Warner Music Group Corp. (NASDAQ:WMG) Q4 2025 Earnings Call Transcript

Warner Music Group Corp. (NASDAQ:WMG) Q4 2025 Earnings Call Transcript November 20, 2025

Warner Music Group Corp. misses on earnings expectations. Reported EPS is $0.21 EPS, expectations were $0.35.

Operator: Welcome to Warner Music Group’s Fourth Quarter Earnings Call for the Period and Fiscal Year Ended September 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. 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 morning, everyone, and welcome to Warner Music Group’s Fiscal Fourth Quarter and Full Year Earnings Conference Call. Please note that our earnings press release, earnings snapshot and Form 10-K are available on our website. On today’s call, we have our CEO, Robert Kyncl; and our CFO, Armin Zerza, who will take you through our results, and then we’ll answer your questions. Before our prepared remarks, I would like to refer you to the second slide of the earnings 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 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 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, 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 could 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.

Q&A Session

Robert Kyncl: Thanks, Kareem, and hello, everyone. If you hopped on the call early, you just got a taste of the range of our artist roster from the massive breakout track from [indiscernible] , to the latest chart toppers from Cardi B and 21 pilots to the resurgent Google Dow’s 1998, which currently sits in the global top 15 on Spotify. It’s an incredibly exciting time to be at Warner Music Group. Against the backdrop of a rapidly changing landscape, we’ve improved our market share and delivered profitable growth, all while realigning our company to capitalize on the tremendous set of opportunities we have ahead. Our growth plan continues to bear fruit, and we’ve seen steady global market share gains over the past year. In the United States, were up 0.6 percentage points over the prior year quarter according to Luminate.

Globally, our share of the Spotify top 200 has jumped by around 6 percentage points versus fiscal 2024. And for the entire quarter, we had the #2 market share. Importantly, we’re carrying this momentum into fiscal ’26 as we continue to execute on our strategy. I’ll dig into this in more depth but first, let’s cover our Q4 highlights. I’m pleased to say that we’ve seen acceleration on the top and bottom lines, driven by impressive performance across the company. Total revenue grew 13% and on an adjusted basis, recorded music subscription streaming increased 8.4%. These results prove that our strategy is working. Let me bring you a picture from just a year ago when both the industry and WMG were in a much different place. A year ago, WMG was facing market share pressure.

Today, with laser focused our resources and investment on the highest return areas of our core music business. This has led to market share gains that have translated into strong measurable improvement in our financial performance. A year ago, the music industry was navigate on the transition from just volume-driven streaming growth to growth that is driven by volume and wholesale price increases. Today, our new agreements with key DSP partners better reflect music’s ever-growing value and provide greater certainty around our economics. A year ago, our operational structure wasn’t optimized to navigate a more globalized and digital environment. Today, we focus and simplified our organization to deliver greater intensity and impact. I’m pleased with the progress that we’ve made.

And I’m truly grateful to our leadership team and our operators across the globe and our amazing artists and songwriters for pushing WMG to new heights. All of these actions have better positioned us to execute quickly and effectively on the opportunities we see ahead and to maximize the value we deliver to artists, songwriters, fans and shareholders.

Performance & Growth Strategy

Robert Kyncl: Let’s turn to the impressive run of hits we’ve been seeing with our new releases as well as our catalog successes. On new releases. In September alone, we had back-to-back #1 albums in 2 of the world’s biggest music markets, thanks to Cardi-B and 21 pilots in the United States and Sharon and [indiscernible] the U.K. On the international front, we had #1 in China, India, Finland, Italy and Spain and on Billboard’s Latin Airplay chart. And in a terrific vote of confidence, one of our legendary superstars Madonna has returned to where it all began for her, Warner Records with a new album coming in 2026. The performance of our global catalog division in Q4 showcased our ability to revitalize our timeless legacy, making it relevant to a range of new audiences.

A major highlight was the release of Buckingham next to long out-of-print 1973 album by Fleetwood Mac, TV next and Lindsey Buckingham. A targeted marketing campaign capitalized on fan demand, selling it to #11 on the main Billboard album chart and #6 in the U.K., a remarkable achievement for an album more than half a century old. Warner Chappell continued its resurgence with our songwriters contributing to 7 of Luminate’s midyear top 10 most seasons in the world and in the United States. And multi-Grammy winner, Amy Allen, held the top spot on the Billboard Hot 100 songwriters chart for 9 weeks in 2025. These Q4 success stories capped off a year of achievements. During fiscal ’25, our recording artists set up the Billboard Global 200 for 22 weeks.

This 42% share of the #1 spot on the chart with Atlantic, Warner Records and Warner Chappell, harder than ever, we’re delivering success across geographies and genres.

Robert Kyncl: Next, I’d like to cover our focus on increasing the value of music. Streaming’s growth formula is made up of 3 components: market share, global subscriber growth and wholesale price. Against the backdrop of healthy subscriber growth and a market share improvement, we’ve also made progress on wholesale price. Since the beginning of 2025, we’ve signed renewals with 4 of the largest DSPs. All of these deals have wholesale price increases, providing certainty around economics and setting up monetization models for the future use cases. A critical component of ensuring we grow the value of music is addressing the promise as well as the potential risks of generative AI. First, we need to acknowledge the reality that generative AI technology has arrived, and it is not going away.

So we need to be proactive and lean into the future. The music industry is no stranger to disruption from the invention of the phonograph to the Napster era to the rise of the day streaming ecosystem, the introduction of new technologies over many decades as opposed both challenges and opportunities. AI represents another defining moment. And as always, our focus remains on protecting the rights of our artists and songwriters while simultaneously growing new revenue streams on their behalf. With this in mind, we’ve developed a set of principles that will govern how we engage with AI platforms. We will only make agreements with partners who commit to licensed models while securing economic terms that properly reflect the value of music. Crucially, our audits and songwriters will have a choice to opt in to any use of their name, image, likeness or voice in new AI-generated sales.

We believe that the combined power of our music with innovative technology will drive greater engagement and interactivity for fans and will result in significant incremental revenue over time. I’m pleased to say that we’ve already done deals with partners like Udio, stability AI and [indiscernible] that are consistent with these principles that I just outlined. Our ability to sign 3 deals with 3 new companies in quick succession highlights the attractiveness of the music business and the opportunity to create value through new technology. These agreements enable us to get ahead of the game, ensuring that our artists and song getters participate fairly in the AI revolution.

Robert Kyncl: As I mentioned earlier, we’ve taken major steps to optimize our organization to drive efficiency and effectiveness, all while reaccelerating growth and gaining market share. Among our recent changes are some moves designed to foster closer collaboration. We directly align Atlantic and Warner records in the U.K. with their counterparts in the U.S. creating a more seamless transatlantic approach to breaking artists globally. In Italy, we’ve organized our operations into 2 frontline labels Atlantic and Warner records, mirroring the label structure in the U.S. and the U.K. We’ve also unified our Australasia and Southeast Asia businesses to create bigger opportunities in this region. Additionally, we streamlined operations and strengthened the impact for artists in Central Europe.

— by merging Benelux with Germany, Switzerland and Austria. On the tech front, we’ve continued to modernize our infrastructure, including strengthening our global digital supply chain to position the company for further scale and growth. We’ve implemented tools to help auditors and songwriters make faster and smarter data-driven decisions about their careers as well as tools for employees to be better informed and more effective. Our emerging stars are building the catalogs of tomorrow, laying the foundation for future stability, while our recent Superstar releases have set us up well for 2026. In Q1, we have highly anticipated new albums from Fredegan, [ FKA Twiks ] not for Radio, anacamura and Robert Plant, along with Deluxe album additions from Aceron, Cardi B and PinkPantheress.

We also have new singles from Charlie XCX, Charlie Puth, Gesu, Hillary Duff, Tiesto, Alex Foran, David GiaantenySwins and many, many more. We’re proud of the progress we’ve made in 2025, and I look forward to carrying this momentum into 2026 and beyond. And now I’ll pass it over to Armin.

Armin Zerza: Thank you, Robert, and good morning, everyone. First, I’d like to thank our teams around the world for the tremendous work they have been doing to accelerate top and bottom line growth while we organize our company for the future. As Robert mentioned, Q4 has been a quarter of acceleration as we delivered record high quarterly revenue as well as our highest year-over-year growth in nearly 2 years. This reflects steady progress on market share with notable improvement in the second half of the fiscal year. In quarter 4, total revenue growth of 13% reflects double-digit growth across recorded music and music publishing. This was highlighted by a sequential improvement in recorded music streaming and 64% growth in Artist Services, WMX led merch campaigns for Oasis and my chemical enrollments.

These projects demonstrate our capabilities to support our artists and capitalize on the opportunities to grow revenue streams beyond Com Music, more net to come. Recorded music subscription streaming grew 8.4%, underpinned by global subscriber growth and supported by our strong market and charge share performance. As a reminder, in calendar year 2026, we will start to see the impact of wholesale price increases from our new DSP deals which should provide incremental tailwinds. At [indiscernible] the streaming grew 3% on an adjusted basis, driven by the performance of our music and the timing of certain DSP payments. Music Publishing grew 13%, driven by double-digit growth across performance, mechanical and[indiscernible] . Adjusted OIBDA rose by 12% and our margins declined slightly due to revenue mix as the significant growth in Artist service revenue carries a lower margin profile.

For full year 2025, we delivered total revenue and adjusted OIBDA growth of 8% on an adjusted basis, reflecting our impressive recovery from the first half. This was spotted by high single-digit recorded music subscription streaming growth. We also achieved operating cash flow conversion of 47% as we increased our A&R investments. We remain committed to delivering our target conversion range of 50% to 60% over the long term. As of September 30, we had a cash balance of $532 million, total debt of $4.4 billion and net debt of $3.8 million. Our weighted average cost of debt was 4.1% and our nearest maturity date remains 2028. With our strategy in place and a clear road map to deliver higher, more consistent growth and drive shareholder value, we are extremely excited about the opportunities ahead.

We’re operationalizing the strategic pillars that Robert laid out with several key priorities and initiatives, which are shared on our last earnings call, and I’d like to provide an update on our progress. First, on investing into [indiscernible] music to accelerate growth, we’re making progress across geographies and vintages. Recall, we prioritized investments in markets with the most attractive return profiles. As a result, we are now growing market share in every key region, including the U.S., the largest music market of the world. Additionally, our balanced approach to driving performance across vintages has resulted in higher new release market share at Atlantic as well as a jump in global catalog share. As Robert mentioned, this has improved our Spotify Top 200 share by 6 percentage points.

In addition to these investments in our core, we see tremendous opportunity to accelerate growth in distribution and direct to consumer. We have a large and growing distribution business today and under new leadership. We’ve been building or acquiring new capabilities to accelerate profitable growth in 2026. We also see tremendous opportunities to capitalize on the passionate demand from fans all over the world for physical music and direct-to-consumer offerings. Areas adjacent to our core music business, more on this in upcoming quarters. Second, on our commitment to driving efficiency to free up more capital to invest and enhance our margins. We are on track to deliver against our reorganization and related cost savings program of $200 million in annualized savings in 2026, increasing to $300 million in 2027.

Third, we are committed to driving incremental growth and value creation through accretive M&A. We have developed a robust deal pipeline and look forward to sharing updates in the near future. These efforts will be turbocharged in a capital-efficient manner through our joint venture with Bain, but also through organic investments as we improve free cash flow. Finally, our focus on thoughtful capital allocation is delivering. As the investments we are making in the highest reporter markets, which include the U.S., U.K., Mexico, China and Japan are delivering share growth. In addition, we’re improving capital spend efficiency and with the bulk of our major tech investments behind us. We should see an improvement in our free cash flow starting in 2026.

Looking forward, we see an attractive formula for us to drive shareholder value and are excited to be operating in a healthy industry with an immense set of opportunities. The macro factors that underpin our outlook include robust global subscriber growth and rising wholesale price environment underpinned by contracts that better reflect music’s increasing value, new premium offerings from DSPs. AI is emerging as an incremental top and bottom line opportunity for the music industry and our artists and songwriters. We are poised to capitalize on this environment with a strategy that will see us intensify our investments to deliver more consistent, higher growth, improve margin and drive shareholder value. For 2026, we expect to see strong top line growth which we look to bolster through focused organic investments and initiatives in our core music business and high-impact accretive M&A as well as contribution from adjacent areas such as distribution and direct-to-consumer offerings.

In addition, we will drive bottom line growth via operating leverage and our cost savings plan, which will contribute 150 to 200 basis points of adjusted OIBDA margin improvement. We expect savings to increase sequentially as we progress through the year. And finally, we see tremendous potential in new incremental growth areas, particularly in AI licensing deals, which we plan to discuss in future calls. In conclusion, we are proud of how we rebounded from a challenging first half in 2025 to deliver solid top and bottom line growth in the second half with strong momentum as we head into 2020. We look forward to providing regular updates as we meet our milestones. With that, we’ll take your questions.

Operator: [Operator Instructions] Your first question comes from Kutgun Maral Evercore ISI..

Kutgun Maral: Great. There’s a lot to unpack, but one area that I’d love to get your updated outlook on is with rights monetization, especially in the context of rising music engagement across platforms. We’ve seen the pace of innovation and product rollouts across the DSPs accelerate meaningfully and everyone from the streaming services to artists to even ticketing platforms like Ticketmaster, exploring new ways to leverage AI, all with the goal of driving deeper engagement. That said, there’s an ongoing debate between those who see the labels as uniquely positioned to benefit from these innovations and those who believe that the labels will remain maybe more passive beneficiaries and therefore, not necessarily see upside. So Robert, you’ve already touched on parts of this, but as you’ve gone through the latest round of DSP renewals and clearly continue to engage with other partners across the ecosystem.

How are you thinking about WMG’s role in capturing incremental value in this next chapter of industry growth?

Robert Kyncl: Thank you. I will start with the word incremental that you just mentioned. We see this as an incremental — sorry, we see this as an incremental opportunity for not just for WMG but for the music industry as a whole. Secondly, we are determined and have decided that were the drivers, not the passengers of this incremental opportunity. The reason for that is this space is moving lightning fast. There’s a great demand for IP. There’s a great demand for State and companies like ours who are working to represent both of those need to drive this change. And that’s exactly what we decided to do. I posted a block close last night in case not all of you got a chance to read it, please do. It’s listed on our website, and it outlines our principles under which we focus and guide our dealmaking in the AI.

There are 3 simple principles. We’ll do agreements with partners who commit to licensed models. We’ll do it on economic terms that properly reflect the value of music. And what I mean by that is that our deal terms are tied to usage and revenue growth. And importantly, that artists and songwriters have the opportunity and right to opt in for any new songs that implicate their name, image, likeness and voice. We see this as an incremental opportunity because the past has shown us that changes like this always create one. If you go back 20, 25 years, with the democratization of distribution. It has unlocked unlimited shore space, which has unlocked deep personalization of music for users, which has unlocked growth and volume of people signing up for subscription services and enjoying them.

And it has unlocked tremendous value in catalogs and music IP overall for all of us. So it has been a net positive for us that has created a lot of value. We see AI as the marketization of creation, and we believe that it brings what we’ve lacked, which is interactivity, which is generally correlated with value creation. If you look at across all kinds of media industries, the more lean forward or with your content, whether you focused on it and watching it. or whether you’re interacting with your hands and your fingers or whether you go in person and engage the value per hour goes up. That’s why we’re focused on it. That’s why I believe this is a tremendous incremental opportunity for us. and we are going to be in the driver seat. In terms of our approach in addition to our 3 principles, our strategy is simple.

We have 3 health legislate, litigate and license. And you’re familiar with our legislation efforts like the OpEx that we’re working on in D.C. on a litigation front. We’re also familiar with various lawsuits which have been out there. But we use those first 2 in order to achieve the third, which is licensed because that is the most powfullever. To chart the path for the future for our artists and songwriters to drive the incremental value and to make sure that we have our fair and correlated share of usage and revenue driving. So we’re really excited about this. The company is energized and onward.

Operator: The next question comes from Benjamin Black with Deutsche Bank.

Benjamin Black: For Armin, I mean could you talk about the building blocks behind your expectations for top line growth in 2026. Maybe dig into how you’re thinking about paid streaming growth, just given the broader expectation for wholesale or parts of minimum increases beginning in calendar 2026. And then secondly, on margins, cost savings aside, how much margin expansion do you expect to deliver organically next year I mean what’s your — what’s your longer-term margin target, perhaps sort of talk us through the puts and takes in achieving that as you look to drive incremental revenue growth in lower-margin areas like distribution and DTC?

Armin Zerza: First of all, Ben, we are, first, very, very happy with the results we delivered in the last 2 quarters, not just the last quarter. And as it relates to streaming, we believe that these results are pretty much reflective of what we should expect in the first quarter of ’26. Now to your question on additional growth building blocks starting in calendar sorry, ’26. There are a few that I’d like to mention. The first one is that in addition to the market momentum that we have seen in global subscriber growth we will, of course, benefit from the contractual wholesale price increases that we have agreed now with several top SSPs. As Robert mentioned, we have actually agreements now with 4 of the 5 top 20 starting to start to increase wholesale prices starting in calendar ’26.

The second area is that in addition to the investments that we have been doing on high ROI markets and projects. We have a very robust pipeline of accretive M&A that will start to materialize in 2026 including on many projects that we have been working on through our joint venture with Bain. The third area is that we are working or have been working on expanding adjacent areas. One area I’d like to mention is distribution. As you know, we have a new leader there, and we’ve done a lot of work to better understand how excellent can accelerate growth in this area. We now feel confident that we can accelerate growth in that area starting in calender ’26. And last but not least, there are many upside opportunities that are not included in our guide like premium offerings from ESPs. And obviously, AI as an opportunity, as Robert just discussed.

Finally, from a leadership perspective, we are very confident that we have no leadership in place across the company that will help us deliver and accelerate growth. But to your margin question, Ben, we have a very strong program to improve margin over time. The first program we are implementing is a big strategic reorganization. And as you have seen, while we’re doing this reorganization, we’re actually accelerating growth. That program will deliver savings in its fiscal year ’26 and up to [indiscernible] fiscal year ’27. So we’re actually very, very comfortable with our guide of margin expansion of 160 basis points next fiscal year. In addition to that, we will improve margins through operating leverage. There are a few areas which we are leveraging.

The first one is as we accelerate our high-margin streaming business. Margin will improve. The second one is through our work on accretive M&A, especially catalog M&A which is higher margin accretive businesses will improve margin. And last but not least, ESP pricing will flow through the margin. So net, we’re really, really confident in our margin drilling books from a cost savings perspective. but also overall from an organic perspective. In fact, in the mid- to long term, we are targeting margins in the mid- to high 20s. And you shouldn’t be surprised about that. When you look at our EBITDA margins in fiscal year ’25, we closed ’25 with an EBITDA margin of about 25%. As you know, EBITDA includes our normalized cost savings. We’re now basically delivering over the next couple of years.

And so you should expect over time that our OIBDA will approach adjusted EBITDA margins in the mid-20s and then we’ll start to do that to contain the growth margins.

Operator: The next question comes from Peter Supino with Wolfe Research.

Peter Supino: I wondered if you would talk about your successful market share gains over the last year. Maybe discuss what you’re doing differently? And if you could provide any context on how each of your flagship frontline labels are performing. .

Robert Kyncl: Sure. Thank you. So first, I’m just pleased to say and keep on reiterating that our strategy is working. It’s great for it to show up in the results and see the progress that we’re making our market share hasn’t grown just in 1 or 2 places. It’s really been broad-based across both our flagship labels as well as all of our regions. in the U.S. We’ve increased by 0.6% in the U.S. year-on-year in Q4 ’25. This is according to Luminate. And we had similar improvement around the world in EMEA, LatAm and APAC. And plus 6 percentage points on Spotify top 200 in fiscal ’25. And notably, we’ve occupied the #2 spot for nearly half the year there, which is incredible. So it is really great to see the company firing on all cylinders creatively as well as financially.

And it really has come down to a lot of focus on artist development, which obviously has been there for a long time. It’s in our DNA, and we continue to lean into it. But we also focus on our distribution business. We focus on our catalog. We’ve had a lot of success in terms of revitalizing our catalogs, [indiscernible] of Buckingham. Next, which was originally released in 1973 and being #11 on Billboard Album Chart and #6 in the U.S. it’s incredible to see the power of IP and what it is that we can do with it in terms of our returning artists Cardi B and 21 pilots beginning #1 with our albums in the U.S. and at Sharon and if Claro in the U.K. And obviously, I mentioned our [indiscernible] stories with Alex Baron spending 10 weeks on a #1 on Billboard Hot 100 and Global 200 and Saber hitting #1 on Spotify global chart.

And so there are for 3 set in the top 3 for over 10 weeks. So it’s just broad-based, Artis development, returning artists, catalogs, all regions, all divisions. So there’s just been a lot of work that really started to hit together. And we just — we have really focused on our operations, making sure that we’re making the right decisions around capital allocation. And that we have strong pipelines, both for our artist releases as well as for M&A, as Armin mentioned. So our playbook is working, and our investment is our investment is a key priority in market, and it’s really bearing fruit.

Operator: The next question comes from Michael Morris with Guggenheim Securities.

Michael Morris: I wanted to follow up on some of the growth components that you highlighted as we look into ’26 and beyond First, on your M&A plans, Armin, you alluded to M&A as a potential accelerant to growth in the coming year? And can you share more detail on what we can look forward to — and how much of an incremental growth driver this can be for you? And then also, you just mentioned distribution as a strategic focus area and a potential driver of growth as early as ’26 as well. So can you expand on this a bit. What changed about your strategy, if anything? And what gives you confidence that this can be a bigger contributor to growth in the coming year. .

Armin Zerza: So on the M&A side, we have a very strong pipeline in place, which, as I mentioned, we expect to start to materialize starting in — as you probably know, we are focused on a few large opportunities where we, as a publisher can add value in a way that creates value not just for artist and songwriters but also in a way that delivers a strong return for us. The key focus simply is our catalog business or a couple of businesses out there in the market. Why? Because they are highly accretive and therefore, deliver to and bottom line growth. We’ll do this in a very capital-efficient way, as we mentioned before, by our joint venture with Bain which will provide us with more than $1 billion of funding and it’s obviously a key name to accelerate growth in this area.

Well, from a status perspective, we’ve been working very well with Bain as a partner, and we are very pleased with the progress that we have been making. So we’ll hear from us soon starting in , but some of those acquisitions, which gives us confidence that this can accelerate growth in addition to the other building blocks I discussed before. From a distribution perspective, distribution is a significant part of our industry and very often a source of new talent. And in fact, we haven’t talked much about this, but we actually have a large growing and profitable distribution business today. And as we have announced before, we have recently appointed a new leader with [indiscernible] Alejandro, who, as you know, has been leading our Latin America business for many years.

And as you probably know, this business is heavily distribution focused yet under and his team grew this business double digit, and frankly, at attractive margins for a long time now. So really encouraged by what he has done with his business, and therefore, he is the perfect leader for our distribution business. We have spent a lot of time with him to better understand what we need to win in this marketplace not just in Latin America and U.S. but also globally. And we have spent quite some time now to build capabilities that allow us to provide better customer service on the one hand, but also to integrate clients faster and more efficient so we can do this business profitably. So we’re now at a point where we are really, really confident that we can accelerate growth on this business, particularly starting in 2026.

Now having said all of this, as I talked before many times, we’re looking at our business from a portfolio banking perspective. So we do it in a way that grows our business on the one hand, but also enhances margin. So net, both this strategy are really perfect for [indiscernible] to accelerate growth and enhance market in that time.

Operator: The next question comes from Doug Creutz with TD Cowen. .

Douglas Creutz: Robert, I know one of your priorities has been to make sure the company is investing in the right technologies to position for future growth. And I wondered if you could share some color on how those investments are contributing to the growth outlook you’ve laid out today? And then also whether some of those priorities might be changing given the rapidly evolving landscape?

Robert Kyncl: Sure. Thank you. Yes. The priorities are not changing. They remain the same. We’re focused on — as you think about our business, it’s a large-scale business with lots of SKUs, lots of albums, lots of tone, clouds of artists, and they have to be managed across large number of DSPs. And so we’re in a high-volume business, and it requires infrastructure, solid strong infrastructure that is scalable. And so we focused on that. We strengthened our digital supply chain sped up our solar payments, introduced more transparent accounting. In publishing, we stabilized and upgraded our core systems, which would include royalty processing and sync licensing systems, and we’re nearly fully live with our financial transformation initiative, which unlocks a whole host of benefits and a better and more insightful P&L, more transparency for audience matters, et cetera.

So we’ve really focused a lot on core infrastructure so that we can accelerate the business and handle the volume. Armin mentioned the deal pipelines that we have, whether it’s organic ones or M&A, all of that requires infrastructure. So we’ve been focusing on that, preparing the company for growth, and that will continue. And we’ve made a lot of progress in that area. So that’s why we feel confident about our acceleration.

Armin Zerza: I just want to add to that. Obviously, this also helps us scale many of our services globally is a key enabler also for the cost savings program that we discussed last time.

Operator: The next question comes from Cameron Mansson-Perrone with Morgan Stanley.

Cameron Mansson-Perrone: You highlighted having deals with 4 of the top 5 DSPs and having secured kind of wholesale rate increases across all of those platforms. I’m wondering, Robert, you’ve talked in the past about kind of the benefits of variability in licensing terms across platform partners and that being a positive with regard to facilitating experimentation. Is that still — would you say that’s still the case across the new platforms that you’ve locked in deals with or have we reached kind of more of a standardized type of deal structure at this point in time? .

Robert Kyncl: Sorry, can I just clarify a question? You were talking about existing DSPs or new platform? The rest into 4 of the 5 larger existing ones? Right. And the question is on — sorry, I couldn’t really fully understand the question.

Cameron Mansson-Perrone: I’m really just trying to — yes, really just trying to clarify. In the past, you’ve talked about the benefits of having kind of variation in your DSP deals. I’m wondering if that’s still the case or if there is more standardization kind of in conjunction with locking in wholesale rate increases?

Robert Kyncl: Got it. Thank you for the clarification. Look, we generally, when you begin — you have different partners, which have different objectives and you strike slightly different deals. As time goes by, businesses grow things standardize more, so do the deal terms. Obviously, different platforms are slightly different. Some have prefunnels, some don’t, et cetera. So that kind of variability. However, we strive for a fair marketplace where people — where our partners pay the same prices for the carton that we licensed to them. So consistency is very important for us and making sure that no partner feels disadvantaged versus another one that we have a very healthy competition on [indiscernible] term. So there’s much more standardization in place than it was in the past.

Cameron Mansson-Perrone: Got it. And then if I could follow up on the market share gains that you’ve had been able to deliver on this year. How do you think with regard to the savings initiatives, like how do you balance those 2 in terms of trying to deliver on your savings initiatives but — and reinvesting to continue to drive market share gains in the future.

Armin Zerza: Yes, maybe I can take that. We are very focused on ensuring that we actually invest more in our core markets and key shares as well as in the most promising projects. So from a savings perspective, we are not cutting our spending on the front line, as we call it. So we’re actually increasing in our investments. The savings are mostly reflective of us becoming more efficient on the back office side. Robert mentioned technology as a key enabler. So I’ll give you a few examples. In finance, we have just introduced SAP, and we’re obviously bidding with millions of transactions. This will enable us to become more efficient as a financing organization. In marketing as we kind of organize our data, we are leveraging more and more the standard data set we have to drive marketing efficiencies on deal making and we’re now introducing AI, we actually have introduced a new office globally and working with an AI company to help us optimism or deal making.

So think about the savings really coming from becoming more operational efficient as a company and backoffice savings, which we leverage to invest more in the most promising markets, more on the most promising arts and more and the most promising goes. And that’s really how we balance this.

Operator: The next question comes from Ian Moore with Bernstein.

Ian Moore: So looking through the AI licensing announcements that have come out in the past couple of weeks, looks like these services kind of point to different — very different parts of the value chain. You got some professional grade production tools in there, some more like listening discovery platforms. I was wondering how you could — if you could maybe bucket the commercial opportunity you see across like the spectrum of new services that you’re licensing to.

Robert Kyncl: Sure. So first, I’d like to say it’s a very energizing moment in the industry. When you see so many new companies popping up attracting venture capital. We have not had this in the last 10 to 15 years. All of the players that have been established in the first decade really. And now there’s a crop of new companies, new investment, new excitement, new talent, just tremendous momentum. So we decided that we are going to seize this opportunity. We’re not going to be a passenger, we’re going to be the driver because it is important to get in early, set the terms and define the future for us rather than let other people define it for us. That means that this will cut across all the different segments that you highlighted there may be professional content, there may be user content.

There’s all kinds of consumption creation. It’s certainly a lot of work for our teams, but it’s very exciting and energizing. And the opportunity that we see is one of interactivity. Interactivity is something that drives value. It’s been proven over and over, whether it’s in the video gaming industry, even going to a concert is interactive. The revenue per hour is always higher when somebody is looking at something with their eyes and using their fingers and their hands to create something. So the value gets created and we’ll capture it. And what happens is also that there’s a very, very high correlation between interactivity and iconic familiarity. It thrives on it. What does that mean? It means that stars will get bigger and that will be benefit from this trend and that iconic IP will benefit from this trend.

So we’re focusing on all of the elements here, and we want to make sure that we capture this incremental and expensive opportunity. And I think of it a bit more like user cumulated content early on YouTube that started and it was seen as a threat. And in fact, it has actually developing something that was very, very positive and commercially successful for all parties involved. So we’re very excited about this, and we’re open for business.

Operator: Your next question comes from Kannan Venkat with Barclays.

Kannan Venkateshwar: Robert, maybe just following up on that point and maybe presenting a little bit of a pushback to see what your reaction to be, but why isn’t AI a threat to an equal measure given that obviously, your content can be used. Your another label content can be used to create new forms of content or at least the models can be trained on it. And over the longer time horizon that could completely bypass content creators theoretically. And that’s obviously a big debate. So I would love to get your reaction on that. And then more on the financials. I mean if you look at the guidance for next year in terms of margin expansion, I think the growth in EBITDA that’s implied by that is roughly equal to or most of the growth seems to be coming from the cost cuts.

And so in terms of operating leverage, would be great to understand. I mean, the underlying trends, excluding things like M&A, for instance, or cost savings, how you guys are trending? If you could just get some more details, that would be helpful.

Robert Kyncl: Sounds good. I’ll take the first part, and Armin will take the second. So of course, with every change, every technology change, there’s always a threat and an opportunity. The market decision of distribution was a threat. Everybody was predicting our demise and sidestepping the major music companies. And obviously, the opposite has proven to be true over time. And we believe the same happens here. Of course, we look at the threat that this could pose in terms of dilution, et cetera. But at the same time, we need to focus on how do we actually turn this into an advantage for all of us and drive the value of the industry and the value that we provide. It’s also important to know that — and I’ve said this many times before, the value of the large music companies and the contribution that we have to the industry is rising, not declining.

With all of these challenges, this is becoming a much more of a big business to big business interaction. It is very hard for individual creators to deal with large technology companies that is much better for these matters to be handled by large music companies, large IT companies who have the capabilities and know-how, the technology, the scale to ensure the right outcomes. So we view this as this is our role is to shape the industry. and make sure that it benefits artists and songwriters as well as us and our shareholders.

Armin Zerza: Yes, on the margin, I think it’s important to note that our guide is, of course, after investments we make into the business, it’s really a net margin guide. The guide is also mostly focused on 2 areas. One is the cost savings program that we delivered into the organic margin growth that we plan to rebound. There’s really 3 drivers that will help us do that. One is as we start to accelerate our streaming business that is a higher-margin business that is actually driving margin growth already for us to price increases will go to the bottom line and will have us improve margin. And three, there are certain interval areas. So think about this as a net margin guide. But the biggest organic drivers for us will be on streaming growth and to the PSM price increases that were [indiscernible]. So that is all the time we have for questions.

Operator: I will turn the call to Robert Kyncl for closing remarks.

Robert Kyncl: So thank you for your attention today. I just want to reiterate that it’s evident from our results that our strategy is working. It’s a labor of quite a few years of work, both on the technology front, on the investment front, on artist development administration. It’s really all divisions at the company have been firing on all cylinders, and it’s great to see it all come together through a sustained growth, market share expansion. And on top of it now is accelerating and seizing the opportunity to shape the AI future and create new incremental business that will be set up the right way for the future to capture the right possibilities both creative and economic for artists and songwriters and our shareholders. Thank you so much for being here. Talk to you in 90 days.

Operator: This concludes today’s conference call. Thank you for joining. You may now disconnect.