Q3 2025 Warner Music Group Corp Earnings Call

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Welcome to Warner Music, group's third quarter earnings, call for the period, ended, June 30 2025.

At the request of Warner Music Group today's call is being recorded for replay purposes and if you object you may disconnect at any time.

I would now like to turn the call over to your host Mr. Kareem chin, head of investor relations, you may begin.

Good morning everyone and welcome to Warner Music, group's fiscal, third quarter earnings conference call.

Please note that our earnings press release earnings, snapshot informed, 10 Q are available on our website.

On today's call, we have our CEO, Robert tinsel, and our CFO Armand, Zahra who will take you through our results and then we will answer your questions.

For our prepared remarks, I'd like to refer you to the second slide of the yearning. Snapshot to remind you that this communication includes forward-looking statements that reflect, the current views of Warner Music Group about future events and financial performance.

We plan to present certain non-GAAP results during this conference call and in our earnings snapshot slides, and we have provided schedules reconciling these results to our GAAP results in our earnings press release.

All of these materials are posted on our website. Also please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted

All forward-looking statements are made as of today and we disclaim any duty to update such statements, our expectations, beliefs and projections are expressed in good faith and we believe there's a reasonable basis for them. However, there can be no assurance that Management's expectations beliefs and projections will result or be achieved.

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

Thanks, Karen and hello everyone.

Before I get into our results, I'd like to formally welcome our new CFO arman's, Arizona who joins us for his first earnings call.

I look forward to partnering with him as we Elevate wmg to new heights.

I'm pleased to say that we've delivered a strong quarter marked by Ari acceleration of growth.

This was driven by sustained and impressive showing on the charts which is now also beginning to translate into an improvement in our global market share.

all of which underscores that our strategy is working,

I'll give you a brief summary of our results and Armin will provide more details.

We saw a broad-based 3 acceleration with total revenue, growth of 7%.

Reflecting growth across recorded music and music publishing.

Recorded music subscription streaming grew 8.5% adjusted for notable items.

As I've mentioned to you before, we're creating a virtual cycle by putting more money behind the music while simultaneously becoming leaner and stronger.

Our tighter focus is helping fuel our progress in 3 strategies.

Growing our market share.

Growing the value of music.

And increasing our efficiency.

I am pleased to say that we have tangible proof points in each area.

I'll start with growing our share.

During the quarter, we've grown our recorded music market share in key regions, including the U.S., where our market share increased roughly 1 percentage point year-over-year, according to Illuminate data.

For achieving these gains by delivering the biggest hits in the world today.

Developing artists who will be the superstars of tomorrow?

And growing the popularity of our iconic catalog.

our recording artists held half of the top 10 on the Spotify Global chart for 12 weeks and the number 1 spot for all but 7 weeks of 2025

And right now we have 7 of the top 20 spots on Billboard Global 200.

We're also seeing great success from our breakout artists in an increasingly noisy and competitive environment. These new stars will highlight W and G's outstanding artist development capabilities.

Atlantics. Alex Warren, has helped the number 1 spot on Billboard Hot 100 for 9 weeks and his album debuted at number 1 in the UK while Warner Records somber. Reached number 1 on the Spotify Global chart.

Teddy swims, Benson, Boone, and Ros have all remained fixtures on the charts, showing the incredible, staying power of the songs that Captivate fans.

That is loose control released just over 2 years ago. Has become the first song in the history of the Billboard. Hot 100 to spend 100 weeks on the chart and still counting.

Outside the United States. We've had number ones from Nikki Savage in Italy, gabs in Denmark. Fadel chaker in Mena and Eurovision song contest with a JJ in Austria among others.

International market, share.

Warner Chappell continued, its strong run as well with Morgan. Whalen's the problem holding the number 1 spot on the billboard 200 album chart for 9 weeks. Riley green hitting the number 1 on Billboard's country AirPlay chart and blackpink's developer produced track jump debuting, a top Billboard Global 200.

Today's hits will become the Evergreen catalog of the future.

Given that music over 3 years old represents roughly 2/3 of our recorded music streaming Revenue.

Continued growth and revitalization is Paramount.

I'll give you just a few examples of our always on approach to catalog marketing.

Veronica Electronica and new album of Madonna's remixes has contributed to her career-wise streams jumping 33%. This fiscal year today,

The 25th anniversary edition of slip Down's, first album has helped drive an 11% increase in the band's streams this fiscal year today.

And Fleetwood Max rumors was the only catalog release on luminates, mid-year top, vinyl album sales charts.

We continue to find new ways to help long-time Legends cut through the noise.

Last year, we revitalized, our approach to the management and marketing of our so-called off raster catalog.

This means we're now taking a fresh inventive and Global approach to marketing artists who are no longer recording new music for us.

As part of this effort, we brought on Orla Reisher in the new role of Head of Dual Catalog Strategy.

She will lead campaigns for the many stars where we represent both their recorded music and Publishing catalogs.

Including legends from Led Zeppelin to David Bowie.

At the same time, we're complementing our organic growth and the increase in the value of music through m&a activity.

Which will be accelerated by our recently announced 1.2 billion joint venture with paying capital.

Next growing the value of music.

The industry is increasingly focused on price driven growth and we continue to see progress in aligning, our contracts with streaming services, with this new paradigm as we improve deal terms.

Since February, we signed renewals with several major services that will provide greater certainty and visibility around our economics.

We look forward to seeing the impact these deals will have in 2026 and beyond.

In fact, you've seen Spotify announced price increases outside the US earlier. This week, reflective of the incredible value proposition. That music subscriptions present

And as I've mentioned, we continue to work with our DSP Partners on the design and implementation of superfan Tears which demonstrate the opportunity to better monetize fandom.

A critical factor in growing. The value of music is to protect the rights of our artists and songwriters.

We're committed to embracing AI in ways that benefit our artists songwriters and the broader music community.

At the same time, we continue our efforts to enable free market licensing for the training of AI models and to protect the visual likeness and voice of our artists from unauthorized defects.

Later, this year, we expect Congress to consider legislation to implement. The AI action plan released by the White House in July

While the plans for recommendations don't address either positively or negatively, the issues of greatest importance to us, we will remain highly engaged throughout the process.

There is a broad policy alignment across the copyright Industries, including the music industry regarding the need to maintain strong. Intellectual property Protections in the generative AI space.

And now, let's turn to our third priority improving efficiency.

Last month, we announced a strategic reorganization plan that will generate million dollars of cost savings to help future-proof the company and unlock the next era of growth.

We're evolving into a faster and more focused and Innovative company with an even more attractive Financial profile.

In addition to the financial benefits, which Armand will talk about our plan will make our company leaner and stronger.

By compounding, our Global expertise back by improved Tech tools.

I've given Armand oversight of the corporate development and spread out teams in addition to finance organization across these interdependent functions. We will take a more holistic approach to discipline and return focused Capital allocation.

Warner Records unveiled, the dynamic, new marketing setup. While Atlantic music group sharpened, its hip-hop and R&B focus and launched a country and Americano driven label called Atlantic outposts.

We've also appointed Alejandra duka as president of ADA. Our independent distribution arm.

This expanse is responsibilities as president of Warner music Latin America.

Having him in this dual role will help us bring down barriers for Ada clients like in them more directly into our infrastructure and empowering them to build their businesses.

for a very focused on growing our distribution business, in the Ada brand through create Services, flexible deal making and Tech innovation

And finally, we've hired a new leader in APAC loaning fee.

he joins us from a telecom giant pccw, where he most recently served as CEO of the subsidiary maker bill, which focuses on artist management and live events as well, as COO of view, its Regional Ott, streaming platform,

Lowi was born in Hong Kong and has a long track record in scaling creative companies.

He has also written hit songs Under the pseudonym Yuri.

We're excited about his ability to turbocharge our growth in Asia, including China and Japan.

Regarding technology, we've made many improvements to our infrastructure that will help us in the long term, including upgrading our distribution supply chain and creating a new interface for our Ada clients.

Additionally, we continue to make updates to our Innovative artist and song other app wmg Pulse.

And expand its user base.

We also began to roll out a new app for our employees called wg1. It serves as a single source of Truth, across the organization, helping to streamline Global collaboration across markets, increase impact for artists, and songwriters and ultimately improve efficiency.

Building on our recent momentum, we have exciting music coming out from a Chiron. Zack Brian. Alex Warren 21, Pilots somber cardi B David Guetta and many more

The success we've been seeing gives us even more confidence that we have the right strategy as well as the expertise to accelerate it.

Our mission is to grow wng through our commitment to artists and song at a development and more Nimble, organization and focus investment.

I will now pass it over to Armin.

Thank you, Robert and good morning, everyone.

For those of you who have not already met, I wanted to properly introduce myself.

After 20 years at Procter and Gamble, I turned Activision Blizzard in 2015.

Spending almost a decade there in financial commercial and operational roles.

Our focus at Activision was to create value for our players.

Communities employees partners and shareholders.

This experience lends itself. Well to the tremendous opportunity we have in the music industry and I'm extremely happy to have joined the talented team at wanna music group.

Our primary goal is to accelerate long-term growth and value creation for artists, and songwriters, Sans, employees, partners, and shareholders.

Together with our leadership team, we have developed a strong plan to execute against the 3, priorities, that Roberts played out.

Before talking about our Q3 results.

Let me elaborate on this plan which will help us to 1 investment of our music business, to accelerate Revenue growth.

To increase efficiency to free up capacity to invest and to expand operating margin 3 level up emanated turbocharged growth and value creation and 4, improved Capital location efficiency and return Capital to shareholders.

First on accelerating growth, we have conducted rigorous analysis across the globe, to assess each Market's repertoire value. Both in terms of local growth and global exportability.

As a result, we have zeroed in in key markets and genres where we will meaningfully increase Investments.

Second.

In addition to providing more resourcing and capital before we Investments across the most, culturally powerful and Highest Potential, weapons are centers and making us more efficient. We expect this program to deliver margin extension of 150 to 200 basis points in fiscal 2026.

This referred to our July 1st 8-K for more details.

From an organizational perspective, this program will help us double down on greater growth in our core music business. This means we'll overweight our resources in The Highest Potential reporter marketing genres in order to provide the most attractive returns.

And will prioritize the skill set and tools in anr marketing. That deliver the biggest impact for artists and songwriters including by leveraging technology, Investments, such as WG pulse and wg1, and our finance transformation initiative which are all starting to be a fruit.

Third on m&a last month. We also announced a joint venture with Bain Capital for the purchase of up to 1.2 billion, dollars of catalogs across recorded music and music publishing.

The TV 112 third-party Capital to expand our buying power adding even more Firepower to our m&a initiative. While also providing us with additional rights revenue and market share.

We will manage all aspects of marketing distribution and administration for the acquired catalog expect news of our first acquisition soon.

Forth on Capital location. We have a clear set of providers in addition to improving Capital efficiency and stepping up investments into our calm music, business and catalog m&a. We are returning Capital to shareholders

We have 100 million dollar buyback, authorization and have announced today that we're increasing our quality of dividends for the fifth year. In a row to 19 cents, a share, an increase of 6%.

I wanted to add that you have committed to being transparent and communicative with the investor Community about our progress and performance in an effort to do this. We will not provide updated disclosure and consistently address. The items that impact year-over-year comparability. You find the details, in our earnings release, including the simple table. Now,

turning to our quarter 3 results for quarter 3, total revenue increased 7% and adjusted or after increased 16% with a margin of 22.1% and increase of 170 basis points over the prior year quarter.

Adjusted for notable items, total revenue, increased 8% and adjusted oil by increased 17% with a margin of 21.8%, an increase of 170 basis points over the prior year quarter.

Recorded music Revenue, increased 6% or 8% on an adjusted basis. Driven by growth across streaming licensing and artist services and expanded Drive. Recorded music, streaming Revenue grew 3%, due to subscription growth of 4% and add supported the kind of 2% our subscription streaming growth, reflects roughly 450 basis points. Headwinds mostly related to a through our payments from a streaming service in a prior quarter, adjusting for notable items, underlying subscription streaming growth was 8.5%, which affects our positive market, share Trends and charts performance.

Physical Revenue, decreased 4% as growth from strong releases in Korea and Japan was offset by the BMG rolloff.

Adjusted for the roll off, physical Revenue would have increased 4%.

Artist services and expanded rights Revenue. Increased 20% due to higher concept promotion in primarily in France and Spain. While licensing Revenue increased 19% reflecting the strength in the UK and China specifically,

Now turning to music, publishing total revenue increased. 9% driven by growth across the performance, mechanical digital and sync Revenue in summary our quarter 3 results. Reflect some of the impressive progress. We have seen from our artists who have continued their hot streak across labels vintages and geographies as Robert said, not only have you been riding high in the charts but we've also seen market share gains in the US where market share was up roughly 1 percentage points year over year based on Luminate data. This progress was led by our Flagship labels Atlantic and 1 of Records. We're also seeing positive improvements globally. Across emia APAC and latam

Is very important represents.

Finally turning to cash. Operating cash flow decreased to 46 million from 188 million. In the prior quarter. Operating cash flow conversion was 12% of adjusted or

free cash flow decreased to 7 million from 160 million in the prior quarter. This is primarily driven by greater investment in anr looking forward. We continue to Target 50 to 60% operating cash flow conversion of a multi-year period. Also, as of June 30th, we had a cash balance of 527 million total debt of 4.4 billion and net debt of 3.8 billion. Our weighted average cost of that was 4.1% and our nearest maturity date remains 2028 in conclusion. Our releases are doing very well. And the outlook for 2026 and Beyond this promising, we expect financial performance that more directly reflects the success of our artists and songwriters. As we move past tough, comparables and see uplift from our recent renewal to streaming services by some of our investments in initiative, will take time to be a fruit. We are committed to revenue acceleration, which in combination with the efficiencies, from our cost Savings Program, will deliver margin

Expansion.

With our updated strategy in place and more Capital out our disposal. We are set up to move quickly. As we create lasting value for our artists strong, writers employees fans, partners and shareholders. Finally, we'd like to thank our teams around the world, for all the excellent work. They have been doing to deliver a strong quarter and they set us up for continued growth.

With that, we take your questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad, if you would like to withdraw your questions, simply press star 1 again.

Please ensure that you are not on speakerphone and that your phone is not on mute when called upon thank you.

Your first question comes from Ben swinburne with Morgan Stanley, your line is open.

Thank you, good morning. Um, I guess 2 questions, you know it, it's clear that you guys are focused on accelerating growth and you are uh, reallocating resources around the company at the same time, you've obviously taken a lot of cost out. Um, so there's some, you know, some tension there in terms of less investment but more targeted, uh, Investments. So, could you just elaborate a little bit on the strategy changes that you've made uh and how we should expect? Those changes in resource, allocations to sort of Drive, uh, financial performance.

And then I would just love to hear if if you have anything interesting to share on on sort of the general generative, AI topic and how you're leveraging that at the company given. I know it's a focus area for you, it would be interested. Thank you.

All right. Thank you Ben and uh, great to hear from you. Um, so first I want to say that we're really happy with the progress, uh, that we're making, not only succeeding in the charts, but starting to see that translating into market share and especially in the United States. You know as uh as I mentioned plus 1, percentage points uh preliminary

In order to sustain the growth in the future, we need to do better with more. Uh, how are you going to do that? Uh, first we're going to uh, free up a lot more Capital through our uh, reinvestment uh through our reorganization. So um uh our reorganization is strategic, not only for being more efficient but also for our growth.

Second, we'll level up our m&a.

And accelerate growth, uh, through that activity key. Part of that is our 1.2 billion dollar joint venture with Bain Capital.

3, uh, we're focusing our resource allocation on the markets with the highest potential for growth globally to accelerate accelerate growth again.

And forth. We have the right leadership in place in the US Europe. Latam and just today, we announced the last piece of the puzzle with lowi being appointed as the leader of APAC. So, across these 4 Points, we feel really strongly about our plan.

It's already in flight for starting to see the results of it. And all of that is capped by our ongoing discussions with dsps, uh, which include commitments around psms. And obviously our discussions around, uh, superfan tears to further increase the value of music.

Song information audience information on money and that is 1 of the areas where we are working on applying an AI to drive further insights. That will be very difficult to do uh timely with people and uh and Genai can help us provide insights about what is happening. Uh, for the artists all around the world and all the dsps and what are the actions that we should be taking? So we're really excited about that. This is just 1 example. There are many others and um, and uh, stay tuned to hear more about it in the future.

Thanks Robert, appreciate it. Mhm.

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

Um, thank you. Good morning. Uh, I appreciate it. Um Robert, I wanted to ask you 1 on subscription streaming. Um, I think, you know you just reported uh about 8 and a half percent core growth in the quarter, you mentioned uh a couple areas of incremental momentum, artists, share and some distribution renewals going forward. So you you you did provide midterm, uh growth subscription growth guide in the past in the 8 to 10% range. You're already there, so this BS. Well, you just talk about how you're thinking about the future performance relative to that guide and whether there are any sources of non-recurring strength, uh, this quarter

And then Armen welcome. Uh, appreciate, um your insights uh including the margin expansion goals. My question is, are there opportunities to improve the cash conversion? Um, whether or not, that's an a priority for you and the management team and maybe if you could just help us um kind of prioritize your your your Capital allocation uh, goals. That would be, that would be very helpful. Thanks.

Thanks Michael. Uh I I'll start with the capital of a patient question that you have. Um, and let me talk about our Capital location priority. First before I talk about cash conversion,

From the capital location perspective. Um, we have seen great returns investing in our business.

So that's our first priority is investing in our core music business. And as Robert mentioned, we'll do this more thoughtfully. Now, prioritizing key Global repto markets and journalists.

Second, we will step up investment in m&a, just this investment in music catalog. Also and everything are reasonably announced on adventure with Bane

And then third is a reset in my prepared remarks. Um, we are focusing on returning Capital to shareholders through buyback and see if it ends and you just saw our dividend and ourselves.

From a cash Congressional perspective. This is a critical, not just a key Focus there for management.

A target has been and continues to be 50 to 60% cash conversion.

And I have seen in the past few years, been we've been at the high end of this range going forward. We feel very strong about our plan. We have many different initiatives to continue to drive and improve that. The first 1 is always a cost savings plan, which will not, not only improve margin and enable investment, but also improve cash conversion.

The second 1 is we are very focused on enf spending efficiency.

You know, we we mentioned already that we are very focused on cloud. Testing our spending on our core music, business number 1, but also on core repertoire markets with global potential. And then third, you know, we've spent a lot of capital to deliver against our Tech and finance transformation initiatives as we go through this investment that that that investment will normalize over time. So because of all that we feel very confident about our Capital, allocation priorities priorities and cash conversion targets.

And also very focused on continuing with journeying capital to our shareholders.

Now to your case second question about uh streaming, I'll probably take that too. Um, first of all, we are very happy with the results. We have this quarter, we saw growth across the world with share growth in the US across both uh, 1 a records and Atlantic, which was critical for us.

On an adjusted basis. If you have mentioned, we have seen 8.5% paid streaming growth now. As as we look forward, we are very confident about our future because 1, the company is in a healthy place. Now and through the F, the industry is in a very healthy place. Now, when we think about long-term growth,

That we believe that our adjusted quarter 3 results are very reflected of those healthy Dynamics.

So, the investment that we've been making is really not showing up in market, share and growth. Now, as we look forward, there are a lot of Tailwinds for us the industry continues to grow. And as you know, it's a little bit more resilient to changes in the economy.

Was next year.

Third, we have no more ammunition to invest into that growth behind our savings program for us. We have m&a that will consume more aggressively including with the Trump Venture with veins. And as this says, upside potential through the super premium here that we're working on with our DSP. So, net with a very confident about our future Pro Prospects, and look forward to discussing those more with you in the future.

Team, next question comes from Benjamin black with Deutsche Bank, your line is open.

Good morning and, and thank you for taking my questions. Um, Robert, um, in, in an environment where it's harder to, to break new stars, Warner seems to be sort of having real success. Um, that's showing up in your new release market share. You, you mentioned an aluminate data, you know, we see it in our own analysis here, you can just talk a little bit about what's driving this success and, and how sustainable is it, in an rman? Uh, you guys mentioned the, the new JV with Bane 1.2 billion at the outset, um, can you just talk about the decision to partner, um, versus going on your own? Are there opportunities to expand the partnership and, you know, in the current rate environment? You know, how do you think about the opportunities that around catalog Acquisitions? Thank you very much.

Sure, thanks man. Um, so yes indeed and you know today's environment is very noisy, right? And uh many different platforms, massive amounts of content and in general for all kinds of companies, it has been hard to generate hits and stars Etc. So for us to be able to sustain on a quarter after quarter basis, uh, incredibly High charting of our artists is, uh, something that we are absolutely thrilled about and our company is humming on all cylinders creatively. Um, ultimately, you know, we've invested into anr. Uh, we do invested into our Executives and, uh, and this chart success is starting to show up in market, share success, which is obviously very important. And it's on the line bar. It's it's it's it's it's a proof of our underlying results. The the, uh, The Playbook, as we mentioned, is to continue to do that in The Highest Potential uh repertoire markets to drive.

this kind of results and

the audits development is something that has always been the DNA of Warner. Uh, if you look back to Bruno, Mars hiran, uh, Coldplay, uh you know, there are so many artists that we have worked with for so long to to develop them, do a Lipa. And uh, so we're really thrilled that the artists who are charting in the world. Today are the ones that we have developed recently in this increasingly noisy environment.

Um, why is that happening? Uh, to our Executives? Our people, uh, we have a, a really amazing team of people who have the skills, which is very unique. And as I mentioned before, we have leadership in place, uh, that's really great in the US a lot of time in Mia and we just uh completed a leadership in uh APAC. So we feel really good about our, our team feel really good about the future and

This is also one of those things that.

proves that the value of major music companies is here to stay, because in this environment to succeed globally, it's extremely hard. You need to have Global infrastructure. A local expertise, which is where we have and it's showing up. So, um, I'm, I'm really thrilled about the progress. We're making and I'll hand it over to Armand to the address the Bane question.

Yeah, thanks for the question. Um the summary is that we are focused on growth margin and cash.

And the, why and catalogs that really all of that.

So, the JV is really a critical building blocks for us, you know, our long-term strategy to accelerate the acquisition of catalog business.

And the good news is that we found a partner with experience uh in in this industry. So we're very happy with the partner and obviously as you know we've seen that in in our disclosure within 50% ownership of the catalogs that we acquire and will operate. The GB basically by managing all aspects of marketing distribution Administration and that this is a key building block for us and we are very happy about the partnership.

Thank you very much.

See you. Next question. Comes from Peter spino with wolf research, your line is open.

If you could just talk about the organizational changes that you're making as part of that Cost Savings Program and maybe detail the largest areas or opportunities for cost reductions. Um, and for the team during this Q&A, you've discussed your interest in stepping up mergers and acquisitions and possibly expanding the use of joint ventures. That topic reminds me of organic growth, and I wonder if you could talk about that.

the pros and cons of providing more specificity on organic growth and underlying Financial Trends, uh, in the business X m&a going forward. Thank you.

Yeah, let me address. You organizational question first.

Um, this is a critical program for us, because we wanted to make sure that we create an organization that helps us drive our growth aspirations.

But at the same time, obviously, also deliver savings to create capacity you invest into the business and expand Martin. And frankly, as we went through the work as a team, we had to ground ourselves a little bit in the reality of our industry, which is that

You know, music is global but at the same time we are operating in 70 markets around the world. So as we designed the organization, it was really important for us to have on the 1 hand, the local expertise to discover new talents in those 700 markets and many more markets around the world.

But at the same time, also have the global scale to elevate local talents globally.

So to deliver against that we have developed a very thoughtful, Global Regional local organization organizational model and then that if we test that, we are investing more money but also more resourcing in key markets in our Frontline business. So in our and marketing teams, which are all focused on discovering artists and songwriters as well as driving our customers.

At the same time, we are scaling our Global and Regional Services behind the section Investments. That is making over the last 3 years.

And the balance of that was very important for us. All of this was enabled by Tech Investments. As I mentioned, over the past 2 years. So we're very, very happy with that with that. Not only because they enable us to scale organization and services more but also provide better services to our artists and songwriters like with our W house apps. Now, as we move to the next phase of the tech investment I mentioned before this, that we will normalize external spend more consistent with the market to be expect savings. There, we also scaling our non- people spend more consistent with the new more efficient organization design. So in summary, we think we got a very, very balanced organization, design, that helps us drive the local opportunities by globalizing artists but also drive cost savings to the bottom line.

And we have said before that, we expect from this about 150% basis points of margin expansion. Next fiscal year

And I'll, I'll, I'll take the organic growth part of the question. So, you know, as we've set up numerous times on this call, um, obviously, we're having a lot of creative success with new releases. That's part of our organic growth. Uh, you know, the day-to-day anr activities finding artists developing them making them Global Superstars, that's all in the works. And uh, or doing, uh, an incredible job there. Uh, in my opening remarks, I mentioned our, uh, always on catalog approach with some of the examples like Veronica, uh, Electronica and slip knot Etc. Uh, you know, we are focusing on marketing our catalog the same way we do front line and, uh, and making sure that that is growing, its 2/3 of our business. Uh, that is D, you know, that is what, uh, organic growth is about. And all of that is, underlined by our relationships with dsps and most certainly around pricing rather than wishful thinking, uh, around price increases. So,

Uh, we feel really good about the industry growth. We feel uh, very strongly about our own, uh, organic growth. And as Armen mentioned, uh, layering it on aggressive, but responsible m&a capabilities augmented by the JB, uh, with Bane, it's just giving us extra Firepower to keep on accelerating.

Thanks very much.

The next question comes from Cut gun morale with evercore isi. Your line is open.

Across, you know, the more traditional core ad supported business as well as emerging platforms, and on the emerging fronts is there anything you could call out? In terms of the recent renewals, you may have had with some Partners or or what the renewal pipeline heading into 2026. Looks like I know you don't talk about specific Partners but um, it's been I think about 2 years since the Tik Tok deal was announced. So I wanted to check in there.

And then, uh, for Armen, you know, you've been with the company for several months now, and it certainly seems like you've hit the ground running based off of some of the recent news flow. I'd be curious to hear some of your early observations in the seat, and, you know, maybe what made you interested in joining the music industry and WMG more specifically. Thank you.

Thanks for the question. Uh, I'll start with my Impressions first time. Super impressed with the management team know here in New York, but also around the world.

We have, I believe 1 of the best creative teams that you can imagine, you know, here in the US in Europe, Latin America. Now also with the appointment of new leaders in uh Asia.

Uh, second, you know this is a super attractive industry. The industry has been growing for many years, but there are also a lot of opportunities that I felt that I could work on with the teams here, based on my experience in another media industry, the gaming industry. Um, second um, you know, these

USB contracts is Robert Manson provided more certainty in the future. And third is a business that is not much more healthy. So we have a lot of opportunity ahead of us.

So in that context, my key part is where to make sure that I have the team to First, make sure that we have more capacity to invest into the business. And we're doing that with our savings program, which will not just accelerate growth, but also expand margins. Uh, secondly, I also want to make sure leverage my m&a experience from the past, which is extensive at CNB and that activation to help accelerate m&a and not just organic growth here.

And then third there's a lot of opportunity to improve Capital location by processing, spending against the biggest and most profitable opportunities. So net, uh I saw the opportunity, I saw the impact I could have you on the business and I'm super excited to be here and I think we have tremendous opportunity to create the value.

For our shareholders, for those of our artists and songwriters and employees here.

Uh, on your C, question on, um, on the ad business.

You know, when we look at the ad business, there's actually 2 parts to it. 1 is our quad DLC business where we actually growing our ads business. And as you know what, the biggest DC, csb platform mentioned, you know, last week, there's a lot of opportunity to accelerate further. The biggest challenge is really in the short form video content business and that's in

For the industry, we try to, we need to work on with the industry together with those Partners, but it's a lot of work for us to continue to improve that over time, and we are not done with that work because a lot of opportunity ahead of us.

Understood, thank you.

The next question comes from Rich. Grenfield with light. Check Partners your line is open.

Hi, thanks for taking the question. Um, Robert, there's been a lot of, I think, industry confusion over what this...

Super premium or Super Fan Experience should be, uh, your friends at Universal certainly started talking about it, um, you know, a couple years ago, and Daniel, like at Spotify, started talking about it. And it seems like the industry has struggled to figure out what the product actually should be. At the same time, we're seeing, you know, if I look at something like SoundCloud, people love sort of interacting and playing with music. There are all of these new AI startups where people are sort of manipulating music. And I guess the question is, do you think we can evolve from what the Super Fan Experience might have been, which was like higher quality audio or, you know, chatting with the artist or, you know, getting to a concert? And may it actually evolve to something that involves sort of interactive music or some form of AI interaction? And just big picture, where do you see this going? Thank you.

Also, interactive, and many different ways. And those are the things to leverage. Uh, I I don't have anything new to announce today but, uh, uh, you know, be sure that we are in deep discussions with our partners to evolve this because the opportunity is there. Uh, we all want to capture it, uh, it makes sense for both the dsps as well as us, uh, the music companies and for artists and song writers. So we're, you know, everybody wants to get it right and and capture this opportunity. So we're we're excited about it and, uh, and we're, I'm busy working on it.

Thank you and I'm happy to join anytime.

All right, sounds good. We'll take you up on it.

You're a final question. Will come from Doug Cruise of TD, Cowen. Your line is open.

Thank you. Uh Armen. Welcome back to the entertainment industry. Uh, question for you while you were at Activision, when I think about your time there 1 of the things, I think that that company was really great at was realizing the full value of its content uh through its negotiations with its uh, digital distribution platform Partners. How did I experience uh, inform, you know your your mental model about how to approach your relationships with your platform Partners here at wmg. Thank you.

Great question. So I I have 2 comments here, 1.

You know, it's interesting to see how Industries evolve over time. And what I mean with that is that recall in the gaming industry, we used to have very few price points until free to play. Showed up, we basically catered to every different price point in the world.

so, basically playing along the demand curve,

It feels like the music industry is, is at the point today.

Where we offer very few products at very limited price points and super premium, tier is obviously 1 opportunity to cater to a more premium consumers.

But I'd argue, there are many, many more opportunities for us to deliver better and premium price product.

To our fans and to our community.

And you know, we are having conversations obviously with our partners and I will tell you that the partners is also see those opportunities. And in many cases, you know, people from the gaming industry, actually join those Partners. So do you see it similar way? Now, the devil is in the detail, on all of this, it's really all about execution because when we play along the 5 curve, we have to make sure that we offer Great Value to Consumers and that's the work that's ahead of us. So be assured that we are very focused on this because that tremendous opportunity to

Deliver growth. But also value for consumers in industry and that's how we will approach that.

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

Well, uh, thank you all for joining today. Uh, I just want to close by saying we are

Uh, really, uh, excited about the progress that we're making in an industry that has healthy Dynamics. Uh, that we're starting to see our creative Excellence translate into Market, chart growth, and important markets, and drive power revenue. And uh, that we have a very uh, strong plan to uh, continue to accelerate this growth in the future and uh, on to execution.

Thank you so much. Have a great day.

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

It feels very cold outside. A few times of paranoia. Oh, what's your name? My name is.

20 for you. Hey we're getting high up on the corner. Wow, I'm so worried about you thinking I made it.

Later on, we can talk later.

Of my head.

Want me again? My head works like it used to and maybe next time I told my girl I like a baby.