Warner Music Group Corp. (WMG)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Actual results and the timing of events could differ materially from those projected in forward-looking statements due to a number of factors, including those described under “Item 1A. Risk Factors” and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements.”

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report.

INTRODUCTION

The Company is the direct parent of Holdings, which is the direct parent of 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 consolidated 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 fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022. 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 fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, as well as a discussion of our financial condition and liquidity as of September 30, 2024. 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.

•Critical accounting policies and estimates. This section identifies those accounting policies that are considered important to the Company’s results of operations and financial condition, require significant judgment and involve significant management estimates. The Company’s significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 2 to the accompanying consolidated financial statements.

Use of Adjusted OIBDA

We evaluate our operating performance based on several factors, including our primary financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets adjusted to exclude the impact of non-cash stock-based compensation and other related expenses and certain items that affect comparability including but not limited to gains or losses on divestitures and expenses related to restructuring and transformation initiatives (“Adjusted OIBDA”). For further details regarding the components of the Company’s Adjusted OIBDA performance measure, see Note 18 to our consolidated financial statements included elsewhere herein. We consider Adjusted OIBDA to be an important indicator of the operational strengths and performance of our businesses. However, a limitation of the use of Adjusted OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Accordingly, Adjusted OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S. 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

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operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares revenue and Adjusted OIBDA between periods as if exchange rates had remained constant period over period. We use revenue and Adjusted OIBDA on a constant-currency basis as one measure to evaluate our performance. We calculate constant-currency by calculating prior-year revenue and Adjusted OIBDA using current-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” Revenue and Adjusted OIBDA on a constant-currency basis should be considered in addition to, not as a substitute for, revenue and Adjusted OIBDA reported in accordance with U.S. 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 and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors. 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 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

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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.

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.

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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 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

Fiscal Year End

Prior to the start of the 2023 fiscal year, the Company maintained a 52-53 week fiscal year ending on the last Friday in each reporting period. Starting with the 2023 fiscal year, the Company transitioned to a reporting calendar in which the reporting periods end on the last day of the calendar quarter. Accordingly, the results of operations for the fiscal year ended for September 30, 2024 and September 30, 2023 reflect 366 and 365 days, respectively, compared to 371 days for the fiscal year ended September 30, 2022. For the fiscal year ended September 30, 2022, the revenue benefit of the additional week was approximately $73 million, primarily reflected in Recorded Music streaming revenue.

Strategic Restructuring Plan

In February 2024, the Company announced a strategic restructuring plan (the “Strategic Restructuring Plan”) designed to free up additional funds to invest in music and accelerate the Company’s growth for the next decade. Under the Strategic Restructuring Plan, the Company expects a reduction in headcount of approximately 13% of the Company’s overall headcount. The Company expects to incur total non-recurring restructuring charges of approximately $210 million or approximately $135 million of total non-recurring after tax charges. The expected pre-tax charges include approximately $148 million of severance and other termination costs and $7 million of other non-cash charges, along with approximately $55 million of non-cash impairment charges primarily in connection with the disposal or winding down of the Company’s non-core owned and operated media properties including the Company’s O&O Media Properties. The majority of severance payments and other termination costs are expected to be paid by the end of fiscal year 2026.

The cost savings under the Strategic Restructuring Plan will be achieved through a combination of the disposal or winding down of the O&O Media Properties, continuing to manage overhead, sharpening focus, expanding shared services, and implementing previously disclosed expected operational efficiencies made possible by the Company’s financial transformative initiative. The Company expects allocating a majority of the costs savings to increase investment in the Company’s core Recorded Music and Music Publishing businesses, new skill sets and tech capabilities.

For the fiscal year ended September 30, 2024, the Company recognized a total of $178 million of restructuring and impairments in connection with the Strategic Restructuring Plan. Total severance and other termination costs were $121 million, of which, $113 million was recognized in our Recorded Music segment and $8 million was recognized in Corporate. Additionally, for the fiscal year ended September 30, 2024, the Company recognized $57 million of non-cash restructuring and impairments which was comprised of $50 million of impairment losses on unamortized intangible assets and $7 million of non-cash restructuring related to future equity awards to be granted, of which, $54 million was recognized in our Recorded Music segment and $3 million was recognized in Corporate. Impairment charges recognized primarily relate to the winding down of the Company’s O&O Media Properties.

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2023 Restructuring Plan

In March 2023, the Company announced a restructuring plan (the “2023 Restructuring Plan”) intended to drive the evolution of the Company and position the Company for long-term growth, primarily through headcount reductions. The 2023 Restructuring Plan is substantially complete as of September 30, 2024. There was a $1 million benefit associated with the 2023 Restructuring Plan recorded for the fiscal year ended September 30, 2024 primarily associated with a change in estimate for costs previously recorded. All restructuring costs were recorded in the Recorded Music segment in the prior year.

BMG Termination

In September 2023, the Company terminated its distribution agreement with BMG as BMG began to bring digital distribution in-house and license directly with digital service partners in fiscal 2024 (the “BMG Termination”). ADA, which is part of our Recorded Music business, had previously been distributing BMG’s recorded music catalog and revenues are reported within our Recorded Music segment. The shift to direct deals by BMG will be a phased in-sourcing of distribution, which we expect to be largely completed by the end of fiscal 2025.

During the fiscal year ended September 30, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music digital revenue of $86 million, of which $81 million was streaming revenue. The impact to Recorded Music’s Adjusted OIBDA was immaterial for the fiscal year ended September 30, 2024.

Executive Transition Costs

During the fiscal year ended September 30, 2023, the Company incurred costs associated with the departure of our Chief Executive Officer which occurred in January 2023 and our Chief Financial Officer which occurred in October 2023 (the “Executive Transition Costs”). For the fiscal year ended September 30, 2023, the Executive Transition Costs were approximately $7 million, which mainly consisted of severance for our previous CEO and CFO. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

The departures of our CEO and CFO resulted in the recognition of $13 million of non-cash stock-based compensation expense for the fiscal year ended September 30, 2023, for RSUs and common stock as there is no remaining service required for vesting. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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RESULTS OF OPERATIONS

Fiscal Year Ended September 30, 2024 Compared with Fiscal Year Ended September 30, 2023 and Fiscal Year Ended September 30, 2022

Consolidated Results

Revenues

The Company’s revenues were composed of the following amounts (in millions):

Total Revenues

2024 vs. 2023

Total revenues increased by $389 million, or 6%, to $6,426 million for the fiscal year ended September 30, 2024 from $6,037 million for the fiscal year ended September 30, 2023. The current year included $68 million of Recorded Music licensing revenue from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”). In addition, revenue growth was unfavorably impacted by the BMG Termination which resulted in $86 million of lower Recorded Music digital revenue, partially offset by $16 million incremental Recorded Music streaming revenue resulting from the Digital License Renewal in the fiscal year ended September 30, 2024 compared to the prior year. Music Publishing digital revenue growth was also impacted by a $24 million benefit in the prior year due to a ruling by the Copyright Royalty Board in Phonorecords III upholding higher percentage of revenue U.S. mechanical royalty rates (the “CRB Rate Benefit”). Adjusted for these items, total revenues increased by 7%, which includes a decrease in revenue related to the divestiture of the owned and operated media businesses in connection with the Strategic Restructuring Plan, and includes $4 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 81% and 19% of total revenues for the fiscal year ended September 30, 2024, respectively, and 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 45% and 55% of total revenues for the fiscal year ended September 30, 2024, respectively. In the prior year, U.S. and international revenues represented 46% and 54% of total revenues prior to intersegment eliminations, respectively.

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Total digital revenues after intersegment eliminations increased by $291 million, or 7%, to $4,280 million for the fiscal year ended September 30, 2024 from $3,989 million for the fiscal year ended September 30, 2023. Excluding the BMG Termination, the Digital License Renewal and the CRB Rate Benefit in the prior year, total digital revenues increased by 10%. Total streaming revenue increased by 8% driven by growth across Recorded Music and Music Publishing, including growth in both subscription streaming and ad-supported streaming revenue. Total digital revenues represented 67% of consolidated revenues for the fiscal year ended September 30, 2024, from 66% for the fiscal year ended September 30, 2023. Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2024 were composed of U.S. revenues of $2,039 million and international revenues of $2,243 million, or 48% and 52% of total digital revenues, respectively. Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2023 were composed of U.S. revenues of $1,993 million and international revenues of $1,998 million, or 50% of total digital revenues for both U.S. and international revenues.

Recorded Music revenues increased by $268 million, or 5%, to $5,223 million for the fiscal year ended September 30, 2024 from $4,955 million for the fiscal year ended September 30, 2023. The increase includes $7 million of unfavorable currency exchange fluctuations. U.S. Recorded Music revenues were $2,210 million and $2,184 million, or 42% and 44% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively. International Recorded Music revenues were $3,013 million and $2,771 million, or 58% and 56% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

The overall increase in Recorded Music revenue was driven by increases in digital, licensing, and physical revenues, partially offset by a decrease in artist services and expanded-rights revenues. Digital revenue increased by $197 million, or 6%, primarily due to growth in streaming revenue as a result of the continued growth in streaming services, including growth in both subscription streaming and ad-supported streaming revenue. Revenue from streaming services increased by $221 million, or 7%, to $3,444 million for the fiscal year ended September 30, 2024 from $3,223 million for the fiscal year ended September 30, 2023. Adjusted for the impacts of the BMG Termination and the Digital License Renewal, Recorded Music streaming revenue grew by 9%. The current year included successful releases from Zach Bryan, Benson Boone, Teddy Swims and Dua Lipa. Download and other digital revenues decreased by $24 million, or 24%, to $75 million for the fiscal year ended September 30, 2024 from $99 million for the fiscal year ended September 30, 2023, which includes the unfavorable impact of the BMG Termination of $5 million compared to the prior year. Licensing revenue increased by $119 million, or 31%, driven by $68 million from the Licensing Extension and growth across broadcast fees, synchronization and other licensing revenue, and a favorable impact of foreign currency exchange rates of $3 million. Physical revenue increased by $12 million, or 2%, driven by strength of new releases primarily in Japan, and a favorable impact of foreign currency exchange rates of $1 million. Artist services and expanded-rights revenue decreased by $60 million primarily due to lower merchandising revenue, a decrease in revenue related to the exit of the Company’s O&O Media Properties announced as part of the Strategic Restructuring Plan, partially offset by higher concert promotion revenue primarily in Japan.

Music Publishing revenues increased by $122 million, or 11%, to $1,210 million for the fiscal year ended September 30, 2024 from $1,088 million for the fiscal year ended September 30, 2023. U.S. Music Publishing revenues were $660 million and $582 million, or 55% and 53% of consolidated Music Publishing revenues, for the fiscal year ended September 30, 2024 and September 30, 2023, respectively. International Music Publishing revenues were $550 million and $506 million, or 45% and 47% of Music Publishing revenues, for the fiscal year ended September 30, 2024 and September 30, 2023, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital revenue of $94 million, or 14%, performance revenue of $25 million, or 14%, and synchronization revenue of $8 million, or 5%, partially offset by a decrease in mechanical revenue of $5 million, or 8%. The increase in digital revenue is primarily due to continued growth in streaming revenue. Revenue from streaming services increased by $96 million, or 15%, to $752 million for the fiscal year ended September 30, 2024 from $656 million for the fiscal year ended September 30, 2023, which includes the impact of the CRB Rate Benefit of $24 million in the prior year. Excluding the impact of the CRB Rate Benefit, Music Publishing revenue from streaming services grew 19%, reflecting the continued market growth and timing of payments, and the favorable impact of foreign currency exchange rates of $3 million. Performance revenue increased primarily due to an increase in touring activity primarily in Europe and the timing of payments from collection societies in the United States, and synchronization revenue increased driven by higher commercial licensing activity and an increase in copyright infringement settlements primarily in the United States. The decrease in mechanical revenue was driven by lower physical sales and timing of distributions.

2023 vs. 2022

Total revenues increased by $118 million, or 2%, to $6,037 million for the fiscal year ended September 30, 2023 from $5,919 million for the fiscal year ended September 30, 2022. The prior fiscal year included an additional week, primarily reflected in Recorded Music streaming revenue, and $38 million in Recorded Music and Music Publishing downloads and other digital revenue from the settlement of certain copyright infringement cases (the “Copyright Settlement”). The increase includes $111 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively, and 84% and 16% of total

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revenues for the fiscal year ended September 30, 2022, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 46% and 54% of total revenues for each of the fiscal years ended September 30, 2023 and September 30, 2022, respectively.

Total digital revenues after intersegment eliminations increased by $123 million, or 3%, to $3,989 million for the fiscal year ended September 30, 2023 from $3,866 million for the fiscal year ended September 30, 2022, which includes $38 million in downloads and other digital revenue from the Copyright Settlement. Total streaming revenue increased 5% driven by growth across Recorded Music and Music Publishing. The growth in Music Publishing includes the impact in the year and the prior year of $24 million and $20 million, respectively, due to the CRB Rate Benefit. Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2023 were composed of U.S. revenues of $1,993 million and international revenues of $1,998 million, or 50% of total digital revenues for each of U.S. and international revenues. Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2022 were composed of U.S. revenues of $1,983 million and international revenues of $1,885 million, or 51% and 49% of total digital revenues, respectively.

Recorded Music revenues decreased by $11 million to $4,955 million for the fiscal year ended September 30, 2023 from $4,966 million for the fiscal year ended September 30, 2022. The decrease includes $99 million of unfavorable currency exchange fluctuations. U.S. Recorded Music revenues were $2,184 million and $2,231 million, or 44% and 45% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively. International Recorded Music revenues were $2,771 million and $2,735 million, or 56% and 55% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively.

The overall decrease in Recorded Music revenue was driven by decreases in physical and artist services and expanded-rights revenues, partially offset by increases in licensing and digital revenues. Physical revenue decreased by $56 million, or 10%, driven by an unfavorable impact of foreign currency exchange rates of $19 million and a lighter release schedule in the first half of the year. Artist services and expanded-rights revenue decreased by $23 million due to an unfavorable impact of foreign currency exchange rates of $12 million, lower merchandising revenue, primarily direct-to-consumer merchandising revenue at EMP, and lower advertising revenue, partially offset by higher concert promotion revenue. Licensing revenue increased by $51 million, which includes growth across broadcast fees, synchronization and other licensing revenue, partially offset by an unfavorable impact of foreign currency exchange rates of $8 million. Digital revenue increased by $17 million, or 1%, which includes an unfavorable impact of foreign currency exchange rates of $60 million and $31 million in downloads and other digital revenue from the Copyright Settlement in the prior year. Revenue from streaming services grew by $64 million, or 2%, to $3,223 million for the fiscal year ended September 30, 2023 from $3,159 million for the fiscal year ended September 30, 2022 and was impacted by unfavorable foreign currency exchange rates of $57 million, or 2%. Streaming revenue reflects a lighter release schedule and the market-related slowdown in ad-supported revenue in the first half of the year, as well as the impact of an additional week in the prior year. Adjusted for the impact of an additional week in the prior year, Recorded Music streaming revenue increased by 4%. The fiscal year ended September 30, 2023 included successful releases from Ed Sheeran, Zach Bryan, Dua Lipa and Bailey Zimmerman. Downloads and other digital revenue decreased by $47 million, or 32%, to $99 million for the fiscal year ended September 30, 2023 from $146 million for the fiscal year ended September 30, 2022 due to the Copyright Settlement in the prior year and continued shift to streaming services.

Music Publishing revenues increased by $130 million, or 14%, to $1,088 million for the fiscal year ended September 30, 2023 from $958 million for the fiscal year ended September 30, 2022. U.S. Music Publishing revenues were $582 million and $513 million, or 53% and 54% of consolidated Music Publishing revenues, for the fiscal year ended September 30, 2023 and September 30, 2022, respectively. International Music Publishing revenues were $506 million and $445 million, or 47% and 46% of Music Publishing revenues, for the fiscal year ended September 30, 2023 and September 30, 2022, respectively.

The overall increase in Music Publishing revenue was driven by increases in digital revenue of $106 million, or 19%, performance revenue of $14 million and mechanical revenue of $13 million, partially offset by a decrease in synchronization revenue of $5 million. The increase in digital revenue is primarily due to increases in streaming revenue driven by the continued growth in streaming services, the impact of digital deal renewals, which includes the Company’s TikTok renewal, a revenue true-up of $9 million and a $4 million year-over-year increase in the impact of the CRB Rate Benefit, partially offset by $7 million in downloads and other digital revenue from the Copyright Settlement in the prior year and an unfavorable impact of foreign currency exchanges rates of $5 million. Revenue from streaming services grew by $117 million, or 22%, to $656 million for the fiscal year ended September 30, 2023 from $539 million for the fiscal year ended September 30, 2022. Performance revenue increased primarily due to continued recovery from COVID disruption in the first half of the year, partially offset by an unfavorable impact of foreign currency exchange rates of $3 million. Mechanical revenue increased from a higher share of physical sales and timing of distributions, partially offset by an unfavorable impact of foreign currency exchange rates of $2 million. The decrease in synchronization revenue is attributable to lower commercial licensing activity and an unfavorable impact of foreign currency exchange rates of $2 million, partially offset by copyright infringement settlements.

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Revenue by Geographical Location

2024 vs. 2023

U.S. revenue increased by $104 million, or 4%, to $2,870 million for the fiscal year ended September 30, 2024 from $2,766 million for the fiscal year ended September 30, 2023. U.S. Recorded Music revenue increased by $26 million, or 1%, primarily driven by growth in licensing revenue of $92 million due to $68 million from the Licensing Extension. U.S. Recorded Music growth was also attributable to higher physical revenue, partially offset by lower U.S. Recorded Music digital and artist services and expanded-rights revenues. U.S Recorded Music physical revenue increased by $1 million compared to the prior year. U.S. Recorded Music digital revenue decreased by $17 million, or 1%, which includes a decrease in U.S. Recorded Music streaming revenue of $4 million, and a decrease in download and other digital revenue of $13 million. The decrease in U.S. Recorded Music digital revenue is primarily due to the impact of the BMG Termination of $48 million. U.S. Recorded Music artist services and expanded-rights revenue decreased by $50 million due to lower merchandising revenue of $15 million and a decrease in revenue related to the exit of the Company’s O&O Media Properties announced as part of the Strategic Restructuring Plan. U.S. Music Publishing revenue increased by $78 million, or 13%, to $660 million for the fiscal year ended September 30, 2024 from $582 million for the fiscal year ended September 30, 2023. U.S. Music Publishing digital revenue increased by $63 million, or 16%, attributable to continued growth in streaming revenue. U.S. Music Publishing streaming revenue increased by $62 million, or 16%, reflecting continued market growth and timing of payments, partially offset by the CRB Rate Benefit of $24 million in the prior year. U.S. Music Publishing synchronization revenue increased by $3 million, primarily driven by an increase in copyright infringement settlements, higher commercial and video game licensing activity, partially offset by lower film and television licensing activity. U.S. Music Publishing performance revenue increased by $11 million, or 18% due to timing of payments from collection societies. U.S. Music Publishing mechanical revenue remained flat to prior year.

International revenue increased by $286 million, or 9%, to $3,563 million for the fiscal year ended September 30, 2024 from $3,277 million for the fiscal year ended September 30, 2023. Excluding the unfavorable impact of foreign currency exchange rates of $5 million, international revenue increased by $291 million, or 9%. International Recorded Music revenue increased by $242 million, or 9%, primarily due to increases in digital revenue of $214 million, licensing revenue of $27 million, and physical revenue of $11 million, partially offset by lower artist services and expanded-rights revenue of $10 million. International Recorded Music digital revenue increased largely due to an increase in streaming revenue of $225 million, or 13%. Streaming revenue growth includes the impact of the Digital Licensing Renewal of $16 million, partially offset by the impact of the BMG Termination of $38 million and an unfavorable impact of foreign currency exchange rates of $14 million. Download and other digital revenues decreased by $11 million due to the continued shift to streaming services. International Recorded Music licensing revenue increased by $27 million, which includes the impact of copyright infringement settlements, growth in broadcast fees and other licensing revenue, and the favorable impact of foreign currency exchange rates of $3 million. International Recorded Music physical revenue increased by $11 million, driven by strength of new releases primarily in Japan, and a favorable impact of foreign currency exchange rates of $1 million. International Recorded Music artist services and expanded-rights revenue decreased by $10 million primarily due to lower direct-to-consumer merchandising revenue, partially offset by higher concert promotion revenue primarily in Japan and France, and a favorable impact of foreign currency exchange rates of $3 million. International Music Publishing revenue increased by $44 million, or 9%, to $550 million for the fiscal year ended September 30, 2024, from $506 million for the fiscal year ended September 30, 2023. This was primarily driven by increases in digital revenue of $31 million, performance revenue of $14 million, and synchronization revenue of $5 million, partially offset by lower mechanical revenue of $5 million and other publishing revenue of $1 million. International Music Publishing streaming revenue increased by $34 million, or 13%, which includes a favorable impact of foreign currency exchange rates of $3 million, partially offset by a revenue true up of $9 million in the prior year. Performance revenue increased by $14 million or 13% due to strong artist touring activity primarily in Europe and Latin America. International Music Publishing synchronization revenue increased by $5 million due to higher commercial licensing activity primarily in Brazil, France and Germany. International Music Publishing mechanical revenue decreased by $5 million largely due to lower physical sales and timing of distributions.

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2023 vs. 2022

U.S. revenue increased by $22 million, or 1%, to $2,766 million for the fiscal year ended September 30, 2023 from $2,744 million for the fiscal year ended September 30, 2022. U.S. Recorded Music revenue decreased by $47 million, or 2%. The primary driver was the decrease of U.S. Recorded Music digital revenue of $58 million, or 4%, which includes the Copyright Settlement and the impact of an additional week in the prior year. U.S. Recorded Music streaming revenue decreased by $19 million, or 1%, as a result of a lighter release schedule and the market-related slowdown in ad-supported revenue, as well as the impact of an additional week in the prior year. Download and other digital revenue decreased by $39 million due to the Copyright Settlement in the prior year and continued shift to streaming services. Decreases are also attributable to lower U.S. Recorded Music physical revenue of $5 million due to a lighter release schedule. U.S. Recorded Music artist services and expanded-rights revenue decreased by $2 million, primarily driven by lower advertising revenue, partially offset by higher merchandising and other artist services and expanded-rights revenue. The increase in licensing revenue of $18 million is due to growth in synchronization and other licensing revenue. U.S. Music Publishing revenue increased by $69 million, or 13%, to $582 million for the fiscal year ended September 30, 2023 from $513 million for the fiscal year ended September 30, 2022. This was primarily driven by the increase in U.S. Music Publishing of $68 million in digital revenue due to the continued growth in streaming services, the impact of digital deal renewals, which includes the Company’s TikTok renewal, and a $4 million year-over-year increase in the impact of the CRB Rate Benefit, partially offset by $7 million of the Copyright Settlement in the prior year. U.S. Music Publishing streaming revenue increased by $75 million, or 23%. Performance and mechanical revenue both increased by $2 million. The decrease in synchronization revenue of $4 million is due to lower commercial licensing activity, partially offset by copyright infringement settlements.

International revenue increased by $97 million, or 3%, to $3,277 million for the fiscal year ended September 30, 2023 from $3,180 million for the fiscal year ended September 30, 2022. Excluding the unfavorable impact of foreign currency exchange rates, international revenue increased by $208 million, or 7%. International Recorded Music revenue increased by $36 million, or 1%, primarily due to increases in digital revenue of $75 million and licensing revenue of $33 million, partially offset by decreases in physical revenue of $51 million and artist services and expanded-rights revenue of $21 million. International Recorded Music digital revenue increased due to an $83 million, or 5%, increase in streaming revenue which includes the unfavorable impact of foreign currency exchange rates of $57 million. Download and other digital revenues decreased by $8 million. International Recorded Music licensing revenue increased by $33 million including growth in broadcast fees and other licensing revenue, partially offset by the unfavorable impact of foreign currency exchange rates of $8 million. International Recorded Music physical revenue decreased by $51 million, driven by an unfavorable impact of foreign currency exchange rates of $19 million and a lighter release schedule. International Recorded Music artist services and expanded-rights revenue decreased by $21 million due to the unfavorable impact of foreign currency exchange rates of $12 million and lower direct-to-consumer merchandising activity at EMP, partially offset by higher concert promotion revenue. International Music Publishing revenue increased by $61 million, or 14%, to $506 million for the fiscal year ended September 30, 2023 from $445 million for the fiscal year ended September 30, 2022. This was primarily driven by the increase in digital revenue of $38 million, performance revenue of $12 million and mechanical revenue of $11 million. International Music Publishing streaming revenue increased by $42 million, or 19%, which includes a revenue true-up of $9 million, partially offset by an unfavorable impact of foreign currency exchange rates of $4 million. Performance revenue increased driven by continued recovery from COVID disruption in the first half of the year. Higher mechanical revenue is primarily driven by a higher share of physical sales and timing of distributions. Synchronization revenue decreased by $1 million primarily due to an unfavorable impact of foreign currency exchange rates.

Cost of revenues

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

2024 vs. 2023

Our cost of revenues increased by $178 million, or 6%, to $3,355 million for the fiscal year ended September 30, 2024 from $3,177 million for the fiscal year ended September 30, 2023. Expressed as a percentage of revenues, cost of revenues decreased to 52% for the fiscal year ended September 30, 2024 from 53% for the fiscal year ended September 30, 2023.

Artist and repertoire costs increased by $169 million, to $2,167 million for the fiscal year ended September 30, 2024 from $1,998 million for the fiscal year ended September 30, 2023. Artist and repertoire costs as a percentage of revenue increased to 34% for the fiscal year ended September 30, 2024, from 33% for the fiscal year ended September 30, 2023, primarily due to revenue mix,

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

Product costs increased by $9 million, to $1,188 million for the fiscal year ended September 30, 2024 from $1,179 million for the fiscal year ended September 30, 2023. Product costs as a percentage of revenue decreased to 18% for the fiscal year ended September 30, 2024 from 20% for the fiscal year ended September 30, 2023 due to revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue.

2023 vs. 2022

Our cost of revenues increased by $97 million, or 3%, to $3,177 million for the fiscal year ended September 30, 2023 from $3,080 million for the fiscal year ended September 30, 2022. Expressed as a percentage of revenues, cost of revenues increased to 53% for the fiscal year ended September 30, 2023 from 52% for the fiscal year ended September 30, 2022.

Artist and repertoire costs increased by $38 million, to $1,998 million for the fiscal year ended September 30, 2023 from $1,960 million for the fiscal year ended September 30, 2022. Artist and repertoire costs as a percentage of revenue remained constant at 33% for each of the fiscal years ended September 30, 2023 and September 30, 2022, primarily due to the favorable impact of foreign currency exchange rates, offset by revenue mix.

Product costs increased by $59 million, to $1,179 million for the fiscal year ended September 30, 2023 from $1,120 million for the fiscal year ended September 30, 2022. Product costs as a percentage of revenue increased to 20% for the fiscal year ended September 30, 2023 from 19% for the fiscal year ended September 30, 2022 due to revenue mix from higher third-party distributed label revenue.

Selling, general and administrative expenses

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

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

2024 vs. 2023

Total selling, general and administrative expense increased by $53 million, or 3%, to $1,879 million for the fiscal year ended September 30, 2024 from $1,826 million for the fiscal year ended September 30, 2023. Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2024 from 30% for the fiscal year ended September 30, 2023.

General and administrative expense increased by $98 million to $1,089 million for the fiscal year ended September 30, 2024 from $991 million for the fiscal year ended September 30, 2023. The increase in general and administrative expense was driven by higher expenses related to transformation initiatives of $23 million, higher depreciation expense related to IT assets being placed in service of $16 million, higher non-cash stock-based compensation expense of $9 million, the impact of acquisitions of approximately $7 million, and unfavorable movements in foreign currency exchange rates of $1 million. These expenses are partially offset by savings from the Company’s restructuring plans, the majority of which has been reinvested into the business, including incremental investment in technology of $28 million, and lower Executive Transition Costs of $7 million related to severance for our previous CEO and CFO in the prior year. Expressed as a percentage of revenue, general and administrative expense increased to 17% for the fiscal year ended September 30, 2024, from 16% for the fiscal year ended September 30, 2023.

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Selling and marketing expense decreased by $25 million, or 4%, to $685 million for the fiscal year ended September 30, 2024 from $710 million for the fiscal year ended September 30, 2023. Expressed as a percentage of revenue, selling and marketing expense decreased to 11% for the fiscal year ended September 30, 2024 from 12% for the fiscal year ended September 30, 2023 due to lower variable marketing spend and an increase in savings from the Company’s restructuring plans.

Distribution expense decreased by $20 million, to $105 million for the fiscal year ended September 30, 2024 from $125 million for the fiscal year ended September 30, 2023 driven by revenue mix. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

2023 vs. 2022

Total selling, general and administrative expense decreased by $36 million, or 2%, to $1,826 million for the fiscal year ended September 30, 2023 from $1,862 million for the fiscal year ended September 30, 2022. Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 30% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022.

General and administrative expense increased by $52 million to $991 million for the fiscal year ended September 30, 2023 from $939 million for the fiscal year ended September 30, 2022. The increase in general and administrative expense was mainly due to higher employee related costs, net of savings from the Restructuring Plan, which includes incremental non-cash stock-based compensation and other related expenses of $10 million, the Executive Transition Costs of $7 million, incremental investment in technology of $17 million, the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition, higher depreciation of $11 million, and expenses related to transformation initiatives of $7 million, partially offset by lower acquisition transaction costs, lower severance costs, the impact of an additional week in the prior year and favorable movements in foreign currency exchange rates of $14 million. Expressed as a percentage of revenue, general and administrative expense remained constant at 16% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

Selling and marketing expense decreased by $82 million, or 10%, to $710 million for the fiscal year ended September 30, 2023 from $792 million for the fiscal year ended September 30, 2022. Expressed as a percentage of revenue, selling and marketing expense decreased to 12% for the fiscal year ended September 30, 2023 from 13% for the fiscal year ended September 30, 2022 due to lower variable marketing spend and savings from the Restructuring Plan.

Distribution expense was $125 million for the fiscal year ended September 30, 2023 and $131 million for the fiscal year ended September 30, 2022. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

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Restructuring and Impairments

2024 vs. 2023

For the fiscal year ended September 30, 2024, total restructuring and impairment costs were $177 million consisting of approximately $128 million of restructuring charges and approximately $50 million of non-cash impairment losses related to the Strategic Restructuring Plan. Restructuring costs in the prior year are attributed to the 2023 Restructuring Plan.

2023 vs. 2022

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

Net gain on divestitures

2024 vs. 2023

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

2023 vs. 2022

During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying consolidated statement of operations. There was no net gain or loss on divestiture recorded during the fiscal year ended September 30, 2022.

Reconciliation of Net Income Attributable to Warner Music Group Corp. and Operating Income to Consolidated 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):

Adjusted OIBDA

2024 vs. 2023

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

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Licensing Extension of $67 million and the Digital License Renewal of $6 million year-over-year, savings from the Company’s restructuring plans, the majority of which was reinvested in the Company’s business, and the impact of the CRB Rate Benefit of $6 million in the prior year. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 22% for the fiscal year ended September 30, 2024 from 20% for the fiscal year ended September 30, 2023, due to strong operating performance, the Licensing Extension, the Digital License Renewal, and savings from the Company’s restructuring plans, the majority of which was reinvested in the Company’s business.

2023 vs. 2022

Adjusted OIBDA increased by $86 million to $1,235 million for the fiscal year ended September 30, 2023, from $1,149 million for the fiscal year ended September 30, 2022 as a result of strong operating performance, partially offset by the benefit of the Copyright Settlement and the extra week in the fiscal year ended September 30, 2022. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 20% for the fiscal year ended September 30, 2023 from 19% for the fiscal year ended September 30, 2022 due to strong operating performance.

Non-cash stock-based compensation and other related costs

2024 vs. 2023

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

2023 vs. 2022

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

Net gain on divestitures

2024 vs. 2023

Net gain on divestitures during the fiscal year ended September 30, 2024 includes a pre-tax gain of $32 million in connection with the divestitures of certain sound recording and publishing rights, including a divestiture of certain non-core O&O Media Properties in connection with the Strategic Restructuring Plan. This compares to a pre-tax gain of $41 million during the fiscal year ended September 30, 2023.

2023 vs. 2022

During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million. There was no net gain or loss on divestiture recorded during the fiscal year ended September 30, 2022.

Executive transition costs

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2024 vs. 2023

There were no executive transition costs recorded during the fiscal year ended September 30, 2024. During the fiscal year ended September 30, 2023, the Company incurred Executive Transition Costs of $7 million, which mainly consisted of severance for our previous CEO and CFO.

2023 vs. 2022

During the fiscal year ended September 30, 2023, the Company incurred Executive Transition Costs of $7 million, which mainly consisted of severance for our previous CEO and CFO. There were no executive transition costs recorded during the fiscal year ended September 30, 2022.

Transformation initiative costs

2024 vs. 2023

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

2023 vs. 2022

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

Restructuring and Impairments

2024 vs. 2023

Our restructuring and impairment charges increased to $177 million for the fiscal year ended September 30, 2024, from $42 million for the fiscal year ended September 30, 2023. The increase is primarily driven by costs recorded in connection with the Strategic Restructuring Plan which include non-cash impairment charges of approximately $50 million and restructuring costs of approximately $128 million. Restructuring costs in the prior year are attributed to the 2023 Restructuring Plan.

2023 vs. 2022

Our restructuring and impairment charges increased to $42 million for the fiscal year ended September 30, 2023 primarily related to the 2023 Restructuring Plan. This compares to restructuring costs of $8 million for the fiscal year ended September 30, 2022.

Depreciation expense

2024 vs. 2023

Our depreciation expense increased by $16 million to $103 million for the fiscal year ended September 30, 2024 from $87 million for the fiscal year ended September 30, 2023. This increase is primarily due to an increase in IT assets being placed into service.

2023 vs. 2022

Our depreciation expense increased by $11 million to $87 million for the fiscal year ended September 30, 2023 from $76 million for the fiscal year ended September 30, 2022. This increase is primarily due to an increase in technology capital spend and assets being placed into service.

Amortization expense

2024 vs. 2023

Our amortization expense decreased by $21 million, or 9%, to $224 million for the fiscal year ended September 30, 2024 from $245 million for the fiscal year ended September 30, 2023. The decrease is primarily due to certain intangible assets becoming fully amortized, partially offset by incremental amortization related to acquisitions of music-related assets.

2023 vs. 2022

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Our amortization expense decreased by $18 million, or 7%, to $245 million for the fiscal year ended September 30, 2023 from $263 million for the fiscal year ended September 30, 2022. The decrease is primarily due to certain intangible assets becoming fully amortized.

Operating income

2024 vs. 2023

Our operating income increased by $33 million to $823 million for the fiscal year ended September 30, 2024 from $790 million for the fiscal year ended September 30, 2023. The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA noted above, as well as lower amortization expense, partially offset by higher restructuring and non-cash impairment charges, higher depreciation expense and a decrease in net gain on divestitures as noted above.

2023 vs. 2022

Our operating income increased by $76 million to $790 million for the fiscal year ended September 30, 2023 from $714 million for the fiscal year ended September 30, 2022. The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA noted above, and lower amortization, partially offset by higher depreciation expense as noted above.

Loss on extinguishment of debt

2024 vs. 2023

There was no loss on extinguishment of debt for the fiscal year ended September 30, 2024. For the fiscal year ended September 30, 2023, we recorded a loss on extinguishment of debt in the amount of $4 million related to the repayment of Senior Term Loan Facility Tranche H loans.

2023 vs. 2022

We recorded a loss on extinguishment of debt in the amount of $4 million for the fiscal year ended September 30, 2023, which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans. There was no loss on extinguishment of debt for the fiscal year ended September 30, 2022.

Interest expense, net

2024 vs. 2023

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

2023 vs. 2022

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

Other expense (income)

2024 vs. 2023

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

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

2023 vs. 2022

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

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

Income tax expense

2024 vs. 2023

Our income tax expense decreased by $47 million to $123 million for the fiscal year ended September 30, 2024 from $170 million for the fiscal year ended September 30, 2023. The decrease of $47 million in income tax expense is primarily due to the impact from winding down of the Company’s O&O Media Properties, return to provision adjustments, and nontaxable income from partnerships.

2023 vs. 2022

Our income tax expense decreased by $15 million to $170 million for the fiscal year ended September 30, 2023 from $185 million for the fiscal year ended September 30, 2022. The decrease of $15 million in income tax expense is primarily due to the impact of lower pre-tax income in the fiscal year ended September 30, 2023 and benefit of R&D credits. These benefits were partially offset by an increase in unrecognized tax benefit related to uncertain tax positions, higher withholding taxes and higher portion of the pre-tax income being earned outside of the United States in the fiscal year ended September 30, 2023.

Net income

2024 vs. 2023

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

2023 vs. 2022

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

Noncontrolling interest

2024 vs. 2023

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

2023 vs. 2022

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

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Business Segment Results

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

Recorded Music

Revenues

2024 vs. 2023

Recorded Music revenue increased by $268 million to $5,223 million for the fiscal year ended September 30, 2024 from $4,955 million for the fiscal year ended September 30, 2023. U.S. Recorded Music revenues were $2,210 million and $2,184 million, or 42% and 44% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively. International Recorded Music revenues were $3,013 million and $2,771 million, or 58% and 56% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

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

2023 vs. 2022

Recorded Music revenue decreased by $11 million to $4,955 million for the fiscal year ended September 30, 2023 from $4,966 million for the fiscal year ended September 30, 2022. U.S. Recorded Music revenues were $2,184 million and $2,231 million, or 44% and 45% of consolidated Recorded Music revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively. International Recorded Music revenues were $2,771 million and $2,735 million, or 56% and 55% of consolidated Recorded Music revenues, for the fiscal year ended September 30, 2023 and September 30, 2022, respectively.

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

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Cost of revenues

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

2024 vs. 2023

Recorded Music cost of revenues increased by $97 million, or 4%, to $2,599 million for the fiscal year ended September 30, 2024 from $2,502 million for the fiscal year ended September 30, 2023. Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

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

Product costs as a percentage of revenue decreased to 23% for the fiscal year ended September 30, 2024 from 24% for the fiscal year ended September 30, 2023. The overall decrease as a percentage of revenue is primarily due to the impact of the Licensing Extension and revenue mix from lower artist services and expanded-rights revenue, partially offset by higher costs on third-party distributed label revenue.

2023 vs. 2022

Recorded Music cost of revenues increased by $37 million, or 2%, to $2,502 million for the fiscal year ended September 30, 2023 from $2,465 million for the fiscal year ended September 30, 2022. Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2023 and September 30, 2022.

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

Product costs as a percentage of revenue increased to 24% for the fiscal year ended September 30, 2023 from 23% for the fiscal year ended September 30, 2022. The overall increase as a percentage of revenue primarily relates to revenue mix due to higher third-party distributed label revenue.

Selling, general and administrative expense

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

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

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2024 vs. 2023

Recorded Music selling, general and administrative expense increased by $8 million, or 1%, to $1,432 million for the fiscal year ended September 30, 2024 from $1,424 million for the fiscal year ended September 30, 2023. General and administrative expenses increased by $60 million, primarily due to higher non-cash stock-based compensation and other related expenses of $23 million, the impact of acquisitions of approximately $7 million, unfavorable movements in foreign currency exchange rates of $3 million, partially offset by incremental savings from the Company’s restructuring plans, the majority of which has been reinvested into the Company’s business, including incremental investment in technology of $18 million. The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Company’s restructuring plans. The decrease in distribution expense was primarily due to revenue mix and lower merchandising revenue. Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 27% for the fiscal year ended September 30, 2024 from 29% for the fiscal year ended September 30, 2023.

2023 vs. 2022

Recorded Music selling, general and administrative expense decreased by $105 million, or 7%, to $1,424 million for the fiscal year ended September 30, 2023 from $1,529 million for the fiscal year ended September 30, 2022. The decrease in general and administrative expense was primarily due to the favorable movements in foreign currency exchange rates of $18 million, legal expenses for the Copyright Settlement in the prior year and lower severance costs, acquisition transaction costs and employee related costs, including savings from the Restructuring Plan, partially offset by the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior year related to an acquisition. The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Restructuring Plan. The decrease in distribution expense was primarily due to lower physical and artist services and expanded-rights revenue. Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022.

Operating income and Adjusted OIBDA

2024 vs. 2023

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

Recorded Music Adjusted OIBDA increased by $188 million, to $1,282 million for the fiscal year ended September 30, 2024 from $1,094 million for the fiscal year ended September 30, 2023. The increase in Adjusted OIBDA is primarily driven by strong operating performance, $67 million year-over-year increase from the Licensing Extension, $6 million year-over-year increase from the Digital License Renewal, and savings from the Company’s restructuring plans, the majority of which has been reinvested in the Company’s business. Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 25% for the fiscal year ended September 30, 2024 from 22% for the fiscal year ended September 30, 2023, which includes the impact from the Licensing Extension and Digital License Renewal.

2023 vs. 2022

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

Recorded Music Adjusted OIBDA increased by $48 million, to $1,094 million for the fiscal year ended September 30, 2023 from $1,046 million for the fiscal year ended September 30, 2022 due to strong operating performance, the favorable impact of foreign exchange rates, savings from the 2023 Restructuring Plan, partially offset by revenue mix and the impact of an additional week during the fiscal year ended September 30, 2022. Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 22% for the fiscal year ended September 30, 2023 from 21% for the fiscal year ended September 30, 2022 due to the factors that led to the increase in Adjusted OIBDA noted above.

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Music Publishing

Revenues

2024 vs. 2023

Music Publishing revenues increased by $122 million, or 11%, to $1,210 million for the fiscal year ended September 30, 2024 from $1,088 million for the fiscal year ended September 30, 2023. U.S. Music Publishing revenues were $660 million and $582 million, or 55% and 53% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively. International Music Publishing revenues were $550 million and $506 million, or 45% and 47% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2024 and September 30, 2023, respectively.

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

2023 vs. 2022

Music Publishing revenues increased by $130 million, or 14%, to $1,088 million for the fiscal year ended September 30, 2023 from $958 million for the fiscal year ended September 30, 2022. U.S. Music Publishing revenues were $582 million and $513 million, or 53% and 54% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively. International Music Publishing revenues were $506 million and $445 million, or 47% and 46% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively.

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

Cost of revenues

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

2024 vs. 2023

Music Publishing cost of revenues increased by $82 million, or 12%, to $763 million for the fiscal year ended September 30, 2024 from $681 million for the fiscal year ended September 30, 2023. Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues remained constant at 63% for each of the fiscal years ended September 30, 2024 and September 30, 2023.

2023 vs. 2022

Music Publishing cost of revenues increased by $61 million, or 10%, to $681 million for the fiscal year ended September 30, 2023 from $620 million for the fiscal year ended September 30, 2022. Expressed as a percentage of Music Publishing revenue, Music Publishing cost of revenues decreased to 63% for the fiscal year ended September 30, 2023 from 65% for the fiscal year ended September 30, 2022, primarily attributable to the favorable impact of foreign currency exchange rates, partially offset by revenue mix.

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Selling, general and administrative expense

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

______________________________________

(1)Includes depreciation expense of $4 million, $3 million and $5 million for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively.

2024 vs. 2023

Music Publishing selling, general and administrative expense increased to $125 million for the fiscal year ended September 30, 2024 from $117 million for the fiscal year ended September 30, 2023. The increase was primarily due to higher compensation and employee-related costs, partially offset by a decrease in selling and marketing expense due to lower variable marketing spend. Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the fiscal year ended September 30, 2024 from 11% for the fiscal year ended September 30, 2023.

2023 vs. 2022

Music Publishing selling, general and administrative expense increased to $117 million for the fiscal year ended September 30, 2023 from $112 million for the fiscal year ended September 30, 2022. The increase in general and administrative expense was primarily due to higher employee-related costs. Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 11% for the fiscal year ended September 30, 2023 from 12% for the fiscal year ended September 30, 2022.

Operating income and Adjusted OIBDA

2024 vs. 2023

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

Music Publishing Adjusted OIBDA increased by $34 million, or 11%, to $330 million for the fiscal year ended September 30, 2024 from $296 million for the fiscal year ended September 30, 2023. Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin remained constant at 27% for each of the fiscal years ended September 30, 2024 and September 30, 2023, driven by strong operating performance, partially offset by the CRB Rate Benefit in the prior year of $6 million.

2023 vs. 2022

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

Music Publishing Adjusted OIBDA increased by $63 million, or 27%, to $296 million for the fiscal year ended September 30, 2023 from $233 million for the fiscal year ended September 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above. Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin increased to 27% for the fiscal year ended September 30, 2023 from 24% for the fiscal year ended September 30, 2022 due to strong operating performance and the favorable impact of foreign currency exchange rates, partially offset by revenue mix.

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Corporate Expenses and Eliminations

2024 vs. 2023

Our operating loss from corporate expenses and eliminations increased by $46 million to $331 million for the fiscal year ended September 30, 2024 from $285 million for the fiscal year ended September 30, 2023. The increase is primarily due to an increase in depreciation of $13 million, incremental investment in technology of $5 million, restructuring and non-cash impairment charges associated with the Strategic Restructuring Plan of $11 million, and higher expenses related to transformation initiatives of $23 million, partially offset by the Executive Transition Costs of $7 million in the prior year and lower non-cash stock-based compensation and other related costs of $15 million.

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

2023 vs. 2022

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

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

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FINANCIAL CONDITION AND LIQUIDITY

Financial Condition at September 30, 2024

At September 30, 2024, we had $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, defined as total debt, less cash and equivalents and premiums, discounts and deferred financing costs) and $518 million of Warner Music Group Corp. equity. This compares to $3.964 billion of debt (which is net of $38 million of premiums, discounts and deferred financing costs), $641 million of cash and equivalents (net debt of $3.323 billion) and $307 million of Warner Music Group Corp. equity at September 30, 2023.

Cash Flows

The following table summarizes our historical cash flows (in millions). The financial data for fiscal years ended September 30, 2024, 2023 and 2022 have been derived from our consolidated financial statements included elsewhere herein.

Operating Activities

Cash provided by operating activities was $754 million for the fiscal year ended September 30, 2024 compared to $687 million for the fiscal year ended September 30, 2023 and $742 million for the fiscal year ended September 30, 2022. The $67 million, or 10%, increase in cash provided by operating activities during the current year was primarily due to timing of working capital largely driven by a higher restructuring liability due to the timing of severance payments related to the Strategic Restructuring Plan.

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

Investing Activities

Cash used in investing activities was $311 million for the fiscal year ended September 30, 2024 compared to $300 million for the fiscal year ended September 30, 2023 and $824 million for the fiscal year ended September 30, 2022.

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

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

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

Financing Activities

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

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

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

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

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

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 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 Ba2 in April 2023 with a positive outlook updated in April 2024. In September 2024, Fitch assigned us a BBB- long-term credit rating with a stable outlook. In addition, our weighted-average interest rate on our outstanding indebtedness has decreased from 10.5% in 2011 to 4.3% as of September 30, 2024. 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.

Term Loan Mortgage Agreement

On January 27, 2023, Acquisition Corp., along with Warner Records Inc. and Warner Music Inc., entered into an agreement with Truist Bank, which provides for a term loan of $19 million (“Term Loan Mortgage”) secured by the Company’s real estate properties in Nashville, Tennessee. Interest on the Term Loan Mortgage will accrue at a rate of 30-day Secured Overnight Financing Rate (“SOFR”) plus the applicable margin of 1.40% subject to a zero floor. Equal principal installments and interest are due monthly. The outstanding balance for the Term Loan Mortgage as of September 30, 2024 was $18 million.

Revolving Credit Facility

On January 31, 2018, Acquisition Corp. entered into the revolving credit agreement (as amended by the amendment dated October 9, 2019 and as further amended, amended and restated or otherwise modified from time to time, the “Revolving Credit

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Agreement”) for a senior secured revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto (the “Revolving Credit Facility”). On April 3, 2020, Acquisition Corp. entered into an amendment to the Revolving Credit Agreement (the “Second Amendment”) which, among other things, increased the commitments under the Revolving Credit Facility from an aggregate principal amount of $180 million to an aggregate principal amount of $300 million and extended the final maturity of the Revolving Credit Facility from January 31, 2023 to April 3, 2025. For a more detailed description of the changes effected by the Second Amendment, see Note 10 to our consolidated financial statements included elsewhere herein.

On March 1, 2021, Acquisition Corp. entered into an amendment (the “Revolving Credit Agreement Amendment”) to the Revolving Credit Agreement among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, as administrative agent, governing Acquisition Corp.’s revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Revolving Credit Agreement Amendment (among other changes) adds certain exceptions and increases the leverage ratio below which Acquisition Corp. can access certain baskets in connection with Acquisition Corp.’s negative covenants, including those related to incurrence of indebtedness, restricted payments and covenant suspension.

On March 23, 2023, Acquisition Corp. entered into an amendment (the “Fourth Revolving Credit Agreement Amendment”) to the Revolving Credit Agreement among Acquisition Corp. and Credit Suisse AG, as administrative agent, governing Acquisition Corp.’s revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Fourth Revolving Credit Agreement Amendment provides for the replacement of LIBOR-based rates with a SOFR-based rate and other rates for alternate currencies, such as EURIBOR and SONIA. We utilized the expedients set forth in FASB Topic 848, Reference Rate Reform (“ASC 848”) including those relating to derivative instruments used in hedging relationships. This transition does not result in a financial impact to our consolidated financial statements.

On November 30, 2023, Acquisition Corp. entered into an amendment (the “Fifth Revolving Credit Agreement Amendment”) to the revolving credit agreement, dated January 31, 2018, as amended, among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent, governing Acquisition Corp.’s revolving credit facility (the “Revolving Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Fifth Revolving Credit Agreement Amendment (among other changes): (i) increased the commitments under the Fifth Revolving Credit Agreement Amendment from an aggregate principal amount of $300 million to an aggregate principal amount of $350 million, (ii) extended the final maturity date of the Revolving Credit Facility from April 3, 2025 to November 30, 2028, (iii) appointed JPMorgan Chase Bank, N.A. as administrative agent in the place of Credit Suisse AG, Cayman Islands Branch, (iv) modified the existing springing Secured Indebtedness to EBITDA Ratio financial maintenance covenant by increasing the springing threshold from $105,000,000 to $140,000,000, and (v) included provisions that allow Acquisition Corp. to terminate the security interests securing the obligations under the Revolving Credit Facility upon the satisfaction of certain conditions and, in the event that the security interests are so terminated, the existing springing Secured Indebtedness to EBITDA Ratio financial maintenance covenant (which is calculated net of up to $250 million of cash and cash equivalents held by Acquisition Corp. and its restricted subsidiaries) shall automatically be replaced with a new financial maintenance covenant prohibiting Acquisition Corp. from permitting the Total Indebtedness to EBITDA Ratio to be greater than 3.60:1.00 (calculated net of all cash and cash equivalents held by Acquisition Corp. and its restricted subsidiaries) as of the end of any fiscal quarter.

On September 20, 2024, Acquisition Corp. entered into an amendment (the “Sixth Revolving Credit Agreement Amendment”) to the revolving credit agreement, dated January 31, 2018, as amended, among Acquisition Corp., the several banks and other financial institutions party thereto and Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent, governing the Revolving Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Sixth Revolving Credit Agreement Amendment amended the First Lien Indebtedness to EBITDA Ratio, the Senior Secured Indebtedness to EBITDA Ratio and the Total Indebtedness to EBITDA Ratio, in each case so that the applicable ratio is calculated net of up to $750 million of cash and cash equivalents held by Acquisition Corp. and its restricted subsidiaries as of the date of determination.

Acquisition Corp. is the borrower under the Revolving Credit Agreement which provides for a revolving credit facility in the amount of up to $350 million and includes a $90 million letter of credit sub-facility. Amounts are available under the Revolving Credit Facility in U.S. dollars, euros or pounds sterling. The Revolving Credit Agreement permits loans for general corporate purposes and may also be utilized to issue letters of credit. The loans under the Revolving Credit Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable interest period (“Revolving Term SOFR”), and other rates for alternate currencies, such as EURIBOR and SONIA, as provided in the Revolving Credit Agreement, subject to a zero floor, plus 1.75% per annum in the case of Initial Revolving Loans (as defined in the Revolving Credit Agreement), or 1.875% per annum in the case of 2020 Revolving Loans (as defined in the Revolving Credit Agreement), or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent from

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time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the one-month Revolving Term SOFR plus 1.0% per annum, plus, in each case, 0.75% per annum in the case of Initial Revolving Loans, or 0.875% per annum in the case of 2020 Revolving Loans; provided that, in respect of 2020 Revolving Loans, the applicable margin with respect to such loans is subject to adjustment as set forth in the pricing grid in the Revolving Credit Agreement. Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.05x at September 30, 2024, the applicable margin for SOFR loans and RFR loans would be 1.375% instead of 1.875% and the applicable margin for ABR loans would be 0.375% instead of 0.875% in the case of 2020 Revolving Loans (as defined in the Revolving Credit Agreement).

Prepayments

If, at any time, the aggregate amount of outstanding loans (including letters of credit outstanding thereunder) exceeds the commitments under the Revolving Credit Facility, prepayments of the loans (and after giving effect to such prepayment the cash collateralization of letters of credit) will be required in an amount equal to such excess. The application of proceeds from mandatory prepayments shall not reduce the aggregate amount of then effective commitments under the Revolving Credit Facility and amounts prepaid may be reborrowed, subject to then effective commitments under the Revolving Credit Facility.

Voluntary reductions of the unutilized portion of the Commitments under the Revolving Credit Facility are permitted at any time in certain minimum principal amounts, without premium or penalty. Voluntary prepayments of borrowings under the Revolving Credit Facility are permitted at any time in certain minimum principal amounts, subject to reimbursement of the lenders’ redeployment costs actually incurred in the case of a prepayment of SOFR-based borrowings other than on the last day of the relevant interest period.

Senior Term Loan Facility

Acquisition Corp. is party to a $1,145 million senior secured term loan credit facility, pursuant to a credit agreement dated November 1, 2012, as amended or supplemented (the “Senior Term Loan Credit Agreement”) with Credit Suisse AG, as administrative agent and collateral agent, and the other financial institutions and lenders from time to time party thereto (as described below, the “Senior Term Loan Facility” and, together with the Revolving Credit Facility, the “Senior Credit Facilities”).

On January 20, 2021, Acquisition Corp. entered into an amendment (the “Senior Term Loan Credit Agreement Amendment”) to the Senior Term Loan Credit Agreement. The Senior Term Loan Credit Agreement Amendment (among other changes) (i) extends the maturity date of its outstanding term loans from November 1, 2023 to January 20, 2028 and (ii) removes a number of negative covenants limiting the ability of Acquisition Corp. to take various actions. The remaining negative covenants are limited to restrictions on liens, restrictions on fundamental changes and change of control, and are in a form substantially similar to the negative covenants in the 2.750% Senior Secured Notes due 2028, 3.875% Senior Secured Notes due 2030, 3.000% Senior Secured Notes due 2031 and 2.250% Senior Secured Notes due 2031.

On April 14, 2021, Acquisition Corp. borrowed additional term loans in an amount of $325 million under the Increase Supplement as described further in Note 10 to our consolidated financial statements included elsewhere herein. The Increase Supplement was entered into to provide for the redemption of Acquisition Corp.’s 5.500% Senior Notes due 2026. Following such borrowing, there was an aggregate principal amount outstanding under the Senior Term Loan Credit Agreement of $1,145 million.

On November 1, 2022, Acquisition Corp. entered into a Seventh Incremental Commitment Amendment (the “Seventh Incremental Commitment Amendment”) to the Senior Term Loan Credit Agreement, pursuant to which Acquisition Corp. borrowed additional term loans in the amount of $150 million for an aggregate principal amount outstanding under the Senior Term Loan Credit Agreement of $1,295 million.

On May 10, 2023, Acquisition Corp. entered into an amendment (the “Senior Term Loan Credit Agreement Amendment”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the guarantors party thereto and Credit Suisse AG, as administrative agent. The Senior Term Loan Credit Agreement Amendment provides for the replacement of LIBOR-based rates with a SOFR-based rate. We utilized the expedients set forth in ASC 848, including those relating to derivative instruments used in hedging relationships. This transition does not result in a financial impact to our consolidated financial statements.

On June 30, 2023, Acquisition Corp. entered into an increase supplement (the “Third Increase Supplement”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the guarantors party thereto, the lender party thereto and Credit Suisse AG, as administrative agent, pursuant to which Acquisition Corp. has borrowed additional Tranche G term loans in an amount equal to $150 million, the proceeds of which have been used to prepay the Tranche H term loans in full (see “Senior Term Loan Facility Amendment”), for an aggregate principal amount outstanding under the Senior Term Loan Credit Agreement of $1,295 million. The Company recorded a loss on extinguishment of debt of approximately $4 million for the fiscal year ended September 30, 2024, which represents the remaining unamortized discount and deferred financing costs of the Tranche H term loan.

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On December 29, 2023, Acquisition Corp. entered into an amendment (the “Thirteenth Amendment”) to the Senior Term Loan Credit Agreement among Acquisition Corp., the other loan parties, Holdings, each lender party hereto, Credit Suisse AG, Cayman Islands Branch as the resigning administrative agent, and JPMorgan Chase Bank, N.A, as the successor administrative agent. The Thirteenth Amendment appointed JPMorgan Chase Bank, N.A. as administrative agent in the place of Credit Suisse AG, Cayman Islands Branch.

On January 24, 2024, Acquisition Corp entered into an amendment (the “Fourteenth Amendment”) to the credit agreement, dated November 1, 2012 (as amended by the amendments dated as of May 9, 2013, July 15, 2016, November 21, 2016, May 22, 2017, December 6, 2017, March 14, 2018, June 7, 2018, January 20, 2021, March 8, 2021, November 1, 2022, May 10, 2023, June 30, 2023 and December 29, 2023), among Acquisition Corp., the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, governing Acquisition Corp.’s senior secured term loan facility with JPMorgan Chase Bank N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Fourteenth Amendment (among other changes) extends the maturity date of its outstanding term loans from January 20, 2028 to January 24, 2031 through the issuance of tranche I term loans and refinancing of the existing tranche G term loans. The tranche I term loans shall bear interest at a rate equal to, at Acquisition Corp.’s election (i) the forward-looking term rate based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable interest period (“Term SOFR”) subject to a zero floor, plus 2.00% per annum or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) one-month Term SOFR, plus 1.00% per annum, in each case, subject to a 1.00% floor, plus 1.00% per annum. In connection with the Fourteenth Amendment, the Company recognized approximately $3 million of expenses associated with fees paid to third parties and capitalized approximately $2 million in fees paid to creditors. Certain participating lenders were repaid and replaced by new lenders. The proceeds and repayments of $42 million have been presented in the accompanying consolidated statement of cash flows.

On September 17, 2024, Acquisition Corp. entered into an amendment (the “Fifteenth Amendment”) to the credit agreement, dated November 1, 2012 (as amended by the amendments dated as of May 9, 2013, July 15, 2016, November 21, 2016, May 22, 2017, December 6, 2017, March 14, 2018, June 7, 2018, January 20, 2021, March 8, 2021, November 1, 2022, May 10, 2023, June 30, 2023, December 29, 2023 and January 24, 2024), among Acquisition Corp., the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, governing Acquisition Corp.’s senior secured term loan facility with JPMorgan Chase Bank N.A., as administrative agent, and the other financial institutions and lenders from time to time party thereto. The Fifteenth Amendment (among other changes) reprices the term loans through the issuance of tranche J term loans and the refinancing of the existing tranche I term loans. The tranche J term loans shall bear interest at a rate equal to, at Acquisition Corp.’s election (i) Term SOFR subject to a zero floor, plus 1.75% per annum or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) one-month Term SOFR, plus 1.00% per annum, in each case, subject to a 1.00% floor, plus 1.00% per annum. In connection with the Fifteenth Amendment, the Company recognized approximately $2 million of expenses associated with fees paid to third parties. Certain participating lenders were repaid and replaced by new lenders. The proceeds and repayments of $62 million have been presented in the accompanying consolidated statement of cash flows.

General

Acquisition Corp. is the borrower under the Senior Term Loan Facility (the “Term Loan Borrower”). The loans outstanding under the Senior Term Loan Facility mature on January 20, 2028.

In addition, the Senior Term Loan Credit Agreement provides the right for individual lenders to extend the maturity date of their loans upon the request of the Term Loan Borrower and without the consent of any other lender.

Subject to certain conditions, without the consent of the then existing lenders (but subject to the receipt of commitments), the Senior Term Loan Facility may be expanded (or a new term loan facility entered into) by up to the greater of (i) $300 million and (ii) such additional amount as would not cause the net senior secured leverage ratio, after giving effect to the incurrence of such additional amount and any use of proceeds thereof, to exceed 4.50:1.00.

Interest Rates and Fees

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

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

Prepayments

The Senior Term Loan Facility is subject to mandatory prepayment and reduction in an amount equal to (a) 50% of excess cash flow (as defined in the Senior Term Loan Credit Agreement), with reductions to 25% and zero based upon achievement of a net senior secured leverage ratio of less than or equal to 4.50:1.00 or 4.00:1.00, respectively, (b) 100% of the net cash proceeds received from the incurrence of indebtedness by the Term Loan Borrower or any of its restricted subsidiaries (other than indebtedness permitted under the Senior Term Loan Facility) and (c) 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by the Term Loan Borrower and its restricted subsidiaries (including certain insurance and condemnation proceeds) in excess of $75 million and subject to the right of the Term Loan Borrower and its restricted subsidiaries to reinvest such proceeds within a specified period of time, and other exceptions. Voluntary prepayments of borrowings under the Senior Term Loan Facility are permitted at any time, in minimum principal amounts of $1 million or a whole multiple of $500,000 in excess thereof, subject to reimbursement of the lenders’ redeployment costs actually incurred in the case of a prepayment of adjusted SOFR borrowings other than on the last day of the relevant interest period.

Secured Notes

3.875% Senior Secured Notes

On June 29, 2020, Acquisition Corp. issued $535 million in aggregate principal amount of its 3.875% Senior Secured Notes under the Indenture, dated June 29, 2020 (the “Senior Secured Base Indenture”), among Acquisition Corp., the guarantors party thereto, Credit Suisse AG, as Notes Authorized Representative and Collateral Agent and Wells Fargo Bank, National Association, as Trustee, as supplemented by the First Supplemental Indenture (the “3.875% Supplemental Indenture”).

At any time prior to July 15, 2025, the 3.875% Senior Secured Notes may be redeemed at a redemption price equal to 100% of the principal amount of the 3.875% Senior Secured Notes redeemed plus the applicable make-whole premium (the “Make-Whole Redemption”) set forth in the Secured Notes Indenture, plus accrued and unpaid interest thereon, if any, to the applicable redemption date in accordance with the 3.875% Supplemental Indenture. Additionally, at any time prior to July 15, 2025, on one or more occasions, up to 40% of the 3.875% Senior Secured Notes may be redeemed with proceeds that Acquisition Corp. or its direct or indirect parent raises in one or more equity offerings (the “Equity Redemption”) at a redemption price equal to 103.875% of the principal amount of the 3.875% Senior Secured Notes redeemed, plus accrued and unpaid interest thereon, if any, to the date of redemption. On or after July 15, 2025, Acquisition Corp. may redeem all or a portion of the 3.875% Senior Secured Notes, at its option, at the redemption prices starting at 101.938% (expressed as percentages of principal amount) plus accrued and unpaid interest thereon, if any, on the 3.875% Senior Secured Notes to be redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15, 2025. Additionally, during any twelve month period prior to July 15, 2025, the 3.875% Senior Secured Notes may be redeemed at a redemption price equal to 103.000% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (the “Secured Notes Redemption”).

2.750% Senior Secured Notes

Also on June 29, 2020, Acquisition Corp. issued €325 million in aggregate principal amount of its 2.750% Senior Secured Notes under the Senior Secured Base Indenture, as supplemented by the Second Supplemental Indenture, dated as of June 29, 2020, among Acquisition Corp., the guarantors party thereto and the Trustee (the “2.750% Supplemental Indenture”).

At any time prior to July 15, 2023, the 2.750% Senior Secured Notes may be redeemed pursuant to a Make-Whole Redemption in accordance with the 2.750% Supplemental Indenture. Additionally, at any time prior to July 15, 2023, the 2.750% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 102.750% of the principal amount of the 2.750% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption. On or after July 15, 2023, Acquisition Corp. may redeem all or a portion of the 2.750% Senior Secured Notes, at its option, at the redemption prices starting at 101.375% (expressed as percentages of principal amount) plus accrued and unpaid interest thereon, if any, on the 2.750% Senior Secured Notes to be redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15, 2023. Additionally, during any twelve month period prior to July 15, 2023, the 2.750% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption.

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3.000% Senior Secured Notes

On August 12, 2020, Acquisition Corp. issued $550 million in aggregate principal amount of its 3.000% Senior Secured Notes under the Senior Secured Base Indenture, as supplemented by the Third Supplemental Indenture, dated as of August 12, 2020, among Acquisition Corp., the guarantors party thereto and the Trustee (the “3.000% Supplemental Indenture”).

At any time prior to February 15, 2026, the 3.000% Senior Secured Notes may be redeemed pursuant to a Make-Whole Redemption in accordance with the 3.000% Supplemental Indenture. Additionally, at any time prior to August 15, 2023, the 3.000% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 103.000% of the principal amount of the 3.000% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption. On or after February 15, 2026, Acquisition Corp. may redeem all or a portion of the 3.000% Senior Secured Notes, at its option, at the redemption prices starting at 101.500% (expressed as percentages of principal amount) plus accrued and unpaid interest thereon, if any, on the 3.000% Senior Secured Notes to be redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on February 15, 2026. Additionally, during any twelve month period prior to February 15, 2026, the 3.000% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption.

On November 2, 2020, Acquisition Corp. issued and sold $250 million of additional 3.000% Senior Secured Notes (the “Additional Notes”). Interest on the Additional Notes will accrue at the rate of 3.000% per annum and will be payable semi-annually in arrears on February 15 and August 15, commencing on February 15, 2021. The Additional Notes have identical terms as (other than the issue date and the issue price) and are fungible with, and treated as a single series of senior secured debt securities with, the 3.000% Senior Secured Notes issued on August 12, 2020 (the “Original Notes”).

2.250% Senior Secured Notes

On August 16, 2021, Acquisition Corp. issued and sold €445 million in aggregate principal amount of its 2.250% Senior Secured Notes due 2031 (the “2.250% Senior Secured Notes”) under the Senior Secured Base Indenture, as supplemented by the Fifth Supplemental Indenture, dated as of August 16, 2021, among Acquisition Corp., the guarantors party thereto and the Trustee (the “2.250% Supplemental Indenture”).

At any time prior to August 15, 2026, the 2.250% Senior Secured Notes may be redeemed pursuant to a Make-Whole Redemption in accordance with the 2.250% Supplemental Indenture. Additionally, at any time prior to August 15, 2026, the 2.250% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 102.250% of the principal amount of the 2.250% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption. On or after August 15, 2026, Acquisition Corp. may redeem all or a portion of the 2.250% Senior Secured Notes, at its option, at the redemption prices starting at 101.125% (expressed as percentages of principal amount) plus accrued and unpaid interest thereon, if any, on the 2.250% Senior Secured Notes to be redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on August 15, 2026. Additionally, during any twelve month period prior to August 15, 2026, the 2.250% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption at 101.125%.

3.750% Senior Secured Notes

On November 17, 2021, Acquisition Corp. priced $540 million in aggregate principal amount of its 3.750% Senior Secured Notes due 2029 (the “3.750% Senior Secured Notes,” together with the 3.875% Senior Secured Notes, the 2.750% Senior Secured Notes, the 3.000% Senior Secured Notes and the 2.250% Senior Secured Notes, the “Secured Notes”). We issued the 3.750% Senior Secured Notes on November 24, 2021 under the Senior Secured Base Indenture, as supplemented by the Sixth Supplemental Indenture, dated as of November 24, 2021, among Acquisition Corp., the guarantors party thereto and the Trustee (the “3.750% Supplemental Indenture,” together with the Senior Secured Base Indenture, the 3.875% Supplemental Indenture, the 2.750% Supplemental Indenture, the 3.000% Supplemental Indenture and the 2.250% Supplemental Indenture, the “Secured Notes Indenture”).

At any time on one or more occasions on or prior to the fifth business day following December 20, 2021 by giving notice at least five business days prior to such time, Acquisition Corp. may elect to redeem all or a portion of the 3.750% Senior Secured Notes at a special optional redemption price equal to the issue price of the 3.750% Senior Secured Notes plus 1% of the principal amount thereof, plus accrued and unpaid interest thereon to, but excluding, the redemption date, provided, that Acquisition Corp. may only elect to redeem fewer than all of the 3.750% Senior Secured Notes, if, after giving effect to any such redemption, at least $250 million aggregate principal amount of the 3.750% Senior Secured Notes remains outstanding following such special optional redemption.

At any time prior to December 1, 2024, the 3.750% Senior Secured Notes may be redeemed pursuant to a Make-Whole Redemption in accordance with the 3.750% Supplemental Indenture. Additionally, at any time prior to December 1, 2024, the 3.750% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 103.750% of the principal

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amount of the 3.750% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption. On or after December 1, 2024, Acquisition Corp. may redeem all or a portion of the 3.750% Senior Secured Notes, at its option, at the redemption prices starting at 101.875% (expressed as a percentage of principal amount) plus accrued and unpaid interest thereon, if any, on the 3.750% Senior Secured Notes to be redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1, 2024. Additionally, during any twelve month period prior to December 1, 2024, the 3.750% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption.

General Terms of Our Indebtedness

Certain terms of the Senior Credit Facilities and certain terms of each series of notes under our Secured Notes Indenture are described below.

Ranking

The indebtedness incurred pursuant to the Revolving Credit Facility and the Senior Term Loan Facility and the Secured Notes are Acquisition Corp.’s senior secured obligations and are secured on an equal and ratable basis with all existing and future indebtedness secured with the same security arrangements. The Secured Notes rank senior in right of payment to Acquisition Corp.’s existing and future subordinated indebtedness; rank equally in right of payment with all of Acquisition Corp.’s existing and future senior indebtedness and any future senior secured credit facility; are effectively senior to Acquisition Corp.’s unsecured senior indebtedness to the extent of the value of the collateral securing the senior secured obligations; and are structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of any of Acquisition Corp.’s non-guarantor subsidiaries (other than indebtedness and liabilities owed to Acquisition Corp. or one of its subsidiary guarantors (as such term is defined below)).

Guarantees and Security

The obligations under each of the Revolving Credit Facility, the Senior Term Loan Facility and the Secured Notes Indenture are guaranteed by each direct and indirect U.S. restricted subsidiary of Acquisition Corp., other than certain excluded subsidiaries. All obligations of Acquisition Corp. and each guarantor under the Revolving Credit Facility, the Senior Term Loan Facility and the Secured Notes Indenture are secured by substantially all the assets of Acquisition Corp and each subsidiary guarantor.

Covenants, Representations and Warranties

The Revolving Credit Facility, the Senior Term Loan Facility and the Secured Notes contain customary representations and warranties and certain affirmative and negative covenants. The negative covenants applicable to securities issued pursuant to the Secured Notes Indenture, Senior Term Loan Facility and the Revolving Credit Facility limit the ability of Acquisition Corp. and its restricted subsidiaries to, among other things, create liens and consolidate, merge, sell or otherwise dispose of all or substantially all of its assets. In addition, our Revolving Credit Facility includes additional covenants, which are incurrence-based high yield covenants and limit the ability of Acquisition Corp. and its restricted subsidiaries to, among other things, incur additional indebtedness or issue certain preferred shares; pay dividends, redeem stock or make other distributions; repurchase, prepay or redeem subordinated indebtedness; make investments; create restrictions on the ability of its restricted subsidiaries to pay dividends to it or make other intercompany transfers; transfer or sell assets; enter into certain transactions with its affiliates; and designate subsidiaries as unrestricted subsidiaries. These additional covenants are currently suspended. These covenants 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 negative covenants are subject to customary exceptions. There are no financial covenants included in the Revolving Credit Agreement, other than a springing leverage ratio of 5.00:1.00 (with no step-down), which is not tested, unless at the end of a fiscal quarter the outstanding amount of loans and drawings under letters of credit which have not been reimbursed exceeds $140 million. There are no financial covenants included in the Senior Term Loan Credit Agreement or the Secured Notes Indenture.

Events of Default

Events of default under the Revolving Credit Facility, the New Senior Term Loan Facility and the Secured Notes Indenture include, as applicable, nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, cross default and cross acceleration to other material debt, certain bankruptcy or insolvency events, certain ERISA events, certain material judgments, actual or asserted invalidity of security interests in excess of $50 million, or $75 million in the case of the Secured Notes Indenture, in each case subject to customary thresholds, notice and grace period provisions.

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Change of Control

Upon the occurrence of a change of control triggering event, which is defined in the Secured Notes Indenture, each holder of the Secured Notes has the right to require Acquisition Corp. to repurchase some or all of such holder’s Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.

Existing Debt as of September 30, 2024

As of September 30, 2024, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions):

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

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 August 15, 2024, the Company’s board of directors declared a cash dividend of $0.18 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid on September 4, 2024.

On November 8, 2024, the Company’s board of directors declared a cash dividend of $0.18 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, payable on December 3, 2024 to stockholders of record as of the close of business on November 19, 2024.

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

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 September 30, 2024.

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.

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The Revolving Credit Facility contains a springing leverage ratio that is tied to a ratio based on EBITDA, which is defined under the Revolving Credit Agreement. Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans. 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.

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.

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The following is a reconciliation of net income, 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 September 30, 2024, for the twelve months ended September 30, 2023 and for the three months ended September 30, 2024 and September 30, 2023. In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended September 30, 2024. 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):

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

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

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

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

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

(f)Reflects non-cash stock-based compensation expense related to the Omnibus Incentive Plan and the Warner Music Group Corp. Senior Management Free Cash Flow Plan in the prior year.

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

(h)Reflects expected savings resulting from transformation initiatives, including the Strategic Restructuring Plan and the 2023 Restructuring Plan, and the pro forma impact of certain specified transactions for the three and twelve months ended September 30, 2024. Certain of these cost savings initiatives and transactions impacted quarters prior to the quarter during which they were identified within the last twelve-month period. The pro forma impact of these specified transactions and initiatives resulted in a $59 million increase in the twelve months ended September 30, 2024 Adjusted EBITDA.

(i)Reflects the balance of senior secured debt at Acquisition Corp. of approximately $4.014 billion less cash of $694 million.

(j)Reflects the ratio of Senior Secured Indebtedness, including Revolving Credit Agreement Indebtedness, to Adjusted EBITDA. This is calculated net of cash and equivalents of the Company as of September 30, 2024 not exceeding $750 million in accordance with the Sixth Revolving Credit Agreement Amendment as described further in Note 10. If the outstanding aggregate principal amount of borrowings and drawings under letters of credit which have not been reimbursed under our Revolving Credit Facility is greater than $140 million at the end of a fiscal quarter, the maximum leverage ratio permitted under the Revolving Credit Facility is 5.00:1.00. The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $140 million at the end of a fiscal quarter. On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were

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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.

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.

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Contractual and Other Obligations

Firm Commitments

The following table summarizes the Company’s aggregate contractual obligations at September 30, 2024, and the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flow in future periods.

______________________________________

The following is a description of our firmly committed contractual obligations at September 30, 2024:

(1)Outstanding debt obligations consist of the Senior Secured Notes, Senior Term Loan Facility and the Term Loan Mortgage. These obligations have been presented based on the principal amounts due as of September 30, 2024. Amounts do not include any fair value adjustments, bond premiums, discounts or unamortized deferred financing costs.

(2)Operating lease obligations primarily relate to the minimum lease rental obligations for our real estate and operating equipment in various locations around the world.

(3)The Company routinely enters into long-term commitments with recording artists, songwriters and publishers for the future delivery of music. Such commitments generally become due only upon delivery and Company acceptance of albums from the recording artists or future musical compositions from songwriters and publishers. Additionally, such commitments are typically cancellable at the Company’s discretion, generally without penalty. Based on contractual obligations and the Company’s expected release schedule, off-balance sheet aggregate firm commitments to such talent approximated $558 million at September 30, 2024. The aggregate firm commitments expected for the next twelve-month period based on contractual obligations and the Company’s expected release schedule approximates $329 million at September 30, 2024.

(4)We have minimum funding commitments and other related obligations to support the operations of various investments, which are reflected in the table above. Other long-term liabilities, which are not included in the table above, include $10 million and $13 million of liabilities for uncertain tax positions as of September 30, 2024 and September 30, 2023, respectively. We are unable to accurately predict when these amounts will be realized or released.

*Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The SEC’s Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggests companies provide additional disclosure and commentary on those accounting policies considered most critical. FRR 60 considers an accounting policy to be critical if it is important to our financial condition and results, and requires significant judgment and estimates on the part of management in our application. We believe the following list represents critical accounting policies as contemplated by FRR 60. For a summary of all of our significant accounting policies, see Note 2 to our consolidated financial statements included elsewhere herein.

Business Combinations

We account for our business acquisitions under the FASB ASC Topic 805, Business Combinations (“ASC 805”) guidance for business combinations. The total cost of acquisitions is allocated to the underlying identifiable net assets based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. If our assumptions or estimates in the fair value calculation change based on information that becomes available during the one-year period from the acquisition date, the fair value of our acquired intangible assets could change; this would also change the value of our goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill and Other Intangible Assets

We account for our goodwill and other indefinite-lived intangible assets as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”). We test goodwill for impairment at the reporting unit level and have concluded that our reporting units are generally the same as our reportable segments. We evaluate the determination of our reporting units periodically or whenever events or substantive changes in circumstances occur. ASC 350 requires that goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques on an annual basis and when events occur that may suggest that the fair value of such assets cannot support the carrying value. ASC 350 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or intangible asset is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit or intangible asset is less than its carrying amount, then performing the quantitative impairment test is unnecessary. However, if an entity concludes otherwise, then the quantitative impairment test shall be used to identify the impairment and measure the amount of an impairment loss to be recognized (if applicable).

As of September 30, 2024, we had recorded goodwill in the amount of $2.021 billion, including $1.557 billion and $464 million for our Recorded Music and Music Publishing businesses, respectively, primarily related to the Merger and PLG Acquisition. As of September 30, 2024, we had recorded indefinite-lived intangible assets of $152 million. We test our goodwill and other indefinite-lived intangible assets for impairment on an annual basis in the fourth quarter of each fiscal year as of July 1. We performed a qualitative assessment for our reporting units and other indefinite-lived intangible assets in fiscal 2024. This assessment considered changes in our projected future cash flows and discount rates, recent market transactions and overall macroeconomic conditions. Based on this assessment, we concluded that it was more likely than not that the estimated fair values of our reporting units and other indefinite-lived intangible assets were higher than their carrying values and that the performance of a quantitative impairment test was not required.

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

Revenue Recognition

Recorded Music

As required by FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when, or as, control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods. The Company’s revenue recognition process involves several applications that are responsible for the initiation and processing of transactions in order to recognize revenue in accordance with the Company’s policy and ASC 606.

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Revenues from the sale or license of Recorded Music products through digital distribution channels are typically recognized when sale or usage occurs based on usage reports received from the customer. Certain contracts contain minimum guarantees, which are recoupable against royalties. Upon contract inception, the Company will assess whether a shortfall or breakage is expected (i.e., where the minimum guarantee will not be recouped through royalties) in order to determine timing of revenue recognition for the minimum guarantee.

For fixed fee contracts and minimum guarantee contracts where breakage is expected, the total transaction price (fixed fee or minimum guarantee) is typically recognized using an appropriate measure of progress over the contractual term. The Company updates its assessment of the transaction price each reporting period to see if anticipated royalty earnings exceed the minimum guarantee. For contracts where breakage is not expected, royalties are recognized as revenue as sales or usage occurs based upon the licensee’s usage reports and, when these reports are not available, revenue is based on historical data, industry information and other relevant trends.

Music Publishing

Music Publishing revenues are earned from the receipt of royalties relating to the licensing of rights in musical compositions and the sale of published sheet music and songbooks. The receipt of royalties principally relates to amounts earned from the public performance of musical compositions, the mechanical reproduction of musical compositions on recorded media, including digital formats and the use of musical compositions in synchronization with visual images. Music publishing royalties, except for synchronization royalties, generally are recognized when the sale or usage occurs. The most common form of consideration for publishing contracts is sales- and usage-based royalties. The collecting societies submit usage reports, typically with payment for royalties due, often on a quarterly or biannual reporting period, in arrears. Royalties are recognized as the sale or usage occurs based upon usage reports and, when these reports are not available, royalties are estimated based on historical data, such as recent royalties reported, company-specific information with respect to changes in repertoire, industry information and other relevant trends. Synchronization revenue is typically recognized as revenue when control of the license is transferred to the customer in accordance with ASC 606.

Royalty Costs and Royalty Advances

The Company incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our Recorded Music catalog and Music Publishing copyrights. Royalties owed to artists are calculated using negotiated rates which is applied to revenue earned in accordance with recording artist and songwriter contracts. There are instances where such data is not available to be processed and royalty cost calculations may involve judgments about significant volumes of data to be processed and analyzed.

We had $2,549 million and $2,219 million of royalty payables in our balance sheet at September 30, 2024 and September 30, 2023, respectively.

In many instances, the Company commits to pay our recording artists and songwriters royalties in advance of future sales. The Company accounts for these advances under the related guidance in FASB ASC Topic 928, Entertainment—Music (“ASC 928”). Under ASC 928, the Company capitalizes as assets advances that it believes are recoverable from future royalties to be earned by the recording artist or songwriter. Recoverability is assessed upon initial commitment of the advance based upon the Company’s forecast of anticipated revenue from the sale of future and existing albums or musical compositions. In determining whether the advance is recoverable, the Company evaluates the current and past popularity of the recording artist or songwriter, the sales history of the recording artist or songwriter, the initial or expected commercial acceptability of the product, the current and past popularity of the genre of music that the product is designed to appeal to, and other relevant factors. Advances vary in both amount and expected life based on the underlying recording artist or songwriter. To the extent that a portion of an outstanding advance is no longer deemed recoverable, that amount will be expensed in the period the determination is made.

We had $1,344 million and $1,101 million of advances in our balance sheet at September 30, 2024 and September 30, 2023, respectively. We believe such advances are recoverable through future royalties to be earned by the applicable recording artists and songwriters.

Recent Accounting Pronouncements

Refer to Note 2 to our consolidated financial statements included elsewhere herein for more information regarding recently issued accounting pronouncements.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Actual results and the timing of events could differ materially from those projected in forward-looking statements due to a number of factors, including those described under “Item 1A. Risk Factors” and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements.”

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report.

INTRODUCTION

The Company is the direct parent of Holdings, which is the direct parent of 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 consolidated 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 fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021. 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 fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021, as well as a discussion of our financial condition and liquidity as of September 30, 2023. 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.

•Critical accounting policies and estimates. This section identifies those accounting policies that are considered important to the Company’s results of operations and financial condition, require significant judgment and involve significant management estimates. The Company’s significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 2 to the accompanying consolidated financial statements.

Use of 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 (“OIBDA”). We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S. GAAP”). In addition, our definition of OIBDA may differ from similarly titled measures used by other companies. A reconciliation of consolidated OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp. is provided in our “Results of Operations.”

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Use of Constant Currency

As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares revenue and OIBDA between periods as if exchange rates had remained constant period over period. We use revenue on a constant-currency basis as one measure to evaluate our performance. We calculate constant currency by calculating prior-year revenue using current-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” This revenue should be considered in addition to, not as a substitute for, revenue reported in accordance with U.S. GAAP. Revenue on a constant-currency basis, as we present it, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S. 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 150,000 songwriters and composers, with a global collection of more than one 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 and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm. Our business’ distribution operations also includes ADA, which markets, distributes and sells the products of independent labels to retail and wholesale distributors; 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 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-

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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.

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 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 150,000 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.

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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 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

Fiscal Year End

Prior to the start of the 2023 fiscal year, the Company maintained a 52-53 week fiscal year ending on the last Friday in each reporting period. Starting with the 2023 fiscal year, the Company transitioned to a reporting calendar in which the reporting periods end on the last day of the calendar quarter. Accordingly, the results of operations for the fiscal year ended September 30, 2023 reflect 365 days, compared to 371 days for the fiscal year ended September 30, 2022 and 364 days for the fiscal year ended September 30, 2021. For the fiscal year ended September 30, 2022, the revenue benefit of the additional week was approximately $73 million, primarily reflected in Recorded Music streaming revenue.

Restructuring

In March 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to drive the evolution of the Company and position the Company for long-term growth, primarily through headcount reductions. Under the Restructuring Plan, the Company expects to reduce headcount by approximately 270 people, or approximately 4% of the Company’s overall headcount. During the fiscal year ended September 30, 2023, the Company recognized restructuring charges of approximately $40 million for severance costs, all of which will be paid in cash. All restructuring expenses were recorded in the Recorded Music segment. The Restructuring Plan is substantially complete as of September 30, 2023, with related cash expenditures expected to be made by the end of fiscal 2024.

The headcount reductions generated pre-tax cost savings of approximately $19 million in fiscal year 2023 and the Company expects to generate pre-tax costs savings of approximately $50 million on an annualized run-rate basis in fiscal year 2024. The Company anticipates investing a portion of the cost savings from the headcount reductions for targeted hires, to add new skill sets and for other initiatives intended to position the Company for long-term growth.

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

Executive Transition Costs

During the fiscal year ended September 30, 2023, the Company incurred costs associated with the departure of our Chief Executive Officer which occurred in January 2023 and our Chief Financial Officer which occurred in October 2023 (the “Executive Transition Costs”). For the fiscal year ended September 30, 2023, the Executive Transition Costs were approximately $7 million, which mainly consisted of severance for our previous CEO and CFO. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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The departures of our CEO and CFO resulted in the recognition of $13 million of non-cash stock-based compensation expense for the fiscal year ended September 30, 2023, for RSUs and common stock as there is no remaining service required for vesting. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Russia-Ukraine Conflict

On February 24, 2022, the geopolitical situation in Eastern Europe intensified with Russia's invasion of Ukraine, and the sanctions and other measures imposed in response to this conflict have increased global economic and political uncertainty. WMG operates both its Recorded Music and Music Publishing businesses within Russia and, on March 10, 2022, the Company announced a suspension of these operations in Russia. While our operations in Russia do not constitute a material portion of our business, a significant escalation or expansion of the conflict's current scope, increased or sustained economic disruption, sanctions or countersanctions, further devaluation of the local currency or increased cyber-related disruptions could make it difficult to deliver our content, broaden inflationary costs, and have an adverse effect on our results of operations.

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RESULTS OF OPERATIONS

Fiscal Year Ended September 30, 2023 Compared with Fiscal Year Ended September 30, 2022 and Fiscal Year Ended September 30, 2021

Consolidated Results

Revenues

The Company’s revenues were composed of the following amounts (in millions):