Warner Music Group Corp

Previous wording

•Results of operations. This section provides an analysis of our results of operations for the three months ended December 31, 2023 and December 31, 2022. This analysis is presented on both a consolidated and segment basis.

Current wording

•Results of operations. This section provides an analysis of our results of operations for the three and six months ended March 31, 2024 and March 31, 2023. This analysis is presented on both a consolidated and segment basis.

Previous wording

•Financial condition and liquidity. This section provides an analysis of our cash flows for the three months ended December 31, 2023 and December 31, 2022, as well as a discussion of our financial condition and liquidity as of December 31, 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.

Current wording

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

Previous wording

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 100,000 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.

Current wording

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 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.

Previous wording

Our Recorded Music business’ operations include WMX, a next generation services division that connects artists with fans and amplifies brands in creative, immersive, and engaging ways. This division includes a rebranded WEA commercial services & marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm. Our business’ distribution operations also includes 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.

Current wording

Our Recorded Music business’ operations include WMX, a next generation services division that connects artists with fans and amplifies brands in creative, immersive, and engaging ways. This division includes a rebranded WEA commercial services & marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm. Our business’ distribution operations also include Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally.

Previous wording

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 100,000 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.

Current wording

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 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.

Previous wording

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. The headcount reductions generated pre-tax cost savings of approximately $12 million for the three months ended December 31, 2023.

Current wording

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 headcount reductions generated pre-tax cost savings of approximately $12 million and $24 million for the three and six months ended March 31, 2024.

Previous wording

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

Current wording

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

Previous wording

During the quarter ended December 31, 2023, in connection with the BMG Termination, the Company reported lower Recorded Music digital revenue of $13 million compared to the prior-year quarter, of which $12 million was streaming revenue. The impact to Recorded Music’s Adjusted OIBDA was immaterial in the quarter.

Current wording

During the three and six months ended March 31, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music digital revenue of $22 million and $35 million, respectively, of which $20 million and $32 million was streaming revenue, respectively. The impact to Recorded Music’s Adjusted OIBDA was immaterial in the year.

Previous wording

Total digital revenues after intersegment eliminations increased by $152 million, or 16%, to $1,104 million for the three months ended December 31, 2023 from $952 million for the three months ended December 31, 2022. Total streaming revenue increased 17% driven by growth across Recorded Music and Music Publishing. Prior to intersegment eliminations, total digital revenues for the three months ended December 31, 2023 were composed of U.S. revenues of $536 million and international revenues of $568 million, or 49% and 51% of total digital revenues, respectively. Prior to intersegment eliminations, total digital revenues for the three months ended December 31, 2022 were composed of U.S. revenues of $484 million and international revenues of $468 million, or 51% and 49% of total digital revenues, respectively.

Current wording

Total digital revenues after intersegment eliminations increased by $93 million, or 10%, to $1,035 million for the three months ended March 31, 2024 from $942 million for the three months ended March 31, 2023. Total streaming revenue increased 11% driven by growth across Recorded Music and Music Publishing. Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2024 were composed of U.S. revenues of $511 million and international revenues of $524 million, or 49% and 51% of total digital revenues, respectively. Prior to intersegment eliminations, total digital revenues for the three months ended March 31, 2023 were composed of U.S. revenues of $473 million and international revenues of $469 million, or 50% of total digital revenues for each of U.S. and international revenues.

Previous wording

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 revenue. Digital revenue increased by $105 million, which includes the favorable impact of foreign currency exchange rates of $5 million. Revenue from streaming services increased by $107 million, or 14%, to $887 million for the three months ended December 31, 2023 from $780 million for the three months ended December 31, 2022, which includes the favorable impact of foreign currency exchange rates of $4 million, or 1%. Streaming revenue includes $27 million from the Digital License Renewal, partially offset by the impact of the BMG Termination of $12 million. Adjusted for these items, streaming revenues increased 12%. The quarter included carryover success from Ed Sheeran, Dua Lipa and Zach Bryan. Download and other digital revenues decreased by $2 million, or 9%, to $21 million for the three months ended December 31, 2023 from $23 million for the three months ended December 31, 2022 due to the continued shift to streaming services. Licensing revenue increased by $82 million, primarily due to $68 million from the Licensing Extension, the timing of new licensing deals primarily in the United States, and the favorable impact of foreign currency exchange rates of $2 million. Physical revenue increased by $21 million, driven by the favorable impact of foreign currency exchange rates of $3 million and stronger performances in the United States, Japan and the UK. Artist services and expanded-rights revenue decreased by $2 million due to lower merchandising revenue, partially offset by higher concert promotion revenue and the favorable impact of foreign currency exchange rates of $6 million.

Current wording

The overall increase in Recorded Music revenue was driven by increases in digital and licensing revenues, partially offset by lower physical and artist services and expanded-rights revenues. Digital revenue increased by $52 million primarily due to growth in streaming revenue, partially offset by the unfavorable impact of foreign currency exchange rates of $4 million. Revenue from streaming services increased by $55 million, or 7%, to $828 million for the three months ended March 31, 2024 from $773 million for the three months ended March 31, 2023. The growth in streaming revenue is partially offset by the impacts of the BMG Termination of $20 million, the Digital License Renewal of $4 million, and the unfavorable impact of foreign currency exchange rates of $4 million. Adjusted for the BMG Termination and the Digital License Renewal, streaming revenues increased 11%. The quarter included carryover success from Zach Bryan, Jack Harlow, and Ed Sheeran. Download and other digital revenues decreased by $3 million, or 13%, to $20 million for the three months ended March 31, 2024 from $23 million for the three months ended March 31, 2023 due to the unfavorable impact of the BMG Termination of $2 million and the continued shift to streaming services. Licensing revenue increased by $6 million, primarily due to the timing of copyright infringement settlements and new licensing deals, and includes the favorable impact of foreign currency exchange rates of $1 million. Physical revenue decreased by $7 million, primarily driven by the timing of releases. Artist services and expanded-rights revenue decreased by $5 million due to lower merchandising revenue and the unfavorable impact of foreign currency exchange rates of $1 million, partially offset by higher concert promotion revenue.

Previous wording

The overall increase in Music Publishing revenue was mainly driven by increases in digital revenue of $47 million, or 32%, and performance revenue of $6 million, or 13%. 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, and the favorable impact of foreign currency exchange rates of $2 million. Revenue from streaming services grew by $47 million, or 32%, to $193 million for the three months ended December 31, 2023 from $146 million for the three months ended December 31, 2022. Performance revenue increased due to strong live performance in Europe and the favorable impact of foreign currency exchange rates of $1 million. Synchronization revenue remained constant, attributable to lower commercial licensing activity in the United States, partially offset by the timing of legal settlements. Mechanical revenue increased due to the favorable impact of foreign currency exchange rates of $1 million.

Current wording

The overall increase in Music Publishing revenue was mainly driven by increases in digital revenue of $41 million, or 28%, performance revenue of $7 million, or 16%, and synchronization revenue of $2 million, or 4%. 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, continued investment in our publishing catalog and the favorable impact of foreign currency exchange rates of $1 million. Revenue from streaming services grew by $43 million, or 30%, to $185 million for the three months ended March 31, 2024 from $142 million for the three months ended March 31, 2023. Performance revenue increased due to strong artist touring activity in Europe, partially offset by the unfavorable impact of foreign currency exchange rates of $1 million. Synchronization revenue increased by $2 million, primarily attributable to the timing of copyright infringement settlements and favorable impact of foreign currency exchange rates of $1 million. Mechanical revenue decreased $1 million, primarily driven by lower physical sales.

Previous wording

International revenue increased by $133 million, or 16%, to $950 million for the three months ended December 31, 2023 from $817 million for the three months ended December 31, 2022. Excluding the favorable impact of foreign currency exchange rates of $20 million, International revenue increased by $113 million, or 14%. International Recorded Music revenue increased by $118 million due to increases in digital revenue of $90 million, physical revenue of $15 million, artist services and expanded-rights revenue of $12 million and licensing revenue of $1 million. International Recorded Music digital revenue increased due to a $90 million, or 23%, increase in streaming revenue, which includes $27 million from the Digital License Renewal and the favorable impact of foreign currency exchange rates of $4 million. International Recorded Music physical revenue increased by $15 million, primarily driven by stronger performances in Japan and the UK and the favorable impact of foreign currency exchange rates. International Recorded Music artist services and expanded-rights revenue increased by $12 million due to higher concert promotion revenue and the favorable impact of foreign currency exchange rates of $6 million, partially offset by lower direct-to-consumer merchandising revenue at EMP. International Recorded Music licensing revenue increased by $1 million primarily due to higher broadcast fees and the favorable impact of foreign currency exchange rates. International Music Publishing revenue increased from the prior-year quarter by $15 million, or 13%, to $132 million for the three months ended December 31, 2023 from $117 million for the three months ended December 31, 2022. This was primarily driven by the increase in digital revenue of $10 million, performance revenue of $4 million and mechanical revenue of $2 million. International Music Publishing streaming revenue increased by $11 million or 20%, which includes the favorable impact of foreign currency exchange rates of $2 million, while download and other digital decreased by $1 million. Performance revenue increased driven by strong live performance in Europe. Mechanical revenue increased primarily due to the favorable impact of foreign currency exchange rates of $1 million. Synchronization revenue remained constant.

Current wording

International revenue increased by $74 million, or 10%, to $817 million for the three months ended March 31, 2024 from $743 million for the three months ended March 31, 2023. Excluding the unfavorable impact of foreign currency exchange rates of $2 million, International revenue increased by $76 million, or 10%. International Recorded Music revenue increased by $60 million due to increases in digital revenue of $45 million, artist services and expanded-rights revenue of $11 million, licensing revenue of $9 million, partially offset by lower physical revenue of $5 million. The increase in International Recorded Music digital revenue was driven by an increase in streaming revenue of $44 million, or 11%, which includes the unfavorable impact of the Digital License Renewal of $4 million and the unfavorable impact of foreign currency exchange rates of $4 million. International Recorded Music physical revenue decreased by $5 million, primarily due to the timing of releases. International Recorded Music artist services and expanded-rights revenue increased by $11 million due to higher concert promotion revenue, partially offset by lower direct-to-consumer merchandising revenue at EMP and the unfavorable impact of foreign currency exchange rates of $1 million. International Recorded Music licensing revenue increased by $9 million, driven by the timing of copyright infringement settlements and the favorable impact of foreign currency exchange rates of $1 million. International Music Publishing revenue increased from the prior-year quarter by $14 million, or 11%, to $136 million for the three months ended March 31, 2024 from $122 million for the three months ended March 31, 2023. This was primarily driven by the increase in digital revenue of $10 million and performance revenue of $4 million. International Music Publishing streaming revenue increased by $11 million or 19%, which includes the favorable impact of foreign currency exchange rates of $1 million, while download and other digital decreased by $1 million. Performance revenue increased by $4 million driven by strong artist touring activity in Europe, and synchronization and mechanical revenues remained constant.

Previous wording

(1)Includes depreciation expense of $26 million and $21 million for the three months ended December 31, 2023 and December 31, 2022, respectively.

Current wording

(1)Includes depreciation expense of $26 million and $22 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

Previous wording

Total selling, general and administrative expense increased by $36 million, or 8%, to $476 million for the three months ended December 31, 2023 from $440 million for the three months ended December 31, 2022. Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 27% for the three months ended December 31, 2023 from 30% for the three months ended December 31, 2022.

Current wording

Total selling, general and administrative expense decreased by $6 million, or 1%, to $446 million for the three months ended March 31, 2024 from $452 million for the three months ended March 31, 2023. Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 30% for the three months ended March 31, 2024 from 32% for the three months ended March 31, 2023.

Previous wording

General and administrative expense increased by $48 million to $269 million for the three months ended December 31, 2023 from $221 million for the three months ended December 31, 2022. The increase in general and administrative expense was mainly due to higher employee related costs, net of savings from the Restructuring Plan, incremental investment in technology of $11 million and expenses related to transformation initiatives of $7 million, the unfavorable movements in foreign currency exchange rates of $5 million. Expressed as a percentage of revenue, general and administrative expense remained constant at 15% for each of the three months ended December 31, 2023 and December 31, 2022.

Current wording

General and administrative expense increased by $5 million to $258 million for the three months ended March 31, 2024 from $253 million for the three months ended March 31, 2023. The increase in general and administrative expense was mainly due to incremental investment in technology of $6 million, expenses related to transformation initiatives and related costs of $5 million, partially offset by lower non-cash stock-based compensation and other related costs of $11 million, and savings from the 2023 Restructuring Plan. Expressed as a percentage of revenue, general and administrative expense decreased to 17% for the three months ended March 31, 2024 from 18% for the three months ended March 31, 2023.

Previous wording

Selling and marketing expense decreased by $12 million, or 6%, to $176 million for the three months ended December 31, 2023 from $188 million for the three months ended December 31, 2022. Expressed as a percentage of revenue, selling and marketing expense decreased to 10% for the three months ended December 31, 2023 from 13% for the three months ended December 31, 2022 due to lower variable marketing spend and savings from the Restructuring Plan.

Current wording

Selling and marketing expense decreased by $3 million, or 2%, to $169 million for the three months ended March 31, 2024 from $172 million for the three months ended March 31, 2023. Expressed as a percentage of revenue, selling and marketing expense decreased to 11% for the three months ended March 31, 2024 from 12% for the three months ended March 31, 2023 due to lower variable marketing spend and savings from the 2023 Restructuring Plan.

Previous wording

Our non-cash stock based compensation and other related costs decreased by $1 million to $14 million for the three months ended December 31, 2023 from $15 million for the three months ended December 31, 2022.

Current wording

Our non-cash stock-based compensation and other related costs decreased by $11 million to $10 million for the three months ended March 31, 2024 from $21 million for the three months ended March 31, 2023, primarily related to the separation agreement with our previous Chief Executive Officer in the prior year.

Previous wording

Net gain on divestitures decreased during the three months ended December 31, 2023, to a pre-tax gain of $17 million in connection with the divestiture of certain sound recording rights in the quarter. This compares to a pre-tax gain of $41 million in the three months ended December 31, 2022.

Current wording

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

Previous wording

Our transformation initiatives and other related costs increased by $7 million to $19 million for the three months ended December 31, 2023 from $12 million for the three months ended December 31, 2022 due to an increase in costs associated with our finance transformation.

Current wording

Our transformation initiatives and other related costs increased by $5 million to $19 million for the three months ended March 31, 2024 from $14 million for the three months ended March 31, 2023 due to an increase in costs associated with our finance transformation.

Previous wording

Our depreciation expense increased by $5 million to $26 million for the three months ended December 31, 2023 from $21 million for the three months ended December 31, 2022. This increase is primarily due to an increase in technology capital spend and assets being placed into service.

Current wording

Our depreciation expense increased by $4 million to $26 million for the three months ended March 31, 2024 from $22 million for the three months ended March 31, 2023. This increase is primarily due to an increase in IT assets being placed into service.

Previous wording

Our interest expense, net, increased to $39 million for the three months ended December 31, 2023 from $32 million for the three months ended December 31, 2022 due to a higher principal balance related to the issuance of incremental Senior Term Loan Facility and higher interest rates on variable rate debt, partially offset by higher interest income.

Current wording

Our interest expense, net, increased to $42 million for the three months ended March 31, 2024 from $35 million for the three months ended March 31, 2023 due to the maturity of the interest rate swaps and higher interest rates on variable rate debt.

Previous wording

Other expense for the three months ended December 31, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $39 million, currency exchange losses on our intercompany loans of $9 million, and unrealized losses on hedging activity of $6 million. This compares to foreign currency losses on our Euro-denominated debt of $68 million and unrealized losses on hedging activity of $8 million, partially offset by currency exchange gains on our intercompany loans of $15 million for the three months ended December 31, 2022.

Current wording

Other income for the three months ended March 31, 2024 primarily includes foreign currency gains on our Euro-denominated debt of $21 million, currency exchange gains on our intercompany loans of $7 million, and unrealized gains on hedging activity of $5 million. This compares to foreign currency losses on our Euro-denominated debt of $20 million, currency exchange losses on our intercompany loans of $13 million, partially offset by unrealized gains on hedging activity of $2 million for the three months ended March 31, 2023.

Previous wording

Net income increased by $69 million to $193 million for the three months ended December 31, 2023 from $124 million for the three months ended December 31, 2022 as a result of the factors described above.

Current wording

Net income increased by $59 million to $96 million for the three months ended March 31, 2024 from $37 million for the three months ended March 31, 2023 as a result of the factors described above.

Previous wording

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

Current wording

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

Previous wording

(1)Includes depreciation expense of $13 million and $13 million for the three months ended December 31, 2023 and December 31, 2022, respectively.

Current wording

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

Previous wording

Music Publishing operating income increased by $14 million to $63 million for the three months ended December 31, 2023 from $49 million for the three months ended December 31, 2022 primarily driven by the same factors affecting Adjusted OIBDA discussed below.

Current wording

Music Publishing operating income increased by $17 million to $69 million for the three months ended March 31, 2024 from $52 million for the three months ended March 31, 2023 primarily driven by a $14 million gain on a divestiture recognized during the three months ended March 31, 2024, as well as the same factors affecting Adjusted OIBDA discussed below.

Previous wording

Music Publishing Adjusted OIBDA increased by $14 million, or 19%, to $86 million for the three months ended December 31, 2023 from $72 million for the three months ended December 31, 2022 largely due to higher revenues. Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin decreased to 28% for the three months ended December 31, 2023 from 29% for the three months ended December 31, 2022, primarily due to the unfavorable impact of foreign currency exchange rates.

Current wording

Music Publishing Adjusted OIBDA increased by $6 million, or 8%, to $82 million for the three months ended March 31, 2024 from $76 million for the three months ended March 31, 2023 largely due to higher revenues. Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin decreased to 27% for the three months ended March 31, 2024 from 30% for the three months ended March 31, 2023, primarily due to revenue mix and the unfavorable impact of foreign currency exchange rates.

Previous wording

Our operating loss from corporate expenses and eliminations increased by $16 million for the three months ended December 31, 2023 to $83 million from $67 million for the three months ended December 31, 2022, primarily due to incremental investment in technology of $4 million, higher expenses related to transformation initiatives of $7 million, higher depreciation of $5 million, partially offset by lower non-cash stock-based compensation and other related expenses of $7 million.

Current wording

Our operating loss from corporate expenses and eliminations increased by $5 million for the three months ended March 31, 2024 to $84 million from $79 million for the three months ended March 31, 2023, primarily driven by $7 million of restructuring and impairment charges in connection with the Company’s Strategic Restructuring Plan, higher expenses related to transformation initiatives and related costs of $5 million, higher depreciation of $4 million, partially offset by lower non-cash stock-based compensation and other related expenses of $11 million.

Previous wording

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $11 million for the three months ended December 31, 2023 to $47 million from $36 million for the three months ended December 31, 2022, primarily due to the operating loss factors noted above.

Current wording

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $3 million for the three months ended March 31, 2024 to $42 million from $39 million for the three months ended March 31, 2023, primarily due to the operating loss factors noted above.

Previous wording

Total revenues increased by $260 million, or 17%, to $1,748 million for the three months ended December 31, 2023 from $1,488 million for the three months ended December 31, 2022. The quarter included $68 million from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”) in Recorded Music licensing revenue and $27 million from a new deal with one of the Company’s digital partners (the “Digital License Renewal”) in Recorded Music streaming revenue. Additionally, the quarter included the impact of the termination of the distribution agreement with BMG (the “BMG Termination”) which resulted in $13 million of lower Recorded Music digital revenue in the three months ended December 31, 2023 compared to the prior-year quarter. Adjusted for these items, total revenues increased by 12%. The increase includes $20 million of favorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 83% and 17% of total revenue for the three months ended December 31, 2023, respectively, and 83% and 17% of total revenue for the three months ended December 31, 2022, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 46% and 54% of total revenues for the three months ended December 31, 2023 and 45% and 55% of total revenues for the three months ended December 31, 2022.

Current wording

Total revenues increased by $355 million, or 12%, to $3,242 million for the six months ended March 31, 2024 from $2,887 million for the six months ended March 31, 2023. The current year included $68 million from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”) in Recorded Music licensing revenue. In addition, revenue growth was unfavorably impacted by the termination of the distribution agreement with BMG (the “BMG Termination”) which resulted in $35 million of lower Recorded Music digital revenue, partially offset by $23 million incremental Recorded Music streaming revenue resulting from the renewal with one of the Company’s digital partners (the “Digital License Renewal”) in the six months ended March 31, 2024 compared to the prior year. Adjusted for these items, total revenues increased by 10%. The increase includes $18 million of favorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 81% and 19% of total revenues for the six months ended March 31, 2024, respectively, and 82% and 18% of total revenues for the six months ended March 31, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 46% and 54% for the six months ended March 31, 2024, respectively, and 46% and 54% for the six months ended March 31, 2023, respectively.

Previous wording

Artist and repertoire costs increased by $76 million, to $540 million for the three months ended December 31, 2023 from $464 million for the three months ended December 31, 2022. Artist and repertoire costs as a percentage of revenue remained constant at 31% for each of the three months ended December 31, 2023 and December 31, 2022, primarily due to the impact of the Licensing Extension, offset by revenue mix and the unfavorable impact of foreign currency exchange rates.

Current wording

Artist and repertoire costs increased by $153 million, to $1,079 million for the six months ended March 31, 2024 from $926 million for the six months ended March 31, 2023. Artist and repertoire costs as a percentage of revenue increased to 33% for the six months ended March 31, 2024 from 32% for the six months ended March 31, 2023, primarily due to revenue mix, timing of artist and repertoire investments, and the unfavorable impact of foreign currency change rates, partially offset by the impact of the Licensing Extension.

Previous wording

Product costs increased by $43 million, to $340 million for the three months ended December 31, 2023 from $297 million for the three months ended December 31, 2022. Product costs as a percentage of revenue decreased to 19% for the three months ended December 31, 2023 from 20% for the three months ended December 31, 2022, primarily due to the impact of the Licensing Extension, offset by revenue mix from higher third-party distributed label revenue.

Current wording

Product costs increased by $36 million, to $592 million for the six months ended March 31, 2024 from $556 million for the six months ended March 31, 2023. Product costs as a percentage of revenue decreased to 18% for the six months ended March 31, 2024 from 19% for the six months ended March 31, 2023, primarily due to the impact of the Licensing Extension, partially offset by revenue mix.

Previous wording

Distribution expense remained constant at $31 million for the three months ended December 31, 2023 and the three months ended December 31, 2022. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended December 31, 2023 and December 31, 2022.

Current wording

Distribution expense decreased to $50 million for the six months ended March 31, 2024 from $58 million for the six months ended March 31, 2023. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the six months ended March 31, 2024 and March 31, 2023.

Previous wording

Adjusted OIBDA increased by $116 million to $451 million for the three months ended December 31, 2023 as compared to $335 million for the three months ended December 31, 2022 primarily due to strong operating performance, savings from the Restructuring Plan, the impact of the Licensing Extension of $67 million and the Digital License Renewal of $10 million, partially offset by revenue mix, the incremental investment in technology of $11 million, and the unfavorable impact of foreign currency exchange rates. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 26% for the three months ended December 31, 2023 from 23% for the three months ended December 31, 2022 due to the factors noted above. Excluding the impact of the Licensing Extension and Digital License Renewal, Adjusted OIBDA margin was 23% for the three months ended December 31, 2023.

Current wording

Adjusted OIBDA increased by $142 million to $763 million for the six months ended March 31, 2024 as compared to $621 million for the six months ended March 31, 2023 as a result of strong operating performance, the favorable impacts of the Licensing Extension of $67 million and the Digital License Renewal of $9 million and $24 million of savings from the 2023 Restructuring Plan, partially offset by the reinvestment of these savings in the Company’s business including $17 million of incremental investment in technology for the six months ended March 31, 2024. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 24% for the six months ended March 31, 2024 from 22% for the six months ended March 31, 2023. Excluding the impact of the Licensing Extension and Digital License Renewal, Adjusted OIBDA margin was 22% for each of the six months ended March 31, 2024 and March 31, 2023.

Previous wording

Net gain on divestitures decreased during the three months ended December 31, 2023, to a pre-tax gain of $17 million in connection with the divestiture of certain sound recording rights in the quarter. This compares to a pre-tax gain of $41 million in the three months ended December 31, 2022.

Current wording

Net gain on divestitures decreased during the six months ended March 31, 2024, to a pre-tax gain of $31 million in connection with the divestiture of certain sound recording and publishing rights. This compares to a pre-tax gain of $41 million in the six months ended March 31, 2023.

Previous wording

Our amortization expense decreased by $8 million, or 13%, to $55 million for the three months ended December 31, 2023 from $63 million for the three months ended December 31, 2022. The decrease is primarily due to certain intangible assets becoming fully amortized.

Current wording

Our amortization expense decreased by $12 million, or 10%, to $112 million for the six months ended March 31, 2024 from $124 million for the six months ended March 31, 2023. The decrease is primarily due to certain intangible assets becoming fully amortized.

Previous wording

Our operating income increased by $89 million to $354 million for the three months ended December 31, 2023 from $265 million for the three months ended December 31, 2022. The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA and lower amortization and net gains on divestitures, partially offset by higher depreciation as noted above.

Current wording

Our operating income increased by $84 million to $473 million for the six months ended March 31, 2024 from $389 million for the six months ended March 31, 2023. The increase in operating income was due to the factors that led to the increase in Adjusted OIBDA, partially offset by higher restructuring and impairment charges, an increase in depreciation and a decrease in net gain on divestitures as noted above.

Previous wording

Our income tax expense increased by $24 million to $72 million for the three months ended December 31, 2023 from $48 million for the three months ended December 31, 2022. The increase of $24 million in income tax expense is primarily due to the impact of increase in pre-tax income, higher portion of the pre-tax income earned outside of the United States and taxed at rates higher than in the United States, increase in unrecognized tax benefit related to uncertain tax positions, and higher withholding taxes in the current year.

Current wording

Our income tax expense increased by $21 million to $90 million for the six months ended March 31, 2024 from $69 million for the six months ended March 31, 2023. The increase of $21 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year, higher portion of the pre-tax income earned outside of the United States and taxed at rates higher than in the United States, and higher withholding taxes in the current year, partially offset by the impact from the winding down of the Company’s O&O Media Properties and noncontrolling interest.

Previous wording

Income attributable to noncontrolling interest increased by $32 million to $34 million for the three months ended December 31, 2023, from $2 million for the three months ended December 31, 2022, largely driven by higher income from non-wholly-owned subsidiaries in the current period, primarily due to the impact of the Licensing Extension.

Current wording

Income attributable to noncontrolling interest increased by $29 million to $34 million for the six months ended March 31, 2024 from $5 million for the six months ended March 31, 2023, largely driven by higher income from non-wholly-owned subsidiaries in the current year, primarily due to the impact of the Licensing Extension.

Previous wording

Recorded Music cost of revenues increased by $82 million, or 13%, to $690 million for the three months ended December 31, 2023 from $608 million for the three months ended December 31, 2022. Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs decreased to 24% for the three months ended December 31, 2023 from 25% for the three months ended December 31, 2022, primarily due to the impact of the Licensing Extension, offset by revenue mix and the unfavorable impact of foreign currency exchange rates. Expressed as a percentage of Recorded Music revenue, Recorded Music product costs remained constant at 24% for the three months ended December 31, 2023 and the three months ended December 31, 2022, primarily due to the impact of the Licensing Extension, offset by revenue mix from higher third-party distributed label revenue.

Current wording

Recorded Music cost of revenues increased by $112 million, or 10%, to $1,288 million for the six months ended March 31, 2024 from $1,176 million for the six months ended March 31, 2023. Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs remained constant at 26% for each of the six months ended March 31, 2024 and March 31, 2023. Expressed as a percentage of Recorded Music revenue, Recorded Music product costs decreased to 22% for the six months ended March 31, 2024 from 23% for the six months ended March 31, 2023, primarily due to the impact of the Licensing Extension, partially offset by the unfavorable impact of foreign currency exchange rates.