Warner Music Group Q3 2025 Earnings Report

Warner Music Group EPS Results

• Actual EPS: -$0.03
• Consensus EPS: $0.27
• Beat/Miss: Missed by -$0.30
• One Year Ago EPS: $0.27

Warner Music Group Revenue Results

• Actual Revenue: $1.69 billion
• Expected Revenue: $1.59 billion
• Beat/Miss: Beat by +$99.21 million
• YoY Revenue Growth: +8.70%

Warner Music Group Announcement Details

• Quarter: Q3 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 8:30AM ET

Warner Music Group (NASDAQ:WMG) operates as a music entertainment company in the United States, the United Kingdom, Germany, and internationally. It operates through Recorded Music and Music Publishing segments. The Recorded Music segment is involved in the discovery and development of recording artists, as well as related marketing, promotion, distribution, sale, and licensing of music created by such recording artists; markets its music catalog through compilations and reissuances of previously released music and video titles, as well as previously unreleased materials; and conducts its operation primarily through a collection of record labels, such as Warner Records and Atlantic Records, as well as Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Spinnin' Records, Warner Classics, and Warner Music Nashville. This segment markets, distributes, and sells music and video products to retailers and wholesale distributors; independent labels to retail and wholesale distributors; and various distribution centers and ventures, as well as retail outlets, online physical retailers, streaming services, and download services. The Music Publishing segment owns and acquires rights to approximately one million musical compositions comprising pop hits, American standards, folk songs, and motion picture and theatrical compositions. Its catalog includes approximately 150,000 songwriters and composers; and various genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative, and gospel. This segment also administers the music and soundtracks of various third-party television and film producers and studios. The company was founded in 1929 and is headquartered in New York, New York.

Warner Music Group Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: 7% total revenue growth in Q3, with subscription streaming up 8.5% on an adjusted basis, reflecting broad‐based strength across recorded music and publishing.
• Positive Sentiment: US recorded music market share rose by approximately one percentage point year‐over‐year, underpinned by sustained chart dominance and breakout hits globally.
• Positive Sentiment: Announced a $1.2 billion joint venture with Bain Capital to bolster catalog acquisitions and turbocharge M&A efforts across recorded music and publishing.
• Neutral Sentiment: Unveiled a strategic reorganization plan aimed at generating $300 million in annualized cost savings by fiscal 2027 to fund growth priorities and improve margins.
• Negative Sentiment: Operating cash flow fell to $46 million (from $188 million) and free cash flow to $7 million (from $160 million) year‐over‐year, driven by increased A&R investments.

Presentation

[Operator]

Welcome to Warner Music Group's Third Quarter Earnings Call for the period ended 06/30/2025. At the request of Warner Music Group, today's call is being recorded for replay purposes. And if you object, you may disconnect at any time. I would now like to turn the call over to your host, Mr. Karim Chin, Head of Investor Relations. You may begin.

[Kareem Chin, SVP & Head - Investor Relations at Warner Music]

Good morning, everyone, and welcome to Warner Music Group's fiscal third quarter earnings conference call. Please note that our earnings press release, earnings snapshot, and Form 10 Q are available on our website. On today's call, we have our CEO, Robert Kinzel, and our CFO, Armen Zerza, who will take you through our results, and then we will answer your questions. Before our prepared remarks, I'd like to refer you to the second slide of the earnings snapshot to remind you that this communication includes forward looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non GAAP results during this conference call and in our earnings snapshot slides and have provided schedules reconciling these results to our GAAP results in our earnings press release.

[Kareem Chin, SVP & Head - Investor Relations at Warner Music]

All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. All forward looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there's a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, and projections will result or be achieved.

[Kareem Chin, SVP & Head - Investor Relations at Warner Music]

Investors should not rely on forward looking statements because they are subject to a variety of risks, uncertainties, and other factors that can cause actual results that differ materially from our expectations. Information concerning factors that can cause actual results to differ materially from those in the forward looking statements is contained in our filings with the SEC. And with that, I'll turn it over to Robert.

[Robert Kyncl, CEO & Director at Warner Music]

Thanks, Karim, and hello, everyone. Before I get into our results, I'd like to formally welcome our new CFO, Armin Serza, who joins us for his first earnings call. I look forward to partnering with him as we elevate W and G to new heights. I'm pleased to say that we've delivered a strong quarter marked by reacceleration of growth. This was driven by a sustained and impressive showing on the charts, which is now also beginning to translate into an improvement in our global market share, all of which underscores that our strategy is working. I'll give you a brief summary of our results and Armen will provide more detail. We saw a broad based reacceleration with total revenue growth of 7%, reflecting growth across recorded music and music publishing. Recorded music subscription streaming grew 8.5% adjusted for notable items. As I've mentioned to you before, we're creating a virtuous cycle by putting more money behind the music while simultaneously becoming leaner and stronger. Our tighter focus is helping fuel our progress in three strategic priorities: growing our market share, growing the value of music, and increasing our efficiency.

[Robert Kyncl, CEO & Director at Warner Music]

I am pleased to say that we have tangible proof points in each area. I'll start with growing our share. During the quarter, we've grown our recorded music market share in key regions, including The US, where our market share increased roughly one percentage point year over year per Luminate data. We're achieving these gains by delivering the biggest hits in the world today, developing artists who will be the superstars of tomorrow, and growing the popularity of our iconic catalog. Our recording artists held half of the top 10 on the Spotify global chart for twelve weeks and the number one spot for all but seven weeks of 2025.

[Robert Kyncl, CEO & Director at Warner Music]

And right now, we have seven of the top 20 spots on Billboard Global 200. We're also seeing great success from our breakout artists. In an increasingly noisy and competitive environment, these new stars will highlight WMG's outstanding artist development capabilities. Atlantic's Alex Warren has held the number one spot on Billboard Hot 100 for nine weeks and his album debut at number one in The UK, while Warner Records Somber reached number one on the Spotify global chart. Teddy Swims, Benson Boone, and Rose have all remained fixtures on the charts, showing the incredible staying power of the songs that captivate fans.

[Robert Kyncl, CEO & Director at Warner Music]

That is Loose Control, released just over two years ago, has become the first song in the history of the Billboard Hot 100 to spend one hundred weeks on the chart and still counting. Outside The United States, we've had number ones from Nikisavich in Italy, Gabs in Denmark, Fidel, Shaker in MENA, and Eurovision Song Contest winner JJ in Austria among others. This is also representative of the progress we've seen on expanding our international market share. Warner Chappell continued its strong run as well with Morgan Whelan's I'm the Problem holding the number one spot on the Billboard 200 album chart for nine weeks, Riley Green hitting number one on Billboard country airplay chart, and BLACKPINK's Diplo produced track Jump debuting atop Billboard Global 200. Today's hits will become the evergreen catalog of the future.

[Robert Kyncl, CEO & Director at Warner Music]

Given that music over three years old represents roughly two thirds of our recorded music streaming revenue, continued growth and revitalization is paramount. I'll give you just a few examples of our always on approach to catalog marketing. Veronica Electronica, a new album of Madonna's remixes, has contributed to her career wide streams jumping 33% this fiscal year to date. The twenty fifth anniversary edition of Slip Down's first album has helped drive an 11% increase in the band's streams this fiscal year to date. And Fleetwood Mac's Rumors was the only catalog release on Luminate's mid year top Vinyl album sales chart.

[Robert Kyncl, CEO & Director at Warner Music]

We continue to find new ways to help longtime legends cut through the noise. Last year, we revitalized our approach to the management and marketing of our so called off roster catalog. This means we're now taking a fresh, inventive, and global approach to marketing artists who are no longer recording new music for us. As part of this effort, we brought on Orla Re Fisher in the new role of head of dual catalog strategy. She will lead campaigns for the many stars where we represent both their recorded music and publishing catalogs, including legends from Led Zeppelin to David Bowie.

[Robert Kyncl, CEO & Director at Warner Music]

At the same time, we're complementing our organic growth and increasing the value of music through M and A activity, which will be accelerated by our recently announced $1,200,000,000 joint venture with Bain Capital. Next, growing the value of music. The industry is increasingly focused on price driven growth, and we continue to see progress in aligning our contracts with streaming services with this new paradigm as we improve deal terms. Since February, we signed renewals with several major services that will provide greater certainty and visibility around our economics. We look forward to seeing the impact these deals will have in 2026 and beyond.

[Robert Kyncl, CEO & Director at Warner Music]

In fact, you've seen Spotify announce price increases outside The US earlier this week, reflective of the incredible value proposition that music subscriptions present. And as I've mentioned, we continue to work with our DSP partners on the design and implementation of super fan tiers, which demonstrate the opportunity to better monetize fandom. A critical factor in growing the value of music is to protect the rights of our artists and songwriters. We're committed to embracing AI in ways that benefit our artists, songwriters, and the broader music community. At the same time, we continue our efforts to enable free market licensing for the training of AI models and to protect the visual likeness and voice of our artists from unauthorized deepfakes.

[Robert Kyncl, CEO & Director at Warner Music]

Later this year, we expect Congress to consider legislation to implement the AI action plan released by the White House in July. While the plan's recommendations don't address either positively or negatively, the issues of greatest importance to us, we will remain highly engaged throughout the process. There is a broad policy alignment across the copyright industries, including the music industry, regarding the need to maintain strong intellectual property protections in the generative AI space. And now let's turn to our third priority, improving efficiency. Last month, we announced a strategic reorganization plan that will generate $300,000,000 of cost savings to help future proof the company and unlock the next era of growth.

[Robert Kyncl, CEO & Director at Warner Music]

We're evolving into a faster and more focused and innovative company with an even more attractive financial profile. In addition to the financial benefits, which Armen will talk about, our plan will make our company leaner and stronger by compounding our global expertise backed by improved tech tools. I've given Armin oversight of the corporate development and strat ops teams in addition to finance organization. Across these interdependent functions, we will take a more holistic approach to discipline and return focused capital allocation. As part of our plan, Warner Records unveiled a dynamic new marketing setup, while Atlantic Music Group sharpened its hip hop and R and B focus and launched a country and Americana driven label called Atlantic Outpost.

[Robert Kyncl, CEO & Director at Warner Music]

We've also appointed Alejandro Duque as president of ADA, our independent distribution arm. This expands his responsibilities as president of Warner Music Latin America. Having him in this dual role will help us bring down barriers for ADA clients, plugging them more directly into our infrastructure, and empowering them to build their businesses. We're very focused on growing our distribution business and the ADA brand through great services, flexible deal making, and tech innovation. And finally, we've hired a new leader in APAC, Lo Ting Fi.

[Robert Kyncl, CEO & Director at Warner Music]

He joins us from a telecom giant PCCW, where he most recently served as CEO of the subsidiary Makerville, which focuses on artist management and live events, as well as COO of View, its regional OTT streaming platform. Lofi was born in Hong Kong and has a long track record in scaling creative companies. He has also written hit songs under the pseudonym Yuri. We're excited about his ability to turbocharge our growth in Asia, including China and Japan. Regarding technology, we've made many improvements to our infrastructure that will help us in the long term, including upgrading our distribution supply chain and creating a new interface for our ADA clients.

[Robert Kyncl, CEO & Director at Warner Music]

Additionally, we continue to make updates to our innovative audio sensor and other app, WMG Pulse, and expand its user base. We've also begun to roll out a new app for our employees called WNG One. It serves as a single source of truth across the organization, helping to streamline global collaboration across markets, increase impact for our artists and songwriters, and ultimately improve efficiency. Building on our recent momentum, we have exciting music coming out from Ed Sheeran, Zach Bryan, Alex Warren, Twenty One Pilots, Somber, Cardi B, David Guetta, and many more. The success we've been seeing gives us even more confidence that we have the right strategy as well as the expertise to accelerate it.

[Robert Kyncl, CEO & Director at Warner Music]

Our mission is to grow W and G through our commitment to artists and strong data development and more nimble organization and focused investment. I will now pass it over to Harman.

[Armin Zerza, EVP & CFO at Warner Music Group]

Thank you, Robert, and good morning, everyone. For those of you who have not already met, I wanted to properly introduce myself. After twenty years at Procter and Gamble, I joined Activision Blizzard in 02/2015, spending almost a decade there in financial, commercial, and operational roles. Our focus at Activision was to create value for our players, communities, employees, partners, and shareholders. This experience lent itself well to the tremendous opportunity we have in the music industry, and I'm extremely happy to have joined the talented team at Warner Music Group.

[Armin Zerza, EVP & CFO at Warner Music Group]

Our primary goal is to accelerate long term growth and value creation for artists and songwriters, fans, employees, partners, and shareholders. Together with our leadership team, we have developed a strong plan to execute against the three priorities that Robert laid out. Before talking about our q three results, let me elaborate on this plan, which will help us to, one, invest into our core music business to accelerate revenue growth two, increase efficiency to free up capacity to invest and to expand operating margin three, level up M and A to turbocharge growth and value creation and four, improve capital location efficiency and return capital to shareholders. First, on accelerating growth. We have conducted rigorous analysis across the globe to assess each market's repertoire value, both in terms of local growth and global exportability.

[Armin Zerza, EVP & CFO at Warner Music Group]

As a result, we have serodine in key markets and genres where we will meaningfully increase investment, giving us a proprietary playbook on how to impactfully drive additional revenue and market share while taking a more holistic approach to disciplined return focused capital allocation. Second, in order to free up capacity and help fuel this growth and margin expansion, we have launched two key initiatives. Last month, we announced a strategic restructuring program that will deliver annualized run rate savings of $300,000,000 by the end of fiscal twenty twenty seven. In addition to providing more resourcing and capital for reinvestment across the most culturally powerful and highest potential repertoire centers and making us more efficient, we expect this program to deliver margin expansion of 150 to 200 basis points in fiscal twenty twenty six. Please refer to our July 1 eight k for more details.

[Armin Zerza, EVP & CFO at Warner Music Group]

From an organizational perspective, this program will help us double down on greater growth in our core music business. This means we'll overweight our resources in the highest potential repertoire markets and genres in order to provide the most attractive returns. And we'll prioritize the skill set and tools in a and r marketing to deliver the biggest impact for artists and songwriters, including by leveraging technology investments such as WMG Pulse and WMG One, and our finance transformation initiative, which are all starting to bear fruit. Third, on m and a. Last month, we also announced a joint venture with Bain Capital for the purchase of up to 1,200,000,000 of catalogs across recorded music and music publishing.

[Armin Zerza, EVP & CFO at Warner Music Group]

The JV leverages third party capital to expand our buying power, adding even more firepower to our m and a initiatives, while also providing us with additional rights, revenue, and market share. We will manage all aspects of marketing, distribution, and administration for the acquired catalogs. Expect news of our first acquisition soon. Fourth, on capital allocation, we have a clear set of priorities. In addition to improving capital efficiency and stepping up investment into our core music business and catalog m and a, we are returning capital to shareholders.

[Armin Zerza, EVP & CFO at Warner Music Group]

We have a $100,000,000 buyback authorization and have announced today that we're increasing our quarterly dividend for the fifth year in a row to $0.19 a share, an increase of 6%. I wanted to add that we are committed to being transparent and communicative with the investor community about our progress and performance. In an effort to do this, we'll now provide updated disclosure and consistently address the items that impact year over year comparability. You'll find the details in our earnings release included in a simple table. Now turning to our quarter three results.

[Armin Zerza, EVP & CFO at Warner Music Group]

For quarter three, total revenue increased 7% and adjusted OIBDA increased 16% with a margin of 22.1%, an increase of 170 basis points over the prior year quarter. Adjusted for notable items, total revenue increased 8% and adjusted OIBDA increased 17% with a margin of 21.8%, an increase of 170 basis points over the prior year quarter. Recorded music revenue increased 6% or 8% on an adjusted basis, driven by growth across streaming, licensing, and artist services and expanded rights. Recorded music streaming revenue grew 3% due to subscription growth of 4% and ad supported decline of 2%. Our subscription streaming growth reflects roughly four fifty basis points headwind, mostly related to a true up payment from a streaming service in the prior year quarter.

[Armin Zerza, EVP & CFO at Warner Music Group]

Adjusting for notable items, underlying subscription streaming growth was 8.5%, which reflects our positive market share trends and chart performance. Physical revenue decreased 4% as growth from strong releases in Korea and Japan was offset by the BMG roll off. Adjusted for the roll off, physical revenue would have increased 4%. Artist services and expanded rights revenue increased 20% due to higher concert promotion in primarily in France and Spain, while licensing revenue increased 19%, reflecting the strength in The UK and China specifically. Now turning to music publishing, total revenue increased 9% driven by growth across performance, mechanical, digital and sync revenue.

[Armin Zerza, EVP & CFO at Warner Music Group]

In summary, our quarter three results reflect some of the impressive progress we have seen from our artists who have continued their hot streak across labels, vintages and geographies. As Robert said, not only have we been riding high in the charts, but we've also seen market share gains in The U. S, where our market share was up roughly one percentage points year over year based on Luminate data. This progress was led by our flagship labels, Atlantic and Warner Records. We are also seeing positive improvement globally across EMEA, APAC and LatAm.

[Armin Zerza, EVP & CFO at Warner Music Group]

Despite all of our progress, there's still a lot of work to do. China and Japan, for example, represent markets with tremendous opportunity and upside. With the leadership in place for the APAC region and in Japan, we're now focused on improving our share in these very important reporters centers. Finally, turning to cash. Operating cash flow decreased to $46,000,000 from $188,000,000 in the prior year quarter.

[Armin Zerza, EVP & CFO at Warner Music Group]

Operating cash flow conversion was 12% of adjusted OIBDA. Free cash flow decreased to $7,000,000 from $160,000,000 in the prior year quarter. This is primarily driven by greater investment in ANR. Looking forward, we continue to target 50% to 60% operating cash flow conversion of a multiyear period. Also as of June 30, had a cash balance of $527,000,000 total debt of $4,400,000,000 and net debt of $3,800,000,000 Our weighted average cost of debt was 4.1%, and our nearest maturity date remains 2028.

[Armin Zerza, EVP & CFO at Warner Music Group]

In conclusion, our releases are doing very well, and the outlook for 2026 and beyond is promising. We expect financial performance that more directly reflects the success of our artists and songwriters as we move past tough comparables and see uplift from our recent renewals with training services. While some of our investments and initiatives will take time to bear fruit, we are committed to revenue acceleration, which in combination with the efficiencies from our cost savings program, will deliver margin expansion. With our updated strategy in place and more capital at our disposal, we are set up to move quickly as we create lasting value for our artists, songwriters, employees, fans, partners and shareholders. Finally, we'd like to thank our teams around the world for all the excellent work they have been doing to deliver a strong quarter and to set us up for continued growth. With that, we take your questions.

[Operator]

Thank Your first question comes from Ben Swinburne with Morgan Stanley. Your line is open.

[Benjamin Swinburne, Head of U.S Media Research at Morgan Stanley]

Thank you. Good morning. I guess two questions. It's clear that you guys are focused on accelerating growth and you're reallocating resources around the company. At the same time, you've obviously taken a lot of cost out.

[Benjamin Swinburne, Head of U.S Media Research at Morgan Stanley]

So there's some tension there in terms of less investment, but more targeted investments. So can you elaborate a little bit on the strategy changes that you've made and how we should expect those changes in resource allocations to sort of drive financial performance? And then I would just love to hear if you have anything interesting to share on sort of the general generative AI topic and how you're leveraging that at the company, given I know it's a focus area for you, we'd be interested. Thank you.

[Robert Kyncl, CEO & Director at Warner Music]

All right. Thank you, Ben, and, great to hear from you. So first, I want to say that we're really happy with the progress, that we're making, not only succeeding in the charts, but starting to see that translating into market share. And especially in The United States, you know, as as I mentioned, plus one percentage point per Luminate. In order to sustain the growth in the future, we need to do better with more.

[Robert Kyncl, CEO & Director at Warner Music]

How are gonna do that? First, we're gonna free up a lot more capital through our reinvest through our reorganization. So our reorganization is strategic not only for being more efficient, but also for our growth. Second, we'll level up our m and a and accelerate growth through that activity. Key part of that is our $1,200,000,000 joint venture with Bain Capital.

[Robert Kyncl, CEO & Director at Warner Music]

Three, we're focusing our resource allocation on the markets with the highest potential for growth globally to accelerate accelerate growth again. And fourth, we have the right leadership in place in The US, Europe, LatAm. And just today, we announced the last piece of the puzzle with, LoFi being appointed as the leader of APAC. So across these four points, we feel really strongly about our plan. It's already in flight.

[Robert Kyncl, CEO & Director at Warner Music]

We're starting to see the results of it. And all of that is capped by our ongoing discussions with DSPs, which include commitments around PSMs and, obviously, our discussions around super fan tiers to further increase the value of music. On your second question around GenAI, there's a lot of work across the company on this topic. It has many tensions, but one of the things I can one example I can give you is we we've last quarter, we've launched our WMG Pulse app for artists and songwriters. We chose them all of their streaming information, song information, audience information, and money.

[Robert Kyncl, CEO & Director at Warner Music]

And that is one of the areas where we are working on applying GenAI to drive further insights that would be very difficult to do timely with people. And and Gen AI can help us provide insights about what is happening for the artists all around the world and all their DSPs and what are the actions they should we should be taking. So we're really excited about that. This is just one example. There are many others, and stay tuned to hear more about it in the future.

[Benjamin Swinburne, Head of U.S Media Research at Morgan Stanley]

Thanks, Robert. Appreciate it.

[Operator]

The next question comes from Michael Morris with Guggenheim Securities. Your line is open.

[Michael Morris, Senior Managing Director at Guggenheim Partners]

Thank you. Good morning. I appreciate it. Robert, I wanted to ask you one on subscription streaming. I think you just reported about 8.5% core growth in the quarter.

[Michael Morris, Senior Managing Director at Guggenheim Partners]

You mentioned a couple areas of incremental momentum, artist share and some distribution renewals going forward. So you did provide mid term growth guide in the past in the 8% to 10% range. You're already there. So this bodes well. Can you just talk about how you're thinking about the future performance relative to that guide?

[Michael Morris, Senior Managing Director at Guggenheim Partners]

And whether there are any sources of nonrecurring strength this quarter? And then Armen, welcome. I appreciate your insights, including the margin expansion goals. My question is, are there opportunities to improve the cash conversion, whether or not that's a priority for you and the management team? And maybe if you could just help us kind of prioritize your capital allocation goals, that would be very helpful. Thanks.

[Armin Zerza, EVP & CFO at Warner Music Group]

Thanks, Michael. I'll start with the capital allocation question that you had. And let me talk about our capital allocation priority first before I talk about cash conversion. From a capital allocation perspective, we have seen great returns investing in our business. So that's our first priority is investing in our core music business.

[Armin Zerza, EVP & CFO at Warner Music Group]

And as Robert mentioned, we'll do this more thoughtfully now, prioritizing key global repertoire markets and genres. Second, we will step up investment in m and a, plus plus investment in music catalogs, also leveraging our recently announced joint venture with Bain. And then third, as I said in my prepared remarks, we are focusing on returning capital to shareholders through buyback and dividend, and you just saw our dividend announcement. From a cash conversion perspective, this is a critical, not just a key focus area for management. Our target has been and continues to be 50% to 60% cash conversion.

[Armin Zerza, EVP & CFO at Warner Music Group]

And we have seen in the past three years been we have been at the high end of this range. Going forward, we feel very strong about our plan. We have many different initiatives to continue to drive and improve that. The first one is obviously our cost savings plan, which will not not only improve margin and enable investment, but also improve cash conversion. The second one is we are very focused on a and r spending efficiency.

[Armin Zerza, EVP & CFO at Warner Music Group]

You know, it we we mentioned already that we are very focused on prioritizing our spending on our core music business, number one, but also on core repertoire markets with global potential. And then third, you know, we've spent a lot of capital to deliver against our tech and finance transformation initiatives. As we go through this investment, that that that investment will normalize over time. So because of all that, we feel very confident about our capital allocation priorities priorities and cash conversion targets and also very focused on continuing returning capital to our shareholders. Now to your second question about streaming, I'll probably take that too.

[Armin Zerza, EVP & CFO at Warner Music Group]

First of all, we are very happy with the results we had this quarter. We saw growth across the world with share growth in The US across both, Warner Record and Atlantic, which was critical for us. On an adjusted basis, as you have mentioned, we have seen 8.5% paid streaming growth. Now as we look forward, we are very confident about our future because, one, the company is in a healthy place now and, two, the industry is in a very healthy place. Now when we think about long term growth, we believe that our adjusted quarter three results are very reflective of those healthy dynamics.

[Armin Zerza, EVP & CFO at Warner Music Group]

So the investment that we've been making is really not showing up in market share and growth. Now as we look forward, there are a lot of tailwind for us. The industry continues to grow. And as you know, it's a little bit more resilient to changes in the economy. Second, as you know, we'll see the impact from our DSP renewals next year.

[Armin Zerza, EVP & CFO at Warner Music Group]

Third, we have now more ammunition to invest into that growth behind our savings program. Fourth, we have m and a that will consume more aggressively, including with the joint venture with Vein. And then fifth, there's upside potential through the super premium period we're working on with our DSP. So net, we feel very confident about our future prospects and look forward to discussing those more with you in the future.

[Michael Morris, Senior Managing Director at Guggenheim Partners]

Thank you. Appreciate it.

[Operator]

The next question comes from Benjamin Black with Deutsche Bank. Your line is open.

[Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank]

Good morning and thank you for taking my questions. Robert, in an environment where it's harder to break new stars, Werner seems to be sort of having real success that's showing up in your new release market share. Mentioned Illuminate data. We've seen our own analysis here. Can you just talk a little bit about what's driving this success and how sustainable is it?

[Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank]

And Armen, you guys mentioned the new JV with Bain, 1,200,000,000.0 at the outset. Can you just talk about the decision to partner versus going on your own? Are there opportunities to expand the partnership? And you know, in the current rate environment, you know, how do you think about the opportunity set around catalog acquisitions? Thank you very much.

[Robert Kyncl, CEO & Director at Warner Music]

Sure. Thanks, Ben. So, yes, indeed. And, you know, today's environment is very noisy. Right?

[Robert Kyncl, CEO & Director at Warner Music]

And many different platforms, mass amounts of content. And in general, for all kinds of companies, it has been hard to generate hits and stars, etcetera. So for us to be able to sustain on a quarter after quarter basis incredibly high charting of our artists is something that we are absolutely thrilled about, and our company is humming on all cylinders creatively. Ultimately, you know, we've invested into ANR. We've invested into our executives, and and this chart success is starting to show up in market share success, which is obviously very important than its underlying bar.

[Robert Kyncl, CEO & Director at Warner Music]

It's it's it's it's the proof of our underlying results. The the, the playbook, as we mentioned, is to continue to do that in the highest potential, repertoire markets to drive these kind of results. And the artist development is something that has always been the DNA of Warner. If you look back to Bruno Mars, Ed Sheeran, Coldplay, you know, there are so many artists that we have worked with for so long to to develop them to Alipa. And so we're really thrilled that the artists who are charting in the world today are the ones that we have developed recently in this increasingly noisy environment.

[Robert Kyncl, CEO & Director at Warner Music]

Why is that happening? It's our executives, our people. We have a a really amazing team of people who have the skill, which is very unique. And as I mentioned before, we have leadership in place that's really great in The US, LatAm, and EMEA, and we just completed the leadership in APAC. So we feel really good about our our team, feel really good about the future.

[Robert Kyncl, CEO & Director at Warner Music]

And this is also one of those things that proves that the value of major music companies is here to stay. Because in this environment, to succeed globally, it's extremely hard. We need to have global infrastructure and local expertise, which is what we have, and it's showing up. So, I'm I'm really, thrilled about the progress we're making, and I'll hand it over to Armen to address the, Bain, question.

[Armin Zerza, EVP & CFO at Warner Music Group]

Yeah. Thanks for the question. The summary is that we are focused on growth, margin, and cash, and acquiring Catalogs does really all of that. So the JV is really a critical building blocks for us in our long term strategy to accelerate the acquisition of Catalog business. And the good news is that we found a partner with experience in in this industry, so we're very happy with the partner.

[Armin Zerza, EVP & CFO at Warner Music Group]

And, obviously, as you know, we've seen that in the in our disclosure, we think 50% ownership of the catalogs that we acquired will operate the GB basically by managing all aspects of marketing, distribution, and administration. Next, this is a key billing book for us, and we are very happy about the partnership.

[Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank]

Thank you very much.

[Operator]

The next question comes from Peter Supino with Wolfe Research. Your line is open.

[Peter Supino, MD & Senior Analyst - Media & Entertainment, Cable & Telecom at Wolfe Research, LLC]

Hi. Good morning. A question for Armen and one for the team. Armen, if you would expand on the announcement that was made a month ago regarding cost savings. Can you just talk about the organizational changes that you're making as part of that cost savings program and maybe detail the largest areas or opportunities for cost reductions.

[Peter Supino, MD & Senior Analyst - Media & Entertainment, Cable & Telecom at Wolfe Research, LLC]

And and for the team, during this q and a, you've discussed your interest in stepping up mergers and acquisitions and possibly expanding the use of joint ventures. That topic reminds me of organic growth. And I wonder if you could talk about the pros and cons of providing more specificity on organic growth and underlying financial trends, in the business ex m and a going forward? Thank you.

[Armin Zerza, EVP & CFO at Warner Music Group]

Yeah. Let me address your organizational question first. This is a critical program for us because we wanted to make sure that we create an organization that helps us drive our growth aspirations, but at the same time, obviously, also deliver savings to create capacity, invest in the business, and expand margin. And, frankly, as we went through the work as a team, we had to ground ourselves a little bit in the reality of our industry, which is that, you know, music is global, but at the same time, we are operating in 70 markets around the world. Thus, we designed the organization.

[Armin Zerza, EVP & CFO at Warner Music Group]

It was really important for us to have, on the one hand, the local expertise to discover new talent in those 70 markets and many more markets around the world, but at the same time, also have the global scale to elevate local talent globally. So to deliver against that, we have developed a very thoughtful global, regional, local organization organizational model. And the net of it is that we are investing more money, but also more resourcing in key markets in our frontline business, so in our marketing tools, which are all focused on discovering artists and songwriters as well as driving our catalog business. At the same time, we are scaling our global and regional services behind the tech investments that we're making over the last three years. And the balance of that was very important for us.

[Armin Zerza, EVP & CFO at Warner Music Group]

All of this was enabled by tech investments, as I mentioned, over the past three years. So we're very, very happy that with that, not only because they enable us to scale organization and services more, but also provide better services to artists and songwriters, like with our WMPulse app. Now as we move to the next phase of the tech investment, I mentioned before this, that we will normalize external spend more consistent with the market, so we expect savings there. We're also scaling our non people spend more consistent with the new more efficient organization design. So in summary, we think we got a very, very balanced organizational design that helps us drive the local opportunities by globalizing artists, but also drive cost savings to the bottom line.

[Armin Zerza, EVP & CFO at Warner Music Group]

We have said before that we expect from this about 150 basis points of margin expansion next fiscal year. Alright.

[Robert Kyncl, CEO & Director at Warner Music]

Then I'll I'll I'll take the organic growth part of the question. So, you know, as we've said of numerous times on this call, obviously, we're having a lot of creative success with new releases. That's part of our organic growth. You know, the day to day and our activities, finding artists, developing them, making them global superstars. That's all in the works, and we're doing an incredible job there.

[Robert Kyncl, CEO & Director at Warner Music]

In my opening remarks, I mentioned our always on catalog approach with some of the examples like Veronica, Electronica, and, Slipknot, etcetera. You know, we are focusing on marketing our catalog the same way we do frontline and and making sure that that is growing. It's two thirds of our business. That is, you know, that is what organic growth is about. And all of that is underlined by our relationships with DSPs and more certainty around pricing rather than wishful thinking around price increases.

[Robert Kyncl, CEO & Director at Warner Music]

So we feel really good about the industry growth. We feel very strongly about our own organic growth. And as Armen mentioned, layering on aggressive but responsible M and A capabilities augmented by the JV with Bain is just giving us extra firepower on accelerating.

[Peter Supino, MD & Senior Analyst - Media & Entertainment, Cable & Telecom at Wolfe Research, LLC]

Thanks very much.

[Operator]

The next question comes from Katkan Meral with Evercore ISI. Your line is open.

[Kutgun Maral, Director at Evercore ISI]

Good morning and thanks for taking questions. Two topics if I could. One on ad supported streaming at, recorded music and a high level question specific to Armin. So first, on ad supported streaming, is is there anything more you can share on how we should think about the trends at that line going forward across, you know, the more traditional core ad supported business as well as emerging platforms? And on the emerging front, is there anything you could call out in terms of the recent renewals you may have had with some partners or or what the renewal pipeline heading into 2026 looks like?

[Kutgun Maral, Director at Evercore ISI]

I know you don't talk about specific partners, but, it's been, I think, about two years since the TikTok deal was announced, so I wanted to check-in there. And then for Armen, you've been with the company for several months now, and it certainly seems like you've hit the ground running based off of some of the recent news flow. I'd be curious to hear some of your early observations in the seat and, you know, maybe what made you interested in joining the music industry and WMG more specifically. Thank you.

[Armin Zerza, EVP & CFO at Warner Music Group]

Thanks for the question. I'll start with my impressions. First, I'm super impressed with the management team, you know, here in New York, but also around the world. We have, I believe, one of the best creative teams that you can imagine, you know, here in The US, in Europe, Latin America, now also with the appointment of new leaders in Asia. Second, you know, this is a super attractive industry.

[Armin Zerza, EVP & CFO at Warner Music Group]

The industry has been growing for many years, but there are also a lot of opportunities that I felt that I could work on with the teams here based on my experience in another media industry, the gaming industry. Second, you know, DSP contracts, as Robert mentioned, provide us more certainty in the future. And third is a business that is now much more healthy, so we have a lot of opportunity ahead of us. So in that context, my key part is where to make sure that I help the team to first make sure that we have more capacity to invest into the business. And we're doing that with our savings program, which will not just accelerate growth, but also expand margin.

[Armin Zerza, EVP & CFO at Warner Music Group]

Secondly, I also want to make sure I leverage my m and a experience from the past, which is extensive at P and P and at activation to help accelerate m and A and not just organic growth here. And then third, there's a lot of opportunity to improve capital allocation by prioritizing spending against the biggest and most profitable opportunities. So, Nat, I saw the opportunity. I saw the impact that could have here on the business, and I'm super excited to be here. And I think we have tremendous opportunity to create value for our shareholders, but also for our artists and songwriters and employees here.

[Armin Zerza, EVP & CFO at Warner Music Group]

On your question on on the ads business, you know, when we look at the ads business, there's actually two parts to it. One is our core DSP business, where we're actually growing our ads business. And as, you know, what the biggest p s p PSP platform mentioned, you know, last week, there's a lot of opportunity to accelerate further. The biggest challenge is really in the short form video content business, and that's a challenge for the industry. We track we need to work on with the industry together with those partners.

[Armin Zerza, EVP & CFO at Warner Music Group]

But it's a lot of work for us to continue to improve that over time, and we are not done with that. We have a lot of opportunity ahead of us.

[Kutgun Maral, Director at Evercore ISI]

Understood. Thank you.

[Operator]

The next question comes from Rich Greenfield with LiteCheck Partners. Your line is open.

[Rich Greenfield, General Partner at LightShed Ventures]

Hi. Thanks for taking the question. Robert, there's been a lot of, I think, industry confusion over what this super premium or super fan experience should be. Your friends at Universal certainly started talking about it a couple years ago, and Daniel, like, at Spotify started talking about it. And then it it seems like the industry has struggled to figure out what the product actually should be.

[Rich Greenfield, General Partner at LightShed Ventures]

And at the same time, we're seeing you know, if I look at something like SoundCloud, people love sort of interacting and playing with music. There's all of these new AI startups where people are sort of manipulating music. And I'm I guess the the question is is do you think we can evolve from what the super fan experience might have been, which was, like, higher quality audio or, you know, chat with the artist or, you know, tickets to a concert. And may it actually evolve to something that involves sort of interactive music or some form of AI interaction? And just big picture, where do you see this going? Thank you.

[Robert Kyncl, CEO & Director at Warner Music]

Well, first, I think maybe we should invite you to our product session together with the DSPs because, you know, you I I know you have a lot of passion and expertise on this. I'm half joking only. But you're right. It's it's been something that's been discussed for a while. Obviously, there's nothing new to announce today, but we are in deep discussions with our partners.

[Robert Kyncl, CEO & Director at Warner Music]

You're also right about interactivity. Right? Obviously, anything on the Internet is not only personalized, but but but also interactive in many different ways, and those are the things to leverage. I I don't have anything new to announce today, but, you know, be sure that we are in deep discussions with our partners to evolve it because the opportunity is there. We all want to capture it.

[Robert Kyncl, CEO & Director at Warner Music]

It makes sense for both the DSPs as well as us, the music companies, and for artists and songwriters. So we're you know, everybody wants to get it right and and capture this opportunity. So we're we're excited about it, and, and we're, I'm busily working on it.

[Rich Greenfield, General Partner at LightShed Ventures]

Thank you. And I'm happy to join anytime.

[Robert Kyncl, CEO & Director at Warner Music]

Alright. Sounds good. We'll take you off on it.

[Operator]

Your final question will come from Doug Krutz of TD Cowen. Your line is open.

[Doug Creutz, Managing Director at TD Cowen]

Thank you. Armen, welcome back to the entertainment industry. Question for you. While you were at Activision, when I think about your time there, one of the things I think that that company was really great at was realizing the full value of its content through its negotiations with its digital distribution platform partners. How does that experience inform your mental model about how to approach your relationships with your platform partners here at WMG? Thank you.

[Armin Zerza, EVP & CFO at Warner Music Group]

Great question. So I I have two comments here. One, you know, it's interesting to see how industries evolve over time. And what I mean with that is that recall in the gaming industry, we used to have very few price points until free to play showed up. We basically catered to every different price point in the world.

[Armin Zerza, EVP & CFO at Warner Music Group]

So basically playing along the demand. It feels like the music industry at the is at is at the point today where we offer very few products at very limited price points. And super premium tier is obviously one opportunity to cater to a more premium consumer, but I'd argue there are many, many more opportunities for us to deliver better and premium priced products to our fans and to our community. And, you know, we are having conversations, obviously, with our partners. And I will tell you that the partners is also see those opportunities.

[Armin Zerza, EVP & CFO at Warner Music Group]

And in many cases, you know, people from the gaming industry actually joined those partners. So they see it similar way. Now devil is in the detail on all of this. It's really all about execution because when we play along the price curve, we have to make sure that we offer great value to consumers. And that's the work that's ahead of us.

[Armin Zerza, EVP & CFO at Warner Music Group]

So be assured that we are very focused on this because there's tremendous opportunity to deliver growth, but also value for our consumers in England. That's how we'll approach that.

[Operator]

That is all the time we have for questions. I will turn the call to Robert Kinzel for closing remarks.

[Robert Kyncl, CEO & Director at Warner Music]

Well, thank you all for joining today. I just want to close by saying we are really excited about the progress that we're making in an industry that has healthy dynamics, that we're starting to see our creative excellence translate into market share growth in important markets and drive our revenue, And that we have a very strong plan to continue to accelerate this growth in the future and on to execution. Thank you so much. Have a great day.

[Operator]

This concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Armin Zerza, EVP & CFO

Analysts

• Kareem Chin, SVP & Head - Investor Relations at Warner Music
• Robert Kyncl, CEO & Director at Warner Music
• Benjamin Swinburne, Head of U.S Media Research at Morgan Stanley
• Michael Morris, Senior Managing Director at Guggenheim Partners
• Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank
• Peter Supino, MD & Senior Analyst - Media & Entertainment, Cable & Telecom at Wolfe Research, LLC
• Kutgun Maral, Director at Evercore ISI
• Rich Greenfield, General Partner at LightShed Ventures
• Doug Creutz, Managing Director at TD Cowen