WMG

Warner Music Group’s second quarter results were received positively by the market, reflecting both revenue and profit performance above Wall Street expectations. Management attributed the quarter’s growth to a combination of improved subscription streaming revenue, driven in part by new pricing arrangements with major digital partners, and continued momentum in its music publishing and catalog businesses. CEO Robert Kyncl highlighted that “margin improvement and strong cash flow generation” were achieved through disciplined cost savings initiatives and operating leverage. The company also noted that physical music sales benefited from successful artist releases, with Madonna’s album debuting at number one in both the U.S. and U.K. Is now the time to buy WMG? Find out in our full research report (it’s free). Revenue: $1.86 billion vs analyst estimates of $1.80 billion (10.4% year-on-year growth, 3.8% beat) Adjusted EPS: $0.51 vs analyst estimates of $0.39 (31.2% beat) Adjusted EBITDA: $433 million vs analyst estimates of $411.3 million (23.2% margin, 5.3% beat) Operating Margin: 16.4%, up from 10% in the same quarter last year Market Capitalization: $13.12 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Clay Griffin (MoffettNathanson) asked about the impact of CFO Armin Zerza’s departure, with CEO Robert Kyncl emphasizing that capital allocation discipline and strategy are deeply institutionalized and performance improvements are not at risk. Benjamin Black (Deutsche Bank) questioned discrepancies between reported U.S. market share and Warner’s global results; Kyncl explained that global metrics and organic growth are stronger than what is visible in U.S.-only data. Michael Morris (Guggenheim Securities) probed the effect of the Apple deal and ongoing per-subscriber minimum increases; CFO Lou Dickler said these price hikes contributed about 3.5% to subscription growth and will continue to benefit results. David Karnovsky (JPMorgan) asked for a breakdown of subscription and ad-supported streaming growth; Dickler confirmed growth was primarily from subscribers, pricing, and market share, with ad-supported revenue boosted by World Cup-related spending but expected to normalize. Kannan Venkateshwar (Barclays) inquired about the building blocks for long-term margin expansion, with Dickler citing catalog growth, restructuring savings, and targeted high-ROI investments as core contributors. In upcoming quarters, the StockStory team will be tracking (1) the pace and impact of new streaming price increases across digital partners, (2) the roll-out and monetization of AI-driven licensing agreements such as with Suno and Stability AI, and (3) operational execution on catalog acquisitions and artist development, especially in light of recent management changes. Additional attention will be paid to the normalization of ad-supported streaming growth and the effectiveness of ongoing cost efficiencies. Warner Music Group currently trades at $25.16, down from $26 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free for active Edge members). ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time. Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 4:30 p.m. ET Chief Executive Officer - Robert Kyncl Global Controller and Chief Accounting Officer and Acting Chief Financial Officer - Lou Dickler Head of Investor Relations - Kareem Chin Need a quote from a Motley Fool analyst? Email [email protected] Operator: Welcome to Warner Music Group 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. Kareem Chin: Good afternoon, welcome to Warner Music Group's fiscal third quarter earnings 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 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. We disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith. 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. With that, I'll turn over to Robert. Robert Kyncl: Hello, everyone, thank you for joining us today. We have remained focused on execution against our strategic goals. We're proud to have delivered or over-delivered 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 a robust 12% increase in recorded music subscription streaming revenue on an adjusted basis. We also saw continued progress on our cost-savings initiatives. 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 OIBDA, 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. Lou Dickler, our Global Controller and Chief Accounting Officer, will serve as Acting CFO as we conduct a search. Lou 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 Bay-Schuck, 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 OIBDA growth, double-digit Adjusted EPS growth, and 50%-60% operating cash flow conversion. 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 Kaye and Stella Lefty, who recently broke into the Billboard Hot 100 top three. We're amplifying breakthrough stars like Sombr, PinkPantheress, and Alex Warren, as well as hit-makers like Kehlani and Charli XCX, who just became the first British female artist ever to land two U.K. 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 signaling that her next project is underway. Under Elliot Grainge'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, "Dai," Burna Boy's official FIFA World Cup collab with Shakira, became the number one song in the world, topping both the Spotify and Billboard global charts for multiple weeks. Meanwhile, Madonna's new album, "Confessions on a Dance Floor," debuted at number one in the U.S. and U.K., leading the way for the 17% growth in our physical revenue in the quarter. The successful release of her album is a true company effort, as she's signed to us for both recorded music and publishing. We're proud stewards of her amazing catalog, which is seeing record new audience growth, particularly with people under age 35, who now make up to 60% of her Spotify streams. Leveraging our frontline approach to marketing our top 500 off-roster catalog artists is driving market share gains year-over-year. 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. 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. 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. 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 Capital has deployed $650 million in catalog acquisitions and has a strong pipeline for the future. We've expanded our distribution business through the acquisition of independent music platform Revelator. Distribution is an important part of the ecosystem. We're taking a thoughtfully balanced build-and-buy approach, which is driving profitable growth in this area. Our ADA distribution business is already large and growing and profitable. Under Alejandro Duque's leadership, we've exported the best practices from our successful business in Latin America, where distribution deals are the norm, and are applying these learnings to power our distribution across the globe. In addition, by embedding and integrating Revelator's cutting-edge tools, 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 GoDigital 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 Raye releasing a self-penned U.K. number one album, superstar songwriter Amy Allen contributing to Olivia Rodrigo's number one global smash, "Drop Dead," and Ilya 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 Green, 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. Just over two years ago, we took a much more proactive approach to pricing. Fast-forward to today, we, along with our DSP partners, have evolved the industry standard to contractual wholesale rate increases occurring in a 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. 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, 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, KLAY, and Udio, expect our licensing deals to contribute materially to our subscription streaming revenue growth starting in fiscal 2027. 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 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. 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 text and data mining exception that would have allowed AI developers to use copyrighted content to train their systems without a license. In July, Australian Prime Minister Albanese rejected a proposal from AI developers that would have shielded them from liability for copyright infringement. Now, onto 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, 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, Sombr, David Guetta, Ravyn Lenae, Myke Towers, Teddy Swims, Tinashe, Dan + Shay, 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. Lou Dickler: Thank you, Robert. For the fifth consecutive quarter, we have delivered growth in line with or better than our sustainable growth model and targets of high single-digit revenue growth and double-digit Adjusted OIBDA growth. Q3 was another quarter of healthy top and bottom-line performance, anchored by the PSM increases and sustained global share progress that drove revenue growth. We also saw continued margin expansion as cost savings delivery and operating leverage resulted in margin improvement. Our strong business momentum continued this quarter with the delivery of impressive results as total revenue grew 9%, or 11% on an adjusted basis. Recorded music revenue grew 9%, led by subscription streaming growth of 12% on an adjusted basis. Subscription growth reflects the benefit of PSM increases, stable global market share trends, and subscriber growth. Ad-supported streaming revenue was very strong and grew 10% on an adjusted basis, driven by an overall healthy ad market supported by increased ad spending related to the FIFA World Cup and improved deal economics. Physical revenue increased 17%, driven by strong releases in the quarter as well as catalog and carryover success. Artist services and expanded rights revenue increased 15%, driven by concert promotion revenue primarily in Japan, as well as higher merchandising revenue, while licensing revenue decreased 1%. Recorded music Adjusted OIBDA increased 16%, with a margin of 25.3%, an increase of 150 basis points. Music publishing total revenue increased 11%, driven by 14% streaming growth due to continued market growth and the impact of new deals and renewals. Sync revenue increased 7%, and mechanical revenue increased 19%, while performance revenue decreased 2%. Music publishing Adjusted OIBDA increased 14%, with a margin of 28.9%, an increase of 70 basis points. Total company Adjusted OIBDA growth was 15%, and margin expanded by 100 basis points. Adjusted for notable items, Adjusted OIBDA growth was 18%, and margin expanded 130 basis points. The increase reflects revenue mix, operating leverage, and cost savings delivery. Adjusted net income and Adjusted EPS increased 21%. We generated operating cash flow growth of 209% in the third quarter, and for the last nine months, our conversion ratio was 55% of Adjusted OIBDA. As of June 30th, we had a cash balance of $618 million, total debt of $4.7 billion, and net debt of $4.1 billion. In conclusion, we are incredibly optimistic about the future and laser-focused on delivering on our targets of high single-digit revenue growth, double-digit Adjusted OIBDA and Adjusted EPS growth, and 50%-60% operating cash flow conversion. We remain on track to deliver margin expansion at the high end of our 150 to 200 basis points target in fiscal 2026, and we continue to target margins in the mid-20s in the short term and high-20s over the long term. With that, we will take your questions. Operator: Thank you. If you would like to ask a question, please press *1 on your telephone keypad. If you would like to withdraw your question, simply press *1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Clay Griffin with MoffettNathanson. Your line is open Clay Griffin: Thank you. Good afternoon. For Robert, I wanted to ask about the impact of Armin's departure. He obviously helped shape a clear narrative to investors and his arrival coincided with the more consistent results. What does his leaving the company mean for the future? Robert Kyncl: Sure. Thank you, Clay. First, I want to say I appreciate Armin's contributions to the company, which are long-lasting, and particularly to the finance organization, where he helped sharpen our focus around capital allocation, improved our forecasting, and as you say, Clay, investor messaging. All of those are deeply institutionalized in our company now, I'm very confident about them continuing exactly as they are. In terms of our improved performance, it's a result of a multi-year strategy that really started in 2023. If you look back, we've done two restructurings between fiscal 2023 and 2024, which totaled $300 million. We took it out of the business and promptly reinvested it into technology, but mostly into A&R, in order to drive growth. We've seen the fruits of that labor starting to kick in mid-fiscal 2025. In 2024, we also started, in fiscal 2024, we started bold leadership changes. A good example is Elliot Grainge taking over Atlantic, Kevin Gore taking over global catalog, then last year, Alejandro Duque taking over ADA in addition to his lifetime opportunity. All of these leadership changes have contributed to rapid innovation and growth. Lastly, also in fiscal 2024, Carletta and her team started to devise a strategy for changing our pricing with the DSPs, that is something that we've obviously been talking about for quite some time. In my earlier remarks, I spoke about our Apple deal, which really is a really nice bookmark to having all of our major DSPs aligned around this. We had a strategy around these three points that we've been delivering on, you're starting to see the fruit of that labor through continued strong performance over the last five quarters. It's providing us with better visibility, which provides you with better visibility into our results. I really have to say that this kind of progress, having that kind of strategy and that kind of progress, is a result of an incredible roster of talent that we have, which is both artistic as well as executive, our growth strategy and underlying momentum remain really firmly intact. Clay Griffin: Thanks, Robert. Appreciate that. Robert Kyncl: Sure. Operator: Your next question comes from Benjamin Black with Deutsche Bank. Your line is open. Benjamin Black: Good afternoon, everyone. Thank you for taking the question. One for Robert. Market share in the U.S. was pretty weak according to the Luminate data. It doesn't seem like your results reflect that. I guess, what are we missing, and can you perhaps explain that dynamic for us? Thank you. Robert Kyncl: Yeah, sure. You're missing full visibility. That's what it is. We had a great quarter. We run a global business. We first and foremost look at global metrics. However, those are not publicly available to you, which is why you can only look at the U.S. ones. Obviously, we're seeing a much more favorable impact in our global market share, and that is reflected in our results, as you say. Furthermore, we look at fiscal year to date impact. If you look at the publicly disclosed metrics on U.S. streaming share, we're up 0.3 percentage points, and on U.S. streaming new release share, we're up 0.8 percentage points. Obviously, there's lumpiness to the business quarter-to-quarter, but we look at things more long-term and make sure that we're trending in the right direction. If you look at the last three years in the global market share, we've made a very significant improvement. Again, it's showing up in our business results. I think the more important message here is that we've been able to accomplish all of this largely organically, which is different from our peers. I would say the only acquisition that you can probably say that has played some impact was on our 10K acquisition, but actually, most of the growth came after the acquisition, so it really counts more as organic as well. How do we do it? Really, there are four things that I think help us achieve this. One, capital allocation discipline across the entire portfolio. Two, we have a strong pipeline management for A&R and acquisitions. Three, driving audience historic catalog with focus optimization, as I spoke about in my opening remarks. Four, building out distribution infrastructure, which helps us scale the business. Now we can accelerate all of this through M&A together with our partners at Bain as well. Looking forward, I'm very confident due to our growth-oriented culture that is humming across all cylinders, and I'm confident in the direction and the growth of market share over the long term into the future. We have an exciting slate ahead of us with Alex Warren, Sombr, David Guetta, Ravyn Lenae, and many more. Benjamin Black: Great. Thank you for that context. Very helpful. Robert Kyncl: Sure. Operator: Your next question comes from Michael Morris with Guggenheim Securities. Your line is open. Michael Morris: Thank you. Good afternoon. Robert, I wanted to follow up on the Apple announcement that you made. It's good to hear that you reached that renewal. Can you share some more color on your collaboration with these DSP partners, how you justify these per-subscriber minimum increases that you're able to achieve, and how does this renewal with Apple, that you said it's the final one, how does this impact your outlook for the business? Thank you. Robert Kyncl: Yeah. One, again, it's so great to be able to look back to the moment when we started to think about this and cook up the strategy, which was back in 2024, and started to work on it, put it in place in 2025, then it started to kick in a year later. Sequencing, every time you make a big change like this, it's really hard to sequence things and make sure people feel it's done fairly. We've navigated all of these complexities to the extent that now we have PSM increases across 88% of our subscription streaming revenue, which I really feel proud of, because two years ago it was zero. Big credit goes to Carletta Higginson and her team on this, because they've done an incredible job. Big credit goes to our partners. Our DSP partners are acting like partners, not adversaries. It's really a sign of a healthy industry when you reach an equilibrium between the supplier and the buyer, in this case, in a mutually beneficial way, because we know we need each other for the future, we just need to find the right ways to drive value. I think we found it. I feel very grateful to our partners and to our teams. When you think about the incredible value that music provides, it's all the music ever made in the past, as well as in the future, for one low monthly fee. Of course, that fee once in a while should go up. It also goes up with added functionality, et cetera. We're working with our partners to increase all kinds of features that are added to delight consumers. Overall, I'm just delighted by our collaboration. I'll let Lou take the other part of the question. Lou Dickler: On outlook, I'll just reiterate that we've got confidence in the targets we've set out of high single-digit top-line growth, obviously that is anchored by a growth in paid streaming, the double-digit Adjusted OIBDA and Adjusted EPS growth, and on the cash side, the 50%-60% operating cash flow conversion. While we're not providing guidance as it relates to streaming, we do have high confidence in continued growth. We believe we can do that in a few ways. We expect to continue to benefit from the growth in global subscribers, which will continue. We have delivered consistent market share performance. We are very excited about the Q4 release schedule, which Robert alluded to. We continue to see market share growth across global catalog. With the price increases, the contractual wholesale price increases across our largest DSPs, we believe that this contributed about 3.5% percentage point growth impact to subscription streaming within the quarter. As far as outlook for Q4, we do expect the price increases to continue to flow through and are anticipating a slightly accelerated performance through Q4, which will include the impact of the Apple deal. In addition to that, we also have growth opportunities around both organic and inorganic investments in core. We've got the Beethoven joint venture with Bain. That has additional capacity, and as we deploy more capital in that fund, we should expect revenue upside in future periods. We've got the expanded distribution through our acquisition of Revelator, which increases our capacity. That should start to show up at the end of the calendar year. Finally, we've got new licensing deals with AI companies, most notably Suno, and we expect that to provide nice contributions starting next fiscal year. Through all these areas, really, we're definitely excited about the opportunity ahead, and we remain confident that we can continue to deliver growth consistent with the targets we've outlined. Michael Morris: Thank you. Appreciate that. Operator: Your next question comes from Peter Supino with Wolfe Research. Your line is open. Peter Supino: Hi, good afternoon. I wanted to ask about Suno. If you could update us on the timing of that relationship and whether Suno might benefit from Spotify's, not whether, but when Suno might benefit from Spotify's new product rollout. Robert Kyncl: Sure. One, on Suno, the plan remains exactly as it was, which is for them to transition to a license model later this year. There's no change in the timing. Everything's on schedule, which is great. Lou just mentioned we expect material revenue contributions from our AI licensing sources in the fiscal 2027 year. Obviously, some of that is underpinned by Suno. There was also the Munich court decision last week, which effectively confirmed the Warner Music Group contract and strategy, which has committed Suno to transition to a license model. We're very thankful to the court to confirm our strategy. I want to pause on this a little bit and say one thing, which is the creative industry goes through transitions like this once in a while. In mid 1950s, none of the movie studios have ever licensed anything or worked with the television industry, which was just rising, NBC, CBS, the broadcast networks just came along and they wouldn't work with them because they feared that it was entirely substitutive to the movie industry until Walt Disney was a little bit over his skis, spending a lot of money trying to build what now is known as Disneyland. At that time it was just a plan. They needed more capital. At that time, they decided to go to ABC and strike a production deal, for The Wonderful World of Disney. That cash helped them complete Disneyland. Of course, through that, they uncovered one of the greatest sources of revenue and profits for the entertainment industry, which came from the television industry. I thought it's such an incredible analogy to what we're going through with AI. It's really important that we step back, look and think holistically, and work towards a better future that respects artists, songwriters, and it delivers a lot of value to consumers and to copyright holders and ultimately to investors. Overall. Peter Supino: This call is for immediate. Sorry. Excuse me, Robert, I didn't mean to interrupt you. Robert Kyncl: Yeah. Oh, sorry. Okay. Anyway, we're excited by this and I'm very, very happy that it's happening. In terms of Spotify, as you know, I'm a huge champion of anything that is increasing the value of music and better reflecting value of music. We don't comment on any negotiations in progress, but we're very supportive of Spotify's efforts. I think what Gustav and Alex are doing is very thoughtful and we'll share more once there's something to announce. Peter Supino: Perfect. That was my follow-up question. Thank you. Robert Kyncl: All right. Operator: Your next question comes from Kutgun Maral with Evercore ISI. Your line is open. Kutgun Maral: Great. Thanks for taking the question. Robert, I wanted to follow up on your perspectives on AI. Every platform is leaning into AI, and it seems clear that we're fast approaching a point where some of these tools can be deployed more broadly and potentially gain mainstream adoption. With that, can you expand on some of your earlier comments on how you're working with DSPs on AI protections specifically? Thank you. Robert Kyncl: Yeah, sure. As you know, both from my shareholder letter and my letter when we did AI deals and whenever we talk internally and externally, protecting artists and songwriters is our top priority, right? Because it's obviously very sensitive and very personal. It's important. Our excitement around AI is underpinned by responsibility as well, right? It doesn't work without it, which means protecting them. We are better suited to do this than any individual is on their own or any small organization on their own. So, for instance, we have agreements with our distributors to very effectively take down deepfakes. They are not legally required to do that. Nevertheless, through our relationships, both contractual as well as personal, we now have it in our contractual agreements that artists are protected this way, which is great. The DSPs are our partners. The social platforms are our partners. We've also expanded the number of deals where fully gen AI content must be identified and removed from pro rata share. Right? We're getting at this from multiple angles, and we're very focused on this, because it is important, and it's part of the duty that we have towards artists and songwriters. Really the best way to also think about where the current state of this is Deezer who's most transparent with metrics publicly, with metrics around this. There's 90,000 tracks, AI-generated tracks uploaded every day, which is more than 50% of the daily uploads, but the consumption is somewhere between 1% and 3% and the monetization is a fraction of that. We're staying on top of it from metric standpoint, from protection standpoint, from contractual standpoint. This is the core of what we do. Kutgun Maral: That's great. Thank you. Operator: Your next question comes from David Karnovsky with JPMorgan. Your line is open. David Karnovsky: Great. Thank you. Maybe two for Lou. First, can you dissect the RM subscription streaming growth of 12%? I think you mentioned some components, but wanted to see if you could give a full breakdown. Then can you also provide any color on your ad-supported growth, which I think was higher than both UMG and Spot, and how should we think about the outlook for this line? Lou Dickler: Absolutely. Thanks for the question, David. We did have solid subscription and ad-supported streaming growth in the quarter. If we went to deconstruct the growth of 12% on the subscription side, you'll see there are really three main items, and this is consistent with what we've talked about in prior quarters. First is we saw roughly 6%-7% growth come from subscriber growth. Second, pricing contributed a bit more this quarter at about 3.5%, which I alluded to earlier. Then third, we believe that market share contributed a difference of roughly 1%, which is steady on a global basis and really a testament to the disciplined capital allocation approach that we've had across vintages, across both new release and catalog. We did see some slight deceleration of growth from prior quarter, which was due to a tough comp, which we called out in the last call. We said it was approximately 2%-3%. If you were to take that out of the equation, you would see that our growth was consistent quarter-over-quarter. To reiterate, we're seeing a shift from volume-led growth historically, to now both volume and value led growth with price increases, and that's driving the strong performance in the quarter. As Robert had alluded to, it's part of our successful strategy. On the ad-supported side, we did see an uplift in ad-supported growth at 10%, which was incredibly healthy within the quarter, and that's on an adjusted basis. We are seeing great trends, healthy trends within ad-supported market, and we've got some improved DSP deal economics, which certainly contributed to the strong growth. Q3 was elevated at 10% due to the benefit from ad spending around the World Cup within the quarter, which obviously is not recurring. If you look back to the prior quarter, we also had some elevated growth due to an easier comp in the prior quarter. We expect that the ad-supported growth will normalize in Q4 as we look forward, probably more in the mid-single-digit growth, which is more reflective of the underlying ad trends and more consistent with what we printed in Q1. David Karnovsky: Thanks. Thank you. Operator: Your next question comes from Kannan Venkateshwar with Barclays. Your line is open. Kannan Venkateshwar: Thank you. Lou, maybe one more for you, which is on margins. You give us your near-term and long-term outlooks, but could you help us with the building blocks to achieve your long-term targets? Over the course of this year, you've been trending better than your short-term targets, especially for 2026. Is it possible that you may end up higher than the high end of your guidance over the course of this year? Maybe one question for Robert, which is when you look at something like Spotify's Remix tier, how do you think about the risks and the opportunities? How do you balance both sides of the equation and what are you actually seeking from these deals from your perspective? Thank you. Lou Dickler: I'll take the first part on margin outlook. We obviously had very healthy margin delivery in the quarter. We had 130 basis point improvement on an adjusted basis. We are really happy with the progress we've made to date and over the last five quarters as we continue to grow the business in a more profitable way. The margin progression is really one of the key metrics that we're driving and helping to drive shareholder value, and we've made a ton of progress on that front. There's really no change in the outlook. We said it in the prepared remarks, we still expect to hit the high end of the range of 150 to 200 basis points for this year. As far as the components of margin expansion, it really comes from several areas. First, we've continued to focus on profitable growth throughout the company, the sustainable growth model is really institutionalized within the company and the operators appreciate the need to do that because it allows them to reinvest in the company to drive growth. Second is the continued benefit we've seen from the restructuring plan, most recently the 2025 plan. We are on track to realize the $200 million of savings this year and $300 million on an annualized basis in 2027, we'll see some uplift in margin next year for the effect of that restructuring plan. A significant portion of that, of course, goes to operating results in OpEx. Third is the growth in catalog. Catalog is a higher margin business for us. It's about two-thirds of our overall revenue, a significant driver of growth. We've seen market share gains in global catalog and this business is one that we feel we can continue to grow. Then finally, I guess also on the catalog front, we also expect to start seeing more of the benefit from the Bain joint venture. We clearly are focused on acquiring high-value assets and catalogs that have growth potential, we expect that to also contribute nicely to margin. Then sort of the final point that I'll bring up is just on expanded distribution. That's obviously, in comparison, a lower margin business for us. We are taking a more measured approach to build profitable business. We're not looking to do low-margin deals and to buy share. We're really taking a more measured approach and focused on driving the business to higher margins. We think overall, we have a ton of confidence in sustaining our margin expansion, not only this year as we deliver and move towards the mid-20s margin, but also over the longer term as we drive to higher margins in the high 20s. Robert Kyncl: Before I answer your question, I just want to add something to Lou, which is, what I think is entirely underappreciated is the fact that we've been growing at a very healthy clip while cutting costs. We've been expanding margin, and which is a very, very hard thing to do. Nevertheless, that's what we're doing, and it's part of a multi-year strategy that we set in place. At that time, we don't have the clear conviction and confidence to tell you that's exactly what it's going to be, but definitely that was our plan, and now we have the confidence to say that's what it is and that's what it will be. It's really great to be able to say that. On your question around the risks from something like the Remix tier on Spotify. Number 1, this fits into my second priority, which is increasing the value of music. You know that. You've heard it from me 1 million times. One lever. Different partners will execute differently, right? We have to be obviously flexible as it relates to how our partner wants to execute on increasing the value and on the AI, because that fits their platform. That's number 1. ARPU, moving ARPU up is generally one simple lever, and I think the way Alex and Gustav are thinking about it is thoughtful. We're supportive, and this will be incremental. Our whole point of doing these deals is to drive incremental value, incremental ARPU, and greater user engagement, and stickiness overall with subscriptions. We are laser-focused on this. We're excited about the opportunity, and it's great to have partners that are engaging on this. Kannan Venkateshwar: Thank you. Operator: Your next question comes from Cameron Mansson-Perrone with Morgan Stanley. Your line is open. Cameron Mansson-Perrone: Thanks. Robert, earlier you mentioned capital allocation across the whole portfolio as a key driver for growing share over time. I was wondering if you could update us on whether we should expect any impacts to your kind of general framework or approach when it comes to investment returns. Within that, Lou just touched on the Bain JV and the $650 million you've put to work there. Any color on hurdle rates or targets for acquisitions made through that partnership would be helpful. Thanks. Robert Kyncl: Sure. Thank you. No, we're always ready and flexible to pivot when things don't work. Currently, things are working, so there's no change to our approach. We are very focused on our portfolio across organic and inorganic investments, we've really institutionalized a global deal evaluation and investment process across both recorded music and publishing. I don't mean separately, I mean all together. Together across those two business lines and together across all labels and all countries. We're truly evaluating our entire global portfolio and target the highest ROI opportunities. If a budget is higher in one place and lower in another one, and the lower budget territory or label has a greater ROI opportunity, we rapidly shift dollars. We're optimizing our spend in this way. This approach so far has been able to generate us returns of roughly 20% on our investments. That is really what we're targeting with Bain as well. We don't deviate in our approach with Bain to our own internal one. It's one and the same process. Obviously, I'm happy that we've been able to deploy $650 million against the $1.65 billion in capacity. The focus is the same, which is iconic high-margin catalogs with growth potential. Return threshold is the same as the one I just mentioned. We also must have dedicated growth plans for each transaction, right? That we add incremental value and, de-risk for anything unexpected. Quite happy with all of this progress, very confident in our pipeline, which will help us drive profitable growth and continue on our amazing journey. Cameron Mansson-Perrone: That's helpful. Thanks. Operator: Your last question will come from Rich Greenfield with LightShed Partners. Your line is open. Rich Greenfield: Yeah, thanks for taking the question. I got a couple, Robert. Universal and Merlin have opted into Spotify's coming AI tier. You've done a deal with KLAY, with the other labels. I'm sort of wondering, is there anything unique to what Spotify wants to do with AI versus KLAY that gives you reservations? Because it seems like they're ready to go. They'd like more labels, and it seems right up your alley of finding new ways of generating incremental revenue. Then sort of a broader industry topic. DSP-paid subscribers always seems like a positive for Warner Music and your other label peers versus ad tier subscribers. Spotify recently rolled out this thing, Spotify Reserve, in partnership with Live Nation. I'm wondering, in theory, getting more of your artists to want to do Reserve ticketing, and I know that's on the touring side, but it seems like the more artists that work with Reserve, not only does it make the fan happy, but it makes the label more money. It makes the artist more money. It seems like a win-win all around. Is there anything I'm missing on why labels, specifically Warner, wouldn't be excited, and your artists wouldn't be excited about getting tickets in the hands of actual fans versus ticket brokers? Robert Kyncl: Sure. Thanks, Rich. First, on your Spotify question. Yeah, by the way, as I mentioned earlier on the call, we're supportive of what Alex and Gustav at Spotify are working on, and Charlie. We're happy, we're actually very happy that UMG and Merlin are on board. I just can't comment on our negotiation. We're supportive, so there is no philosophical disconnect here. On your other question, we are always interested in anything that is increasing the value of music, as I said before. That can take on many different permutations, whether it's ARPU increase, whether it's more engagement features, et cetera. There's also a capacity. We are doing so many things at this company in order to drive the results that we have. We can't do everything all at once. We prioritize on the highest ROI opportunities very quickly, and we work through those. It doesn't mean that our posture on some of the other ones is a negative one. We just might not have been able to get to it just yet. That's all. Rich Greenfield: Well, let me just rephrase the KLAY question in a different way. KLAY hasn't launched either- Nor has Spotify's with Universal and Merlin. Is it just that artists are nervous to do this? I'm just trying to figure out what's the roadblock. Obviously, artists have to opt in. Are artists just not interested in opting in, or is it just taking a lot longer than we should have normally expected? Robert Kyncl: We just haven't done our agreement yet. That's all there is to it. Rich Greenfield: No, I don't mean with Spotify. I meant with KLAY. Robert Kyncl: Oh, sorry. Rich Greenfield: launched their product either. No one has launched this AI product yet. Is it just artists aren't ready for this? Robert Kyncl: What it takes is operationalizing the permissioning process. That's really what it is. Right. It's a bit complex, and it's laborious, and we're all working through it. It is something that we all have to go through and we are going through. Again, it's not a statement on whether it's good or bad, positive or negative, but it's just an operational activity that every content provider has to go through in order to enable its partners. That's it, and we're in the midst of it. That's really all that's to it. Rich Greenfield: Thank you. Really helpful. Operator: That is all the time we have for questions. I'll turn the call to Robert Kyncl for closing remarks. Robert Kyncl: Thank you all for dialing in. I just want to reiterate what I said in the beginning, which is our long-term strategy is working. We've transformed the company over the last three years. We've done lots of difficult things, restructurings that got reinvested, restructurings that got dropped to the bottom line, both leadership changes, restructuring our pricing relationship with the DSPs. There's a strategy here that was set in motion, and it's delivering results. We have an amazing team of executives who are rowing in the same direction, driving growth, driving efficiency, and our industry is very resilient. We're really excited about our output and our continued performance, and we look forward to speaking with you next quarter. Thank you very much. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect. Before you buy stock in Warner Music Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Warner Music Group wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Warner Music Group (WMG) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Total Revenue: Increased 9%, or 11% on an adjusted basis. Recorded Music Revenue: Grew 9%, led by subscription streaming growth of 12% on an adjusted basis. Ad-Supported Streaming Revenue: Grew 10% on an adjusted basis. Physical Revenue: Increased 17%, driven by strong releases and catalog success. Artist Services and Expanded Rights Revenue: Increased 15%, driven by concert promotion revenue primarily in Japan and higher merchandising revenue. Licensing Revenue: Decreased 1%. Recorded Music Adjusted OIBDA: Increased 16%, with a margin of 25.3%, up 150 basis points. Music Publishing Revenue: Increased 11%, driven by 14% streaming growth. Music Publishing Sync Revenue: Increased 7%. Music Publishing Mechanical Revenue: Increased 19%. Music Publishing Performance Revenue: Decreased 2%. Music Publishing Adjusted OIBDA: Increased 14%, with a margin of 28.9%, up 70 basis points. Total Company Adjusted OIBDA: Grew 15%, with margin expansion of 100 basis points; adjusted for notable items, growth was 18% and margin expanded 130 basis points. Adjusted Net Income and Adjusted EPS: Increased 21%. Operating Cash Flow: Increased 209% in the third quarter; conversion ratio was 55% of adjusted OIBDA for the last nine months. Cash Balance: $618 million as of June 30. Total Debt: $4.7 billion. Net Debt: $4.1 billion. Warning! GuruFocus has detected 2 Warning Signs with WMG. Is WMG fairly valued? Test your thesis with our free DCF calculator. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Delivered strong financial results with total revenue up 9% (11% adjusted) and adjusted OIBDA up 15%, marking the fifth consecutive quarter of meeting or exceeding targets. Recorded music subscription streaming revenue grew 12% on an adjusted basis, driven by contractual wholesale price increases now covering 88% of subscription revenue, including a new deal with Apple. Continued market share gains in the U.S. streaming (up 0.3 percentage points year-to-date) and new release share (up 0.8 percentage points), largely organic, with a strong release slate including Miley Cyrus and Madonna. Music publishing revenue grew 11% with streaming up 14%, and the company renewed key deals with artists like Riley Green and Quevedo, while also expanding distribution through the Revelator acquisition and new partnerships. Margin expansion of 100 basis points (130 basis points adjusted) and strong cash flow generation (operating cash flow up 209%) supported by cost savings initiatives and a disciplined capital allocation framework. AI licensing deals (e.g., Suno, Stability AI) are on track to contribute materially to revenue starting in fiscal 2027, with regulatory wins in Chile and Australia supporting copyright protection. U.S. streaming market share was weak in the quarter according to Luminate data, though management attributes this to lumpiness and points to global gains. Ad-supported streaming growth of 10% was elevated due to one-time World Cup ad spending and is expected to normalize to mid-single-digit growth in Q4. Subscription streaming growth decelerated slightly due to a tough comparison from the prior year, with a 2-3% impact noted. The departure of CFO Armin Zerza for personal reasons introduces leadership uncertainty, though the company has appointed an acting CFO and is conducting a search. AI licensing deals are still in early stages, with operational challenges in permissioning processes for artists, and the company has not yet finalized agreements with all DSPs on AI tiers. Physical revenue growth of 17% is partly driven by specific releases (e.g., Madonna) and may not be sustainable, while licensing revenue declined 1% in the quarter. Q: Can you dissect the recorded music subscription streaming growth of 12% and provide color on the ad-supported growth, which was higher than expected? A: Lou Dickler (Acting CFO) broke down the 12% subscription growth into three components: roughly 6% to 7% from subscriber growth, 3.5% from pricing (PSM increases), and about 1% from steady global market share gains. The slight deceleration from the prior quarter was due to a tough 2% to 3% comparison. Ad-supported streaming grew 10% on an adjusted basis, driven by a healthy ad market, improved DSP deal economics, and elevated ad spending related to the World Cup. He expects ad-supported growth to normalize to mid-single digits in Q4. Q: Can you share more color on the collaboration with DSP partners to justify the per-subscriber minimum (PSM) increases, and how does the Apple renewal impact your outlook? A: Robert Kyncl (CEO) highlighted that the strategy, initiated in 2024, has been successfully executed, with PSM increases now covering 88% of subscription streaming revenue, up from zero two years ago. He credited the DSP partners for acting as collaborators, creating a mutually beneficial equilibrium. Lou Dickler (Acting CFO) added that price increases contributed about 3.5 percentage points to subscription streaming growth in the quarter. He expects the impact to accelerate in Q4 with the Apple deal, and remains confident in the targets of high single-digit revenue growth and double-digit adjusted OIBDA growth. Q: U.S. market share data from Luminate looked weak. What are we missing, and can you explain the dynamic? A: Robert Kyncl (CEO) stated that the public U.S. data lacks full visibility into their global business, which is performing much better. He noted that on a fiscal year-to-date basis, U.S. streaming share is up 0.3 percentage points and new release share is up 0.8 percentage points. He attributed the organic share gains to four factors: disciplined capital allocation, strong A&R pipeline management, catalog optimization using proprietary AI tools, and building out distribution infrastructure. He expressed confidence in long-term market share growth. Q: Can you help us with the building blocks to achieve your long-term margin targets, and is it possible you may end up higher than the high end of your guidance for fiscal '26? A: Lou Dickler (Acting CFO) reaffirmed the expectation to hit the high end of the 150 to 200 basis point margin expansion target for fiscal '26. The building blocks include: continued focus on profitable growth, the $200 million in savings from the 2025 restructuring plan this year (and $300 million annualized by 2027), growth in the higher-margin catalog business (which is about two-thirds of revenue), and contributions from the Bain joint venture. Robert Kyncl (CEO) added that growing at a healthy clip while cutting costs is an underappreciated achievement, but it is part of the multiyear strategy now delivering results. Q: Can you update us on the timing of the Suno relationship and whether Suno might benefit from Spotify's new product rollout? A: Robert Kyncl (CEO) confirmed that Suno's transition to a licensed model is on schedule for later this year, with material revenue contributions expected in fiscal '27. He cited a recent Munich court decision that confirmed WMG's contract strategy. He drew an analogy to the movie studios' initial reluctance to work with television in the 1950s, arguing that embracing AI licensing is the right path for future growth. Regarding Spotify, he expressed support for their efforts but declined to comment on ongoing negotiations. Q: With every platform leaning into AI, can you expand on how you're working with DSPs on AI protections specifically? A: Robert Kyncl (CEO) emphasized that protecting artists and songwriters is the top priority. He detailed several measures: agreements with distributors to effectively take down deepfakes (which are not legally required), expanded deals requiring fully gen AI content to be identified and removed from pro-rata share, and close partnerships with DSPs and social platforms. He cited Deezer's data showing 90,000 AI-generated tracks uploaded daily (over 50% of uploads) but consumption is only 1% to 3%, and monetization is a fraction of that, indicating they are staying on top of the issue from metric, protection, and contractual standpoints. Q: What is the impact of Armin Zerza's departure, and what does it mean for the future? A: Robert Kyncl (CEO) thanked Armin for his contributions, particularly in sharpening capital allocation and investor messaging, but stressed that these are now deeply institutionalized. He attributed the improved performance to a multiyear strategy starting in 2023, including two restructurings totaling $300 million, bold leadership changes (e.g., Elliot Grainge at Atlantic, Kevin Gore at global catalog), and the new pricing strategy with DSPs. He affirmed that the growth strategy and underlying momentum remain firmly intact. Q: Can you update us on the capital allocation framework and provide color on hurdle rates for the Bain JV? A: Robert Kyncl (CEO) stated there is no change to the approach, which is focused on the highest ROI opportunities across the entire global portfolio. He noted the institutionalized global deal evaluation process generates returns of roughly 20% on investments. The Bain JV, which has deployed $650 million of its $1.65 billion capacity, targets the same return threshold and focuses on iconic, high-margin catalogs with growth potential and dedicated growth plans for each transaction. Q: Universal and Merlin have opted into Spotify's AI tier. Is there anything unique to what Spotify wants to do versus Klay that gives you reservations? A: Robert Kyncl (CEO) clarified there is no philosophical disconnect, stating WMG is supportive of Spotify's efforts. He explained that the delay in launching AI products like Klay is not due to artist reluctance but rather the operational complexity of the permissioning process, which every content provider must work through. He emphasized that WMG prioritizes the highest ROI opportunities and will get to others as capacity allows. Q: How do you think about the risks and opportunities of something like Spotify's remix tier, and how do you balance both sides? A: Robert Kyncl (CEO) framed this as fitting into his second priority of increasing the value of music. He noted that different partners will execute differently, and WMG For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Warner Music Group Corp. (WMG) reported $1.86 billion in revenue for the quarter ended June 2026, representing a year-over-year increase of 10.4%. EPS of $0.51 for the same period compares to -$0.03 a year ago. The reported revenue represents no surprise over the Zacks Consensus Estimate of $0 million. With the consensus EPS estimate being $0.38, the EPS surprise was +34.21%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Here is how Warner Music Group performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Revenue- Total Recorded Music: $1.49 billion compared to the $1.43 billion average estimate based on two analysts. Revenue- Music Publishing: $377 million compared to the $362.13 million average estimate based on two analysts. Revenue- Corporate expenses and eliminations: $-1 million versus the two-analyst average estimate of $-1.53 million. Revenue- Recorded Music- Digital: $1.02 billion versus the two-analyst average estimate of $1.01 billion. Revenue- Recorded Music- Physical: $137 million versus the two-analyst average estimate of $115.98 million. Revenue- Recorded Music- Total Digital and Physical: $1.15 billion compared to the $1.13 billion average estimate based on two analysts. Revenue- Music Publishing- Other: $4 million versus the two-analyst average estimate of $3.93 million. Revenue- Recorded Music- Licensing: $111 million versus the two-analyst average estimate of $112.15 million. Revenue- Music Publishing- Performance: $59 million versus $59.63 million estimated by two analysts on average. Revenue- Music Publishing- Digital: $235 million compared to the $228.07 million average estimate based on two analysts. Revenue- Music Publishing- Mechanical: $19 million versus the two-analyst average estimate of $15.6 million. Revenue- Music Publishing- Synchronization: $60 million versus the two-analyst average estimate of $54.9 million. View all Key Company Metrics for Warner Music Group here>>> Shares of Warner Music Group have returned -10% over the past month versus the Zacks S&P 500 composite's +3.3% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Warner Music Group Corp. (WMG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Warner Music Group Corp.? Here are five stocks we like better. Warner Music delivered strong fiscal Q3 results: Revenue rose 9% year over year, adjusted OIBDA increased 15%, and operating cash flow surged 209%. Management expects fiscal 2026 margin expansion at the high end of its 150- to 200-basis-point target. Subscription streaming remained the main growth driver, with adjusted revenue up 12% from subscriber gains, contractual pricing increases and improved market share. Physical music, artist services and music publishing also posted double-digit growth, while ad-supported streaming is expected to moderate after FIFA World Cup-related spending fades. Warner is investing in future growth through AI, catalogs and distribution. The company expects AI licensing to contribute materially to subscription-streaming revenue by fiscal 2027, while its Bain Capital venture has deployed $650 million toward catalog acquisitions and its Revelator acquisition expands distribution and rights-management capabilities. Big 3 Music Giant Warner: Streaming Boom Sends Shares Higher Warner Music Group (NASDAQ:WMG) reported fiscal third-quarter revenue growth and margin expansion, citing subscription price increases, streaming-market-share progress, cost reductions and strong cash-flow generation. For the quarter ended June 30, total revenue rose 9%, or 11% on an adjusted constant-currency basis. Adjusted OIBDA increased 15%, producing 100 basis points of margin expansion. Operating cash flow increased 209%, lifting the company’s cash balance by roughly $100 million to $618 million. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control How to Invest in Music Stocks CEO Robert Kyncl said the company had met or exceeded its targets for five consecutive quarters. He reiterated Warner Music’s long-term objectives of high-single-digit consolidated revenue growth, double-digit Adjusted OIBDA and adjusted EPS growth, and operating cash flow conversion of 50% to 60%. Recorded-music revenue increased 9%, led by 12% adjusted growth in subscription streaming revenue. Acting CFO Lou Dickler said subscriber growth contributed roughly 6% to 7% to subscription-streaming growth, while pricing added about 3.5 percentage points and market share accounted for about 1 percentage point. → 3 Drone Stocks That Should Soar After the Summer Slump The Market Is Suddenly All Ears on Warner Music Group Dickler said the pricing contribution reflects contractual per-subscriber minimum, or PSM, increases negotiated with digital service providers. Kyncl said the company now has PSM increases across 88% of subscription-streaming revenue, compared with none two years ago. Warner Music’s recently renewed agreement with Apple completed alignment with its major digital service partners on contractual pricing increases, according to Kyncl. Ad-supported streaming revenue grew 10% on an adjusted basis. Dickler attributed the performance to a healthy advertising market, improved digital-service-provider economics and elevated spending related to the FIFA World Cup. He said the company expects ad-supported streaming growth to normalize to the mid-single digits in the fourth quarter, as World Cup-related spending does not recur. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Physical revenue increased 17%, supported by new releases as well as catalog and carryover sales. Artist services and expanded-rights revenue rose 15%, driven primarily by concert-promotion revenue in Japan and higher merchandising revenue. Licensing revenue declined 1%. Music publishing revenue increased 11%, including 14% streaming growth. Sync revenue rose 7% and mechanical revenue increased 19%, while performance revenue declined 2%. Recorded music Adjusted OIBDA rose 16% to a 25.3% margin, up 150 basis points, while music publishing Adjusted OIBDA rose 14% to a 28.9% margin, up 70 basis points. Kyncl addressed the departure of former CFO Armin Zerza, who stepped down for personal reasons. He said Zerza helped sharpen the company’s focus on capital allocation, forecasting and investor communications, and that those practices are now institutionalized. Global Controller and Chief Accounting Officer Lou Dickler is serving as acting CFO while Warner Music conducts a search. Tom Corson, previously co-chairman and chief operating officer of Warner Records, has been named chief operating officer of Warner Music Group. Kyncl said the company’s performance reflects a multiyear strategy that included restructurings in fiscal 2023 and 2024 totaling $300 million, alongside reinvestment in technology and artists and repertoire. Dickler said Warner Music remains on track to realize $200 million in savings during fiscal 2026 and $300 million on an annualized basis in fiscal 2027 from its 2025 restructuring plan. The company expects to deliver fiscal 2026 margin expansion at the high end of its previously stated 150- to 200-basis-point range. Dickler said Warner Music continues to target margins in the mid-20% range in the short term and the high-20% range over the longer term. Kyncl said Warner Music’s year-to-date U.S. streaming share and U.S. new-release streaming share have increased. During the question-and-answer session, he said publicly disclosed U.S. data showed streaming share up 0.3 percentage points year to date and new-release streaming share up 0.8 percentage points, while noting that the company focuses primarily on global trends and longer-term performance. The company is using proprietary artificial-intelligence tools across a catalog of more than 1 million songs to identify marketing opportunities, optimize music for streaming services and automate workflows. Kyncl cited Chris Rainbow’s 1979 recording “Be Like a Woman,” which grew from 50,000 streams during all of 2025 to more than 140 million streams so far this year after the company used those tools. Warner Music also expanded its distribution operation through the acquisition of Revelator, a platform providing digital distribution, rights-management, royalty-accounting and analytics tools. The company recently entered distribution arrangements with GoDigital Music and Berlin-based AIM Music. Kyncl said Warner Music’s joint venture with Bain Capital has deployed $650 million toward catalog acquisitions, out of $1.65 billion in capacity. He said the company is targeting roughly 20% returns on investments, including investments made through the Bain venture, and is focusing on high-margin catalogs with growth potential. Management said artificial intelligence represents a prospective revenue source but emphasized the need for artist and songwriter protections. Warner Music has licensing partnerships with Suno, Stability AI, KLAY and Udio, and expects AI licensing agreements to begin contributing materially to subscription-streaming revenue in fiscal 2027. Kyncl said Suno remains on schedule to transition to a licensed model later this year. He also said operationalizing artist permissions is a complex and labor-intensive process for AI products, rather than a reflection of whether artists support the products. On protections, Kyncl said Warner Music has agreements with distributors to take down deepfakes and has expanded arrangements requiring fully generative AI content to be identified and excluded from pro-rata revenue pools. He cited Deezer’s public data showing that more than 90,000 AI-generated tracks are uploaded daily, but said their consumption represents approximately 1% to 3% of total listening and monetization is a fraction of that level. As of June 30, Warner Music had total debt of $4.7 billion and net debt of $4.1 billion. Management said it expects continued growth from global subscriber additions, pricing, catalog, distribution and future AI licensing revenue. Warner Music Group is a major global music company that operates across recorded music and music publishing. Its recorded-music business comprises a portfolio of well-known labels—including Atlantic, Warner Records and Parlophone—as well as distribution and artist-services operations that support both established and emerging artists. The company's publishing arm, Warner Chappell Music, manages songwriting catalogs and administers rights for compositions across multiple media, providing licensing for film, television, advertising and other commercial uses. WMG's activities span the full music value chain: signing and developing artists, producing and marketing recordings, distributing music through physical channels and streaming platforms, and monetizing rights through licensing, synchronization and neighboring-rights collection. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Warner Music Group Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Financial Highlights Robust Revenue Growth Underpinned by Strong Operating Performance across Recorded Music and Music Publishing Double-Digit Recorded Music Subscription Streaming Growth Driven by Improved Terms with DSP Partners, Positive Industry Trends, and Resilient Global Market Share Margin Expansion Supported by Revenue Mix and Cost-Savings Delivery; Continue to Expect High End of 150-200 Basis Points Full-Year Margin Expansion Guidance $100 million Cash Balance Increase over Prior-Year Quarter Driven by Strong Operating Cash Flow Growth; Reiterate 50-60% Operating Cash Flow Conversion Target for FY2026 For the three months ended June 30, 2026 Total revenue increased 10%, or 9% in constant currency Net income was $200 million compared to a loss of $16 million in the prior-year quarter Operating income increased 80% to $305 million versus $169 million in the prior-year quarter Adjusted OIBDA increased 16% to $433 million versus $373 million in the prior-year quarter, or 15% in constant currency Earnings per share was $0.39 compared to $(0.03) in the prior-year quarter Adjusted earnings per share was $0.51 compared to $0.42 in the prior-year quarter Cash provided by operating activities increased to $142 million versus $46 million in the prior-year quarter NEW YORK, August 05, 2026--(BUSINESS WIRE)--Warner Music Group Corp. today announced its third-quarter financial results for the period ended June 30, 2026. "For the fifth consecutive quarter, WMG has delivered or over-delivered on our targets, proving the strength of our strategy and the momentum of our business," said Robert Kyncl, CEO, Warner Music Group. "Our performance - driven by robust subscription streaming growth, market share gains, and disciplined operating leverage - highlights our ability to champion human creativity while deploying tech and AI to scale long-term profitability. We are closing the year with sharp operational focus and strong positioning to generate compounding value for our artists, songwriters, and shareholders for many years to come." "Our strong results were highlighted by double-digit subscription streaming growth bolstered by contractual per-subscriber minimum increases and sustained global share performance," said Lou Dickler, Acting CFO, Warner Music Group. "We delivered healthy margin expansion and remain on track to meet the high end of our fiscal '26 margin expansion targets while remaining laser-focused on long-term value creation." Total WMG Revenue was up 10.4% (or 9.3% in constant currency). Recorded Music revenue comparisons were impacted by $16 million of digital revenue from the settlement of certain copyright infringement cases in the prior-year quarter (the "Copyright Settlement"). Consistent with prior quarters, Recorded Music revenue growth was also unfavorably impacted by the termination of the distribution agreement with BMG (the "BMG Termination"), which resulted in $10 million less Recorded Music digital revenue compared to the prior-year quarter. Excluding these items, total revenue increased 12.1% (or 11.0% in constant currency). Digital revenue was up 10.5% (or 9.1% in constant currency) and streaming revenue was up 12.3% (or 10.8% in constant currency). Adjusted for the $16 million impact of the Copyright Settlement and the $10 million impact of the BMG Termination compared to the prior-year quarter, digital revenue increased 13.1% (or 11.6% in constant currency), and adjusted for the $10 million impact of the BMG Termination compared to the prior-year quarter, streaming revenue increased 13.3% (or 11.8% in constant currency). Recorded Music streaming revenue increased 11.8% (or 10.1% in constant currency); however, adjusted for the $10 million impact of the BMG Termination compared to the prior-year quarter, Recorded Music streaming revenue was up 13.1% (or 11.3% in constant currency). Music Publishing streaming revenue increased 14.4% (or 13.8% in constant currency). The increase in total revenue was also driven by higher Recorded Music artist services and expanded-rights and physical revenue, and growth across Music Publishing synchronization, mechanical and performance revenue. Operating income increased 80.5% (or 75.3% in constant currency) to $305 million from $169 million in the prior-year quarter, primarily due to the factors affecting Adjusted OIBDA discussed below, as well as a decrease in restructuring and impairment charges of $62 million, partially offset by higher amortization expense of $11 million. Adjusted OIBDA increased 16.1% (or 14.6% in constant currency) to $433 million from $373 million and Adjusted OIBDA margin increased 1.1 percentage points to 23.2% from 22.1% in the prior-year quarter (or 1.0 percentage point from 22.2% in constant currency). The increases include the $9 million impact of the Copyright Settlement and the $1 million impact of the BMG Termination compared to the prior-year quarter. Excluding these items, Adjusted OIBDA increased 19.3% (or 17.7% in constant currency) and Adjusted OIBDA margin increased 1.4 percentage points to 23.2% from 21.8% (or 1.3 percentage points from 21.9% in constant currency). The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily driven by strong operating performance, revenue mix and savings from the Company’s restructuring plans, a portion of which has been reinvested into the Company’s business, partially offset by unfavorable movements in foreign currency exchange rates of approximately $16 million. Net income was $200 million compared to a loss of $16 million in the prior-year quarter. The change in net income was due to the impact of exchange rates on the Company’s Euro-denominated debt resulting in a $3 million gain in the quarter compared to a $70 million loss in the prior-year quarter and a currency exchange loss on intercompany loans of $1 million in the quarter compared to a $63 million loss in the prior-year quarter, partially offset by realized and unrealized losses on hedging activity of $1 million in the quarter compared to $8 million in the prior-year quarter. The change in net income was also driven by an impairment charge of $70 million for long-lived assets associated with EMP in the prior-year quarter. The increase in net income was partially offset by a $62 million increase in income tax expense, primarily due to an increase in pre-tax income in the quarter and a $20 million smaller benefit from EMP impairment in the quarter. Basic earnings per share was $0.39 for both the Class A and Class B shareholders due to the net income attributable to the Company in the quarter of $200 million. Diluted earnings per share was $0.38 for Class A shareholders and $0.39 for Class B shareholders due to the net income attributable to the Company in the quarter of $200 million. As of June 30, 2026, the Company reported a cash balance of $618 million, total debt of $4.710 billion and net debt (defined as total debt, net of deferred financing costs, premiums and discounts, minus cash and equivalents) of $4.092 billion. Total debt includes $303 million of subsidiary debt acquired in the Company’s acquisition of Tempo Music Holdings, LLC ("Tempo Music") and $363 million in loans outstanding under the Beethoven JV. This debt is secured only by certain music rights owned by Tempo Music and the Beethoven JV, respectively, and is nonrecourse to the Company and its subsidiaries, other than Tempo Music and the Beethoven JV, respectively. Cash provided by operating activities increased $96 million, or 209%, to $142 million in the quarter compared to $46 million in the prior-year quarter. The increase was largely a result of strong operating performance. Free Cash Flow, as defined below, increased to $114 million from $7 million in the prior-year quarter, primarily due to the factors affecting cash provided by operating activities described above and due to a decrease in capital expenditures of $11 million, or 28%, to $28 million from $39 million in the prior-year quarter, primarily driven by lower investments in technology and costs associated with our finance transformation initiative. Recorded Music Recorded Music revenue was up 9.9% (or 8.9% in constant currency) driven by increases across digital, artist services and expanded-rights and physical revenue. Licensing revenue remained constant with the prior-year quarter (or decreased 0.9% in constant currency). Excluding the $16 million impact of the Copyright Settlement and the $10 million impact of the BMG Termination compared to the prior-year quarter, Recorded Music revenue was up 12.0% (or 11.0% in constant currency). Digital revenue was up 9.4% (or 7.7% in constant currency) and streaming revenue was up 11.8% (or 10.1% in constant currency). Adjusted for the $16 million impact of the Copyright Settlement and the $10 million impact of the BMG Termination compared to the prior-year quarter, Recorded Music digital revenue was up 12.5% (or 10.8% in constant currency). Adjusted for the $10 million impact of the BMG Termination compared to the prior-year quarter, streaming revenue was up 13.1% (or 11.3% in constant currency). Streaming revenue reflects growth in subscription revenue of 12.5% (or 10.8% in constant currency) and in ad-supported revenue of 10.0% (or 8.0% in constant currency). Subscription revenue, adjusted for the $6 million impact of the BMG Termination compared to the prior-year quarter, was up 13.5% (or 11.8% in constant currency). Ad-supported revenue, adjusted for the $4 million impact of the BMG Termination compared to the prior-year quarter, was up 12.0% (or 10.0% in constant currency). The increase in subscription revenue reflects positive market share trends, subscriber growth and improved deal economics. The increase in ad-supported revenue reflects strong performance in the quarter, as well as improved deal economics. Artist services and expanded-rights revenue was up 14.9% (the same in constant currency) due to higher concert promotion revenue primarily in Japan and higher merchandising revenue. Physical revenue increased 15.1% (or 17.1% in constant currency) primarily driven by strong releases in the quarter as well as catalog and carryover success. Top sellers in the quarter included Bruno Mars, Don Toliver, sombr, Alex Warren and Madonna. Recorded Music operating income increased 62.2% (or 58.3% in constant currency) to $326 million from $201 million in the prior-year quarter, and operating margin was up 7.1 percentage points to 21.9% versus 14.8% in the prior-year quarter (or up 6.8 percentage points from 15.1% in constant currency). The increase in operating income and operating income margin was driven by the factors affecting Adjusted OIBDA discussed below, as well as decreases in restructuring and impairment charges of $63 million and depreciation expense of $4 million primarily relating to EMP, partially offset by higher amortization expense of $10 million attributable to acquisitions. Adjusted OIBDA increased 17.4% (or 15.6% in constant currency) to $377 million from $321 million and Adjusted OIBDA margin increased 1.6 percentage points to 25.3% from 23.7% in the prior-year quarter (or increased 1.5 percentage points from 23.8% in constant currency). The increases include the $9 million impact of the Copyright Settlement and the $1 million impact of the BMG Termination. Excluding these items, Adjusted OIBDA increased 21.2% (or 19.3% in constant currency) and Adjusted OIBDA margin increased 1.9 percentage points to 25.3% from 23.4% (or 1.7 percentage points from 23.6% in constant currency). The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily driven by revenue growth and strong operating performance, and savings from the Company’s restructuring plans, of which a portion has been reinvested in the Company’s business, partially offset by unfavorable movements in foreign currency exchange rates of approximately $12 million. Music Publishing Music Publishing revenue was up 12.2% (or 10.9% in constant currency) driven by growth across digital, synchronization, mechanical and performance revenue. Digital revenue increased 15.2% (the same in constant currency) and streaming revenue increased 14.4% (or 13.8% in constant currency) driven by continued market growth and the impact of new deals and renewals. Synchronization revenue increased 11.1% (or 7.1% in constant currency) primarily due to an increase in other copyright infringement settlements and mechanical revenue increased 18.8% (the same in constant currency) driven by the timing of distributions. Performance revenue increased 1.7% (or decreased 1.7% in constant currency). Music Publishing operating income was up 18.3% (or 16.4% in constant currency) to $71 million from $60 million in the prior-year quarter and operating margin increased 0.9 percentage points to 18.8% from 17.9% in the prior-year quarter (the same in constant currency). The increases in operating income and operating margin were driven by the same factors affecting Adjusted OIBDA discussed below. Music Publishing Adjusted OIBDA increased 13.5% (the same in constant currency) to $109 million from $96 million in the prior-year quarter. Adjusted OIBDA margin increased 0.3 percentage points to 28.9% from 28.6% in the prior-year quarter (or 0.7 percentage points from 28.2% in constant currency). The increases in Adjusted OIBDA and Adjusted OIBDA margin were primarily driven by revenue growth and strong operating performance, partially offset by unfavorable movements in foreign currency exchange rates of approximately $5 million. Recent Announcements In addition, the Company also announced today that its Board of Directors declared a regular quarterly cash dividend of $0.20 per share on the Company’s Class A Common Stock and Class B Common Stock. The dividend is payable on September 1, 2026, to stockholders of record as of the close of business on August 20, 2026. Financial details for the quarter can be found in the Company’s current Quarterly Report on Form 10-Q for the period ended June 30, 2026, which will be filed this afternoon with the Securities and Exchange Commission. This afternoon, management will be hosting a conference call to discuss the results at 4:30 P.M. EDT. The call will be webcast on www.wmg.com. About Warner Music Group With a legacy extending back over 200 years, Warner Music Group today is home to an unparalleled family of creative artists, songwriters, and companies that are moving culture across the globe. At the core of WMG’s Recorded Music division are four of the most iconic companies in history: Atlantic, Elektra, Parlophone and Warner Records. They are joined by renowned labels such as TenThousand Projects, 300 Entertainment, Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Reprise, Rhino, Roadrunner, Sire, Spinnin’ Records, Warner Classics and Warner Records Nashville. Warner Chappell Music - which traces its origins back to the founding of Chappell & Company in 1811 - is one of the world's leading music publishers, with a catalog of more than one million copyrights spanning every musical genre from the standards of the Great American Songbook to the biggest hits of the 21st century. "Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995 This communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. Words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and variations of such words or similar expressions that predict or indicate future events or trends, or that do not relate to historical matters, identify forward-looking statements. 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 is a reasonable basis for them. However, we cannot assure you that management's expectations, beliefs and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Please refer to our Form 10-K, Form 10-Qs and our other filings with the U.S. Securities and Exchange Commission concerning factors that could cause actual results to differ materially from those described in our forward-looking statements. We maintain an Internet site at www.wmg.com. We use our website as a channel of distribution for material company information. Financial and other material information regarding Warner Music Group is routinely posted on and accessible at http://investors.wmg.com. In addition, you may automatically receive email alerts and other information about Warner Music Group by enrolling your email address through the "email alerts" section at http://investors.wmg.com. Our website and the information posted on it or connected to it shall not be deemed to be incorporated by reference into this communication. Supplemental Disclosures Regarding Non-GAAP Financial Measures We evaluate our operating performance based on several factors, including the following non-GAAP financial measures: Adjusted OIBDA We allocate resources and evaluate performance based on several factors, including Adjusted OIBDA. We define Adjusted OIBDA as operating income (loss) adjusted to exclude the following items: (i) non-cash depreciation of tangible assets, (ii) non-cash amortization of intangible assets, (iii) non-cash stock-based compensation and other related expenses, (iv) gains or losses on divestitures, (v) expenses related to restructuring and transformation initiatives, which include costs associated with the Company’s financial transformation initiative to design and implement new information technology and upgrade our finance infrastructure, and (vi) executive transition costs. Items excluded are not viewed to contribute directly to management’s evaluation of operating results. We consider Adjusted OIBDA to be an important indicator of the operational strengths and performance of our businesses. However, a limitation of the use of Adjusted OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Accordingly, Adjusted OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles ("U.S. GAAP"). In addition, our definition of Adjusted OIBDA may differ from similarly titled measures used by other companies. Adjusted Net Income and Adjusted EPS We define Adjusted Net Income as net income (loss) attributable to Warner Music Group Corp. adjusted to exclude the following items: (i) non-cash amortization of intangible assets, (ii) expenses related to restructuring and transformation initiatives, which include costs associated with the Company’s financial transformation initiative to design and implement new information technology and upgrade our finance infrastructure, (iii) gains or losses on divestitures, (iv) non-cash stock-based compensation, (v) loss on extinguishment of debt, and (vi) other (income) expenses. These exclusions are then further adjusted to account for tax effects. Adjusted Net Income should be considered in addition to, not as a substitute for, net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with U.S. GAAP. We use Adjusted Net Income to calculate Adjusted Earnings (Loss) Per Share ("EPS"), which we define as Adjusted Net Income divided by the basic weighted-average shares outstanding for the period. Our definition of Adjusted Net Income and Adjusted EPS may differ from similarly titled measures used by other companies. Constant Currency Because exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of revenue on a constant-currency basis in addition to reported revenue helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period over period. We use results on a constant-currency basis as one measure to evaluate our performance. We calculate constant-currency results by applying current-year foreign currency exchange rates to prior-year results. However, a limitation of the use of the constant-currency results as a performance measure is that it does not reflect the impact of exchange rates on our revenue. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant-currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S. GAAP. Free Cash Flow Our definition of Free Cash Flow is defined as cash flow provided by operating activities less capital expenditures. We use Free Cash Flow, among other measures, to evaluate our operating performance. Management believes Free Cash Flow provides investors with an important perspective on the cash available to fund our debt service requirements, ongoing working capital requirements, capital expenditure requirements, strategic acquisitions and investments, and any dividends, prepayments of debt or repurchases or retirement of our outstanding debt or notes in open market purchases, privately negotiated purchases, any repurchases of our common stock or otherwise. As a result, Free Cash Flow is a significant measure of our ability to generate long-term value. It is useful for investors to know whether this ability is being enhanced or degraded as a result of our operating performance. We believe the presentation of Free Cash Flow is relevant and useful for investors because it allows investors to view performance in a manner similar to the method management uses. Free Cash Flow is not a measure of performance calculated in accordance with U.S. GAAP and therefore it should not be considered in isolation of, or as a substitute for, net income (loss) as an indicator of operating performance or cash flow provided by operating activities as a measure of liquidity. Free Cash Flow, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, Free Cash Flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. Because Free Cash Flow deducts capital expenditures from "net cash provided by operating activities" (the most directly comparable U.S. GAAP financial measure), users of this information should consider the types of events and transactions that are not reflected. We provide below a reconciliation of Free Cash Flow to the most directly comparable amount reported under U.S. GAAP, which is "net cash provided by operating activities." View source version on businesswire.com: https://www.businesswire.com/news/home/20260805530693/en/ Contacts Media Contact:Hannah Karp [email protected] Investor Contact:Kareem Chin [email protected]