Warner Music Group Corp

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

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•risks related to the effects of climate change and natural or man-made disasters;

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•trends, developments or other events in some foreign countries in which we operate;

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•trends, developments or other events in the United States and in some foreign countries in which we operate;

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•our ability to maintain the security of information relating to our customers, employees and vendors and our music;

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•our and our service providers’ ability to maintain the security of information relating to our customers, employees and vendors and our music;

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•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.

Current wording

•Results of operations. This section provides an analysis of our results of operations for the three months ended December 31, 2024 and December 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 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.

Current wording

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

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 180,000 songwriters and composers, with a global collection of more than one and a half million musical compositions. We classify our business interests into two fundamental operations: Recorded Music and Music Publishing. A brief description of each of those operations is presented below.

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 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.

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 180,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios. We have an extensive production music catalog collectively branded as Warner Chappell Production Music.

Previous wording

In February 2024, the Company announced a strategic restructuring plan (the “Strategic Restructuring Plan”) designed to free up additional funds to invest in music and accelerate the Company’s growth for the next decade. Under the Strategic Restructuring Plan, the Company expects a reduction in headcount of approximately 10% of the Company’s overall headcount. The Company expects to incur total non-recurring restructuring charges of approximately $135 million or approximately $80 million of total non-recurring after tax charges. The expected pre-tax charges include approximately $85 million of severance costs and approximately $50 million of non-cash impairment charges primarily in connection with the disposal or winding down of the Company’s non-core owned and operated media properties including the Company’s in-house advertising sales function (the “O&O Media Properties”). The majority of the Strategic Restructuring Plan is expected to be completed by the end of fiscal year 2025.

Current wording

In 2024, the Company announced the Strategic Restructuring Plan to free up additional funds to invest in music and accelerate the Company’s growth for the next decade. The Company expects to incur total non-recurring restructuring charges of approximately $230 million or approximately $150 million of total non-recurring after tax charges. The expected pre-tax charges include approximately $154 million of severance and other termination costs, along with approximately $76 million of non-cash impairment charges recorded to date. The majority of severance payments and other termination costs are expected to be paid by the end of fiscal year 2026.

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 in 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 non-core operations, continuing to manage overhead, sharpening focus, expanding shared services, and implementing previously disclosed expected operational efficiencies made possible by the Company’s financial transformative initiative. The Company expects allocating a majority of the costs savings to increase investment in the Company’s core Recorded Music and Music Publishing businesses, new skill sets and tech capabilities.

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 rolled off in fiscal 2025.

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 by the end of the fiscal year.

Previous 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.

Current wording

During the three months ended December 31, 2024, in connection with the BMG Termination, the Company reported lower Recorded Music streaming revenue of $16 million and lower physical revenue of $16 million. The impact to Recorded Music’s Adjusted OIBDA was immaterial for the three months ended December 31, 2024.

Previous 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.

Current wording

Total revenues decreased by $82 million, or 5%, to $1,666 million for the three months ended December 31, 2024 from $1,748 million for the three months ended December 31, 2023. Revenue growth was unfavorably impacted by the BMG Termination, which resulted in $32 million lower Recorded Music revenue compared to the three months ended December 31, 2023, of which $16 million was in streaming revenue and $16 million was in physical revenue. The prior-year quarter also included $75 million from a licensing agreement extension for an artist’s catalog (the “Licensing Extension”) in Recorded Music licensing revenue and $30 million of Recorded Music streaming revenue from a deal with one of the Company’s digital partners (the “Digital License Renewal”), which resulted in upfront revenue recognition for the three months ended December 31, 2023. Excluding these items, total revenues increased by 3%, which includes $19 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 81% and 19% of total revenue for the three months ended December 31, 2024, respectively, and 83% and 17% of total revenue for the three months ended December 31, 2023, respectively. Prior to intersegment eliminations, U.S. and international revenues represented 42% and 58% of total revenues for the three months ended December 31, 2024 and 46% and 54% of total revenues for the three months ended December 31, 2023.

Previous 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.

Current wording

Total digital revenues after intersegment eliminations decreased by $22 million, or 2%, to $1,082 million for the three months ended December 31, 2024 from $1,104 million for the three months ended December 31, 2023. Excluding the BMG Termination and the Digital License Renewal, total digital revenues increased 2%. Total streaming revenue decreased 2% driven by Recorded Music, partially offset by growth in Music Publishing. Total streaming revenue includes $14 million of unfavorable currency exchange fluctuations. Prior to intersegment eliminations, total digital revenues for the three months ended December 31, 2024 were composed of U.S. revenues of $508 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 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.

Previous wording

Recorded Music revenues decreased by $31 million, or 2%, to $1,251 million for the three months ended June 30, 2024 from $1,282 million for the three months ended June 30, 2023. The decrease includes $17 million of unfavorable currency exchange fluctuations. U.S. Recorded Music revenues were $517 million and $557 million, or 41% and 43% of consolidated Recorded Music revenues for each of the three months ended June 30, 2024 and June 30, 2023, respectively. International Recorded Music revenues were $734 million and $725 million, or 59% and 57% of consolidated Recorded Music revenues for each of the three months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

Recorded Music revenues decreased by $100 million, or 7%, to $1,345 million for the three months ended December 31, 2024 from $1,445 million for the three months ended December 31, 2023. The decrease includes $16 million of unfavorable currency exchange fluctuations. Excluding the impacts of the Licensing Extension of $75 million, the BMG Termination of $32 million, and the Digital License Renewal of $30 million, Recorded Music revenue increased 3%. U.S. Recorded Music revenues were $532 million and $627 million, or 40% and 43% of consolidated Recorded Music revenues for each of the three months ended December 31, 2024 and December 31, 2023, respectively. International Recorded Music revenues were $813 million and $818 million, or 60% and 57% of consolidated Recorded Music revenues for each of the three months ended December 31, 2024 and December 31, 2023, respectively.

Previous 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.

Current wording

International revenue increased by $13 million, or 1%, to $963 million for the three months ended December 31, 2024 from $950 million for the three months ended December 31, 2023. Excluding the unfavorable impact of foreign currency exchange rates of $18 million, International revenue increased by $31 million, or 3%. International Recorded Music revenue decreased by $5 million, or 1%, driven by decreases in artist services and expanded-rights revenue and digital revenues, partially offset by increases in licensing and physical revenues. International Recorded Music artist services and expanded-rights revenue decreased by $9 million due to lower direct-to-consumer merchandising revenue at EMP, lower concert promotion revenue primarily in France, and the unfavorable impact of foreign currency exchange rates of $2 million. International Recorded Music digital revenue decreased by $7 million, attributable to lower streaming revenue of $7 million, or 1%, which reflects the unfavorable impact of the BMG Termination and the Digital License Renewal in the prior-year quarter, and an unfavorable impact of foreign currency exchange rates of $13 million. International Recorded Music licensing revenue increased by $7 million driven by higher broadcast revenue and the impact of settlements, and physical revenue increased by $4 million driven by strong releases primarily in Japan, partially offset by an unfavorable impact of foreign currency exchange rates of $1 million. International Music Publishing revenue increased from the prior-year quarter by $18 million, or 14%, to $150 million for the three months ended December 31, 2024 from $132 million for the three months ended December 31, 2023. International Music Publishing revenue growth was driven by increases in digital revenue of $11 million due to growth in streaming, performance revenue of $4 million due to higher touring revenue, and other revenue of $4 million. This was partially offset by a decrease in mechanical revenue of $1 million. International Music Publishing synchronization revenue remained constant for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Previous 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.

Current wording

Artist and repertoire costs increased by $34 million, to $574 million for the three months ended December 31, 2024 from $540 million for the three months ended December 31, 2023. Artist and repertoire costs as a percentage of revenue increased to 34% during the three months ended December 31, 2024 from 31% for the three months ended December 31, 2023, primarily driven by revenue mix compared to the three months ended December 31, 2023, which included items with upfront revenue recognition without associated artist and repertoire costs, and unfavorable movements in currency exchange rates.

Previous 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.

Current wording

Product costs decreased by $20 million, to $320 million for the three months ended December 31, 2024 from $340 million for the three months ended December 31, 2023. Product costs as a percentage of revenue remained constant at 19% for each of the three months ended December 31, 2024 and December 31, 2023.

Previous 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.

Current wording

Total selling, general and administrative expense decreased by $2 million, to $474 million for the three months ended December 31, 2024 from $476 million for the three months ended December 31, 2023. Expressed as a percentage of revenue, total selling, general and administrative expense increased to 28% for the three months ended December 31, 2024 from 27% for the three months ended December 31, 2023 due to the factors noted below.

Previous 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.

Current wording

General and administrative expense increased by $15 million to $284 million for the three months ended December 31, 2024 from $269 million for the three months ended December 31, 2023. The increase in general and administrative expense was largely due to the unfavorable movements in foreign currency exchange rates of approximately $11 million, higher depreciation expense driven by assets placed into service of $3 million, higher non-cash stock-based compensation costs of $5 million, partially offset by savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business. Expressed as a percentage of revenue, general and administrative expense increased to 17% for the three months ended December 31, 2024 from 15% for the three months ended December 31, 2023 largely driven by unfavorable movements in foreign currency exchange rates.

Previous 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.

Current wording

Selling and marketing expense decreased by $18 million, or 10%, to $158 million for the three months ended December 31, 2024 from $176 million for the three months ended December 31, 2023. Expressed as a percentage of revenue, selling and marketing expense decreased to 9% for the three months ended December 31, 2024 from 10% for the three months ended December 31, 2023 due to lower variable marketing spend and savings from the Strategic Restructuring Plan, of which a portion has been reinvested in the Company’s business.

Previous 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.

Current wording

Distribution expense increased by $1 million to $32 million for the three months ended December 31, 2024 from $31 million for the three months ended December 31, 2023. Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the three months ended December 31, 2024 and the three months ended December 31, 2023.

Previous wording

Our non-cash stock-based compensation and other related costs increased by $3 million to $11 million for the three months ended June 30, 2024 from $8 million for the three months ended June 30, 2023, primarily related to issuance of additional restricted stock units and market-based performance stock units.

Current wording

Our non-cash stock-based compensation and other related costs increased by $5 million to $19 million for the three months ended December 31, 2024 from $14 million for the three months ended December 31, 2023, primarily related to issuance of additional restricted stock units and market-based performance stock units.

Previous 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.

Current wording

There was no net gain on divestitures during the three months ended December 31, 2024. Net gain on divestitures during the three months ended December 31, 2023 includes a pre-tax gain of $17 million in connection with the divestiture of certain sound recording rights.

Previous 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.

Current wording

Our restructuring and impairment charges increased to $27 million for the three months ended December 31, 2024, which includes severance costs related to the Strategic Restructuring Plan and impairment losses related to the write-off of certain long-form audiovisual production assets as well as lease termination costs for office closures in connection with the Strategic Restructuring Plan. There were no restructuring and impairment charges for the three months ended December 31, 2023.

Previous 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.

Current wording

Our depreciation expense increased by $3 million to $29 million for the three months ended December 31, 2024 from $26 million for the three months ended December 31, 2023. The increase is primarily due to technology assets being placed into service.

Previous 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.

Current wording

Our amortization expense increased by $2 million, or 4%, to $57 million for the three months ended December 31, 2024 from $55 million for the three months ended December 31, 2023. The increase is driven by incremental amortization related to acquisitions of music-related assets, partially offset by certain intangible assets becoming fully amortized.

Previous 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.

Current wording

Our operating income decreased by $140 million to $214 million for the three months ended December 31, 2024 from $354 million for the three months ended December 31, 2023. In addition to the factors impacting Adjusted OIBDA described above, the decrease in operating income was driven by $27 million of restructuring and impairment charges for the three months ended December 31, 2024 related to the Strategic Restructuring Plan, $17 million net gain on a divestiture in the prior-year quarter, higher amortization expenses of $2 million, and higher non-cash stock-based compensation and other related costs of $5 million.

Previous 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.

Current wording

Our interest expense, net, decreased to $37 million for the three months ended December 31, 2024 from $39 million for the three months ended December 31, 2023 due to lower interest rates on variable rate debt.

Previous 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.

Current wording

Other income for the three months ended December 31, 2024 primarily includes foreign currency gains on our Euro-denominated debt of $61 million, currency exchange gains on our intercompany loans of $46 million, realized gains on the sale of an investment of $29 million, and realized and unrealized gains on hedging activity of $15 million. This compares to foreign currency losses on our Euro-denominated debt of $39 million, currency exchange losses on our intercompany loans of $9 million, and realized and unrealized losses on hedging activity of $6 million for the three months ended December 31, 2023.

Previous wording

Our income tax expense increased by $8 million to $120 million for the nine months ended June 30, 2024 from $112 million for the nine months ended June 30, 2023. The increase of $8 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year and higher portion of the pre-tax income earned outside of the United States and taxed at rates higher than in the United States, partially offset by the impact from the winding down of the Company’s O&O Media Properties and updated allowable costs for reported foreign derived intangible income.

Current wording

Our income tax expense increased by $17 million to $89 million for the three months ended December 31, 2024 from $72 million for the three months ended December 31, 2023. The increase of $17 million in income tax expense is primarily due to the impact of higher pre-tax income in the current year, higher U.S. state and local taxes, and higher portion of the pre-tax income earned outside of the United States and taxed at rates higher than in the United States.

Previous 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.

Current wording

Net income increased by $48 million to $241 million for the three months ended December 31, 2024 from $193 million for the three months ended December 31, 2023 as a result of the factors described above.

Previous wording

Income attributable to noncontrolling interest increased by $29 million to $36 million for the nine months ended June 30, 2024 from $7 million for the nine months ended June 30, 2023, largely driven by higher income from non-wholly-owned subsidiaries in the current year, primarily due to the impact of the Licensing Extension.

Current wording

Income attributable to noncontrolling interest decreased by $29 million to $5 million for the three months ended December 31, 2024 from $34 million for the three months ended December 31, 2023. The decrease is due to lower income from non-wholly-owned subsidiaries, primarily due to the impact of the Licensing Extension in the prior-year quarter.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Recorded Music cost of revenues decreased by $4 million, or 1%, to $686 million for the three months ended December 31, 2024 from $690 million for the three months ended December 31, 2023. Expressed as a percentage of Recorded Music revenue, Recorded Music artist and repertoire costs increased to 27% for the three months ended December 31, 2024 from 24% for the three months ended December 31, 2023, primarily driven by revenue mix and the unfavorable movements in currency exchange rates. Expressed as a percentage of Recorded Music revenue, Recorded Music product costs remained constant at 24% for each of the three months ended December 31, 2024 and December 31, 2023.

Previous wording

(1)Includes depreciation expense of $13 million for each of the three months ended June 30, 2024 and June 30, 2023.

Current wording

(1)Includes depreciation expense of $15 million for the three months ended December 31, 2024 and $13 million for the three months ended December 31, 2023.

Previous 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.

Current wording

Recorded Music selling, general and administrative expense decreased by $1 million, to $363 million for the three months ended December 31, 2024 from $364 million for the three months ended December 31, 2023. The increase in general and administrative expense was mainly driven by unfavorable movements in foreign currency exchange rates of approximately $11 million, higher non-cash stock-based compensation and other related costs of $4 million, and the impact of acquisitions of $1 million. The decrease in selling and marketing expense was primarily due to lower variable marketing spend and savings from the Strategic Restructuring Plan, a portion of which has been reinvested into the Company’s business. The increase in distribution expense was primarily driven by revenue mix. Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense increased to 27% for the three months ended December 31, 2024 from 25% for the three months ended December 31, 2023.

Previous 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.

Current wording

Recorded Music operating income decreased by $136 million to $238 million for the three months ended December 31, 2024 from $374 million for the three months ended December 31, 2023. In addition to the factors impacting Adjusted OIBDA described below, the decrease in operating income was driven by $28 million of restructuring and impairment charges which includes severance costs related to the Strategic Restructuring Plan and impairment losses related to the write-off of certain long-form audiovisual production assets and lease termination costs for office closures in connection with the Strategic Restructuring Plan in the current quarter. The decrease is also driven by higher depreciation expenses of $2 million due to technology assets being placed into service, partially offset by lower amortization expenses of $4 million due to certain intangible assets becoming fully amortized.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Music Publishing selling, general and administrative expense increased by $3 million, or 10%, to $32 million for the three months ended December 31, 2024 from $29 million for the three months ended December 31, 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 December 31, 2024 and December 31, 2023.

Previous 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

Current wording

Music Publishing operating income decreased by $8 million to $55 million for the three months ended December 31, 2024 from $63 million for the three months ended December 31, 2023, driven by the same factors affecting Adjusted OIBDA discussed below, as well as an increase in amortization expense of $5 million.