acquisition Corp.

long-term debt, including the current portion, net $ 3,990

Tempo Asset-Based Notes due 2050 311

Unamortized discount

Total asset-based long-term debt, including the current portion, net (b)

Total long-term debt, including the current portion, net $ 4,292

______________________________________

(a) Reflects $350 million of commitments under the Revolving Credit Facility available at December 31, 2024, less letters of credit outstanding of approximately $2 million at December 31, 2024.

There were no loans outstanding under the Revolving Credit Facility at December 31, 2024.

(a) Reflects $350 million of commitments under the Revolving Credit Facility available at March 31, 2025, less letters of credit outstanding of approximately $2 million at March 31, 2025.

There were one loan outstanding under the Revolving Credit Facility at March 31, 2025.

(b) The Asset-Based Notes are secured only by certain music rights owned by Tempo and are nonrecourse to the Company and its subsidiaries, other than Tempo.

For further discussion of our debt agreements, see “Liquidity” in the “Financial Condition and Liquidity” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

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The Company intends to pay 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.

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

On 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, which was paid to stockholders on December 3, 2024.

The Company paid an aggregate of approximately $94 million, or $0.18 per share, in cash dividends to stockholders and participating security holders for the three months ended December 31, 2024, respectively.

On February 14, 2025, 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 to stockholders on March 4, 2025.

The Company paid an aggregate of approximately $95 million and $189 million, or $0.18 and $0.36 per share, in cash dividends to stockholders and participating security holders for the three and six months ended March 31, 2025, respectively.

Covenant Compliance

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

The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of March 31, 2025.

On January 18, 2019, we delivered a notice to the trustee under the 2012 Secured Indenture and 2014 Unsecured Indenture changing the Fixed GAAP Date, as defined under the indentures, to October 1, 2018.

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The following is a reconciliation of net income (loss), which is a U.S.

GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended December 31, 2024, for the twelve months ended December 31, 2023 and for the three months ended December 31, 2024 and December 31, 2023.

In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended December 31, 2024.

GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended March 31, 2025, for the twelve months ended March 31, 2024 and for the three months ended March 31, 2025 and March 31, 2024.

The terms and related calculations are defined in the Revolving Credit Agreement.

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Twelve Months Ended

December 31, Three Months Ended

March 31, Three Months Ended

2025 2024 2025 2024

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Other non-cash charges (f)

Unrestricted subsidiary income

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

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

(d) Reflects costs associated with our transformation initiatives and technology system updates, which includes costs of $17 million and $74 million related to our finance transformation for the three and twelve months ended December 31, 2024, respectively, as well as $19 million and $56 million for the three and twelve months ended December 31, 2023, respectively.

(d) Reflects costs associated with our transformation initiatives and technology system updates, which includes costs of $18 million and $74 million related to our finance transformation for the three and twelve months ended March 31, 2025, respectively, as well as $19 million and $65 million for the three and twelve months ended March 31, 2024, respectively.

(e) Reflects non-cash stock-based compensation expense related to the Omnibus Incentive Plan.

(f) Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market adjustment of equity investments, investment losses (gains) and $26 million of non-cash impairment losses resulting from the Strategic Restructuring Plan in the current year.

(g) 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 December 31, 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 $37 million increase in the twelve months ended December 31, 2024 Adjusted EBITDA.

(f) Reflects non-cash activity, including the unrealized losses (gains) on the mark-to-market adjustment of equity investments, investment losses (gains) and non-cash impairment losses resulting from the Strategic Restructuring Plan.

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 $20 million increase in the twelve months ended March 31, 2025 Adjusted EBITDA.

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

of approximately $3.955 billion less cash of $750 million.

of approximately $3.990 billion less cash of $619 million, which excludes cash acquired as part of the acquisition of Tempo.

(i) 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 December 31, 2024 not exceeding $750 million in accordance with the Sixth Revolving Credit Agreement Amendment.

This is calculated net of cash and equivalents of the Company as of March 31, 2025 not exceeding $750 million in accordance with the Sixth Revolving Credit Agreement Amendment.

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.

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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.

In connection with the acquisition of Tempo, the acquired entity was designated as an unrestricted subsidiary, and therefore net income and Adjusted EBITDA do not include the results of Tempo, and the Asset-Based Notes issued by a subsidiary of Tempo are not included in our indebtedness for purposes of calculating the Leverage Ratio.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis