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 and Form 10-Q 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 will answer your questions. Before our prepared remarks, I'd 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-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, 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 to 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, Kareem, and hello, everyone. Before I get into our results, I'd like to formally welcome our new CFO, Armin Zerza, 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 reacceleration of growth. This was driven by a 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 detail. We saw a broad-based reacceleration 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 virtuous cycle by putting more money behind the music while simultaneously becoming leaner and stronger. Our tighter focus is helping fuel our progress in three strategic priorities: 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 per Luminate Data. We're 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 #1 spot for all but seven weeks of 2025. And right now, we have seven 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 WMG's outstanding artist development capabilities. Atlantic's Alex Warren has held the #1 spot on Billboard Hot 100 for nine weeks and his album debuted at #1 in the U.K., while Warner Record's Sombr reached #1 on the Spotify global chart. Teddy Swims, Benson Boone and Rosé have all remained fixtures on the charts, showing the incredible staying power of the songs that captivate fans. Teddy's Lose Control, released just over two 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 #1s from Niky Savage in Italy, Gobs in Denmark, Fadel Chaker in MENA and Eurovision Song Contest winner, JJ in Austria, among others. This is also representative of the progress we've seen on expanding our international market share. Warner Chappell continued its strong run as well with Morgan Wallen's I'm the Problem holding the #1 spot on the Billboard 200 album chart for nine weeks, Riley Green hitting the #1 on billboard country airplay chart, and BLACKPINK's Diplo-produced track, JUMP, debuting atop billboard Global 200. Today's hits will become the evergreen catalog of the future. Given that music over three years old represents roughly two-thirds 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, a new album of Madonna's remixes has contributed to her career-wide streams jumping 33% this fiscal year-to-date. The 25th Anniversary Edition of Slipknot's first album has helped drive an 11% increase in the band's streams this fiscal year-to-date. And Fleetwood Mac's Rumours was the only catalog release on Luminate's midyear top vinyl album sales chart. We continue to find new ways to help longtime legends cut through the noise. Last year, we revitalized our approach to the management and marketing of our so-called off-roster 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 Lee-Fisher 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 Bain 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 U.S. 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 tiers, 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 plan's 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 $300 million 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 Armin will talk about, our plan will make our company leaner and stronger by compounding our global expertise backed by improved tech tools. I've given Armin oversight of the corporate development and strat ops teams in addition to finance organization. Across these interdependent functions, we will take a more holistic approach to disciplined and return-focused capital allocation. As part of our plan, Warner Records unveiled a dynamic new marketing setup, while Atlantic Music Group sharpened its hip-hop and R&B focus and launched a country and Americana-driven label called Atlantic Outpost. We've also appointed Alejandro Duque as President of ADA, our independent distribution arm. This expands his responsibilities as President of Warner Music Latin America. Having him in this dual role will help us bring down barriers for ADA clients, plugging them more directly into our infrastructure and empowering them to build their businesses. We're very focused on growing our distribution business and the ADA brand through great services, flexible deal-making and tech innovation. And finally, we've hired a new leader in APAC, Lo Ting-Fai. He joins us from a telecom giant PCCW, where he most recently served as CEO of the subsidiary, MakerVille, which focuses on artist management and live events as well as COO of Viu, its regional OTT streaming platform. Lofai was born in Hong Kong and has a long track record in scaling creative companies. He has also written hit songs under the pseudonym Yu Ri. 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 artists and songwriter app, WMG Pulse and expand its user base. We've also begun to roll out a new app for our employees called WMG One. It serves as a single source of truth across the organization, helping to streamline global collaboration across markets increased impact for artists and songwriters and ultimately improve efficiency. Building on our recent momentum, we have exciting music coming out from Ed Sheeran, Zach Bryan, Alex Warren, Twenty One Pilots, Sombr, 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 WMG through our commitment to artists and songwriter development and a more nimble organization and focused investment. I will now pass it over to Armin.

Thank you, Robert, and good morning, everyone. For those of you who I have not already met, I wanted to properly introduce myself. After 20 years at Procter & Gamble, I joined 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 Warner Music Group. Our primary goal is to accelerate long-term growth and value creation for artists and songwriters, fans, employees, partners and shareholders. Together with our leadership team, we have developed a strong plan to execute against the three priorities that Robert laid out. Before talking about our Q3 results, let me elaborate on this plan, which will help us to: one, invest into our core music business to accelerate revenue growth; two, increase efficiency to free up capacity to invest and to expand operating margin; three, level up M&A to turbocharge growth and value creation; and four, improve capital allocation 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 key markets and genres where we will meaningfully increase investments, giving us a proprietary playbook on how to impactfully drive additional revenue and market share while taking a more holistic approach to disciplined return-focused capital allocation. Second, in order to free up capacity and help fuel this growth and margin expansion, we have launched two key initiatives: last month, we announced a strategic restructuring program that will deliver annualized run-rate savings of $300 million by the end of fiscal 2027. In addition to providing more resourcing and capital for reinvestment across the most culturally powerful and highest potential repertoire centers, making us more efficient, we expect this program to deliver margin expansion of 150 to 200 basis points in fiscal 2026. Please refer to our July 1 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 repertoire markets and genres in order to provide the most attractive returns, and we'll prioritize the skill set and tools in A&R and marketing to deliver the biggest impact for artists and songwriters, including by leveraging technology investments such as WMG Pulse and WMG One and our finance transformation initiatives, which are all starting to bear 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 of catalogs across Recorded Music and Music Publishing. The JV leverages third-party capital to expand our buying power, adding even more firepower to our M&A initiatives, while also providing us with additional rights, revenue and market share. We will manage all aspects of marketing, distribution and administration for the acquired catalogs. Expect news of our first acquisition soon. Fourth, on capital allocation, we have a clear set of priorities. In addition to improving capital efficiency and stepping up investment into our core music business and catalog M&A, we are returning capital to shareholders. We have a $100 million buyback authorization. And as announced today that we're increasing our quarterly dividend for the fifth year in a row to $0.19 a share, an increase of 6%. I wanted to add that we are committed to being transparent and communicative with the investor community about our progress and performance. In an effort to do this, we'll now provide updated disclosure and consistently address the items that impact year-over-year comparability. You'll find the details in our earnings release included in a simple table. Now turning to our quarter 3 results. For quarter 3, total revenue increased 7% and adjusted OIBDA increased 16% with a margin of 22.1%, an increase of 170 basis points over the prior year quarter. Adjusted for notable items, total revenue increased 8% and adjusted OIBDA 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 rights. Recorded Music streaming revenue grew 3% due to subscription growth of 4% and ad-supported decline of 2%. Our subscription streaming growth reflects roughly 450 basis points headwind mostly related to a true-up payment from a streaming service in the prior year quarter. Adjusting for notable items, underlying subscription streaming growth was 8.5%, which reflects our positive market share trends and chart performance. Physical revenue decreased 4% as growth from strong releases in Korea and Japan was offset by the BMG roll-off. Adjusted for the roll-off, physical revenue would have increased 4%. Artist services and expanded rights revenue increased 20% due to higher concert promotion primarily in France and Spain, while licensing revenue increased 19%, reflecting the strength in the U.K. and China specifically. Now turning to Music Publishing. Total revenue increased 9%, driven by growth across 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've continued their hot streak across labels, vintages and geographies. As Robert said, not only have we been riding high in the charts, but we've also seen market share gains in the U.S. where our market share was up roughly 1 percentage point year-over-year based on Luminate data. This progress was led by our flagship labels, Atlantic and Warner Records. We are also seeing positive improvement globally across EMEA, APAC and LatAm. Despite all of our progress, there is still a lot of work to do. China and Japan, for example, represent markets with tremendous opportunity and upside. With the leadership in place for the APAC region and in Japan, we are now focused on improving our share in these very important repertoire centers. Finally, turning to cash. Operating cash flow decreased to $46 million from $188 million in the prior year quarter. Operating cash flow conversion was 12% of adjusted OIBDA. Free cash flow decreased to $7 million from $160 million in the prior year quarter. This is primarily driven by greater investment in A&R. Looking forward, we continue to target 50% to 60% operating cash flow conversion over a multiyear period. Also, as of June 30, 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 debt 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 is promising. We expect financial performance that moderately reflects the success of our artists and songwriters as we move past tough comparables and see uplift from our recent renewals with streaming services. While some of our investments and initiatives will take time to bear 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 at our disposal, we are set up to move quickly as we create lasting value for our artists, songwriters, 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 to set us up for continued growth. With that, we'll take your questions.

Your first question comes from Ben Swinburne with Morgan Stanley.

I guess two questions. It's clear that you guys are focused on accelerating growth and you're reallocating resources around the company. At the same time, you've obviously taken a lot of cost out. So there's some tension there in terms of less investment but more targeted investments. So could you just elaborate a little bit on the strategy changes that you've made and how we should expect those changes in resource allocations to sort of drive financial performance? And then I would just love to hear if you have anything interesting to share on sort of the generative AI topic and how you're leveraging that at the company, given I know it's a focus area for you, we'd be interested.

Thank you, Ben, it’s great to connect with you. Firstly, I want to express our satisfaction with the progress we’re making, not only in the charts but also in translating that success into market share, particularly in the United States, where we've seen an increase of 1 percentage point according to Luminate. To ensure sustained growth in the future, we need to improve our capabilities further. We'll achieve this by freeing up more capital through our reorganization, which is designed to enhance efficiency and drive significant growth. Additionally, we plan to enhance our mergers and acquisitions strategy to accelerate growth, highlighted by our $1.2 billion joint venture with Bain Capital. We are also concentrating our resources on markets with the highest potential for growth globally. Moreover, we have established strong leadership teams in the U.S., Europe, and Latin America, and we recently appointed Lofai as the leader for APAC, which completes our organizational structure. We are very confident in our plan, which is already in motion and showing positive results. This effort is supported by our ongoing discussions with digital service providers, including commitments related to profit-sharing models and our initiatives around superfan tiers to further enhance the value of music. Regarding generative AI, there is considerable work underway across the company. For instance, last quarter, we launched our WMG Pulse app for artists and songwriters, providing them with streaming data, song details, audience insights, and financial information. We’re leveraging AI to generate valuable insights that would be challenging to obtain in a timely manner without it. Generative AI will help us understand artists' activities across all digital service platforms and guide our actions. We're enthusiastic about these developments, and this is just one example among many, so stay tuned for more updates in the future.

The next question comes from Michael Morris with Guggenheim Securities.

Robert, I wanted to ask you about subscription streaming. You recently reported around 8.5% core growth in the quarter and noted some areas of added momentum, such as artist share and upcoming distribution renewals. You previously provided a midterm subscription growth forecast in the 8% to 10% range, which you’ve already reached, indicating positive prospects ahead. Can you share your thoughts on future performance in relation to that forecast and whether there were any one-time sources of strength this quarter? Also, Armin, welcome. I value your insights, especially regarding margin expansion goals. My question is whether there are opportunities to enhance cash conversion, regardless of whether it’s a focus for you and your management team. Additionally, it would be very helpful if you could outline your capital allocation priorities.

Thanks, Michael. I'll start with the capital allocation question that you had. And let me talk about our capital allocation priority first before I talk about cash conversion. From a capital allocation perspective, 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 repertoire markets and genres. Second, we will step up investment in M&A just with investment in music catalogs, also leveraging our recently announced joint venture with Bain. And then third, as I've already said in my prepared remarks, we are focusing on returning capital to shareholders through buyback and dividends, and you just saw our dividend announcement. From a cash conversion perspective, this is a critical, not just a key focus there for management. Our target has been and continues to be 50% to 60% cash conversion. And you have seen in the past three years, we have 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 one is obviously our cost savings plan which will not only improve margin and enable investment but also improved cash conversion. The second one is we are very focused on A&R spending efficiency. We mentioned already that we are very focused on prioritizing our spending on our core music business, number one, but also on core repertoire markets with global potential. And then third, we have spent a lot of capital to deliver against our tech and finance transformation initiatives. As we go through this investment, that investment will normalize over time. So because of all that, we feel very confident about our capital allocation priorities and cash conversion targets and also very focused on continuing returning capital to our shareholders. Now to your second question about streaming, I'll probably take that too. First of all, we are very happy with the results we had this quarter, and we saw growth across the world with share growth in the U.S. across both Warner Records and Atlantic, which is critical for us. On an adjusted basis, as you have mentioned, we have seen 8.5% paid streaming growth. Now as we look forward, we are very confident about our future because: one, the company is in a healthy place now; and two, the industry is in a very healthy place. And when we think about long-term growth, we believe that our adjusted quarter 3 results are very reflective of those healthy dynamics. So the investment that we've been making is really now showing up in market share and growth. Now as we look forward, there are a lot of tailwinds to us. The industry continues to grow. And as you know, it's a little bit more resilient to changes in the economy. Second, as you know, we see the impact from our DSP renewals next year. Third, we have now more ammunition to invest into that growth behind our savings program. Fourth, we have M&A that we'll pursue more aggressively, including with the joint venture with Bain. And then fifth, there's upside potential to the super premium tier that we're working on with our DSPs. So on that, we feel very confident about our future prospects and look forward to discussing those more with you in the future.

The next question comes from Benjamin Black with Deutsche Bank.

Robert, in an environment where it's harder to break new stars, Warner seems to be sort of having real success that's showing up in your new release market share. You mentioned the Luminate data. We see it in our own analysis here. Can you just talk a little bit about what's driving this success? And how sustainable is it? And then, Armin, you guys mentioned the new JV with Bain, $1.2 billion at the outset. Can you just talk about the decision to partner versus going on your own? Are there opportunities to expand the partnership? And in the current rate environment, how do you think about the opportunity set around catalog acquisitions?

Sure. Thank you, Ben. In today's environment, there is a lot of noise across various platforms with a massive amount of content. It has become challenging for companies to create standout hits. Therefore, we are incredibly excited about our ability to consistently have our artists rank highly in charts. Our company is creatively thriving. We have made investments in A&R and our executives, and this chart success is translating into market share improvements, which are crucial indicators of our overall performance. We plan to continue focusing on markets with the highest potential to drive such results. Artist development has always been central to Warner. Looking back at artists like Bruno Mars, Ed Sheeran, Coldplay, and Dua Lipa, we have a history of nurturing talent. We are pleased that the artists who are currently charting are those we have recently developed despite the competitive landscape. This success is attributed to our exceptional team, which possesses unique skills. We have strong leadership in the U.S., Latin America, EMEA, and we recently completed our leadership in APAC. We are confident in our team and optimistic about the future. This success highlights the enduring value of major music companies, especially in a challenging global environment where having a robust infrastructure and local expertise is essential. I am excited about the progress we are making, and now I will pass it over to Armin to address the Bain question.

Yes. Thanks for the question. The summary is that we are focused on growth, margin and cash, and acquiring catalogs does really all of that. So the JV is really a critical building block for us in our long-term strategy to accelerate the acquisition of catalog business. And the good news is that we found a partner with experience in this industry. So we're very happy with our partner. And obviously, as you know, you've seen that in our disclosure, we retain 50% ownership of the catalogs that we acquired, and we will operate with basically by managing all aspects of marketing, distribution and administration. This is a key building block for us, and we are very happy about the partnership.

The next question comes from Peter Supino with Wolfe Research.

A question for Armin and one for the team. Armin, if you would expand on the announcement that was made a month ago regarding cost savings. Can you 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? 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 the pros and cons of providing more specificity on organic growth and underlying financial trends in the business ex M&A going forward.

Let me address your organizational question first. 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 to invest in the business and expand margins. 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 music is global but at the same time, we are operating in 70 markets around the world. As we designed the organization, it was really important for us to have, on the one hand, the local expertise to discover new talent in those 70 markets and many more markets around the world but at the same time, we also have the global scale to elevate local talent globally. So to deliver against that, we have developed a very thoughtful global, regional, local organizational model. And the net of it is that we are investing more money but also more resourcing in key markets in our frontline business, so A&R and marketing tools which are all focused on discovering artists and songwriters as well as driving our catalog business. At the same time, we are scaling our global and regional services behind the tech investments that we've been making over the last three 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 three years. So we're very, very happy with that, not only because they enable us to scale organization and services more but also provide better services to artists and songwriters like with our WMG Pulse app. 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, so we expect savings there. We're also scaling our non-pay more consistent with the new, more efficient organization design. So in summary, we think we've got a very, very balanced organizational design that helps us drive the local opportunities while globalizing artists, but also drive cost savings to the bottom line. We have said before, that we expect from this about 150 basis points of margin expansion next fiscal year.

And I'll take the organic growth part of the question. So as we've said numerous times on this call, obviously, we're having a lot of creative success with new releases. That's part of our organic growth, the day-to-day A&R activities, finding artists, developing them, making them global superstars. That's all in the works, and we're doing an incredible job there. In my opening remarks, I mentioned our always-on catalog approach with some of the examples like Veronica Electronica and Slipknot, et cetera. We are focusing on marketing our catalog the same way we do frontline and making sure that that is growing. It's two-thirds of our business. That is what organic growth is about, and all of that is underlined by our relationships with DSPs and more certainly around pricing rather than wishful thinking around price increases. So we feel really good about the industry growth. We feel very strongly about our own organic growth. And as Armin mentioned, layering on aggressive but responsible M&A capabilities augmented by the JV with Bain is just giving us extra firepower on accelerating.

The next question comes from Kutgun Maral with Evercore ISI.

I have two topics to discuss: one regarding ad-supported streaming in Recorded Music and a general question for Armin. First, could you provide more insights on the trends related to ad-supported streaming, both within the traditional core ad-supported business and the new platforms? Also, can you highlight any recent renewals with partners or what the renewal pipeline looks like as we approach 2026? I understand you can't mention specific partners, but since it's been about two years since the TikTok deal was announced, I wanted to follow up on that. As for Armin, you've been with the company for several months now and it seems like you've been very proactive given the recent developments. I'd like to hear some of your initial thoughts from your new position and what inspired you to join the music industry and WMG in particular.

Thanks for the question. I'll start with my impressions. First, I'm super impressed with the management team here in New York, but also around the world. We have, I believe, one of the best creative teams that you can imagine here in the U.S., in Europe, Latin America and now also with the appointment of new leaders in Asia. Second, 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. Second, DSP contracts, as Robert mentioned, provide utmost certainty in the future. And it's a business that is now much more healthy. So we have a lot of opportunity ahead of us. So in that context, my key priorities were to make sure that I help 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 margin. Secondly, I also want to make sure I leverage my M&A experience from the past, which is extensive with P&G and at Activision to help accelerate M&A and not just organic growth here. And then third, there's a lot of opportunity to improve capital allocation by prioritizing spending against the biggest and most profitable opportunities. So net, I saw the opportunity. I saw the impact I could have on the business, and I'm super excited to be here, and I think we have tremendous opportunity to create value for our shareholders, but also for artists and songwriters and employees here. On your question on the ads business, when we look at the ads business, there's actually two parts to it. One is our core DSP business, where we're actually growing our ads business. And as one of the biggest DSP platforms mentioned last week, there's a lot of opportunity to accelerate further. The biggest challenge is really in the short-form media content business, and that's a challenge for the industry. But frankly, 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're not done with that work, a lot of opportunity ahead of us.

The next question comes from Rich Greenfield with LightShed Partners.

Robert, there seems to be considerable confusion in the industry regarding what the super premium or superfan experience should entail. Your colleagues at Universal began discussing this a couple of years ago, and Daniel Ek at Spotify has also addressed it. It appears that the industry is having difficulty defining the product. Meanwhile, platforms like SoundCloud show that people enjoy engaging with music, and there are many new AI startups focused on music manipulation. My question is, do you think we can transition from the traditional concept of the superfan experience—like higher quality audio, artist chats, or concert tickets—toward something that includes interactive music or AI interactions? Looking at the bigger picture, where do you envision this heading?

Well, first, I think maybe we should invite you to our product session together with the DSPs because I know you have a lot of passion and expertise on this. I'm half joking only. But you're right, it's been something that's been discussed for a while. Obviously, there's nothing new to announce today, but we are in deep discussions with our partners. You're also right about interactivity, right? Obviously, anything on the Internet is not only personalized but also interactive in many different ways and those are the things to leverage. I don't have anything new to announce today, but be sure that we are in deep discussions with our partners to evolve it because the opportunity is there. We all want to capture it. It makes sense for both the DSPs as well as us, the music companies and for artists and songwriters. So everybody wants to get it right and capture this opportunity. So we're excited about it, and we're busily working on it.

And your final question will come from Doug Creutz of TD Cowen.

Armin, welcome back to the entertainment industry. Question for you. While you were at Activision, when I think about your time there, one of the things I think that, that company was really great at was realizing the full value of its content through its negotiations with its digital distribution platform partners. How does that experience inform your mental model about how to approach your relationships with your platform partners here at WMG?

Great question. So I have two comments here. One, it's interesting to see how industries evolve over time. And what I mean with that is that if you recall in the gaming industry, we used to have very few price points until free-to-play showed up; we basically cater to every different price point in the world. So basically playing along the demand curve. It feels like the music industry is at the point today where we offer very few products at very limited price points. And super premium tier is obviously one opportunity to cater to a more premium consumer. But I'd argue there are many, many more opportunities for us to deliver better and premium-priced products to our fans and to our communities. And we are having conversations, obviously, with our partners. And I will tell you that the partners also see those opportunities, and in many cases, people from the gaming industry actually joined those partners, so they see a 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 price 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 there's tremendous opportunity to deliver growth, but also value for our consumers, and that's how we're going to approach that.

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

Well, thank you all for joining today. I just want to close by saying we are really excited about the progress that we're making in an industry that has healthy dynamics, that we're starting to see our creative excellence translate into market share growth in important markets and drive our revenue, and that we have a very strong plan to continue to accelerate this growth in the future and onto execution. Thank you so much. Have a great day.

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