Warner Music Group Corp.

Welcome to Warner Music Group's third quarter earnings call for the period ended June 30, 2026. 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. Now, I would like to turn today's call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Good afternoon, and welcome to Warner Music Group's fiscal third quarter earnings call. Please note that our earnings press release, earnings snapshot, and form 10Q are available on our website. On today's call, we have our CEO, Robert Kyncl, and our acting CFO, Lou Dickler, who will take you through our results and then answer your questions. Before our prepared remarks, I would like 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 including metrics that are adjusted for notable items during this conference call and in our earnings materials and have provided schedules reconciling these results to our GAAP results in our earnings press release. 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 that there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, and projections will result or be achieved. Investors should not rely on forward-looking statements as 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 these risk factors is contained in our filings with the SEC. And with that, I'll turn over to Robert.

Hello, everyone, and thank you for joining us today. We have remained focused on execution against our strategic goals, and we're proud to have delivered or overdelivered against our targets for the fifth quarter in a row. As you will have already seen in the preliminary financial results we released on Monday, This was yet another quarter of healthy top and bottom line growth, led by robust 12% increase in recorded music subscription streaming revenue on an adjusted basis. We also saw continued progress on our cost savings initiatives and our operating leverage resulted in margin improvement and strong cash flow generation in the quarter. Highlights include a 9% increase in total revenue, rising to 11% on an adjusted basis, 15% growth in adjusted EBITDA, which led to 100 basis points of margin expansion and a 209% increase in operating cash flow that resulted in a roughly 100 million increase in our cash balance. These impressive results are a testament to the hard work of our global teams and a culture that celebrates human creativity while embracing technology shifts to future-proof our business. Before diving deeper into performance and strategy, I'd like to provide an update on recent management changes. As you know, Armin Zerza has stepped down from his position for personal reasons, and I'd like to thank him for the lasting contributions he has made to WMG. Louis Dickler, our global controller and chief accounting officer, will serve as acting CFO as we conduct a search. Louis will walk you through the financial results later on. As part of these management changes, Tom Corson, co-chairman and COO of Warner Records, will step into the role of COO of Warner Music Group. Tom is one of the most dynamic, respected, and effective executives in the music business, and a fierce champion of talent. Together with Aaron Bashak, he's helped architect Warner Records' resurgence, and will leverage his vision, disciplined execution and deep experience across the entire company as we continue to deliver for our artists and songwriters. I want to reiterate our commitment to our previously articulated financial targets of high single-digit consolidated revenue growth, double-digit adjusted OIPDA growth, double-digit adjusted EPS growth and 50% to 60% operating cash flow conversions. These targets are supported by our long-term strategy, enduring structural changes, a focused capital allocation framework, and a disciplined execution already underway. Moving on, we continue to make great progress on our three strategic priorities, growing our share, increasing the value of music, and becoming more efficient. First, growing our share. We're focused on sustainable market share growth and year-to-date our overall U.S. streaming share and our U.S. new release streaming share are up. We're achieving this through intensified focus across our portfolio. We're developing the next wave of talent like Bella Kay and Stella Lefty, who recently broke into the Billboard Hot 100 top three. And we're amplifying breakthrough stars like Sombra, Pink Panthers and Alex Warren, as well as hitmakers like Galani and Charli XCX, who just became the first British female artist ever to land two UK number one albums in the same year. We're also continuing to attract new superstar talent, with Miley Cyrus recently signing to Atlantic Records and signalling that her next project is underway. Under Elliot Grange's leadership, Atlantic's share of new releases has ballooned, jumping to the number two spot on Billboard Mid-Year Report, up from the number four spot in 2024, reflecting the label's creative renewal. Globally, Die Die, Burna Boy's official World Cup collab with Shakira, became the number one song in the world, topping both Spotify and Billboard global charts for multiple weeks. Meanwhile, Madonna's new album, Confessions 2, debuted at number one in the US and UK, leading the way for the 17th percent growth in our physical revenue in the quarter. The successful release of her album is a true company effort, as she signed to us for both recorded music and publishing. were proud stewards of her amazing catalog, which is seeing record new audience growth, particularly with people under age 35 who now make up up to 60% of her Spotify streams. In fact, leveraging our frontline approach to marketing our top 500 off-roster catalog artists is driving market share gains year over year. And as I've talked about before, Our teams are also expertly using proprietary AI tools across our entire catalog of over 1 million songs to detect opportunities to optimize all of our music for streaming services and using automated workflows to fuel long-tail performance. So we're able to give all of our musical gems the care and attention they deserve, something that was humanly impossible a year ago. More specifically, we're utilizing AI to create new marketing content derived from our catalog, like motion art, lyric videos, and visualizers, to drive engagement. And we've built a proprietary marketing identification model that helps us prioritize opportunities to drive user engagement and revenue. A quick example, using these tools, we were able to boost Chris Rainbow's 1979 recording, Be Like a Woman, from just 50,000 streams in all of 2025 to over 140 million streams so far this year. Our ability to effectively deploy end-to-end automation across our catalog represents a tremendous untapped opportunity that we will continue to build towards. We're proud of the fact that our share improvements to date have been largely organic, differentiating us from some of our peers. but we're now taking steps to accelerate and fortify these gains through disciplined, patient and return-focused M&A. For example, our joint venture with Bain has deployed 650 million in catalog acquisitions and is a strong pipeline for the future. And we've expanded our distribution business through the acquisition of independent music platform Revelator. Distribution is an important part of the ecosystem and we're taking a thoughtfully balanced and many more. ADA will enhance its value proposition for artists and labels with next-generation digital distribution, rights management, royalty accounting, and real-time analytics. Our momentum in the space is attracting new partners. We recently signed a global distribution deal with Go Digital Music, an independent music group, bringing over 85,000 new tracks into the ADA ecosystem. We also inked a distribution partnership with AIM Music, a newly founded Berlin-based independent label. Our publishing business continues its winning streak, growing 11% this quarter. Recent highlights include Ray releasing a self-bent UK number one album, superstar songwriter Amy Allen contributing to Olivia Rodrigo's number one global smash, Drop Dead, and Illya contributing to Ariana Grande's Billboard Hot 100 number one single, Hate That I Made You Love Me. We've renewed deals with Billboard's 2026 Country Hitmaker of the Year, Riley Greene, and Latin Grammy-winning global Spanish superstar, Quevedo, a testament to the best-in-class reputation that Warner Chappell has built over the years. Next, turning to increasing the value of music. As you know, I've always championed the deal structures that better reflect the true value of music. and just over two years ago, we took much more proactive approach to pricing. Fast forward to today, we, along with our DSP partners, have evolved the industry standard to a contractual wholesale rate increases, occurring in much more regular cadence, providing us, the rights holders, with greater baseline certainty. This also benefits the DSPs, which are taking the opportunity to increase subscription prices, while innovating to provide new offerings to their consumers. So it's truly a win for everyone. The latest proof point in this evolution is our renewed deal with Apple, which completes alignment across all of our major DSP partners around contractual PSM increases, giving us better visibility into our outlook. The success of our strategy is evidenced by the marked acceleration in our subscription streaming growth, which we expect to be resilient for the years to come. AI creates a new incremental vector to increase the value of music, and we've taken a leadership role to capitalize on the new opportunities it is unlocking. We've developed new monetization frameworks like our partnerships with Suno, Stability AI, Clay, and Udio, and expect our licensing deals to contribute materially to our subscription streaming revenue growth starting in fiscal 27. As we continue to explore opportunities to partner with traditional DSPs on AI tiers, we're thinking holistically about our relationships to ensure the right deal terms are in place, including guardrails and protections for our artists and songwriters. And this not only unlocks industry-wide growth, but also enables our partners to innovate, providing fans with new ways to engage with their favorite artists and songs. On the regulatory front, we've been actively working with governments around the world to craft AI policies that protect free market licensing and resist weakening of copyright. And in the last quarter, we've seen some key wins. As a result of intense lobbying efforts at the highest levels of government, Chile again rejected the introduction of a new Texan data mining exception that would have allowed AI developers to use copyrighted content to train their systems without a license. and in July, Australian Prime Minister Albanese rejected a proposal from AI developers that would have shielded them from liability for copyright infringement. And now on to the third priority of becoming more efficient. Our strategic reorganization, investments in technology and the continued successful rollout of our financial transformation program have enabled us to consistently deliver strong growth while cutting costs and increasing margins. We're integrating AI to optimize revenue growth and increase productivity while leveraging AI across our functional departments, including finance, legal and HR, to streamline workflows, accelerate decision making and reduce our spend. Our cost savings initiatives are progressing on schedule, and we have the organizational structure in place to continue transforming WMG into a more efficient and technology enabled music company. We have an exciting release schedule ahead, including new music from Alex Warren, Sombra, David Guetta, Raven Lanais, Mike Towers, Teddy Swims, Tinashe, Dan and Che, Miley Cyrus, and many more. With strong momentum driven by our creative success and execution across our strategic, financial, and operational priorities, We have set ourselves up for sustainable growth that will continue to be supported by a capital allocation program with clearly defined return thresholds across organic and inorganic investments, driving the value of music across tiers and platforms, and disciplined cost management that drives strong margin expansion and cash flow delivery. I will now pass it over to Lou.