Warner Music Group Corp. Q4 FY2025 earnings call

• Market Share: Saw steady global market share gains, up 0.6 percentage points in the US Q4 over prior year, and Spotify top 200 share jumped ~6 percentage points vs fiscal 2024. • Q4 Highlights: Impressive new releases with back-to-back #1 albums in major markets, catalog division success like Fleetwood Mac's Buckingham Nicks album, and Warner Chappell resurgence. • AI Strategy: Developed principles for engaging with AI platforms, including only partnering with those using licensed models, securing fair economics, and giving artists/songwriters opt-in rights. • Organizational Optimization: Aligned labels globally, unified regions, streamlined operations, and modernized infrastructure for efficiency and growth. • Future Releases: Anticipated strong Q1 2026 releases from various artists.

In Q4, total revenue grew 13%. Recorded music subscription streaming increased 8.4%. Music Publishing grew 13%. Artist Services saw 64% growth. For full year 2025, total revenue and adjusted OIBDA grew 8% on an adjusted basis, with recorded music subscription streaming showing high single-digit growth. Recorded music subscription streaming contributed significantly, with global subscriber growth and strong market share performance. Music Publishing benefited from double-digit growth across performance, mechanical, etc.

• 2026 Outlook: Expect strong top line growth driven by core music business, high-impact accretive M&A, and adjacent areas like distribution and DTC. • Margin Expansion: Expect 150 to 200 basis points of adjusted OIBDA margin improvement in 2026 via cost savings plan and operating leverage. • M&A: Have a strong pipeline of accretive M&A, particularly in catalog business, to be executed in a capital-efficient manner with joint venture with Bain. • Distribution: Confident in accelerating growth in distribution business starting in 2026 with new leadership and improved capabilities.

• AI Risks: Generative AI technology poses both opportunities and threats, with potential for content being used in ways that could bypass content creators if not managed properly. • Market Uncertainties: Macro factors and industry changes could impact financial performance, though management is positioned to navigate these.

Q: Could you update on WMG's role in capturing incremental value with DSP renewals and AI?

A: Robert Kyncl stated WMG sees AI as an incremental opportunity, being in the driver seat with principles of licensed models, fair economics, and artist/songwriter opt-in rights. It's seen as similar to past distribution changes, creating net positive value.

Q: Ben Black asked about building blocks for top line growth in 2026 and margin expansion.

A: Armin Zerza mentioned benefits from DSP wholesale price increases, accretive M&A, distribution growth, and premium offerings. Margin expansion from cost savings program, operating leverage from streaming growth, accretive M&A, and ESP pricing.

Q: Peter Supino asked about market share gains and flagship labels.

A: Robert Kyncl said market share gains are broad-based across labels and regions, due to focus on artist development, catalog revitalization, and capital allocation.

Q: Michael Morris asked about M&A plans and distribution.

A: Armin Zerza said M&A pipeline includes accretive catalog deals with joint venture with Bain, and distribution is a growing business with new leadership and improved capabilities.

Q: Douglas Creutz asked about tech investments and growth outlook.

A: Robert Kyncl and Armin Zerza mentioned investments in core infrastructure like digital supply chain and publishing systems to support growth and cost savings.

Q: Cameron Mansson-Perrone asked about DSP deal variability and market share savings.

A: Robert Kyncl said there's more standardization but still variability, and Armin Zerza explained savings come from backoffice efficiency to reinvest in core markets.

Q: Kannan Venkateshwar asked about AI threat and margin guidance.

A: Robert Kyncl said AI is an opportunity to shape the industry, and Armin Zerza explained margin guidance includes cost savings, streaming growth, and PSM price increases.