Warner Music Group Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS Warner Music Group Corp. Condensed Consolidated Balance Sheets (In millions, except share amounts which are reflected in thousands) (Unaudited) March 31, 2026 September 30, 2025 Assets Current assets: Cash and equivalents $ 741 $ 532 Accounts receivable, net of allowances of $ 28 million and $ 27 million 1,505 1,340 Inventories 65 62 Royalty advances expected to be recouped within one year 649 581 Assets held for sale 68 89 Prepaid and other current assets 192 166 Total current assets 3,220 2,770 Royalty advances expected to be recouped after one year 1,082 1,079 Property, plant and equipment, net of accumulated depreciation of $ 749 million and $ 701 million 414 441 Operating lease right-of-use assets, net 168 189 Goodwill 2,054 2,061 Intangible assets subject to amortization, net 3,101 2,725 Intangible assets not subject to amortization 153 154 Deferred tax assets, net 90 111 Other assets 330 299 Total assets $ 10,612 $ 9,829 Liabilities, Redeemable Noncontrolling Interest and Equity Current liabilities: Accounts payable $ 452 $ 257 Accrued royalties 2,834 2,740 Accrued liabilities 468 666 Accrued interest 27 31 Operating lease liabilities, current 48 43 Deferred revenue 451 286 Liabilities held for sale 38 49 Other current liabilities 103 129 Total current liabilities 4,421 4,201 Acquisition Corp. long-term debt 4,046 4,063 Other long-term debt 673 302 Operating lease liabilities, noncurrent 174 200 Deferred tax liabilities, net 180 164 Other noncurrent liabilities 146 142 Total liabilities $ 9,640 $ 9,072 Redeemable noncontrolling interest 133 — Equity: Class A common stock, $ 0.001 par value; 1,000,000 shares authorized, 146,235 and 146,906 shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively $ — $ — Class B common stock, $ 0.001 par value; 1,000,000 shares authorized, 375,380 issued and outstanding as of March 31, 2026 and September 30, 2025, respectively 1 1 Additional paid-in capital 2,134 2,166 Accumulated deficit ( 1,172 ) ( 1,331 ) Accumulated other comprehensive loss, net ( 225 ) ( 189 ) Total Warner Music Group Corp. equity 738 647 Noncontrolling interest 101 110 Total equity 839 757 Total liabilities, redeemable noncontrolling interest and equity $ 10,612 $ 9,829 See accompanying notes 1 Warner Music Group Corp. Condensed Consolidated Statements of Operations (In millions, except share amounts which are reflected in thousands, and per share data) (Unaudited) Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 Revenue $ 1,732 $ 1,484 $ 3,572 $ 3,150 Costs and expenses: Cost of revenue ( 930 ) ( 791 ) ( 1,917 ) ( 1,685 ) Selling, general and administrative expenses (a) ( 460 ) ( 450 ) ( 918 ) ( 924 ) Restructuring and impairments ( 6 ) ( 13 ) ( 40 ) ( 40 ) Amortization expense ( 72 ) ( 62 ) ( 140 ) ( 119 ) Total costs and expenses ( 1,468 ) ( 1,316 ) ( 3,015 ) ( 2,768 ) Net loss on divestitures — — ( 5 ) — Operating income 264 168 552 382 Loss on extinguishment of debt ( 7 ) — ( 7 ) — Interest expense, net ( 41 ) ( 39 ) ( 86 ) ( 76 ) Other income (expense) 38 ( 64 ) 41 89 Income before income taxes 254 65 500 395 Income tax expense ( 73 ) ( 29 ) ( 144 ) ( 118 ) Net income 181 36 356 277 Less: (Income) loss attributable to noncontrolling interest 2 — 3 ( 5 ) Net income attributable to Warner Music Group Corp. $ 183 $ 36 $ 359 $ 272 Net income per share attributable to common stockholders: Class A – Basic $ 0.35 $ 0.07 $ 0.68 $ 0.52 Class A – Diluted $ 0.34 $ 0.07 $ 0.67 $ 0.52 Class B – Basic $ 0.35 $ 0.07 $ 0.68 $ 0.52 Class B – Diluted $ 0.34 $ 0.07 $ 0.67 $ 0.52 Weighted average common shares: Class A – Basic 146,573 144,938 146,664 143,995 Class A – Diluted 149,323 144,938 149,414 143,995 Class B – Basic and Diluted 375,380 375,380 375,380 375,380 (a) Includes depreciation expense: $ ( 31 ) $ ( 28 ) $ ( 62 ) $ ( 57 ) See accompanying notes 2 Warner Music Group Corp. Condensed Consolidated Statements of Comprehensive Income (In millions) (Unaudited) Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 Net income $ 181 $ 36 $ 356 $ 277 Other comprehensive (loss) income, net of tax: Foreign currency adjustment ( 45 ) 84 ( 36 ) ( 45 ) Other comprehensive (loss) income, net of tax ( 45 ) 84 ( 36 ) ( 45 ) Total comprehensive income 136 120 320 232 Less: (Income) loss attributable to noncontrolling interest 2 — 3 ( 5 ) Comprehensive income attributable to Warner Music Group Corp. $ 138 $ 120 $ 323 $ 227 See accompanying notes 3 Warner Music Group Corp. Condensed Consolidated Statements of Cash Flows (In millions) (Unaudited) Six Months Ended March 31, 2026 2025 Cash flows from operating activities Net income $ 356 $ 277 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 202 176 Unrealized losses and remeasurement of foreign-denominated loans and foreign currency forward exchange contracts ( 41 ) ( 40 ) Deferred income taxes 39 24 Loss on extinguishment of debt 7 — Net gain on investments 1 ( 27 ) Net loss on divestitures 5 — Non-cash interest expense 4 3 Non-cash stock-based compensation expense 31 27 Non-cash impairments 11 32 Remeasurement of share-settled liability 4 — Changes in operating assets and liabilities: Accounts receivable, net ( 175 ) 34 Inventories 5 9 Royalty advances ( 72 ) ( 127 ) Other noncurrent assets 8 2 Accounts payable and accrued liabilities ( 35 ) ( 119 ) Royalty payables 112 83 Accrued interest ( 4 ) 13 Operating lease liabilities ( 1 ) ( 5 ) Deferred revenue 166 69 Income taxes payable ( 23 ) ( 7 ) Other balance sheet changes, net ( 34 ) ( 23 ) Net cash provided by operating activities 566 401 Cash flows from investing activities Acquisition of music publishing rights and music catalogs ( 457 ) ( 120 ) Capital expenditures ( 47 ) ( 72 ) Investments and acquisitions of businesses, net of cash received ( 29 ) ( 46 ) Proceeds from the sale of investments — 36 Proceeds from divestitures 10 — Net cash used in investing activities ( 523 ) ( 202 ) Cash flows from financing activities Proceeds from Senior Term Loan A Facility 1,295 — Repayment of Senior Term Loan B Facility ( 1,295 ) — Proceeds from Beethoven Credit Agreement 370 — Deferred financing costs paid ( 12 ) — Distribution to noncontrolling interest holders ( 7 ) ( 8 ) Contributions from redeemable noncontrolling interest holder 134 — Dividends paid ( 200 ) ( 189 ) Payment of deferred consideration ( 42 ) ( 23 ) Taxes paid related to net share settlement of restricted stock units and common stock ( 26 ) ( 19 ) Common stock repurchased and retired ( 48 ) ( 2 ) Other financing activity — ( 7 ) Net cash provided by (used in) financing activities 169 ( 248 ) Effect of exchange rate changes on cash and equivalents ( 2 ) ( 8 ) Effect of change in cash balances classified as assets held for sale ( 1 ) — Net increase (decrease) in cash and equivalents 209 ( 57 ) Cash and equivalents at beginning of period 532 694 Cash and equivalents at end of period $ 741 $ 637 See accompanying notes 4 Warner Music Group Corp. Condensed Consolidated Statements of Equity (In millions, except share amounts which are reflected in thousands, and per share data) (Unaudited) Six Months Ended March 31, 2026 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Warner Music Group Corp. Equity Non-controlling Interest Total Equity Redeemable Non-controlling Interest Shares Value Shares Value Balance at September 30, 2025 146,906 $ — 375,380 $ 1 $ 2,166 $ ( 1,331 ) $ ( 189 ) $ 647 $ 110 $ 757 $ — Net income — — — — — 359 — 359 ( 2 ) 357 ( 1 ) Other comprehensive loss, net of tax — — — — — — ( 36 ) ( 36 ) — ( 36 ) — Dividends ($ 0.38 per share) — — — — — ( 200 ) — ( 200 ) — ( 200 ) — Stock-based compensation expense — — — — 31 — — 31 — 31 — Distribution to noncontrolling interest holders — — — — — — — — ( 7 ) ( 7 ) — Vesting of restricted stock units, net of shares withheld for employee taxes 999 — — — ( 26 ) — — ( 26 ) — ( 26 ) — Common shares repurchased and retired ( 1,671 ) — — — ( 48 ) — — ( 48 ) — ( 48 ) — Redemption of noncontrolling interests — — — — 11 — — 11 — 11 — Contributions from redeemable non-controlling interest holders — — — — — — — — — — 134 Balance at March 31, 2026 146,235 $ — 375,380 $ 1 $ 2,134 $ ( 1,172 ) $ ( 225 ) $ 738 $ 101 $ 839 $ 133 5 Three Months Ended March 31, 2026 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Warner Music Group Corp. Equity Non-controlling Interest Total Equity Redeemable Non-controlling Interest Shares Value Shares Value Balance at December 31, 2025 146,146 $ — 375,380 $ 1 $ 2,154 $ ( 1,255 ) $ ( 180 ) $ 720 $ 104 $ 824 $ 5 Net income — — — — — 183 — 183 ( 1 ) 182 ( 1 ) Other comprehensive loss, net of tax — — — — — — ( 45 ) ( 45 ) — ( 45 ) — Dividends ($ 0.19 per share) — — — — — ( 100 ) — ( 100 ) — ( 100 ) — Stock-based compensation expense — — — — 12 — — 12 — 12 — Distribution to noncontrolling interest holders — — — — — — — — ( 2 ) ( 2 ) — Vesting of restricted stock units, net of shares withheld for employee taxes 840 — — — ( 21 ) — — ( 21 ) — ( 21 ) — Common shares repurchased and retired ( 751 ) — — — ( 22 ) — — ( 22 ) — ( 22 ) — Redemption of noncontrolling interests — — — — 11 — — 11 — 11 — Contributions from redeemable non-controlling interest holders — — — — — — — — — — 129 Balance at March 31, 2026 146,235 $ — 375,380 $ 1 $ 2,134 $ ( 1,172 ) $ ( 225 ) $ 738 $ 101 $ 839 $ 133 6 Six Months Ended March 31, 2025 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Warner Music Group Corp. Equity Non-controlling Interest Total Equity Redeemable Non-controlling Interest Shares Value Shares Value Balance at September 30, 2024 142,559 $ — 375,380 $ 1 $ 2,077 $ ( 1,313 ) $ ( 247 ) $ 518 $ 157 $ 675 $ — Net income — — — — — 272 — 272 5 277 — Other comprehensive loss, net of tax — — — — — — ( 45 ) ( 45 ) — ( 45 ) — Dividends ($ 0.36 per share) — — — — — ( 189 ) — ( 189 ) — ( 189 ) — Stock-based compensation expense — — — — 34 — — 34 — 34 — Distribution to noncontrolling interest holders — — — — — — — — ( 8 ) ( 8 ) — Acquisition of noncontrolling interests — — — — — — — — 74 74 — Vesting of restricted stock units, net of shares withheld for employee taxes 795 — — — ( 19 ) — — ( 19 ) — ( 19 ) — Shares issued under the Plan 1,738 — — — — — — — — — — Common shares repurchased and retired ( 60 ) — — — ( 2 ) — — ( 2 ) — ( 2 ) — Other — — — — ( 2 ) — — ( 2 ) ( 5 ) ( 7 ) — Balance at March 31, 2025 145,032 $ — 375,380 $ 1 $ 2,088 $ ( 1,230 ) $ ( 292 ) $ 567 $ 223 $ 790 $ — Three Months Ended March 31, 2025 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Warner Music Group Corp. Equity Non-controlling Interest Total Equity Redeemable Non-controlling Interest Shares Value Shares Value Balance at December 31, 2024 144,301 $ — 375,380 $ 1 $ 2,091 $ ( 1,171 ) $ ( 376 ) $ 545 $ 152 $ 697 $ — Net income — — — — — 36 — 36 — 36 — Other comprehensive income, net of tax — — — — — — 84 84 — 84 — Dividends ($ 0.18 per share) — — — — — ( 95 ) — ( 95 ) — ( 95 ) — Stock-based compensation expense — — — — 14 — — 14 — 14 — Acquisition of noncontrolling interests — — — — — — — — 74 74 — Vesting of restricted stock units, net of shares withheld for employee taxes 731 — — — ( 17 ) — — ( 17 ) — ( 17 ) — Other — — — — — — — — ( 3 ) ( 3 ) — Balance at March 31, 2025 145,032 $ — 375,380 $ 1 $ 2,088 $ ( 1,230 ) $ ( 292 ) $ 567 $ 223 $ 790 $ — See accompanying notes 7 Warner Music Group Corp. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Description of Business 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. We classify our business interests into two fundamental operations: Recorded Music and Music Publishing. 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. 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. 2. Summary of Significant Accounting Policies Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2026. The consolidated balance sheet at September 30, 2025 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (File No. 001-32502). Basis of Consolidation The accompanying financial statements present the consolidated accounts of all entities in which the Company has a controlling financial interest required to be consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated. As of March 31, 2026 and September 30, 2025, there were approximately $ 59 million and $ 65 million of assets, respectively, related to variable interest entities (“VIEs”) included in our condensed consolidated balance sheets. As of both March 31, 2026 and September 30, 2025, there was approximately $ 2 million of liabilities related to VIEs included in our condensed consolidated balance sheets. The Company has performed a review of all subsequent events through the date the financial statements were issued and has determined that no additional disclosures are necessary. 8 Noncontrolling Interests Interests held by third parties in consolidated subsidiaries are presented as noncontrolling interests, which represent the noncontrolling shareholders’ interests in the underlying net assets of the Company’s consolidated subsidiaries. Noncontrolling interests that are not redeemable are reported in the equity section of the Consolidated Balance Sheets. Noncontrolling interests, where the Company may be required to redeem the noncontrolling interest under contractual redemption requirements that are not solely within the control of the Company, are reported in the Consolidated Balance Sheets between liabilities and equity, as redeemable noncontrolling interests. The Company adjusts the redeemable noncontrolling interests to the higher of the current redemption value or the carrying value of the interests, the capital contributed by the third party adjusted for the noncontrolling interest’s share of net income (loss) and distributions, on each balance sheet date with changes in redemption value recognized as an adjustment to retained earnings attributable to common shareholders. Income Taxes The Company uses the estimated annual effective tax rate method in computing its interim tax provision. Certain items, including those deemed to be unusual and infrequent, are excluded from the estimated annual effective tax rate. In such cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in the realizability of deferred tax assets and uncertain tax positions, and are recorded in the period in which the change occurs. Global Intangible Low-Taxed Income (“GILTI”) imposes U.S. taxes on the excess of a deemed return on tangible assets of certain foreign subsidiaries. The Company made an election to recognize GILTI tax in the specific period in which it occurs. New Accounting Pronouncements Accounting Pronouncements Not Yet Adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendment enhances income tax disclosure requirements by requiring enhanced disclosures on the income tax rate reconciliation and income taxes paid. The amendments in this ASU are effective for fiscal years beginning after December 15, 2024. The Company will include the required disclosures in its Annual Report on Form 10-K for the fiscal year ending September 30, 2026. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires new financial statement disclosures to provide disaggregated information for certain types of expenses, including purchases of inventory, employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue and selling, general and administrative expenses. The amendments in this ASU are effective for our fiscal year ending September 30, 2028, and interim periods within our fiscal year ending September 30, 2029. The Company is in the process of evaluating the effect that the adoption of these standards will have on its consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Internal-Use Software (Subtopic 350-40) : Targeted Improvements to the Accounting for Internal-Use Software . The amendment aligns internal use software capitalization practices with agile development methodologies and an external use software model by introducing updated capitalization criteria and removing existing project staging guidance. The amendments in this ASU are effective for our fiscal year ending September 30, 2029. The Company is in the process of evaluating the effect that the adoption of these standards will have on its consolidated financial statements. 3. Earnings per Share The Company utilizes the two-class method to report earnings per share. Basic earnings per share is computed by dividing net income available to each class of stock, less earnings available to participating securities, divided by the weighted average number of outstanding common shares for each class of stock. Diluted earnings per share is computed by dividing net income available to each class of stock, less earnings available to participating securities, divided by the weighted average number of outstanding common shares, plus potentially dilutive common shares, which is calculated using the treasury-stock method. The potentially dilutive common shares had a dilutive effect on the Company’s EPS calculation for the three and six months ended March 31, 2026 and 2025. The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and six months ended March 31, 2026 and 2025 (in millions, except share amounts, which are reflected in thousands, and per share data): 9 Three Months Ended March 31, 2026 2025 Class A Class B Class A Class B Numerator Net income (loss) attributable to Warner Music Group Corp. $ 53 $ 130 $ 10 $ 26 Less: Net loss (income) attributable to participating securities (a) ( 2 ) — — — Net income (loss) attributable to common stockholders - Basic $ 51 $ 130 $ 10 $ 26 Less: Net loss (income) attributable to shares to be issued on redemption of noncontrolling interests ( 1 ) ( 1 ) — — Net income (loss) attributable to common stockholders - Diluted $ 50 $ 129 $ 10 $ 26 Denominator Weighted average shares outstanding - Basic 146,573 375,380 144,938 375,380 Shares to be issued on redemption of noncontrolling interests 2,750 — — — Weighted average shares outstanding - Diluted 149,323 375,380 144,938 375,380 Earnings Per Share - Basic $ 0.35 $ 0.35 $ 0.07 $ 0.07 Earnings Per Share - Diluted $ 0.34 $ 0.34 $ 0.07 $ 0.07 Six Months Ended March 31, 2026 2025 Class A Class B Class A Class B Numerator Net income (loss) attributable to Warner Music Group Corp. $ 103 $ 256 $ 78 $ 194 Less: Net loss (income) attributable to participating securities (a) ( 4 ) — ( 3 ) — Net income (loss) attributable to common stockholders - Basic $ 99 $ 256 $ 75 $ 194 Less: Net loss (income) attributable to shares to be issued on redemption of noncontrolling interests ( 1 ) ( 3 ) — — Net income (loss) attributable to common stockholders - Diluted $ 98 $ 253 $ 75 $ 194 Denominator Weighted average shares outstanding - Basic 146,664 375,380 143,995 375,380 Shares to be issued on redemption of noncontrolling interests 2,750 — — — Weighted average shares outstanding - Diluted 149,414 375,380 143,995 375,380 Earnings Per Share - Basic $ 0.68 $ 0.68 $ 0.52 $ 0.52 Earnings Per Share - Diluted $ 0.67 $ 0.67 $ 0.52 $ 0.52 ______________________________________ (a) Participating securities include unvested restricted stock units, which include the right to receive non-forfeitable dividend equivalents. Participating securities are not contractually obligated to share in losses. 10 4. Revenue Recognition Disaggregation of Revenue The Company’s revenue consists of the following categories, which aggregate into the segments – Recorded Music and Music Publishing: Three Months Ended March 31, Six Months Ended March 31, 2026 2025 2026 2025 (in millions) Revenue by Type Digital $ 975 $ 841 $ 1,951 $ 1,714 Physical 137 112 289 278 Total digital and physical 1,112 953 2,240 1,992 Artist services and expanded-rights 164 117 395 313 Licensing 104 105 225 215 Total Recorded Music 1,380 1,175 2,860 2,520 Performance 58 53 122 109 Digital 224 188 439 395 Mechanical 17 16 35 30 Synchronization 50 49 110 88 Other 4 4 9 11 Total Music Publishing 353 310 715 633 Intersegment eliminations ( 1 ) ( 1 ) ( 3 ) ( 3 ) Total revenues $ 1,732 $ 1,484 $ 3,572 $ 3,150 Revenue by geographical location U.S. Recorded Music $ 565 $ 497 $ 1,142 $ 1,029 U.S. Music Publishing 178 161 368 334 Total U.S. 743 658 1,510 1,363 International Recorded Music 815 678 1,718 1,491 International Music Publishing 175 149 347 299 Total international 990 827 2,065 1,790 Intersegment eliminations ( 1 ) ( 1 ) ( 3 ) ( 3 ) Total revenues $ 1,732 $ 1,484 $ 3,572 $ 3,150 Sales Returns and Uncollectible Accounts Based on management’s analysis of sales returns, refund liabilities of $ 16 million and $ 17 million were established at March 31, 2026 and September 30, 2025, respectively. Based on management’s analysis of estimated credit losses, reserves of $ 28 million and $ 27 million were established at March 31, 2026 and September 30, 2025, respectively. Deferred Revenue Deferred revenue increased by $ 540 million during the six months ended March 31, 2026 related to cash received from customers for fixed fees and minimum guarantees in advance of performance, including amounts recognized in the period. Revenues of $ 186 million were recognized during the six months ended March 31, 2026 related to the balance of deferred revenue at September 30, 2025. There were no other significant changes to deferred revenue during the reporting period. Performance Obligations For the three months ended March 31, 2026 and March 31, 2025, the Company recognized revenue of $ 20 million and $ 17 million, respectively, from performance obligations satisfied in previous periods. For the six months ended March 31, 2026 and March 31, 2025, the Company recognized revenue of $ 38 million and $ 57 million, respectively, from performance obligations satisfied in previous periods. 11 Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at March 31, 2026 are as follows: Rest of FY26 FY27 FY28 Thereafter Total (in millions) Remaining performance obligations $ 270 $ 399 $ 171 $ 43 $ 883 Total $ 270 $ 399 $ 171 $ 43 $ 883 5. Comprehensive Income Comprehensive income, which is reported in the accompanying condensed consolidated statements of equity, consists of net income and other gains and losses affecting equity that, under U.S. GAAP, are excluded from net income. For the Company, the components of other comprehensive income primarily consist of foreign currency translation gains and losses, minimum pension liabilities, and deferred gains and losses on financial instruments designated as hedges under ASC 815, Derivatives and Hedging . The following summary sets forth the changes in the components of accumulated other comprehensive loss. Foreign Currency Translation Loss (a) Minimum Pension Liability Adjustment Accumulated Other Comprehensive Loss, net (in millions) Balances at September 30, 2024 $ ( 244 ) $ ( 3 ) $ ( 247 ) Other comprehensive loss ( 45 ) — ( 45 ) Balances at March 31, 2025 $ ( 289 ) $ ( 3 ) $ ( 292 ) Balances at September 30, 2025 $ ( 188 ) $ ( 1 ) $ ( 189 ) Other comprehensive loss ( 36 ) — ( 36 ) Balances at March 31, 2026 $ ( 224 ) $ ( 1 ) $ ( 225 ) ______________________________________ (a) Includes historical foreign currency translation related to certain intra-entity transactions. 6. Goodwill and Intangible Assets Goodwill The following analysis details the changes in goodwill for each reportable segment: Recorded Music Music Publishing Total (in millions) Balances at September 30, 2025 $ 1,597 $ 464 $ 2,061 Acquisitions 4 — 4 Other adjustments (a) ( 11 ) — ( 11 ) Balances at March 31, 2026 $ 1,590 $ 464 $ 2,054 ______________________________________ (a) Other adjustments during the six months ended March 31, 2026 represent foreign currency movements. The Company performs its annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and Other, during the fourth quarter of each fiscal year as of July 1. The Company may conduct an earlier review if events or circumstances occur that would suggest the carrying value of the Company’s goodwill may not be recoverable. No indicators of impairment were identified during the current period that required the Company to perform an interim assessment or recoverability test. 12 Intangible Assets Intangible assets consist of the following: Weighted-Average Useful Life March 31, 2026 September 30, 2025 (in millions) Intangible assets subject to amortization: Recorded music catalog 14 years $ 2,216 $ 1,799 Music publishing copyrights 23 years 2,769 2,692 Artist and songwriter contracts 13 years 1,127 1,137 Trademarks 16 years 30 29 Other intangible assets 6 years 55 58 Total gross intangible assets subject to amortization 6,197 5,715 Accumulated amortization ( 3,096 ) ( 2,990 ) Total net intangible assets subject to amortization 3,101 2,725 Intangible assets not subject to amortization: Trademarks and tradenames Indefinite 153 154 Total net intangible assets $ 3,254 $ 2,879 The increase in net intangible assets during the six months ended March 31, 2026 is primarily related to the acquisitions of recorded music catalogs and music publishing copyrights for approximately $ 401 million through the Beethoven joint venture. See Note 7 and Note 11 for additional information regarding the structure and activities of the joint venture. 7. Debt Debt Capitalization As of March 31, 2026, our long-term debt consists of the following: March 31, 2026 September 30, 2025 (in millions) Revolving Credit Facility (a) $ — $ — Senior Term Loan A Facility due 2031 (b) 1,295 — Senior Term Loan B Facility due 2031 (b) — 1,295 2.750 % Senior Secured Notes due 2028 372 381 3.750 % Senior Secured Notes due 2029 540 540 3.875 % Senior Secured Notes due 2030 535 535 2.250 % Senior Secured Notes due 2031 509 522 3.000 % Senior Secured Notes due 2031 800 800 Mortgage Term Loan due 2033 17 17 Total debt, including the current portion 4,068 4,090 Premium less unamortized discount and unamortized DFCs ( 22 ) ( 27 ) Total Acquisition Corp. long-term debt, including the current portion, net $ 4,046 $ 4,063 Beethoven Credit Agreement (c) 370 — Tempo Asset-Based Notes due 2050 (d) 311 311 Unamortized discount ( 8 ) ( 9 ) Total other long-term debt, including the current portion, net $ 673 $ 302 Total long-term debt, including the current portion, net $ 4,719 $ 4,365 ______________________________________ (a) Reflects $ 350 million of commitments under the Revolving Credit Facility with no letters of credit outstanding at March 31, 2026 and September 30, 2025. There were no loans outstanding under the Revolving Credit Facility as of March 31, 2026 and September 30, 2025. (b) On March 11, 2026, Acquisition Corp. borrowed all of the Term Loan A Facility to repay all of the outstanding loans under the Term Loan B Facility. 13 (c) Reflects $ 500 million of commitments under the Beethoven Credit Agreement with the ability, subject to the consent of the Lenders (as defined below), to increase the size of the facility to $ 700 million. There were $ 370 million in loans outstanding under the Beethoven Credit Agreement at March 31, 2026. Loans outstanding under the Beethoven Credit Agreement are secured only by certain music rights owned by Beethoven JV 1, LLC, a Delaware limited liability company (“Beethoven”), and are nonrecourse to the Company and its subsidiaries, other than Beethoven. (d) The Tempo Asset-Based Notes due 2050 are secured only by certain music rights owned by Tempo Music Holdings, LLC (“Tempo Music”) and are nonrecourse to the Company and its subsidiaries, other than Tempo Music. Acquisition Corp. Long-Term Debt The Company is the direct parent of Holdings, which is the direct parent of Acquisition Corp. Acquisition Corp. is party to and the borrower under a $ 1,295 million term loan A facility and a $ 350 million revolving facility, pursuant to an amended and restated credit agreement dated March 11, 2026 (the “Credit Agreement”), with JPMorgan Chase Bank NA, as administrative agent, and the other financial institutions and lenders from time to time party thereto. Additionally, as of March 31, 2026, Acquisition Corp. had issued and outstanding the 2.750 % Senior Secured Notes due 2028, the 3.750 % Senior Secured Notes due 2029, the 3.875 % Senior Secured Notes due 2030, the 2.250 % Senior Secured Notes due 2031 and the 3.000 % Senior Secured Notes due 2031 (together, the “Acquisition Corp. Notes”). All of the Acquisition Corp. Notes are guaranteed by all of Acquisition Corp.’s domestic wholly-owned subsidiaries. The guarantee of the Acquisition Corp. Notes by Acquisition Corp.’s domestic wholly-owned subsidiaries is full, unconditional and joint and several. The secured notes are guaranteed on a senior secured basis. The Company and Holdings are holding companies that conduct substantially all of their business operations through Acquisition Corp. Acquisition Corp. and its subsidiaries are not currently restricted from distributing funds to the Company and Holdings under the indentures for the Acquisition Corp. Notes or the Credit Agreement for the Acquisition Corp. credit facilities, including the Revolving Credit Facility (as defined below) and the Tranche A Term Loans (as defined below). The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Tranche A Term Loans as of March 31, 2026 . Other Long-Term Debt The Company holds approximately $ 311 million of asset-based securities due November 2050 (“Asset-Based Notes”) issued by a subsidiary of Tempo Music secured only by certain music rights owned by Tempo Music and is nonrecourse to the Company and its subsidiaries, other than Tempo Music. These notes, which consist of multiple fixed rate tranches, will accrue at a fixed weighted average rate of 4.62 % until November 30, 2027, with higher interest rates thereafter. Principal and interest are payable in equal semi-annual installments. As of March 31, 2026, Tempo Music is in compliance with the covenants under the Asset-Based Notes. Additionally, WMG BC Holdco LLC (“WMGCo”), a wholly-owned indirect subsidiary of the Company, and BCSS W JV Investments (B), L.P. (“BainCo”), a wholly-owned indirect subsidiary of Bain Capital Special Situations, LP, operate Beethoven, which is party to a Credit and Security Agreement (the “Beethoven Credit Agreement”), dated as of June 29, 2025, with the Bank of New York Mellon, as administrative agent for the Lenders and as collateral agent for the Secured Parties (in each case, as defined in the Beethoven Credit Agreement) pursuant to which the Lenders have agreed to extend up to $ 500 million in commitment amounts to Beethoven Financing 1, LLC, a Delaware limited liability company and wholly-owned indirect subsidiary of Beethoven, as the initial borrower (the “Initial Borrower” and, together with each additional borrower from time to time party thereto, the “Borrowers”) (the “Beethoven Credit Facility”). The obligations of the Borrowers under the Beethoven Credit Agreement are (a) secured by the Borrowers with a first priority security interest in all of their respective assets and (b) guaranteed by Beethoven Holdings 1 LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Beethoven and the direct parent of the Initial Borrower, as the initial guarantor (together with the additional guarantors from time to time party thereto, the “Guarantors”) with a first priority security interest in all of the Guarantors’ respective assets. The advances under the Beethoven Credit Agreement shall bear interest at the rates described below under “—Interest Rates.” The Beethoven Credit Agreement contains customary affirmative and negative covenants for this type of facility, and the ability, subject to the consent of the Lenders, to increase the size of the facility to $ 700 million. There were $ 370 million of loans outstanding under the Beethoven Credit Agreement at March 31, 2026. As of March 31, 2026, the Initial Borrower is in compliance with the covenants under the Beethoven Credit Agreement. On May 5, 2026, the Lenders, pursuant to an amendment to the Beethoven Credit Agreement (the “Credit Agreement Amendment”) agreed to increase the aggregate commitments under the Beethoven Credit Agreement from $ 500 million to $ 750 million. The Credit Agreement Amendment also provides that, subject to the consent of the Lenders, the Borrowers may further increase the size of the facility up to an aggregate commitment of $ 950 million. 14 On February 4, 2026, WMGCo entered into an amendment (the “Amendment”) to a Master Operations and Economics Agreement, dated as of June 29, 2025 (as amended from time to time, the “Master Operations and Economics Agreement”), by and among WMGCo, BainCo, and certain affiliates of the foregoing parties. Pursuant to the Amendment, WMGCo and BainCo have committed to increase their respective initial equity commitment amounts by $ 100 million each. Fiscal 2026 Transactions March 2026 Credit Agreement Amendment On March 11, 2026, Acquisition Corp. entered into the Credit Agreement among Acquisition Corp., as borrower, the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Credit Agreement amends and restates in its entirety the Credit Agreement, dated as of November 1, 2012, among Acquisition Corp., JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto, and incorporates, as amended and restated, the revolving credit facility provided under the Credit Agreement, dated as of January 31, 2018, among Acquisition Corp., JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The Credit Agreement provides for a $ 350 million revolving credit facility (the “Revolving Credit Facility”) and a $ 1,295 million term loan A facility (the “Tranche A Term Loans”). Subject to certain conditions, Acquisition Corp. may obtain increases in the commitments under the Revolving Credit Facility and incur incremental term loans. As of March 31, 2026, Acquisition Corp. had borrowed all of the Tranche A Term Loans to repay Acquisition Corp.’s term loan B facility. No amounts were drawn under the Revolving Credit Facility as of March 31, 2026. In connection with the Credit Agreement, the Company recorded a loss on extinguishment of debt of approximately $ 7 million for the three months ended March 31, 2026, which represents the unamortized balances of original issuance discounts and deferred financing costs. The use of proceeds from the $ 1,295 million Tranche A Term Loans has been presented in the accompanying consolidated statement of cash flows. The Company recognized deferred financing costs of $ 4 million associated with the amendment. Interest Rates The loans under the Credit Agreement bear interest at Acquisition Corp.’s election at a rate equal to (i) a forward-looking term rate based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable interest period (“SOFR”), subject to a zero floor, plus the applicable margin, or (ii) an alternative base rate (“ABR”), which is the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) 0.50 % in excess of the overnight federal funds rate and (z) one-month Term SOFR (as defined in the Credit Agreement) plus 1.0 % per annum, in each case, subject to a 1.00 % floor plus the applicable margin. The applicable margin for the Tranche A Term Loans range from 1.250 % to 1.625 % per annum for SOFR loans and from 0.250 % to 0.625 % per annum for ABR loans, in each case based upon Acquisition Corp.’s issuer credit ratings. The applicable margin for borrowings under the Revolving Credit Facility ranges from 1.125 % to 1.750 % per annum for SOFR loans and 0.125 % to 0.750 % per annum for ABR loans, in each case based upon Acquisition Corp.’s issuer credit ratings. Based on the Applicable Debt Rating of BBB- at March 31, 2026, the applicable margin for SOFR loans and risk-free rate loans would be 1.250 % instead of 1.750 % and the applicable margin for ABR loans would be 0.250 % instead of 0.750 % in the case of Initial Revolving Loans, and the applicable margin for SOFR loans and risk-free rate loans would be 1.375 % instead of 1.625 % and the applicable margin for ABR loans would be 0.375 % instead of 0.625 % in the case of the Tranche A Term Loan. If there is a payment default at any time, then the interest rate applicable to overdue principal will be the rate otherwise applicable to such loan plus 2.0 % per annum. Default interest will also be payable on other overdue amounts at a rate of 2.0 % per annum above the amount that would apply to an alternative base rate loan. The term loan entered into on January 27, 2023 (the “Term Loan Mortgage”) bears interest at a rate of 30-day SOFR plus the applicable margin of 1.40 %, subject to a zero floor. Interest on the Asset-Based Notes, which consist of multiple fixed rate tranches, will accrue at a fixed weighted average rate of 4.62 % until November 30, 2027. Following November 30, 2027, if the Asset-Based Notes remain outstanding, the interest rate on the outstanding Asset-Based Notes will increase by a per annum rate equal to the greater of: (i) 5.0 % and (ii) the amount, if any, by which the sum of the following exceeds the interest rate otherwise payable with respect to such Asset-Based Notes: (A) the yield to maturity (adjusted to a quarterly bond-equivalent basis) on November 30, 2027 of the U.S. treasury security having a term closest to seven years plus (B) 5.0 %, plus (C) with respect to class A notes, 3.53 % and, with respect to class B notes, 4.28 %. 15 The advances under the Beethoven Credit Agreement shall bear interest (a) in the case of a base rate advance, at a rate equal to the base rate, which means, for any day, the highest of (i) the prime rate in effect on such day; (ii) the federal funds rate in effect on such day plus 0.50 %; and (iii) Term SOFR for a one-month tenor in effect on such day plus 1.00 % per annum, plus the applicable margin of 1.00 % and (b) in the case of a Term SOFR advance, the Term SOFR for the interest accrual period plus the applicable margin of 2.00 %. The Company has entered into, and in the future may enter into, interest rate swaps to manage interest rate risk. As of March 31, 2026, there are no interest rate swaps outstanding. Maturity of Tranche A Term Loans The loans outstanding under the Tranche A Term Loans mature on March 11, 2031. Maturity of Revolving Credit Facility The maturity date of the Revolving Credit Facility is March 11, 2031. Maturities of Senior Secured Notes As of March 31, 2026, there are no scheduled maturities of notes until 2028, when $ 372 million is scheduled to mature. Thereafter, $ 2.384 billion is scheduled to mature. Maturity of Term Loan Mortgage The maturity date of the Term Loan Mortgage is January 27, 2033, subject to a call option exercisable by Truist Bank at any time after January 27, 2028 if certain criteria relating to the Company’s creditworthiness are met. Maturity of Tempo Asset-Based Notes The maturity date of the Asset-Based Notes is November 30, 2050. Maturity of Beethoven Credit Agreement The maturity date of the Beethoven Credit Facility is June 29, 2030. Interest Expense, net Total interest expense, net was $ 41 million and $ 39 million for the three months ended March 31, 2026 and 2025, respectively, and $ 86 million and $ 76 million for the six months ended March 31, 2026 and 2025, respectively. Interest expense, net includes interest expense related to our outstanding indebtedness of $ 44 million for both the three months ended March 31, 2026 and 2025, and $ 90 million and $ 87 million for the six months ended March 31, 2026 and 2025, respectively. The weighted-average interest rate of the Company’s total debt was 4.0 % at March 31, 2026, 4.1 % at September 30, 2025, and 4.1 % at March 31, 2025. 8. Restructuring and Impairments 2025 Restructuring Plan On July 1, 2025, the Company announced a strategic restructuring plan (the “2025 Restructuring Plan”) designed to free up funds to invest in music and to accelerate the Company’s long-term growth. The 2025 Restructuring Plan is expected to be fully implemented by the end of calendar year 2026. The Company expects to incur total charges of approximately $ 200 million on a pre-tax basis or approximately $ 150 million on an after-tax basis. Approximately $ 170 million of the charges will be for severance payments and other related termination costs and approximately $ 30 million of certain other charges. The Company anticipates that the Plan will result in cash expenditures of approximately $ 200 million, of which $ 170 million is expected to be paid by the end of fiscal year 2026. 16 For the three months ended March 31, 2026, total severance and other termination costs recorded in connection with the 2025 Strategic Restructuring Plan were $ 5 million, all of which was recognized in our Recorded Music segment. For the six months ended March 31, 2026, total severance and other termination costs recorded in connection with the 2025 Strategic Restructuring Plan were $ 30 million, of which $ 18 million of expense was recognized in our Recorded Music segment and $ 12 million was recognized in Corporate. As of March 31, 2026, total cumulative restructuring and impairment charges recognized in connection with the 2025 Strategic Restructuring Plan were $ 148 million with $ 98 million of costs recognized in our Recorded Music segment, $ 5 million of costs recognized in our Music Publishing segment, and $ 45 million recognized in Corporate. These costs are composed of $ 120 million of severance costs and $ 28 million of non-cash impairment charges primarily related to impairments of operating lease right-of-use assets that are no longer in use and royalty advances based on operational changes in the intended use of these assets. The following table sets forth the activity for the six months ended March 31, 2026 in the restructuring accrual associated with the 2025 Restructuring Plan included within accrued liabilities in the accompanying consolidated balance sheets: Severance Costs (in millions) Balance at September 30, 2025 $ 85 Restructuring charges 30 Cash payments ( 61 ) Balance at March 31, 2026 $ 54 2024 Strategic Restructuring Plan In 2024, the Company announced a strategic restructuring plan (the “2024 Strategic Restructuring Plan”) designed to free up additional funds to invest in music and accelerate the Company’s growth for the next decade. The 2024 Strategic Restructuring Plan is complete and the remaining associated cash payments are expected to be made by the end of fiscal year 2026. As of March 31, 2026, total cumulative restructuring and impairment charges recognized in connection with the 2024 Strategic Restructuring Plan were $ 215 million with $ 206 million of costs recognized in our Recorded Music segment and $ 9 million recognized in Corporate. These costs are composed of $ 133 million of severance and other contract termination costs, of which $ 7 million was non-cash, and $ 82 million of non-cash impairment charges. There was a $ 1 million benefit recognized for the three and six months ended March 31, 2026 related to the 2024 Strategic Restructuring Plan. The below table sets forth the activity for the six months ended March 31, 2026 in the restructuring accrual associated with the 2024 Strategic Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets. Severance Costs Contract Termination Costs Total (in millions) Balance at September 30, 2025 $ 23 $ 7 $ 30 Restructuring charges ( 1 ) — ( 1 ) Cash payments ( 16 ) ( 4 ) ( 20 ) Balance at March 31, 2026 $ 6 $ 3 $ 9 Other Impairments For the three and six months ended March 31, 2026, the Company recognized an impairment charge of $ 2 million and $ 11 million, respectively, within the Recorded Music segment for long-lived assets associated with EMP Merchandising (“EMP”), which was the result of remeasuring the carrying value to fair value as it has been classified as held for sale since September 30, 2025. Please refer to Note 15 for further discussion. 9. Commitments and Contingencies From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. The Company is currently subject to several such claims and legal proceedings. Based on currently available information, the Company does not believe that resolution of pending matters will have a material adverse effect on its financial condition, cash flows or results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that the Company’s defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on the Company’s business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against the Company, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. 17 10. Equity Stock-Based Compensation The Company’s stock-based compensation plans are described in Note 13, “Equity,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025. Stock-based compensation consists primarily of common stock, restricted stock units (“RSUs”), deferred share units, stock options, and market-based performance share units (“PSUs”) granted to eligible employees and executives under the Omnibus Incentive Plan. The Company recognized $ 12 million and $ 14 million of non-cash stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively, all of which was recorded to additional paid-in capital. The Company recognized $ 31 million and $ 27 million of non-cash stock-based compensation expense for the six months ended March 31, 2026 and 2025, respectively, all of which was recorded to additional paid-in capital. Common Stock During the three and six months ended March 31, 2026, the Company satisfied the vesting of PSUs and RSUs by issuing 839,801 and 999,381 shares, respectively, of Class A Common Stock under the Omnibus Incentive Plan, which is net of shares used to settle employee income tax obligations. Share 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. Under this authorization, the Company may, from time to time, purchase shares of its Class A Common Stock through open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase transactions, tender offers or otherwise, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act. The $ 100 million share repurchase authorization does not obligate the Company to purchase any shares and the Share Repurchase Program does not have a fixed expiration date. The Company may enter into a pre-arranged stock trading plan in accordance with the guidelines specified under Rule 10b5-1 to effectuate all or a portion of the Share Repurchase Program. The Company expects to finance any repurchases from a combination of cash on hand and cash provided by operating activities. The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to our results of operations, financial condition, liquidity and other factors. The authorization for the Share Repurchase Program may be suspended, terminated, increased or decreased by the Company’s board of directors at any time. The following table summarizes our total share repurchases and retirement under the Share Repurchase Program during the three and six months ended March 31, 2026 and 2025: Three Months Ended March 31, Six Months Ended March 31, Share Repurchase Type 2026 2025 2026 2025 Number of shares repurchased 750,500 — 1,670,500 60,383 Amount (in millions) $ 22 $ — $ 48 $ 2 11. Redeemable Noncontrolling Interest As of March 31, 2026, the redeemable noncontrolling interests (“RNCI”) consist of interests in Beethoven, a consolidated subsidiary. The Company consolidates Beethoven based on its controlling financial interest of the joint venture through the Company's majority representation on the board. The noncontrolling interest holder in Beethoven, which is BainCo as described in Note 7, has a 50 % ownership share and is entitled to receive 50 % of the required quarterly distributions made by the joint venture from available cash. For distributions resulting from a liquidity event, including the sale of the joint venture, an initial public offering, or other liquidity event as defined in the Master Operations and Economics Agreement, the noncontrolling interest holder is entitled to proceeds from such event until its contributed capital is returned with an annualized return of 8 %, subject to certain adjustments, after which the Company will receive distributions for an equal amount, with any additional amounts distributed equally. Beginning on the sixth anniversary of formation, the noncontrolling interest holder has an exit right, that upon providing notice, the Company has the option to acquire the noncontrolling interest holder’s interest for a price negotiated with the noncontrolling interest holder or otherwise determined by an independent fair market valuation, subject to certain adjustments, if elected. If not acquired by the Company, the noncontrolling interest holder can initiate and complete a sale of Beethoven or an initial public offering that include the interests held by the Company. Beginning on the eighth anniversary, the Company will also have a similar exit right, that provides similar rights to negotiate the sale of the Company’s interests to the noncontrolling interest holder. 18 Given the exit rights held by the noncontrolling interest holder may result in the interests being redeemed by the Company based on events that are not solely in its control, the noncontrolling interest is presented in the Consolidated Balance Sheets at the greater of the current estimated redemption value or carrying value of the interests including adjustments for the attribution of income to the noncontrolling interest holder. The Company adjusts the redeemable noncontrolling interest to the greater of the current estimated redemption value or carrying value at the end of each reporting period, with changes recognized as adjustments to retained earnings. The Company recognized $ 133 million as the redeemable noncontrolling interest balance as of March 31, 2026. In the second quarter of fiscal year 2026, the Company sold recorded music catalog rights to Beethoven for consideration of $ 233 million, receiving $ 182 million of cash in return, net of the Company’s portion of contributions to the joint venture for the acquisition. Given the Company consolidates Beethoven, no gain was recognized, and the cash received is recognized as contributions from redeemable noncontrolling interest holder and issuance of debt under the Beethoven Credit Facility. 12. Income Taxes For the three and six months ended March 31, 2026, the Company recorded an income tax expense of $ 73 million and $ 144 million, respectively. The income tax expense for the three and six months ended March 31, 2026 is higher than the expected tax expense at the statutory rate of 21% primarily due to foreign income taxed at rates higher than in the United States, including withholding taxes, U.S. state and local taxes, taxable gain on contribution to Beethoven JV, and non-deductible executive compensation under IRC Section 162(m). These charges were partially offset by tax benefit associated with partial release of valuation allowance on EMP. For the three and six months ended March 31, 2025, the Company recorded an income tax expense of $ 29 million and $ 118 million, respectively. The income tax expense for the three and six months ended March 31, 2025 is higher than the expected tax expense at the statutory rate of 21% primarily due to foreign income taxed at rates higher than the United States, including withholding taxes, and U.S. state and local taxes, unrecognized tax benefit related to uncertain tax positions, and non-deductible executive compensation under IRC Section 162(m). These charges were partially offset by tax benefits associated with R&D credits, and the net impact of GILTI and FDII. The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of March 31, 2026 could decrease by up to approximately $ 1 million related to various ongoing audits and settlement discussions in various jurisdictions during the next twelve months. The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted legislation as of January 1, 2025 and others are expected to enact legislation in the next few years. The Company has evaluated the potential impact of the rules based on the most recently available information. For the fiscal year ended September 30, 2026, the impact on the Company is expected to be immaterial. The Company will continue to monitor legislative developments to determine if there are significant changes to Pillar 2 rules that could lead to a material impact. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act, which introduces a wide-ranging set of tax reform provisions. In fiscal year 2026, the Company is benefitting from the changes to the business interest expense deduction limitation, allowing for an accelerated deduction, and restored expensing for domestic research and development costs. 13. Derivative Financial Instruments The Company uses derivative financial instruments, primarily foreign currency forward exchange contracts, for the purposes of managing foreign currency exchange rate risk on expected future cash flows. As of March 31, 2026, the Company had outstanding foreign currency forward exchange contracts for the sale of $ 591 million and the purchase of $ 327 million of foreign currencies at fixed rates. As of September 30, 2025, the Company had outstanding foreign currency forward exchange contracts for the sale of $ 460 million and the purchase of $ 170 million of foreign currencies at fixed rates. The Company recorded realized pre-tax losses of $ 2 million and unrealized pre-tax gains of $ 2 million related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the six months ended March 31, 2026. The Company recorded realized pre-tax gains of $ 7 million and unrealized pre-tax gains of $ 3 million related to its foreign currency forward exchange contracts in the condensed consolidated statement of operations as other expense for the six months ended March 31, 2025. 19 The following is a summary of amounts recorded in the consolidated balance sheets pertaining to the Company’s derivative instruments at March 31, 2026 and September 30, 2025: March 31, 2026 September 30, 2025 (in millions) Other Current Assets: Foreign currency forward exchange contracts (a) $ 3 $ — Other Current Liabilities: Foreign currency forward exchange contracts (a) $ ( 2 ) $ ( 3 ) ______________________________________ (a) For March 31, 2026 includes $ 13 million and $ 12 million of foreign exchange derivative contracts in asset and liability positions, respectively, which net to $ 3 million of current assets and $ 2 million of current liabilities, respectively. For September 30, 2025 includes $ 3 million and $ 6 million of foreign exchange derivative contracts in asset and liability positions, respectively, which net to $ 0 million of current assets and $ 3 million of current liabilities, respectively. 14. Segment Information Based on the nature of its products and services, the Company classifies its business interests into two fundamental operations: Recorded Music and Music Publishing, which also represent the reportable segments of the Company. Information as to each of these operations and further description of these segments is set forth below and can be found in Note 1. The Company’s Chief Operating Decision Maker, which is our Chief Executive Officer, allocates resources and evaluates performance based on several factors, including operating income (loss) and other financial measures. The accounting policies of the Company’s business segments are the same as those described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025. The Company accounts for intersegment sales at fair value as if the sales were to third parties. While intercompany transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses recognized by the segment that is counterparty to the transaction) are eliminated in consolidation, and therefore, do not themselves impact consolidated results. Recorded Music Music Publishing Corporate expenses and eliminations Total Three Months Ended (in millions) March 31, 2026 Revenues $ 1,380 $ 353 $ ( 1 ) $ 1,732 Cost of revenue 707 224 ( 1 ) 930 Selling and marketing expense 159 1 7 167 Distribution expense 30 — — 30 General and administrative expense 153 32 78 263 Restructuring & Impairment 6 — — 6 Amortization expense 37 35 — 72 Net loss on divestitures — — — — Operating income (loss) $ 288 $ 61 $ ( 85 ) $ 264 Loss on extinguishment of debt 7 Interest expense, net 41 Other expense, net ( 38 ) Income before income taxes 254 Depreciation expense (a) 10 — 21 31 March 31, 2025 Revenues $ 1,175 $ 310 $ ( 1 ) $ 1,484 Cost of revenue 599 194 ( 2 ) 791 Selling and marketing expense 149 1 7 157 Distribution expense 17 — — 17 20 General and administrative expense 161 34 81 276 Restructuring & Impairment 13 — — 13 Amortization expense 33 29 — 62 Operating income (loss) $ 203 $ 52 $ ( 87 ) $ 168 Interest expense, net 39 Other expense, net 64 Income before income taxes 65 Depreciation expense (a) 13 2 13 28 Recorded Music Music Publishing Corporate expenses and eliminations Total Six Months Ended (in millions) March 31, 2026 Revenues $ 2,860 $ 715 $ ( 3 ) $ 3,572 Cost of revenue 1,467 452 ( 2 ) 1,917 Selling and marketing expense 309 2 11 322 Distribution expense 61 — — 61 General and administrative expense 307 66 162 535 Restructuring & Impairment 28 — 12 40 Amortization expense 71 69 — 140 Net loss on divestitures — — 5 5 Operating income (loss) $ 617 $ 126 $ ( 191 ) $ 552 Loss on extinguishment of debt 7 Interest expense, net 86 Other expense, net ( 41 ) Income before income taxes 500 Depreciation expense (a) 22 1 39 62 March 31, 2025 Revenues $ 2,520 $ 633 $ ( 3 ) $ 3,150 Cost of revenue 1,285 404 ( 4 ) 1,685 Selling and marketing expense 300 2 13 315 Distribution expense 49 — — 49 General and administrative expense 341 65 154 560 Restructuring & Impairment 41 — ( 1 ) 40 Amortization expense 63 55 1 119 Operating income (loss) $ 441 $ 107 $ ( 166 ) $ 382 Interest expense, net 76 Other expense, net ( 89 ) Income before income taxes 395 Depreciation expense (a) 28 3 26 57 (a) Depreciation expense is a component of general and administrative expense 21 15. Additional Financial Information Supplemental Cash Flow Disclosures The Company made interest payments of approximately $ 54 million and $ 53 million during the three months ended March 31, 2026 and 2025, respectively, and approximately $ 92 million and $ 71 million during the six months ended March 31, 2026 and 2025, respectively. The Company paid approximately $ 58 million of income and withholding taxes, net of refunds, for each of the three months ended March 31, 2026 and 2025, and approximately $ 126 million and $ 101 million of income and withholding taxes, net of refunds, for the six months ended March 31, 2026 and 2025, respectively. Non-cash investing activities were approximately $ 73 million and are primarily related to the acquisition of music publishing rights and music catalogs and the receipt of noncash consideration during the six months ended March 31, 2026 and $ 34 million related to business combinations and the acquisition of music catalogs during the six months ended March 31, 2025. Assets and Liabilities Held for Sale In the fourth quarter of fiscal year 2025, the Company signed a non-binding letter of intent to sell its EMP business within our Recorded Music segment and was classified as held for sale. The sale is expected to be completed by the end of the current fiscal year. Upon classification as held for sale, the business was measured at the lower of its carrying amount or its estimated fair value less costs to sell. For the three and six months ended March 31, 2026, the Company recognized an impairment charge of $ 2 million and $ 11 million, respectively, within the Recorded Music segment for long-lived assets associated with EMP, which was the result of remeasuring the carrying value to fair value as it has been classified as held for sale since September 30, 2025. The recoverable fair value was determined based on current market indicators. The major classes of assets and liabilities of the business held for sale as of March 31, 2026 are as follows: March 31, 2026 September 30, 2025 (in millions) (in millions) Cash $ 4 $ 3 Inventories 40 50 Property, plant and equipment, net 13 20 Intangible assets subject to amortization, net 7 10 Other assets 4 6 Assets of business held for sale $ 68 $ 89 Accounts payable and accrued liabilities $ 26 $ 34 Other liabilities 12 15 Liabilities of business held for sale $ 38 $ 49 Net Gain (Loss) on Divestitures The Company recognized a pre-tax loss of $ 5 million during the six months ended March 31, 2026 in connection with the divestiture of certain assets which have been reflected as a net loss (gain) on divestiture in the accompanying condensed consolidated statement of operations. Net Gain on Sale of Investments The Company recognized a pre-tax realized net gain of $ 29 million during the six months ended March 31, 2025 in connection with the sale of an investment that has been presented within the Other income (expense) line of the accompanying condensed consolidated statement of operations. Dividends The Company has been paying quarterly cash dividends to holders of its Class A Common Stock and Class B Common Stock. The declaration of each dividend will continue to be at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, earnings, liquidity and capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by Delaware law, general business conditions and any other factors that the Company’s board of directors deems relevant in making such a determination. 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. 22 On February 5, 2026, the Company’s board of directors declared a cash dividend of $ 0.19 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 3, 2026. The Company paid an aggregate of approximately $ 100 million and $ 200 million, or $ 0.19 and $ 0.38 per share, in cash dividends to stockholders and participating security holders for the three and six months ended March 31, 2026, respectively. On May 7, 2026, the Company’s board of directors declared a cash dividend of $ 0.19 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, payable on June 2, 2026, to stockholders of record as of the close of business on May 26, 2026. 16. Fair Value Measurements The following tables show the fair value of the Company’s financial instruments that are required to be measured at fair value as of March 31, 2026 and September 30, 2025. Fair Value Measurements as of March 31, 2026 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Assets: Foreign currency forward exchange contracts (a) $ — $ 3 $ — $ 3 Other current liabilities: Foreign currency forward exchange contracts (a) $ — $ ( 2 ) $ — $ ( 2 ) Other noncurrent assets: Equity investments with readily determinable fair value (b) $ 7 $ — $ — $ 7 Fair Value Measurements as of September 30, 2025 (Level 1) (Level 2) (Level 3) Total (in millions) Other current liabilities: Foreign currency forward exchange contracts (a) $ — $ ( 3 ) $ — $ ( 3 ) Other noncurrent assets: Equity investment with readily determinable fair value (b) $ 8 $ — $ — $ 8 ______________________________________ (a) The fair value of foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. (b) These represent equity investments with a readily determinable fair value. The Company has measured its investments to fair value in accordance with ASC 321, Investments—Equity Securities, based on quoted prices in active markets. The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be re-measured to fair value on a recurring basis. These assets are evaluated for impairment if certain triggering events occur. If such evaluation indicates that impairment exists, the asset is written down to its fair value. In addition, an impairment analysis is performed at least annually for goodwill and indefinite-lived intangible assets. Furthermore, assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. When the Company determines that the fair value of an asset group held for sale is less than its carrying value, a non-recurring fair value adjustment is recognized as a loss in the period the held-for-sale criteria are met. The Company estimated the fair value of the assets held for sale based on current market indicators. Equity Investments Without Readily Determinable Fair Value The Company evaluates its equity investments without readily determinable fair values for impairment if factors indicate that a significant decrease in value has occurred. The Company has elected to use the measurement alternative to fair value that will allow these investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes. The Company did not record any impairment charges on these investments during the three and six months ended March 31, 2026 and recorded approximately $ 2 million and $ 3 million of impairment charges on these investments during the three and six months ended March 31, 2025, respectively. In addition, there were no observable price changes events that were completed during the three and six months ended March 31, 2026 and 2025. 23 Fair Value of Debt Based on the level of interest rates prevailing at March 31, 2026, the fair value of the Company’s debt was $ 4.574 billion. Based on the level of interest rates prevailing at September 30, 2025, the fair value of the Company’s debt was $ 4.270 billion. The fair value of the Company’s debt instruments is determined using quoted market prices from less active markets or by using quoted market prices for instruments with identical terms and maturities; both approaches are considered a Level 2 measurement. 24