Document

“Warner Music Group’s unique combination of scale and agility gives us, our artists, and our songwriters an edge in music’s ever-expanding universe of opportunity. We continue to build our unparalleled artist development expertise, our differentiated approach to global expansion, and our ground-breaking commitment to innovation at the intersection of music, gaming, social and fitness,” said Steve Cooper, CEO, Warner Music Group. “We’re equally excited about the amazing new releases we have lined up for the rest of the year, and the possibilities on the horizon.”

“The underlying health and resilience of our business is reflected in the diversified revenue growth that we delivered in the second quarter,” said Eric Levin, CFO, Warner Music Group. “While our core business continues to flourish, new growth vectors are constantly emerging. We look forward to driving value for our shareholders and are well-positioned to capitalize on the robust trends taking place in our industry.”


Total WMG Summary Results
(dollars in millions)
	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change		For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)				(unaudited)		(unaudited)
Revenue	$	1,376	$	1,250	10	%	$	2,990	$	2,585	16	%
Recorded Music revenue	1,147		1,059		8	%	2,533		2,220		14	%
Music Publishing revenue	230		192		20	%	459		367		25	%
Digital revenue	931		860		8	%	1,933		1,685		15	%
Operating income	166		151		10	%	405		347		17	%
Adjusted operating income(1)	185		178		4	%	459		389		18	%
OIBDA(1)	255		228		12	%	575		495		16	%
Adjusted OIBDA(1)	274		255		7	%	629		537		17	%
Net income	92		117		-21	%	280		216		30	%
Adjusted net income(1)	111		144		-23	%	334		258		29	%
Net cash provided by operating activities	44		150		-71	%	173		319		-46	%
Free Cash Flow	16		130		-88	%	111		281		-60	%

(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.


	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change		For the Twelve Months Ended March 31, 2022		For the Twelve Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)				(unaudited)		(unaudited)
Adjusted EBITDA(1)	$	282	$	268	5	%	$	1,210	$	943	28	%

(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.

Revenue was up 10.1% (or 13.2% in constant currency) driven by digital revenue growth of 8.3% (or 10.8% in constant currency) across Recorded Music and Music Publishing. Consistent with the prior quarter, the quarter included the impact of a new deal with one of our digital partners affecting Recorded Music streaming revenue. Adjusting for this item, total revenue was up 12.9% (or 16.1% in constant currency). Total streaming revenue increased 9.0% (or 11.6% in constant currency) driven by growth across Recorded Music and Music Publishing, including revenue from emerging streaming platforms. Digital revenue represented 67.7% of total revenue in the quarter, compared to 68.8% in the prior-year quarter. The decrease in digital revenue as a percentage of total revenue is due to the partial recovery of artist services and expanded-rights revenue, which was impacted by COVID in the prior-year quarter and increased 19.5% (or 24.8% in constant currency) in the quarter, as well as the continued growth in Recorded Music licensing and Music Publishing synchronization revenue. Revenue increases in the quarter were also driven by growth in Recorded Music physical revenue and Music Publishing performance and mechanical revenue.

Operating income was $166 million compared to $151 million in the prior-year quarter. OIBDA was $255 million, an increase from $228 million in the prior-year quarter, and OIBDA margin increased 0.3 percentage points to 18.5% from 18.2% in the prior-year quarter. The increases in operating income and OIBDA were primarily due to increased revenue. The increase in OIBDA margin was primarily due to strong operating performance and lower non-cash stock-based compensation and other related expenses as a result of equity awards becoming fully vested, partially offset by growth of lower-margin revenue streams.

Adjusted operating income, Adjusted OIBDA and Adjusted net income exclude non-cash stock-based compensation and other related expenses and expenses related to restructuring and other transformation initiatives in both the quarter and the prior-year quarter. In the prior-year quarter, COVID-related expenses are also excluded. Adjusted EBITDA excludes these items and includes expected savings resulting from transformation initiatives and the pro forma impact of certain specified transactions. See below for calculations and reconciliations of Adjusted operating income, Adjusted OIBDA, Adjusted net income and Adjusted EBITDA.

Adjusted OIBDA increased 7.5% from $255 million to $274 million and Adjusted OIBDA margin decreased 0.5 percentage points to 19.9% from 20.4% in the prior-year quarter. The increase in Adjusted OIBDA was primarily due to increased revenue and strong operating performance. The decrease in Adjusted OIBDA margin was primarily due to revenue mix and growth of lower-margin revenue streams. Adjusted operating income increased 3.9% from $178 million to $185 million due to the same factors affecting Adjusted OIBDA, partially offset by higher depreciation and amortization expenses due to recent acquisitions and capital spending.

Net income was $92 million compared to $117 million in the prior-year quarter. Adjusted net income was $111 million compared to $144 million in the prior-year quarter. The decrease in net income and Adjusted net income was primarily due to aggregate realized and unrealized losses on the mark-to-market of certain investments, partially offset by higher operating income and lower income tax expense due to lower pre-tax income.

Cash provided by operating activities decreased 71% to $44 million from $150 million in the prior-year quarter. The change was largely a result of strong operating performance, which was more than offset by timing of royalty payments and other movements within working capital. Capital expenditures increased to $28 million in the quarter as compared to $20 million in the prior-year quarter, mainly due to investments in IT infrastructure and facilities, including the EMP fulfillment center expansion. Free Cash Flow, as defined below, decreased 88% to $16 million from $130 million in the prior-year quarter.


Recorded Music Summary Results
(dollars in millions)
	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change		For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)				(unaudited)		(unaudited)
Revenue	$	1,147	$	1,059	8	%	$	2,533	$	2,220	14	%
Digital revenue	804		756		6	%	1,674		1,483		13	%
Operating income	189		184		3	%	465		407		14	%
Adjusted operating income(1)	192		191		1	%	474		420		13	%
OIBDA(1)	250		235		6	%	580		504		15	%
Adjusted OIBDA(1)	253		242		5	%	589		517		14	%

(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.


Recorded Music Revenue
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		For the Three Months Ended March 31, 2021		For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		For the Six Months Ended March 31, 2021
	As reported		As reported		Constant		As reported		As reported		Constant
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Digital	$	804	$	756	$	739	$	1,674	$	1,483	$	1,461
Physical	122		118		113		317		292		284
Total Digital and Physical	926		874		852		1,991		1,775		1,745
Artist services and expanded-rights	141		118		113		373		298		287
Licensing	80		67		65		169		147		144
Total Recorded Music	$	1,147	$	1,059	$	1,030	$	2,533	$	2,220	$	2,176

Recorded Music revenue was up 8.3% (or 11.4% in constant currency) due to growth across all revenue lines, including increases in digital revenue which reflect the continued growth in streaming, the Company’s largest source of revenue. Adjusted for the impact of the new deal with one of our digital partners, as noted above, Recorded Music revenue was up 11.6% (or 14.8% in constant currency). Digital revenue grew 6.3% (or 8.8% in constant currency) due to the strong performance of new and carryover releases, as well as revenue growth from emerging streaming platforms. Streaming revenue grew 7.5% (or 9.9% in constant currency). Adjusted for the impact of the new deal with one of our digital partners, Recorded Music streaming revenue was up 12.3% (or 15.0% in constant currency). Digital revenue represented 70.1% of total Recorded Music revenue versus 71.4% in the prior-year quarter. The decrease in digital revenue as a percentage of total Recorded Music revenue is due to the partial recovery of artist services and expanded-rights revenue, which was impacted by COVID, as well as the continued growth of licensing revenue. Artist services and expanded-rights revenue increased 19.5% (or 24.8% in constant currency), reflecting an increase in merchandising and concert promotion revenue, both of which were disrupted by COVID in the prior-year quarter. Licensing revenue increased 19.4% (or 23.1% in constant currency), mainly due to higher synchronization activity. Physical revenue grew 3.4% (or 8.0% in constant currency) primarily due to an increasing demand for vinyl. Major sellers included Ed Sheeran, Michael Bublé, Dua Lipa and Red Hot Chili Peppers.

Recorded Music operating income was $189 million, up from $184 million in the prior-year quarter, and operating margin was down 0.9 percentage points to 16.5% versus 17.4% in the prior-year quarter. OIBDA increased to $250 million from $235 million in the prior-year quarter and OIBDA margin decreased 0.4 percentage points to 21.8%. Adjusted OIBDA was $253 million versus $242 million in the prior-year quarter with Adjusted OIBDA margin down 0.8 percentage points to 22.1%. The increases in OIBDA and Adjusted OIBDA were driven by increased revenue and strong operating performance. The decreases in operating margin, OIBDA margin and Adjusted OIBDA margin were primarily due to growth of lower-margin revenue streams in the quarter, partially offset by strong operating performance.


Music Publishing Summary Results
(dollars in millions)
	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change		For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)				(unaudited)		(unaudited)
Revenue	$	230	$	192	20	%	$	459	$	367	25	%
Digital revenue	127		104		22	%	260		203		28	%
Operating income	38		22		73	%	70		40		75	%
Adjusted operating income(1)	38		25		52	%	71		44		61	%
OIBDA(1)	61		43		42	%	115		82		40	%
Adjusted OIBDA(1)	61		46		33	%	116		86		35	%

(1) See "Supplemental Disclosures Regarding Non-GAAP Financial Measures" at the end of this release for details regarding these measures.


Music Publishing Revenue
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		For the Three Months Ended March 31, 2021		For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		For the Six Months Ended March 31, 2021
	As reported		As reported		Constant		As reported		As reported		Constant
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Performance	$	36	$	35	$	33	$	74	$	65	$	63
Digital	127		104		101		260		203		200
Mechanical	13		12		12		27		23		23
Synchronization	50		38		39		92		71		71
Other	4		3		2		6		5		4
Total Music Publishing	$	230	$	192	$	187	$	459	$	367	$	361

Music Publishing revenue increased 19.8% (or 23.0% in constant currency). The revenue increase was driven by growth across all revenue lines. Digital revenue increased 22.1% (or 25.7% in constant currency) reflecting the continued growth in streaming, including emerging streaming platforms, and timing of new digital deals. Digital revenue growth in the quarter was impacted by a shift in the collection of writer’s share of U.S. digital performance income from certain digital service providers. This change has no impact on Music Publishing OIBDA, but results in a slight improvement to OIBDA margin. Streaming revenue increased 19.6% (or 23.2% in constant currency). Digital revenue represented 55.2% of total Music Publishing revenue versus 54.2% in the prior-year quarter. Synchronization revenue increased due to higher commercial licensing activity. Performance revenue increased as bars, restaurants, concerts and live events continued to recover from COVID disruption. Mechanical revenue increased, driven by strong physical sales.

Music Publishing operating income was $38 million compared to $22 million in the prior-year quarter, largely driven by increased revenue. Operating margin increased 5.0 percentage points to 16.5%. Music Publishing OIBDA increased 41.9% to $61 million and OIBDA margin increased 4.1 percentage points to 26.5%. Adjusted OIBDA increased 32.6% to $61 million and Adjusted OIBDA margin increased 2.5 percentage points to 26.5%. The increases in OIBDA margin and Adjusted OIBDA margin were primarily due to the impact from a recent acquisition, revenue mix and strong operating performance.

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 300 Entertainment, Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Reprise, Rhino, Roadrunner, Sire, Spinnin’ Records, Warner Classics and Warner Music 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.

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.

The Company maintains a 52-53 week fiscal year ending on the last Friday in each reporting period. The fiscal year ended September 30, 2022 includes 53 weeks, and the fiscal year ended September 30, 2021 included 52 weeks. The additional week in fiscal year 2022 fell in the fiscal quarter ended December 31, 2021. Accordingly, the results of operations for the six months ended March 31, 2022 reflect 27 weeks compared to 26 weeks for the six months ended March 31, 2021. All references to March 31, 2022 and March 31, 2021 relate to the periods ended April 1, 2022 and March 26, 2021, respectively. For convenience purposes, the Company continues to date its financial statements as of March 31.


Figure 1. Warner Music Group Corp. - Consolidated Statements of Operations, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)
Revenue	$	1,376	$	1,250	10	%
Cost and expenses:
Cost of revenue	(697)		(623)		12	%
Selling, general and administrative expenses	(444)		(418)		6	%
Amortization expense	(69)		(58)		19	%
Total costs and expenses	$	(1,210)	$	(1,099)	10	%
Operating income	$	166	$	151	10	%

Interest expense, net	(32)		(32)		—	%
Other (expense) income, net	(8)		49		—	%
Income before income taxes	$	126	$	168	-25	%
Income tax expense	(34)		(51)		-33	%
Net income	$	92	$	117	-21	%
Less: Income attributable to noncontrolling interest	—		—		—	%
Net income attributable to Warner Music Group Corp.	$	92	$	117	-21	%

Net income per share attributable to common stockholders:
Class A – Basic and Diluted	$	0.18	$	0.23
Class B – Basic and Diluted	$	0.18	$	0.22


	For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)
Revenue	$	2,990	$	2,585	16	%
Cost and expenses:
Cost of revenue	(1,515)		(1,309)		16	%
Selling, general and administrative expenses	(941)		(819)		15	%
Amortization expense	(129)		(110)		17	%
Total costs and expenses	$	(2,585)	$	(2,238)	16	%
Operating income	$	405	$	347	17	%

Interest expense, net	(62)		(63)		-2	%
Other income, net	46		18		—	%
Income before income taxes	$	389	$	302	29	%
Income tax expense	(109)		(86)		27	%
Net income	$	280	$	216	30	%
Less: Income attributable to noncontrolling interest	(1)		(1)		—	%
Net income attributable to Warner Music Group Corp.	$	279	$	215	30	%

Net income per share attributable to common stockholders:
Class A – Basic and Diluted	$	0.53	$	0.41
Class B – Basic and Diluted	$	0.53	$	0.41


Figure 2. Warner Music Group Corp. - Consolidated Balance Sheets at March 31, 2022 versus September 30, 2021
(dollars in millions)

	March 31, 2022		September 30, 2021		% Change
	(unaudited)
Assets
Current assets:
Cash and equivalents	$	385	$	499	-23	%
Accounts receivable, net	914		839		9	%
Inventories	94		99		-5	%
Royalty advances expected to be recouped within one year	437		373		17	%
Prepaid and other current assets	82		86		-5	%
Total current assets	$	1,912	$	1,896	1	%
Royalty advances expected to be recouped after one year	534		457		17	%
Property, plant and equipment, net	386		364		6	%
Operating lease right-of-use assets, net	253		268		-6	%
Goodwill	1,922		1,830		5	%
Intangible assets subject to amortization, net	2,411		2,017		20	%
Intangible assets not subject to amortization	152		154		-1	%
Deferred tax assets, net	22		31		-29	%
Other assets	189		194		-3	%
Total assets	$	7,781	$	7,211	8	%
Liabilities and Equity
Current liabilities:
Accounts payable	$	320	$	302	6	%
Accrued royalties	1,908		1,880		1	%
Accrued liabilities	371		461		-20	%
Accrued interest	18		14		29	%
Operating lease liabilities, current	40		43		-7	%
Deferred revenue	239		348		-31	%
Other current liabilities	235		102		—	%
Total current liabilities	$	3,131	$	3,150	-1	%
Long-term debt	3,829		3,346		14	%
Operating lease liabilities, noncurrent	269		287		-6	%
Deferred tax liabilities, net	236		207		14	%
Other noncurrent liabilities	143		175		-18	%
Total liabilities	$	7,608	$	7,165	6	%
Equity:
Class A common stock	$	—	$	—	—	%
Class B common stock	1		1		—	%
Additional paid-in capital	1,971		1,942		1	%
Accumulated deficit	(1,587)		(1,710)		-7	%
Accumulated other comprehensive loss, net	(231)		(202)		14	%
Total Warner Music Group Corp. equity	$	154	$	31	—	%
Noncontrolling interest	19		15		27	%
Total equity	173		46		—	%
Total liabilities and equity	$	7,781	$	7,211	8	%


Figure 3. Warner Music Group Corp. - Summarized Statements of Cash Flows, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	44	$	150
Net cash used in investing activities	(25)		(61)
Net cash used in financing activities	(85)		(64)
Effect of foreign currency exchange rates on cash and equivalents	1		(3)
Net (decrease) increase in cash and equivalents	$	(65)	$	22

	For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	173	$	319
Net cash used in investing activities	(649)		(404)
Net cash provided by financing activities	363		114
Effect of foreign currency exchange rates on cash and equivalents	(1)		6
Net (decrease) increase in cash and equivalents	$	(114)	$	35


Figure 4. Warner Music Group Corp. - Digital Revenue Summary, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)
Recorded Music
Streaming	$	776	$	722	7	%
Downloads and Other Digital	28		34		-18	%
Total Recorded Music Digital Revenue	$	804	$	756	6	%

Music Publishing
Streaming	$	122	$	102	20	%
Downloads and Other Digital	5		2		—	%
Total Music Publishing Digital Revenue	$	127	$	104	22	%

Consolidated
Streaming	$	898	$	824	9	%
Downloads and Other Digital	33		36		-8	%
Intersegment Eliminations	—		—		—	%
Total Digital Revenue	$	931	$	860	8	%

	For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		% Change
	(unaudited)		(unaudited)
Recorded Music
Streaming	$	1,612	$	1,414	14	%
Downloads and Other Digital	62		69		-10	%
Total Recorded Music Digital Revenue	$	1,674	$	1,483	13	%

Music Publishing
Streaming	$	251	$	196	28	%
Downloads and Other Digital	9		7		29	%
Total Music Publishing Digital Revenue	$	260	$	203	28	%

Consolidated
Streaming	$	1,863	$	1,610	16	%
Downloads and Other Digital	71		76		-7	%
Intersegment Eliminations	(1)		(1)		—	%
Total Digital Revenue	$	1,933	$	1,685	15	%

OIBDA reflects our operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets. We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses, and believe the presentation of OIBDA helps improve the ability to understand our operating performance and evaluate our performance in comparison to comparable periods. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses. Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) and other measures of financial performance reported in accordance with U.S. GAAP. In addition, OIBDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies.


Figure 5. Warner Music Group Corp. - Reconciliation of Net Income to OIBDA, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022			For the Three Months Ended March 31, 2021			% Change
	(unaudited)			(unaudited)
Net income attributable to Warner Music Group Corp.	$	92		$	117		-21	%
Income attributable to noncontrolling interest	—			—			—	%
Net income	$	92		$	117		-21	%
Income tax expense	34			51			-33	%
Income including income taxes	$	126		$	168		-25	%
Other expense (income), net	8			(49)			—	%
Interest expense, net	32			32			—	%

Operating income	$	166		$	151		10	%
Amortization expense	69			58			19	%
Depreciation expense	20			19			5	%
OIBDA	$	255		$	228		12	%
Operating income margin	12.1		%	12.1		%
OIBDA margin	18.5		%	18.2		%

	For the Six Months Ended March 31, 2022			For the Six Months Ended March 31, 2021			% Change
	(unaudited)			(unaudited)
Net income attributable to Warner Music Group Corp.	$	279		$	215		30	%
Income attributable to noncontrolling interest	1			1			—	%
Net income	$	280		$	216		30	%
Income tax expense	109			86			27	%
Income including income taxes	$	389		$	302		29	%
Other income, net	(46)			(18)			—	%
Interest expense, net	62			63			-2	%

Operating income	$	405		$	347		17	%
Amortization expense	129			110			17	%
Depreciation expense	41			38			8	%
OIBDA	$	575		$	495		16	%
Operating income margin	13.5		%	13.4		%
OIBDA margin	19.2		%	19.1		%


Figure 6. Warner Music Group Corp. - Reconciliation of Segment Operating Income to OIBDA, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022			For the Three Months Ended March 31, 2021			% Change
	(unaudited)			(unaudited)
Total WMG operating income – GAAP	$	166		$	151		10	%
Depreciation and amortization expense	(89)			(77)			16	%
Total WMG OIBDA	$	255		$	228		12	%
Operating income margin	12.1		%	12.1		%
OIBDA margin	18.5		%	18.2		%

Recorded Music operating income – GAAP	$	189		$	184		3	%
Depreciation and amortization expense	(61)			(51)			20	%
Recorded Music OIBDA	$	250		$	235		6	%
Recorded Music operating income margin	16.5		%	17.4		%
Recorded Music OIBDA margin	21.8		%	22.2		%

Music Publishing operating income – GAAP	$	38		$	22		73	%
Depreciation and amortization expense	(23)			(21)			10	%
Music Publishing OIBDA	$	61		$	43		42	%
Music Publishing operating income margin	16.5		%	11.5		%
Music Publishing OIBDA margin	26.5		%	22.4		%

	For the Six Months Ended March 31, 2022			For the Six Months Ended March 31, 2021			% Change
	(unaudited)			(unaudited)
Total WMG operating income – GAAP	$	405		$	347		17	%
Depreciation and amortization expense	(170)			(148)			15	%
Total WMG OIBDA	$	575		$	495		16	%
Operating income margin	13.5		%	13.4		%
OIBDA margin	19.2		%	19.1		%

Recorded Music operating income – GAAP	$	465		$	407		14	%
Depreciation and amortization expense	(115)			(97)			19	%
Recorded Music OIBDA	$	580		$	504		15	%
Recorded Music operating income margin	18.4		%	18.3		%
Recorded Music OIBDA margin	22.9		%	22.7		%

Music Publishing operating income – GAAP	$	70		$	40		75	%
Depreciation and amortization expense	(45)			(42)			7	%
Music Publishing OIBDA	$	115		$	82		40	%
Music Publishing operating income margin	15.3		%	10.9		%
Music Publishing OIBDA margin	25.1		%	22.3		%

Adjusted operating income (loss), Adjusted OIBDA and Adjusted net income (loss) is operating income (loss), OIBDA and net income (loss), respectively, adjusted to exclude the impact of certain items that affect comparability. Factors affecting period-to-period comparability of the unadjusted measures in the quarter included the items listed in Figure 7 below. We use Adjusted operating income (loss), Adjusted OIBDA and Adjusted net income (loss) to evaluate our actual operating performance. We believe that the adjusted results provide relevant and useful information for investors because they clarify our actual operating performance, make it easier to compare our results with those of other companies in our industry and allow investors to review performance in the same way as our management. Since these are not measures of performance calculated in accordance with U.S. GAAP, they should not be considered in isolation of, or as a substitute for, operating income (loss), OIBDA and net income (loss) as indicators of operating performance, and they may not be comparable to similarly titled measures employed by other companies.


Figure 7. Warner Music Group Corp. - Reconciliation of Reported to Adjusted Results, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

For the Three Months Ended March 31, 2022
	Total WMG Operating Income			Recorded Music Operating Income			Music Publishing Operating Income			Total WMG OIBDA			Recorded Music OIBDA			Music Publishing OIBDA			Net Income
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Reported Results	$	166		$	189		$	38		$	255		$	250		$	61		$	92
Factors Affecting Comparability:
Restructuring and Other Transformation Related Costs	12			—			—			12			—			—			12



Non-Cash Stock-Based Compensation and Other Related Costs	7			3			—			7			3			—			7
Adjusted Results	$	185		$	192		$	38		$	274		$	253		$	61		$	111

Adjusted Margin	13.4		%	16.7		%	16.5		%	19.9		%	22.1		%	26.5		%

For the Three Months Ended March 31, 2021
	Total WMG Operating Income			Recorded Music Operating Income			Music Publishing Operating Income			Total WMG OIBDA			Recorded Music OIBDA			Music Publishing OIBDA			Net Income
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Reported Results	$	151		$	184		$	22		$	228		$	235		$	43		$	117
Factors Affecting Comparability:
Restructuring and Other Transformation Related Costs	10			—			2			10			—			2			10

COVID-19 Related Costs	1			—			—			1			—			—			1

Non-Cash Stock-Based Compensation and Other Related Costs	16			7			1			16			7			1			16
Adjusted Results	$	178		$	191		$	25		$	255		$	242		$	46		$	144

Adjusted Margin	14.2		%	18.0		%	13.0		%	20.4		%	22.9		%	24.0		%


For the Six Months Ended March 31, 2022
	Total WMG Operating Income			Recorded Music Operating Income			Music Publishing Operating Income			Total WMG OIBDA			Recorded Music OIBDA			Music Publishing OIBDA			Net Income
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Reported Results	$	405		$	465		$	70		$	575		$	580		$	115		$	280
Factors Affecting Comparability:
Restructuring and Other Transformation Related Costs	23			—			—			23			—			—			23

COVID-19 Related Costs	—			—			—			—			—			—			—

Non-Cash Stock-Based Compensation and Other Related Costs	31			9			1			31			9			1			31
Adjusted Results	$	459		$	474		$	71		$	629		$	589		$	116		$	334

Adjusted Margin	15.4		%	18.7		%	15.5		%	21.0		%	23.3		%	25.3		%

For the Six Months Ended March 31, 2021
	Total WMG Operating Income			Recorded Music Operating Income			Music Publishing Operating Income			Total WMG OIBDA			Recorded Music OIBDA			Music Publishing OIBDA			Net Income
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Reported Results	$	347		$	407		$	40		$	495		$	504		$	82		$	216
Factors Affecting Comparability:
Restructuring and Other Transformation Related Costs	18			—			3			18			—			3			18

COVID-19 Related Costs	2			1			—			2			1			—			2


Non-Cash Stock-Based Compensation and Other Related Costs	22			12			1			22			12			1			22
Adjusted Results	$	389		$	420		$	44		$	537		$	517		$	86		$	258

Adjusted Margin	15.0		%	18.9		%	12.0		%	20.8		%	23.3		%	23.4		%

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.


Figure 8. Warner Music Group Corp. - Revenue by Geography and Segment, Three and Six Months Ended March 31, 2022 versus March 31, 2021 As Reported and Constant Currency
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		For the Three Months Ended March 31, 2021
	As reported		As reported		Constant
	(unaudited)		(unaudited)		(unaudited)
U.S. revenue
Recorded Music	$	518	$	469	$	469
Music Publishing	117		96		96
International revenue
Recorded Music	629		590		561
Music Publishing	113		96		91
Intersegment eliminations	(1)		(1)		(1)
Total Revenue	$	1,376	$	1,250	$	1,216

Revenue by Segment:
Recorded Music
Digital	$	804	$	756	$	739
Physical	122		118		113
Total Digital and Physical	926		874		852
Artist services and expanded-rights	141		118		113
Licensing	80		67		65
Total Recorded Music	1,147		1,059		1,030
Music Publishing
Performance	36		35		33
Digital	127		104		101
Mechanical	13		12		12
Synchronization	50		38		39
Other	4		3		2
Total Music Publishing	230		192		187
Intersegment eliminations	(1)		(1)		(1)
Total Revenue	$	1,376	$	1,250	$	1,216

Total Digital Revenue	$	931	$	860	$	840


	For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021		For the Six Months Ended March 31, 2021
	As reported		As reported		Constant
	(unaudited)		(unaudited)		(unaudited)
U.S. revenue
Recorded Music	$	1,126	$	950	$	950
Music Publishing	232		187		187
International revenue
Recorded Music	1,407		1,270		1,226
Music Publishing	227		180		174
Intersegment eliminations	(2)		(2)		(2)
Total Revenue	$	2,990	$	2,585	$	2,535

Revenue by Segment:
Recorded Music
Digital	$	1,674	$	1,483	$	1,461
Physical	317		292		284
Total Digital and Physical	1,991		1,775		1,745
Artist services and expanded-rights	373		298		287
Licensing	169		147		144
Total Recorded Music	2,533		2,220		2,176
Music Publishing
Performance	74		65		63
Digital	260		203		200
Mechanical	27		23		23
Synchronization	92		71		71
Other	6		5		4
Total Music Publishing	459		367		361
Intersegment eliminations	(2)		(2)		(2)
Total Revenue	$	2,990	$	2,585	$	2,535

Total Digital Revenue	$	1,933	$	1,685	$	1,660

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.”


Figure 9. Warner Music Group Corp. - Calculation of Free Cash Flow, Three and Six Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	44	$	150
Less: Capital expenditures	28		20

Free Cash Flow	$	16	$	130

	For the Six Months Ended March 31, 2022		For the Six Months Ended March 31, 2021
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	173	$	319
Less: Capital expenditures	62		38

Free Cash Flow	$	111	$	281

Adjusted EBITDA is equivalent to “EBITDA” as defined in our Revolving Credit Facility and our 2020 indenture and substantially similar to “EBITDA” as defined under our Senior Term Loan Facility, respectively. Adjusted EBITDA differs from the term “EBITDA” as it is commonly used. The definition of Adjusted EBITDA, in addition to adjusting net income to exclude interest expense, income taxes, and depreciation and amortization, also adjusts net income by excluding items or expenses such as, among other items, (1) the amount of any restructuring charges or reserves; (2) any non-cash charges (including any impairment charges); (3) any net loss resulting from hedging currency exchange risks; (4) the amount of management, monitoring, consulting and advisory fees paid to Access under the Management Agreement or otherwise; (5) business optimization expenses (including consolidation initiatives, severance costs and other costs relating to initiatives aimed at profitability improvement); (6) transaction expenses; (7) equity-based compensation expense; and (8) certain extraordinary, unusual or non-recurring items. The definition of EBITDA under the Revolving Credit Facility also includes adjustments for the pro forma impact of certain projected cost savings, operating expense reductions and synergies and any quality of earnings analysis prepared by independent certified public accountants in connection with an acquisition, merger, consolidation or other investment.

Adjusted EBITDA is a key measure used by our management to understand and evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of those limitations include: (1) it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue for our business; (2) it does not reflect the significant interest expense or cash requirements necessary to service interest or principal payments on our indebtedness; and (3) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments. In particular, this measure adds back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net income; however, these are expenses that may recur, vary greatly and are difficult to predict. In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by U.S. GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Accordingly, Adjusted EBITDA should be considered in addition to, not as a substitute for, net income (loss) and other measures of financial performance reported in accordance with U.S. GAAP.


Figure 10. Warner Music Group Corp. - Reconciliation of Net Income to Adjusted EBITDA, Three and Twelve Months Ended March 31, 2022 versus March 31, 2021
(dollars in millions)

	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		For the Twelve Months Ended March 31, 2022		For the Twelve Months Ended March 31, 2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net Income (Loss)	$	92	$	117	$	371	$	(302)
Income tax expense	34		51		172		116
Interest expense, net	32		32		121		124
Depreciation and amortization	89		77		328		277
Loss on extinguishment of debt (a)	—		—		22		34
Net losses (gains) on divestitures and sale of securities (b)	9		(1)		7		(1)
Restructuring costs (c)	1		3		28		21
Net hedging and foreign exchange (gains) losses (d)	(32)		(32)		(78)		82
Management fees (e)	—		—		—		14
Transaction costs (f)	(5)		3		9		75
Business optimization expenses (g)	13		10		51		34
Non-cash stock-based compensation expense (h)	6		15		53		469
Other non-cash charges (i)	32		(16)		56		(48)
Pro forma impact of cost savings initiatives and specified transactions (j)	11		9		70		48
Adjusted EBITDA	$	282	$	268	$	1,210	$	943

(j)Reflects expected savings resulting from transformation initiatives and the pro forma impact of certain specified transactions for the three and twelve months ended March 31, 2022. Certain of these cost savings initiatives and transactions impacted quarters prior to the quarter during which they were identified within the last twelve-month period. The pro forma impact of these specified transactions and initiatives resulted in a $20 million increase in the twelve months ended March 31, 2022 Adjusted EBITDA.


Media Contact:			Investor Contact:
James Steven			Kareem Chin
(212) 275-2213
James.Steven@wmg.com			Investor.Relations@wmg.com