Warner Music Group Corp

Previous wording

•risks related to the effects of natural or man-made disasters, including pandemics such as COVID-19;

Current wording

•risks related to the effects of natural or man-made disasters, including pandemics;

Previous 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.

Current wording

•Results of operations. This section provides an analysis of our results of operations for the three and nine months ended June 30, 2024 and June 30, 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 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.

Current wording

•Financial condition and liquidity. This section provides an analysis of our cash flows for the nine months ended June 30, 2024 and June 30, 2023, as well as a discussion of our financial condition and liquidity as of June 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.

Previous wording

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 the Company’s core Recorded Music and Music Publishing businesses, new skill sets and tech capabilities.

Current wording

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.

Previous wording

For the three and six months ended March 31, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $46 million, of which, $42 million was recognized in our Recorded Music segment and $4 million was recognized in Corporate. Additionally, for the three and six months ended March 31, 2024, the Company recognized $50 million of impairment losses on unamortized intangible assets and other assets of which, $47 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.

Current wording

For the three months ended June 30, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $1 million, all of which was recognized in our Recorded Music segment. For the nine months ended June 30, 2024, total severance costs recorded in connection with the Strategic Restructuring Plan were $47 million, of which, $43 million was recognized in our Recorded Music segment and $4 million was recognized in Corporate. The below table sets forth the activity for the nine months ended June 30, 2024 in the restructuring accrual associated with the Strategic Restructuring Plan included within accrued liabilities in the accompanying condensed consolidated balance sheets. Additionally, for the nine months ended June 30, 2024, the Company recognized $50 million of impairment losses on unamortized intangible assets and other assets of which $47 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.

Previous 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.

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. There were no restructuring costs incurred in the three months ended June 30, 2023. Total restructuring costs were $41 million for the nine months ended June 30, 2023, consisting of severance costs. All restructuring costs were recorded in the Recorded Music segment in the prior year.

Previous 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.

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 rolled off in fiscal 2025.

Previous 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.

Current wording

During the three and nine months ended June 30, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music digital revenue of $26 million and $61 million, respectively, of which $25 million and $57 million was streaming revenue, respectively. The impact to Recorded Music’s Adjusted OIBDA was immaterial for the three and nine months ended June 30, 2024.

Previous wording

Total revenues increased by $95 million, or 7%, to $1,494 million for the three months ended March 31, 2024 from $1,399 million for the three months ended March 31, 2023. Consistent with prior quarter, revenue growth was unfavorably impacted by the BMG Termination in Recorded Music digital revenue which resulted in $22 million less revenue compared to the prior-year quarter, and a $4 million unfavorable impact within Recorded Music streaming revenue due to the renewal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in upfront revenue recognition for the three months ended December 31, 2023. Adjusted for these items, total revenues increased by 9%, which includes $2 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 80% and 20% of total revenue for the three months ended March 31, 2024, respectively, and 82% and 18% of total revenue for the three months ended March 31, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 45% and 55% of total revenues for the three months ended March 31, 2024 and 47% and 53% of total revenues for the three months ended March 31, 2023.

Current wording

Total revenues decreased by $10 million, or 1%, to $1,554 million for the three months ended June 30, 2024 from $1,564 million for the three months ended June 30, 2023. Consistent with prior quarter, revenue growth was unfavorably impacted by the BMG Termination in Recorded Music digital revenue, which resu lted in $26 million less revenue compared to the prior-year quarter, and a $3 million unfavorable impact within Recorded Music streaming revenue due to the renewal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in upfront revenue recognition for the three months ended December 31, 2023. Music Publishing digital revenue growth was also unfavorably impacted by a$7 million benefit in the prior-year quarter 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 2%, which includes $20 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 80% and 20% of total revenue for the three months ended June 30, 2024, respectively, and 82% and 18% of total revenue for the three months ended June 30, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 44% and 56% of total revenues for the three months ended June 30, 2024 and 45% and 55% of total revenues for the three months ended June 30, 2023.

Previous 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.

Current wording

Total digital revenues after intersegment eliminations increased by $48 million, or 5%, to $1,075 million for the three months ended June 30, 2024 from $1,027 million for the three months ended June 30, 2023. Excluding the BMG Termination, the Digital License Renewal, and the CRB Rate Benefit, total digital revenues increased 8%, Total streaming revenue increased 6% driven by growth across Recorded Music and Music Publishing. Prior to intersegment eliminations, total digital revenues for the three months ended June 30, 2024 were composed of U.S. revenues of $504 million and international revenues of $572 million, or 47% and 53% of total digital revenues, respectively. Prior to intersegment eliminations, total digital revenues for the three months ended June 30, 2023 were composed of U.S. revenues of $506 million and international revenues of $522 million, or 49% and 51% of total digital revenues, respectively.

Previous 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.

Current wording

The overall decrease in Recorded Music revenue was driven by decreases in artist services and expanded-rights, physical, and licensing revenues, partially offset by an increase in digital revenue. Digital revenue increased by $36 million primarily due to growth in streaming revenue, partially offset by the unfavorable impact of foreign currency exchange rates of $12 million. Revenue from streaming services increased by $41 million, or 5%, to $863 million for the three months ended June 30, 2024 from $822 million for the three months ended June 30, 2023. The growth in streaming revenue is partially offset by the impacts of the BMG Termination of $25 million, the Digital License Renewal of $3 million, and the unfavorable impact of foreign currency exchange rates of $11 million. Adjusted for the BMG Termination and the Digital License Renewal, streaming revenues increased 9%. The quarter reflects success from new album releases from Benson Boone and Dua Lipa, as well as carryover success from Zach Bryan and Teddy Swims. Download and other digital revenues decreased by $5 million, or 21%, to $19 million for the three months ended June 30, 2024 from $24 million for the three months ended June 30, 2023 due to the unfavorable impact of the BMG Termination of $1 million compared to the prior-year quarter, the unfavorable impact of foreign currency exchange rates of $1 million, and the continued shift to streaming services. Artist services and expanded-rights revenue decreased by $59 million or 27% due to lower merchandising and concert promotion 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, and the unfavorable impact of foreign currency exchange rates of $3 million. Licensing revenue decreased by $2 million, or 2%, primarily driven by the timing of copyright infringement settlements and the unfavorable impact of foreign currency exchange rates of $1 million. Physical revenue decreased by $6 million, or 5%, primarily driven by timing of releases and strong U.S. releases in the prior-year quarter, and the unfavorable impact of foreign currency exchange rates of $1 million.

Previous 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.

Current wording

The overall increase in Music Publishing revenue was driven by increases in digital, performance, and synchronization revenues, partially offset by lower mechanical revenue. Digital revenue grew by $12 million, or 7%, primarily due to higher streaming revenue driven by the impact of digital deal renewals and continued investment in our publishing catalog, partially offset by the CRB Rate Benefit in the prior-year quarter of $7 million, and the unfavorable impact of foreign currency exchange rates of $1 million. Revenue from streaming services grew by $14 million, or 8%, to $192 million for the three months ended June 30, 2024 from $178 million for the three months ended June 30, 2023. Excluding the CRB Rate Benefit of $7 million in the prior-year quarter, revenue from streaming services grew 12%. Performance revenue increased by $12 million, or 30%, driven by an increase in touring activity outside the U.S. and U.S. radio activity, partially offset by the unfavorable impact of foreign currency exchange rates of $1 million. Synchronization revenue increased by $1 million, or 2%, primarily attributable to higher international commercial licensing activity, partially offset by the timing of copyright infringement settlements in the U.S. Mechanical revenue decreased by $3 million, or 19%, primarily driven by lower physical sales.

Previous 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.

Current wording

International revenue increased by $17 million, or 2%, to $878 million for the three months ended June 30, 2024 from $861 million for the three months ended June 30, 2023. Excluding the unfavorable impact of foreign currency exchange rates of $20 million, International revenue increased by $37 million, or 4%. International Recorded Music revenue increased by $9 million due to increases in digital revenue of $48 million and licensing revenue of $3 million, partially offset by decreases in artist services and expanded-rights revenue of $40 million and physical revenue of $2 million. The increase in International Recorded Music digital revenue was driven by an increase in streaming revenue of $50 million, or 12%, partially offset by the unfavorable impact of the Digital License Renewal of $3 million in the prior-year quarter and the unfavorable impact of foreign currency exchange rates of $11 million. International Recorded Music licensing revenue increased by $3 million, driven by the timing of copyright infringement settlements, partially offset by the unfavorable impact of foreign currency exchange rates of $1 million. International Recorded Music artist services and expanded-rights revenue decreased by $40 million due to lower direct-to-consumer merchandising revenue at EMP, lower concert promotion revenue primarily in Japan and France, and the unfavorable impact of foreign currency exchange rates of $3 million. International Recorded Music physical revenue decreased by $2 million, primarily due to the timing of releases.

Previous wording

Artist and repertoire costs increased by $77 million, to $539 million for the three months ended March 31, 2024 from $462 million for the three months ended March 31, 2023. Artist and repertoire costs as a percentage of revenue increased to 36% during the three months ended March 31, 2024 from 33% for the three months ended March 31, 2023, primarily driven by revenue mix.

Current wording

Artist and repertoire costs increased by $18 million, to $548 million for the three months ended June 30, 2024 from $530 million for the three months ended June 30, 2023. Artist and repertoire costs as a percentage of revenue increased to 35% during the three months ended June 30, 2024 from 34% for the three months ended June 30, 2023, primarily driven by revenue mix.

Previous wording

Product costs decreased by $7 million, to $252 million for the three months ended March 31, 2024 from $259 million for the three months ended March 31, 2023. Product costs as a percentage of revenue decreased to 17% for the three months ended March 31, 2024 from 19% for the three months ended March 31, 2023, primarily driven by lower third-party distributed label revenue.

Current wording

Product costs decreased by $38 million, to $282 million for the three months ended June 30, 2024 from $320 million for the three months ended June 30, 2023. Product costs as a percentage of revenue decreased to 18% for the three months ended June 30, 2024 from 20% for the three months ended June 30, 2023, primarily driven by revenue mix due to the BMG Termination and lower artist services and expanded-rights and third-party distributed label revenue.

Previous wording

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

Current wording

(1)Includes depreciation expense of $25 million and $22 million for the three months ended June 30, 2024 and June 30, 2023, respectively.

Previous 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.

Current wording

Total selling, general and administrative expense increased by $1 million, to $462 million for the three months ended June 30, 2024 from $461 million for the three months ended June 30, 2023. Expressed as a percentage of revenue, total selling, general and administrative expense increased to 30% for the three months ended June 30, 2024 from 29% for the three months ended June 30, 2023.

Previous 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.

Current wording

General and administrative expense increased by $20 million to $264 million for the three months ended June 30, 2024 from $244 million for the three months ended June 30, 2023. The increase in general and administrative expense was largely due to incremental expenses related to transformation initiatives and related costs of $5 million, higher depreciation expense driven by assets placed in service of $3 million, the unfavorable movements in foreign currency exchange rates of $3 million, higher non-cash stock-based compensation and other related costs of $3 million, partially offset by savings from the 2023 Restructuring Plan and the Strategic Restructuring Plan. Expressed as a percentage of revenue, general and administrative expense increased to 17% for the three months ended June 30, 2024 from 16% for the three months ended June 30, 2023.

Previous 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.

Current wording

Selling and marketing expense decreased by $12 million, or 6%, to $173 million for the three months ended June 30, 2024 from $185 million for the three months ended June 30, 2023. Expressed as a percentage of revenue, selling and marketing expense decreased to 11% for the three months ended June 30, 2024 from 12% for the three months ended June 30, 2023 due to lower variable marketing spend and savings from the 2023 Restructuring Plan.

Previous wording

Distribution expense decreased by $8 million to $19 million for the three months ended March 31, 2024 from $27 million for the three months ended March 31, 2023. Expressed as a percentage of revenue, distribution expense decreased to 1% for the three months ended March 31, 2024 from 2% for the three months ended March 31, 2023 due to revenue mix.

Current wording

Distribution expense decreased by $7 million to $25 million for the three months ended June 30, 2024 from $32 million for the three months ended June 30, 2023. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended June 30, 2024 and the three months ended June 30, 2023.

Previous wording

Adjusted OIBDA increased by $26 million to $312 million for the three months ended March 31, 2024 as compared to $286 million for the three months ended March 31, 2023 primarily due to strong operating performance, $12 million savings from the 2023 Restructuring Plan, partially offset by the reinvestment of these savings in the Company’s business including $6 million of incremental investment in technology for the three months ended March 31, 2024. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 21% for the three months ended March 31, 2024 from 20% for the three months ended March 31, 2023 due to the factors noted above.

Current wording

Adjusted OIBDA increased by $19 million to $316 million for the three months ended June 30, 2024 as compared to $297 million for the three months ended June 30, 2023 primarily due to strong operating performance, savings from the Strategic Restructuring Plan and savings from the 2023 Restructuring Plan, partially offset by the reinvestment of these savings in the Company’s business. Expressed as a percentage of total revenue, Adjusted OIBDA margin increased to 20% for the three months ended June 30, 2024 from 19% for the three months ended June 30, 2023 due to the factors noted above.

Previous 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.

Current wording

Net gain on divestitures during the three months ended June 30, 2024 includes a pre-tax gain of $1 million in connection with the divestiture of certain media properties in connection with the Strategic Restructuring Plan.

Previous wording

Executive transition costs of $3 million during the three months ended March 31, 2023 consisted of severance costs associated with the departure of our previous Chief Executive Officer and Chief Financial Officer in the prior year.

Current wording

Executive transition costs of $1 million during the three months ended June 30, 2023, which include costs associated with the departure of our previous Chief Financial Officer in the prior year.

Previous 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.

Current wording

Our transformation initiatives and other related costs increased by $5 million to $18 million for the three months ended June 30, 2024 from $13 million for the three months ended June 30, 2023 due to an increase in costs associated with our finance transformation.

Previous wording

Our restructuring and impairment charges increased to $95 million for the three months ended March 31, 2024, which includes severance costs of approximately $45 million, and approximately $50 million of non-cash impairment losses primarily related to the Strategic Restructuring Plan. The three months ended March 31, 2023 includes $41 million of restructuring charges related to the 2023 Restructuring Plan.

Current wording

Our restructuring and impairment charges increased to $1 million for the three months ended June 30, 2024 related to the Strategic Restructuring Plan. There were no restructuring and impairment charges for the three months ended June 30, 2023.

Previous 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.

Current wording

Our depreciation expense increased by $3 million to $25 million for the three months ended June 30, 2024 from $22 million for the three months ended June 30, 2023. This increase is primarily due to IT assets being placed into service.

Previous wording

Our amortization expense decreased by $4 million, or 7%, to $57 million for the three months ended March 31, 2024 from $61 million for the three months ended March 31, 2023. The decrease is driven by certain intangible assets becoming fully amortized.

Current wording

Our amortization expense decreased by $9 million, or 14%, to $55 million for the three months ended June 30, 2024 from $64 million for the three months ended June 30, 2023. The decrease is driven by certain intangible assets becoming fully amortized.

Previous wording

Our operating income decreased by $5 million to $119 million for the three months ended March 31, 2024 from $124 million for the three months ended March 31, 2023. In addition to the factors impacting Adjusted OIBDA described above, the decrease in operating income was driven by $95 million of restructuring and impairment charges for the three months ended March 31, 2024 primarily related to the Strategic Restructuring Plan, compared to $41 million of restructuring charges for the three months ended March 31, 2023. The decrease was also driven by $5 million of incremental expenses related to transformation initiatives and other related costs, partially offset by lower non-cash stock-based compensation of $11 million and a $14 million net gain on a divestiture in the current quarter.

Current wording

Our operating income increased by $18 million to $207 million for the three months ended June 30, 2024 from $189 million for the three months ended June 30, 2023. In addition to the factors impacting Adjusted OIBDA described above, the increase in operating income was driven by lower amortization expense of $9 million and $1 million net gain on a divestiture in the current quarter, offset by $5 million of incremental expenses related to transformation initiatives and other related costs, higher non-cash stock-based compensation of $3 million, and $1 million of restructuring charges for the three months ended June 30, 2024 related to the Strategic Restructuring Plan.

Previous 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.

Current wording

Our interest expense, net, increased to $40 million for the three months ended June 30, 2024 from $38 million for the three months ended June 30, 2023 due to the maturity of the interest rate swaps and higher interest rates on variable rate debt.

Previous 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.

Current wording

Other income for the three months ended June 30, 2024 primarily includes foreign currency gains on our Euro-denominated debt of $7 million, currency exchange losses on our intercompany loans of $5 million, and unrealized gains on hedging activity of $1 million. This compares to foreign currency gains on our Euro-denominated debt of $2 million, currency exchange gains on the Company’s intercompany loans of $11 million and aggregate realized and unrealized gains of $5 million on the mark-to-market of investments for the three months ended June 30, 2023.

Previous 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.

Current wording

Net income increased by $17 million to $141 million for the three months ended June 30, 2024 from $124 million for the three months ended June 30, 2023 as a result of the factors described above.

Previous wording

Recorded Music cost of revenues increased by $30 million, or 5%, to $598 million for the three months ended March 31, 2024 from $568 million for the three months ended March 31, 2023. Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs increased to 29% for the three months ended March 31, 2024 from 27% for the three months ended March 31, 2023, primarily driven by revenue mix. Expressed as a percentage of Recorded Music revenue, Recorded Music product costs decreased to 21% for the three months ended March 31, 2024 from 23% for the three months ended March 31, 2023, primarily due to revenue mix.

Current wording

Recorded Music cost of revenues decreased by $33 million, or 5%, to $636 million for the three months ended June 30, 2024 from $669 million for the three months ended June 30, 2023. Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs increased to 28% for the three months ended June 30, 2024 from 27% for the three months ended June 30, 2023, primarily driven by revenue mix. Expressed as a percentage of Recorded Music revenue, Recorded Music product costs decreased to 23% for the three months ended June 30, 2024 from 25% for the three months ended June 30, 2023, primarily due to revenue mix due to lower artist services and expanded-rights and third-party distributed label revenue resulting from the BMG Termination.

Previous wording

Recorded Music selling, general and administrative expense decreased by $7 million, or 2%, to $337 million for the three months ended March 31, 2024 from $344 million for the three months ended March 31, 2023. The increase in general and administrative expense was mainly driven by incremental investment in technology of $4 million. The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the 2023 Restructuring Plan. Distribution expense decreased $8 million to $19 million for the three months ended March 31, 2024, from $27 million for the three months ended March 31, 2023, driven by revenue mix. Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 28% for the three months ended March 31, 2024 from 30% for the three months ended March 31, 2023.

Current wording

Recorded Music selling, general and administrative expense decreased by $12 million, or 3%, to $353 million for the three months ended June 30, 2024 from $365 million for the three months ended June 30, 2023. The increase in general and administrative expense was mainly driven by unfavorable movements in foreign currency exchange rates of $3 million, the impact of acquisitions and higher non-cash stock-based compensation and other related costs of $3 million, partially offset by savings from the 2023 Restructuring Plan. The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the 2023 Restructuring Plan. The decrease in distribution expense was primarily driven by revenue mix. Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense remained constant at 28% for each of the three months ended June 30, 2024 and the three months ended June 30, 2023.

Previous wording

Recorded Music operating income decreased by $17 million to $134 million for the three months ended March 31, 2024 from $151 million for the three months ended March 31, 2023. In addition to the factors impacting Adjusted OIBDA described below, the decrease in operating income was driven by $88 million of restructuring and impairment charges primarily due to the Company’s Strategic Restructuring Plan and exit of certain non-core owned and operated media properties, compared to $41 million of restructuring charges in the prior year, partially offset by lower amortization expenses due to certain intangible assets becoming fully amortized.

Current wording

Recorded Music operating income increased by $23 million to $230 million for the three months ended June 30, 2024 from $207 million for the three months ended June 30, 2023. In addition to the factors impacting Adjusted OIBDA described below, the increase in operating income was driven by a decrease in amortization expense of $11 million due to certain intangible assets becoming fully amortized, partially offset by $2 million of restructuring and impairment charges primarily due to the Company’s Strategic Restructuring Plan and exit of certain non-core O&O Media Properties.

Previous wording

Recorded Music Adjusted OIBDA increased by $23 million to $272 million for the three months ended March 31, 2024 from $249 million for the three months ended March 31, 2023 primarily driven by strong operating performance, $12 million of savings from the 2023 Restructuring Plan of which a portion has been reinvested in the Company’s business, partially offset by the unfavorable impact of exchange rates. Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 23% for the three months ended March 31, 2024 from 22% for the three months ended March 31, 2023 due to the factors noted above.

Current wording

Recorded Music Adjusted OIBDA increased by $17 million to $281 million for the three months ended June 30, 2024 from $264 million for the three months ended June 30, 2023 driven by increased savings from the 2023 Restructuring Plan and savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business, partially offset by the unfavorable impact of foreign exchange rates. Expressed as a percentage of Recorded Music revenue, Recorded Music Adjusted OIBDA margin increased to 22% for the three months ended June 30, 2024 from 21% for the three months ended June 30, 2023 due to the factors noted above.

Previous wording

Music Publishing selling, general and administrative expense increased by $3 million, or 11%, to $31 million for the three months ended March 31, 2024 from $28 million for the three months ended March 31, 2023. Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the three months ended March 31, 2024 from 11% for the three months ended March 31, 2023.

Current wording

Music Publishing selling, general and administrative expense increased by $3 million, or 11%, to $31 million for the three months ended June 30, 2024 from $28 million for the three months ended June 30, 2023. Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense remained constant at 10% for each of the three months ended June 30, 2024 and June 30, 2023.

Previous 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.

Current wording

Music Publishing operating income increased by $3 million to $53 million for the three months ended June 30, 2024 from $50 million for the three months ended June 30, 2023, driven by the same factors affecting Adjusted OIBDA discussed below, partially offset by higher amortization expense of $2 million

Previous 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.

Current wording

Music Publishing Adjusted OIBDA increased by $5 million, or 7%, to $79 million for the three months ended June 30, 2024 from $74 million for the three months ended June 30, 2023 largely due to higher revenues. Expressed as a percentage of Music Publishing revenue, Music Publishing Adjusted OIBDA margin remained constant at 26% for each of the three months ended June 30, 2024 and June 30, 2023.

Previous 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.

Current wording

Our Adjusted OIBDA loss from corporate expenses and eliminations increased by $3 million for the three months ended June 30, 2024 to $44 million from $41 million for the three months ended June 30, 2023, primarily due to the operating loss factors noted above.

Previous 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.

Current wording

Total revenues increased by $345 million, or 8%, to $4,796 million for the nine months ended June 30, 2024 from $4,451 million for the nine months ended June 30, 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 BMG Termination which resulted in $61 million of lower Recorded Music digital revenue, partially offset by $20 million incremental Recorded Music streaming revenue resulting from the Digital License Renewal in the nine months ended June 30, 2024 compared to the prior year. Music Publishing digital revenue growth was also impacted by$7 million in the prior year due to the CRB Rate Benefit. Adjusted for these items, total revenues increased by 7%, which includes $2 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 nine months ended June 30, 2024, respectively, and 82% and 18% of total revenues for the nine months ended June 30, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 45% and 55% for the nine months ended June 30, 2024, respectively, and 46% and 54% for the nine months ended June 30, 2023, respectively.