Warner Music Group Corp. 10-Q

ITEM 2. 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 March 31, 2025 (the “Quarterly Report”). “SAFE HARBOR” STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report includes forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms or the negative thereof. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include, without limitation, our ability to compete in the highly competitive markets in which we operate, statements regarding our ability to develop talent and attract future talent, our ability to reduce future capital expenditures, our ability to monetize our music, including through new distribution channels and formats to capitalize on the growth areas of the music entertainment industry, our ability to effectively deploy our capital, the development of digital music and the effect of digital distribution channels on our business, including whether we will be able to achieve higher margins from digital sales, the success of strategic actions we are taking to accelerate our transformation as we redefine our role in the music entertainment industry, the effectiveness of our ongoing efforts to reduce overhead expenditures and manage our variable and fixed cost structure and our ability to generate expected cost savings from such efforts, our success in limiting piracy, the growth of the music entertainment industry and the effect of our and the industry’s efforts to combat piracy on the industry, our intention and ability to pay dividends or repurchase or retire our outstanding debt or notes in open market purchases, privately or otherwise, the impact on us of potential strategic transactions, our ability to fund our future capital needs and the effect of litigation on us. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to accurately predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: • our inability to compete successfully in the highly competitive markets in which we operate; • our ability to identify, sign and retain recording artists and songwriters and the existence or absence of superstar releases; • slower growth in streaming adoption and revenue; • our dependence on a limited number of digital music services for the online distribution and marketing of our music and their ability to significantly influence the pricing structure for online music stores; • the popular demand for particular recording artists and/or songwriters and music and the timely delivery to us of music by major recording artists and/or songwriters; • risks related to the effects of climate change and natural or man-made disasters; • 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, including the impact of tariffs imposed or threatened by the U.S. or foreign governments; • risks associated with our non-U.S. operations, including limited legal protections of our intellectual property rights and restrictions on the repatriation of capital; • unfavorable currency exchange rate fluctuations; • the impact of heightened and intensive competition in the recorded music and music publishing industries and our inability to execute our business strategy; 21 • significant fluctuations in our operations, cash flows and the trading price of our common stock from period to period; • our failure to attract and retain our executive officers and other key personnel; • a significant portion of our revenues are subject to rate regulation either by government entities or by local third-party collecting societies throughout the world and rates on other income streams may be set by governmental proceedings, which may limit our profitability; • risks associated with obtaining, maintaining, protecting and enforcing our intellectual property rights; • our involvement in intellectual property litigation; • threats to our business associated with digital piracy, including organized industrial piracy; • risks associated with the development and use of artificial intelligence; • an impairment in the carrying value of goodwill or other intangible and long-lived assets; • the impact of, and risks inherent in, acquisitions or other business combinations; • risks inherent to our outsourcing certain finance and accounting functions; • the fact that we have engaged in substantial restructuring activities in the past, and may need to implement further restructurings in the future and our restructuring efforts may not be successful or generate expected cost savings; • our and our service providers’ ability to maintain the security of information relating to our customers, employees and vendors and our music; • risks related to evolving laws and regulations concerning data privacy which might result in increased regulation and different industry standards; • new legislation that affects the terms of our contracts with recording artists and songwriters; • a potential loss of catalog if it is determined that recording artists have a right to recapture U.S. rights in their recordings under the U.S. Copyright Act; • the impact of our substantial leverage on our ability to raise additional capital to fund our operations, on our ability to react to changes in the economy or our industry and on our ability to meet our obligations under our indebtedness; • the ability to generate sufficient cash to service all of our indebtedness, and the risk that we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful; • the fact that our debt agreements contain restrictions that may limit our flexibility in operating our business; • the significant amount of cash required to service our indebtedness and the ability to generate cash or refinance indebtedness as it becomes due depends on many factors, some of which are beyond our control; • our indebtedness levels, and the fact that we may be able to incur substantially more indebtedness, which may increase the risks created by our substantial indebtedness; • risks of downgrade, suspension or withdrawal of the rating assigned by a rating agency to us could impact our cost of capital; • the dual class structure of our common stock and Access’s existing ownership of our Class B Common Stock have the effect of concentrating control over our management and affairs and over matters requiring stockholder approval with Access; • the fact that we maintain certain cash deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits, which could have an adverse effect on liquidity and financial performance in the event of a bank failure or receivership; and • risks related to other factors discussed under “Risk Factors” of this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. You should read this Quarterly Report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this Quarterly Report are qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise. 22 Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. Other risks, uncertainties and factors, including those discussed in the “Risk Factors” of our Quarterly Reports and our Annual Report on Form 10-K, could cause our actual results to differ materially from those projected in any forward-looking statements we make. You should read carefully the factors described in the “Risk Factors” section of our Quarterly Reports and our Annual Report on Form 10-K to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. INTRODUCTION Warner Music Group Corp. (the “Company”) was formed on November 21, 2003. The Company is the direct parent of WMG Holdings Corp. (“Holdings”), which is the direct parent of WMG Acquisition Corp. (“Acquisition Corp.”). Acquisition Corp. is one of the world’s major music entertainment companies. The Company and Holdings are holding companies that conduct substantially all of their business operations through their subsidiaries. The terms “we,” “us,” “our,” “ours” and the “Company” refer collectively to Warner Music Group Corp. and its consolidated subsidiaries, except where otherwise indicated. Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the unaudited financial statements and related notes thereto included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of our operations. MD&A is organized as follows: • Business overview. This section provides a general description of our business, as well as a discussion of factors that we believe are important in understanding our results of operations and comparability and in anticipating future trends. • Results of operations. 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 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. Use of Adjusted OIBDA We evaluate our operating performance based on several factors, including our primary financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets adjusted to exclude the impact of non-cash stock-based compensation and other related expenses and certain items that affect comparability including but not limited to gains or losses on divestitures and expenses related to restructuring and transformation initiatives (“Adjusted OIBDA”). We consider Adjusted OIBDA to be an important indicator of the operational strengths and performance of our businesses. However, a limitation of the use of Adjusted OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Accordingly, Adjusted OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S. GAAP”). In addition, our definition of Adjusted OIBDA may differ from similarly titled measures used by other companies. A reconciliation of consolidated Adjusted OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp. is provided in our “Results of Operations.” Use of Constant Currency As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and Adjusted OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares revenue and Adjusted OIBDA between periods as if exchange rates had remained constant period over period. We use revenue and Adjusted OIBDA on a constant-currency basis as one measure to evaluate our performance. We calculate constant-currency by calculating prior-year revenue and Adjusted OIBDA using current-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” Revenue and Adjusted OIBDA on a constant-currency basis should be considered in addition to, not as a substitute for, revenue and Adjusted OIBDA reported in 23 accordance with U.S. GAAP. 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. GAAP. BUSINESS OVERVIEW We are one of the world’s leading music entertainment companies. Our renowned family of iconic record labels, including Atlantic Records, Warner Records, Elektra Records and Parlophone Records, is home to many of the world’s most popular and influential recording artists. In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 180,000 songwriters and composers, with a global collection of more than one and a half million musical compositions. We classify our business interests into two fundamental operations: Recorded Music and Music Publishing. A brief description of each of those operations is presented below. Components of Our Operating Results Recorded Music Operations Our Recorded Music business primarily consists of the discovery and development of recording artists and the related marketing, promotion, distribution, sale and licensing of music created by such recording artists. We play an integral role in virtually all aspects of the recorded music value chain from discovering and developing talent to producing, distributing and selling music to marketing and promoting recording artists and their music. In the United States, our Recorded Music business is conducted principally through our major record labels—Atlantic Records and Warner Records. In October 2018, we launched Elektra Music Group in the United States as a standalone label group, which comprises the Elektra, Fueled by Ramen and Roadrunner labels, and in December 2021, we acquired 300 Entertainment and subsequently launched 300 Elektra Entertainment, or 3EE, a frontline label group that brings together the multi-genre power of 300 Entertainment and Elektra Music Group. Our Recorded Music business also includes Rhino Entertainment, a division that specializes in marketing our recorded music catalog through compilations, reissuances of previously released music and video titles and releasing previously unreleased material from our vault. We also conduct our Recorded Music business through a collection of additional record labels including Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Nonesuch, Parlophone, Reprise, Sire, Spinnin’ Records, TenThousand Projects, Warner Classics and Warner Music Nashville. Outside the United States, our Recorded Music business is conducted in more than 70 countries through various subsidiaries, affiliates and non-affiliated licensees. Internationally, we engage in the same activities as in the United States: discovering and signing artists and distributing, selling, marketing and promoting their music. In most cases, we also market, promote, distribute and sell the music of those recording artists for whom our domestic record labels have international rights. In certain smaller markets, we license the right to distribute and sell our music to non-affiliated third-party record labels. Our Recorded Music business’ operations include WMX, a next generation services division that connects artists with fans and amplifies brands in creative, immersive, and engaging ways. This division includes a rebranded WEA commercial services & marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm. Our business’ distribution operations also include Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally. In addition to our music being sold in physical retail outlets, our music is also sold in physical form to online physical retailers, such as amazon.com, barnesandnoble.com and bestbuy.com, and distributed in digital form to an expanded universe of digital partners, including streaming services such as those of Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music and YouTube, radio services such as iHeart Radio and SiriusXM and other download services. We have integrated the marketing of digital content into all aspects of our business, including artists and repertoire (“A&R”) and distribution. Our business development executives work closely with A&R departments to ensure that while music is being produced, digital assets are also created with all distribution channels in mind, including streaming services, social networking sites, online portals and music-centered destinations. We also work side-by-side with our online and mobile partners to test new concepts. We believe existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize our assets and create new revenue streams. The proportion of digital revenues attributable to each distribution channel varies by region and proportions may change as the introduction of new technologies continues. As one of the world’s largest music entertainment companies, we believe we are well positioned to take advantage of growth in digital distribution and emerging technologies to maximize the value of our assets. 24 We have diversified our revenues beyond our traditional businesses by entering into expanded-rights deals with recording artists in order to partner with such artists in other aspects of their careers. 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 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. This provides for improved long-term relationships with our recording artists and allows us to more effectively connect recording artists and fans. Recorded Music revenues are derived from four main sources: • Digital : the rightsholder receives revenues with respect to streaming and download services; • Physical : the rightsholder receives revenues with respect to sales of physical products such as vinyl, CDs and DVDs; • Artist services and expanded-rights : the rightsholder receives revenues with respect to our artist services businesses and our participation in expanded rights, including advertising, merchandising such as direct-to-consumer sales, touring, concert promotion, ticketing, sponsorship, fan clubs, artist websites, social publishing, and artist and brand management; and • Licensing : the rightsholder receives royalties or fees for the right to use sound recordings in combination with visual images such as in films or television programs, television commercials and video games; the rightsholder also receives royalties if sound recordings are performed publicly through broadcast of music on television, radio and cable, and in public spaces such as shops, workplaces, restaurants, bars and clubs. The principal costs associated with our Recorded Music business are as follows: • A&R costs : the costs associated with (i) paying royalties to recording artists, producers, songwriters, other copyright holders and trade unions; (ii) signing and developing recording artists; and (iii) creating master recordings in the studio; • Product costs : the costs to manufacture, package and distribute products to wholesale and retail distribution outlets, the royalty costs associated with distributing products of independent labels to wholesale and retail distribution outlets, as well as the costs related to our artist services business; • Selling and marketing expenses : the costs associated with the promotion and marketing of recording artists and music, including costs to produce music videos for promotional purposes and artist tour support; and • General and administrative expenses : the costs associated with general overhead and other administrative expenses. Music Publishing Operations While Recorded Music is focused on marketing, promoting, distributing and licensing a particular recording of a musical composition, Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter, or engaging in those activities for other rightsholders, our Music Publishing business shares the revenues generated from use of the musical compositions with the songwriter or other rightsholders. The operations of our Music Publishing business are conducted principally through Warner Chappell Music, our global music publishing company headquartered in Los Angeles, with operations in over 70 countries through various subsidiaries, affiliates, and non-affiliated licensees and sub-publishers. We own or control rights to more than one and a half million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions. Assembled over decades, our award-winning catalog includes over 180,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios. We have an extensive production music catalog collectively branded as Warner Chappell Production Music. Music Publishing revenues are derived from five main sources: • Digital : the rightsholder receives revenues with respect to musical compositions embodied in recordings distributed in streaming services, download services, digital performance and other digital music services; • 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 25 concert or other venue ( e.g. , arena concerts and nightclubs), and performance of music in staged theatrical productions; • Mechanical : the rightsholder receives revenues with respect to musical compositions embodied in recordings sold in any physical format or configuration such as vinyl, CDs and DVDs; • Synchronization : the rightsholder receives revenues for the right to use the musical composition in combination with visual images such as in films or television programs, television commercials and video games as well as from other uses such as in toys or novelty items and merchandise; and • Other : the rightsholder receives revenues for use in sheet music and other uses. The principal costs associated with our Music Publishing business are as follows: • A&R costs : the costs associated with (i) paying royalties to songwriters, co-publishers and other copyright holders in connection with income generated from the uses of their works and (ii) signing and developing songwriters; and • Selling and marketing, general overhead and other administrative expenses : the costs associated with selling and marketing, general overhead and other administrative expenses. Recent Events and Factors Affecting Results of Operations and Comparability Strategic Restructuring Plan In 2024, the Company announced a strategic restructuring plan (the “Strategic Restructuring Plan”) designed to free up additional funds to invest in music and accelerate the Company’s growth for the next decade. 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 $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. The cost savings under the Strategic Restructuring Plan will be achieved through a combination of the disposal or winding down of non-core operations, continuing to manage overhead, sharpening focus, expanding shared services, and implementing previously disclosed expected operational efficiencies made possible by the Company’s financial transformative initiative. The Company expects allocating a majority of the costs savings to increase investment in the Company’s core Recorded Music and Music Publishing businesses, new skill sets and tech capabilities. For the 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 In September 2023, the Company terminated its distribution agreement with BMG as BMG began to bring digital distribution in-house and license directly with digital service partners in fiscal 2024 (the “BMG Termination”). 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 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. 26 RESULTS OF OPERATIONS Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024 Consolidated Results Revenues Our revenues were composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Revenue by Type Digital $ 841 $ 848 $ (7) -1 % Physical 112 111 1 1 % Total digital and physical 953 959 (6) -1 % Artist services and expanded-rights 117 126 (9) -7 % Licensing 105 104 1 1 % Total Recorded Music 1,175 1,189 (14) -1 % Performance 53 52 1 2 % Digital 188 187 1 1 % Mechanical 16 15 1 7 % Synchronization 49 48 1 2 % Other 4 4 — — % Total Music Publishing 310 306 4 1 % Intersegment eliminations (1) (1) — — % Total revenues $ 1,484 $ 1,494 $ (10) -1 % Revenue by Geographical Location U.S. Recorded Music $ 497 $ 508 $ (11) -2 % U.S. Music Publishing 161 170 (9) -5 % Total U.S. 658 678 (20) -3 % International Recorded Music 678 681 (3) — % International Music Publishing 149 136 13 10 % Total international 827 817 10 1 % Intersegment eliminations (1) (1) — — % Total revenues $ 1,484 $ 1,494 $ (10) -1 % Total Revenues 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 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 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 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. 27 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. U.S. 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 $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. U.S. 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 U.S. 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. U.S. Recorded Music revenue decreased by $11 million, or 2%. U.S. 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. U.S. Recorded Music licensing revenue increased by $1 million, or 3%, driven by the timing of licensing settlements. U.S. Recorded Music physical revenue and artist services and expanded-rights revenues remained constant . U.S. 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. U.S. 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. U.S. Music Publishing streaming revenue reflects the impact of digital deal renewals compared to the prior-year quarter. U.S. Music Publishing performance revenue decreased by $1 million, or 5%. U.S. 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. 28 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 $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 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 Our cost of revenues was composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Artist and repertoire costs $ 531 $ 539 $ (8) -1 % Product costs 260 252 8 3 % Total cost of revenues $ 791 $ 791 $ — — % 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 Our selling, general and administrative expenses were composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change General and administrative expense (1) $ 276 $ 258 $ 18 7 % Selling and marketing expense 157 169 (12) -7 % Distribution expense 17 19 (2) -11 % Total selling, general and administrative expense $ 450 $ 446 $ 4 1 % ______________________________________ (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. 29 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. 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 Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Net income attributable to Warner Music Group Corp. $ 36 $ 96 $ (60) (63) % Income attributable to noncontrolling interest — — — — % Net income 36 96 (60) (63) % Income tax expense 29 18 11 61 % Income before income taxes 65 114 (49) (43) % Other expense (income) 64 (37) 101 — % Interest expense, net 39 42 (3) (7) % Operating income 168 119 49 41 % Amortization expense 62 57 5 9 % Depreciation expense 28 26 2 8 % Restructuring and impairments 13 95 (82) (86) % Transformation initiative costs 18 19 (1) (5) % Net gain on divestitures — (14) 14 — % Non-cash stock-based compensation and other related costs 14 10 4 40 % Adjusted OIBDA $ 303 $ 312 $ (9) (3) % Adjusted OIBDA 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 $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. 30 Net gain on divestitures 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 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 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 $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 $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 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 $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 $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. 31 Net income 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 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 Revenues, operating income (loss) and Adjusted OIBDA by business segment were as follows (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Recorded Music Revenues $ 1,175 $ 1,189 $ (14) -1 % Operating income 203 134 69 51 % Adjusted OIBDA 270 272 (2) -1 % Music Publishing Revenues 310 306 4 1 % Operating income 52 69 (17) -25 % Adjusted OIBDA 85 82 3 4 % Corporate expenses and eliminations Revenue eliminations (1) (1) — — % Operating loss (87) (84) (3) 4 % Adjusted OIBDA loss (52) (42) (10) 24 % Total Revenues 1,484 1,494 (10) -1 % Operating income 168 119 49 41 % Adjusted OIBDA 303 312 (9) -3 % Recorded Music Revenues 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 Recorded Music cost of revenues was composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Artist and repertoire costs $ 339 $ 346 $ (7) -2 % Product costs 260 252 8 3 % Total cost of revenues $ 599 $ 598 $ 1 — % 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. 32 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 Recorded Music selling, general and administrative expenses were composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change General and administrative expense (1) $ 161 $ 155 $ 6 4 % Selling and marketing expense 149 163 (14) -9 % Distribution expense 17 19 (2) -11 % Total selling, general and administrative expense $ 327 $ 337 $ (10) -3 % ______________________________________ (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 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 Revenues 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. 33 Cost of revenues Music Publishing cost of revenues were composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change Artist and repertoire costs $ 194 $ 195 $ (1) -1 % Total cost of revenues $ 194 $ 195 $ (1) -1 % 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 Music Publishing selling, general and administrative expenses were composed of the following amounts (in millions): For the Three Months Ended March 31, 2025 vs. 2024 2025 2024 $ Change % Change General and administrative expense (1) $ 34 $ 31 $ 3 10 % Selling and marketing expense 1 — 1 — % Total selling, general and administrative expense $ 35 $ 31 $ 4 13 % ______________________________________ (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 $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 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. 34 RESULTS OF OPERATIONS Six Months Ended March 31, 2025 Compared with Six Months Ended March 31, 2024 Consolidated Results Revenues Our revenues were composed of the following amounts (in millions): For the Six Months Ended March 31, 2025 vs. 2024 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 U.S. Recorded Music $ 1,029 $ 1,135 $ (106) -9 % U.S. Music Publishing 334 342 (8) -2 % Total U.S. 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 35 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. U.S. 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. 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 $29 million. 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. U.S. 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 U.S. 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. U.S. 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. U.S. 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. U.S. 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. U.S. 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. U.S. 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. 36 Music Publishing mechanical revenue of $2 million driven by higher physical revenue. U.S. 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. 2024 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. 37 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. 2024 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. 38 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. 2024 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 39 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 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. 40 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. 2024 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 % Total Revenues $ 3,150 $ 3,242 $ (92) -3 % Operating income 382 473 (91) -19 % Adjusted OIBDA 666 763 (97) -13 % Recorded Music Revenues 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. U.S. 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. 2024 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. 41 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. 2024 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 Revenues 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. U.S. 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. 42 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. 2024 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. 2024 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. 43 FINANCIAL CONDITION AND LIQUIDITY 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. equity. 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. equity at September 30, 2024. Cash Flows The following table summarizes our historical cash flows (in millions). 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 March 31, 2025 2024 Cash provided by (used in): Operating activities $ 401 $ 262 Investing activities (202) (125) Financing activities (248) (190) Operating Activities 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 $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 $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. Liquidity 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. These sources of liquidity are needed to fund our debt service requirements, working capital requirements, capital expenditure requirements, strategic acquisitions and investments, and dividends, prepayments of debt, repurchases or retirement of our outstanding debt or notes or repurchases of our outstanding equity securities in open market purchases, privately negotiated purchases or otherwise, we may elect to pay or make in the future. We maintain our cash in various banks and other financial institutions around the world, and in some cases those cash deposits are in 44 excess of FDIC or other deposit insurance. In the event of a bank failure or receivership, we may not have access to those cash deposits in excess of the relevant deposit insurance, which could have an adverse effect on our liquidity and financial performance. We believe that our primary sources of liquidity will be sufficient to support our existing operations over the next twelve months. Debt Capital Structure Since Access acquired us in 2011, we have sought to extend the maturity dates on our outstanding indebtedness, reduce interest expense and improve our debt ratings. For example, our S&P corporate credit rating improved from B in 2017 to 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 4.1% as of March 31, 2025. Our nearest-term maturity date is in 2028. Subject to market conditions, we expect to continue to take opportunistic steps to extend our maturity dates and reduce related interest expense. From time to time, we may incur additional indebtedness for, among other things, working capital, repurchasing, redeeming or tendering for existing indebtedness and acquisitions or other strategic transactions. Repurchase Program On November 14, 2024, the Company’s board of directors authorized a new $100 million share repurchase program (the “Share Repurchase Program”), which is intended to offset dilution from the Omnibus Incentive Plan. 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. 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 352 3.750% Senior Secured Notes due 2029 540 3.875% Senior Secured Notes due 2030 535 2.250% Senior Secured Notes due 2031 481 3.000% Senior Secured Notes due 2031 800 Mortgage Term Loan due 2033 17 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 (9) Total asset-based long-term debt, including the current portion, net (b) $ 302 Total long-term debt, including the current portion, net $ 4,292 ______________________________________ (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. 45 Dividends The Company’s ability to pay dividends may be restricted by covenants in the credit agreement for the Revolving Credit Facility which are currently suspended but which will be reinstated if Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increases above 3.50:1.00 and the term loans do not achieve an investment grade rating. The Company intends to pay quarterly cash dividends to holders of its Class A Common Stock and Class B Common Stock. 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 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 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. Under the Senior Term Loan Facility, the Revolving Credit Facility and the Secured Notes Indenture, the Fixed GAAP Date is set for April 3, 2020, other than in respect of capital leases, which are frozen at November 1, 2012. The Revolving Credit Facility contains a springing leverage ratio that is tied to a ratio based on EBITDA, which is defined under the Revolving Credit Agreement. Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans. 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. EBITDA as defined in the Revolving Credit Facility is based on Consolidated Net Income (as defined in the Revolving Credit Facility), both of which terms differ from the terms “EBITDA” and “net income” as they are commonly used. For example, the calculation of EBITDA under the Revolving Credit Facility, in addition to adjusting net income to exclude interest expense, income taxes and depreciation and amortization, also adjusts net income by excluding items or expenses such as, among other items, (1) the amount of any restructuring charges or reserves; (2) any non-cash charges (including any impairment charges); (3) any net loss resulting from hedging currency exchange risks; (4) the amount of management, monitoring, consulting and advisory fees paid to Access; (5) business optimization expenses (including consolidation initiatives, severance costs and other costs relating to initiatives aimed at profitability improvement); (6) transaction expenses; (7) equity-based compensation expense; and (8) certain extraordinary, unusual or non-recurring items. The definition of EBITDA under the Revolving Credit Facility also includes adjustments for the pro forma impact of certain projected cost savings, operating expense reductions and synergies and any quality of earnings analysis prepared by independent certified public accountants in connection with an acquisition, merger, consolidation or other investment. The Senior Term Loan Facility and the Secured Notes Indenture use financial measures called “Consolidated EBITDA” or “EBITDA” and “Consolidated Net Income” that have substantially the same definitions to EBITDA and Consolidated Net Income, each as defined under the Revolving Credit Agreement. EBITDA as defined in the Revolving Credit Facility (referred to in this section as “Adjusted EBITDA”) is presented herein because it is a material component of the leverage ratio contained in the Revolving Credit Agreement. Non-compliance with the leverage ratio could result in the inability to use the Revolving Credit Facility, which could have a material adverse effect on our results of operations, financial position and cash flow. Adjusted EBITDA does not represent net income or cash from operating activities as those terms are defined by U.S. GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. While Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters that we may consider not to be indicative of our ongoing operations. In particular, the definition of Adjusted EBITDA in the Revolving Credit Agreement allows us to add back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net income. However, these are expenses that may recur, vary greatly and are difficult to predict. 46 Adjusted EBITDA as presented below should not be used by investors as an indicator of performance for any future period. Further, our debt instruments require that it be calculated for the most recent four fiscal quarters. As a result, the measure can be disproportionately affected by a particularly strong or weak quarter. Further, it may not be comparable to the measure for any subsequent four-quarter period or any complete fiscal year. In addition, our debt instruments require that the leverage ratio be calculated on a pro forma basis for certain transactions including acquisitions as if such transactions had occurred on the first date of the measurement period and may include expected cost savings and synergies resulting from or related to any such transaction. There can be no assurances that any such cost savings or synergies will be achieved in full. In addition, Adjusted EBITDA is a key measure used by our management to understand and evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of those limitations include: (1) it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue for our business; (2) it does not reflect the significant interest expense or cash requirements necessary to service interest or principal payments on our indebtedness; and (3) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments. In particular, this measure adds back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net income; however, these are expenses that may recur, vary greatly and are difficult to predict. In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by U.S. GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Accordingly, Adjusted EBITDA should be considered in addition to, not as a substitute for, net income (loss) and other measures of financial performance reported in accordance with U.S. GAAP. 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 March 31, 2025, for the twelve months ended March 31, 2024 and for the three months ended March 31, 2025 and March 31, 2024. 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 March 31, 2025. The terms and related calculations are defined in the Revolving Credit Agreement. All amounts in the reconciliation below reflect Acquisition Corp. (in millions, except ratios): Twelve Months Ended March 31, Three Months Ended March 31, 2025 2024 2025 2024 Net Income $ 466 $ 567 $ 36 $ 96 Income tax expense 151 191 29 18 Interest expense, net 156 155 39 42 Depreciation and amortization 339 329 90 83 Loss on extinguishment of debt (a) — 4 — — Net gains on divestitures and sale of securities (30) (41) — (17) Restructuring costs (b) 95 60 9 46 Net foreign exchange losses (gains) (c) (4) (27) 67 (32) Transaction costs 5 6 1 3 Business optimization expenses (d) 100 86 20 24 Non-cash stock-based compensation expense (e) 61 32 14 9 Other non-cash charges (f) 31 50 7 52 Unrestricted subsidiary income (4) — (4) — Pro forma impact of cost savings initiatives and specified transactions (g) 101 126 9 28 Adjusted EBITDA $ 1,467 $ 1,538 $ 317 $ 352 Senior Secured Indebtedness (h) $ 3,371 Leverage Ratio (i) 2.3x ______________________________________ (a) Reflects loss on extinguishment of debt, primarily including tender fees and unamortized deferred financing costs. (b) Reflects severance costs and other restructuring related expenses, including those related to the Strategic Restructuring Plan and 2023 Restructuring Plan as well as the Executive Transition Costs in the prior year. (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. 47 (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 non-cash impairment losses resulting from the Strategic Restructuring Plan. (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 March 31, 2025. 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 $3.990 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 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. The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $140 million at the end of a fiscal quarter. On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein. 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. Summary 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. We also have additional borrowing capacity under our indentures and the Senior Term Loan Facility. However, our ability to continue to fund these items and to reduce debt may be affected by general economic, financial, competitive, legislative and regulatory factors, as well as other industry-specific factors such as the ability to control music piracy and the continued transition from physical to digital formats in the recorded music and music publishing industries. It could also be affected by the severity and duration of geopolitical conflicts or natural or man-made disasters, including pandemics. We and our affiliates continue to evaluate opportunities to, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to pay dividends or prepay outstanding debt or repurchase or retire Acquisition Corp.’s outstanding debt or debt securities or repurchase our outstanding equity securities in open market purchases, privately negotiated purchases or otherwise. The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings. In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, we may seek to refinance the Senior Credit Facilities or our outstanding debt or debt securities with existing cash and/or with funds provided from additional borrowings. 48