Welcome to Warner Music Group third quarter earnings call for the period ended June 30, 2026. 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. Good afternoon, welcome to Warner Music Group's fiscal third quarter earnings 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 acting CFO, Lou Dickler, who will take you through our results and then answer your questions. Before our prepared remarks, I would like 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, including metrics that are adjusted for notable items during this conference call and in our earnings materials, 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. We disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith. We believe that 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 as 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 these risk factors is contained in our filings with the SEC. With that, I'll turn over to Robert. Hello, everyone, thank you for joining us today. We have remained focused on execution against our strategic goals. We're proud to have delivered or over-delivered against our targets for the fifth quarter in a row. As you will have already seen in the preliminary financial results we released on Monday, this was yet another quarter of healthy top and bottom-line growth, led by a robust 12% increase in recorded music subscription streaming revenue on an adjusted basis. We also saw continued progress on our cost-savings initiatives. Our operating leverage resulted in margin improvement and strong cash flow generation in the quarter. Highlights include a 9% increase in total revenue, rising to 11% on an adjusted basis, 15% growth in Adjusted OIBDA, which led to 100 basis points of margin expansion, and a 209% increase in operating cash flow that resulted in a roughly $100 million increase in our cash balance. These impressive results are a testament to the hard work of our global teams and a culture that celebrates human creativity while embracing technology shifts to future-proof our business. Before diving deeper into performance and strategy, I'd like to provide an update on recent management changes. As you know, Armin Zerza has stepped down from his position for personal reasons, and I'd like to thank him for the lasting contributions he has made to WMG. Lou Dickler, our Global Controller and Chief Accounting Officer, will serve as Acting CFO as we conduct a search. Lou will walk you through the financial results later on. As part of these management changes, Tom Corson, Co-Chairman and COO of Warner Records, will step into the role of COO of Warner Music Group. Tom is one of the most dynamic, respected, and effective executives in the music business and a fierce champion of talent. Together with Aaron Bay-Schuck, he's helped architect Warner Records' resurgence and will leverage his vision, disciplined execution, and deep experience across the entire company as we continue to deliver for our artists and songwriters. I want to reiterate our commitment to our previously articulated financial targets of high single-digit consolidated revenue growth, double-digit Adjusted OIBDA growth, double-digit Adjusted EPS growth, and 50%-60% operating cash flow conversion. These targets are supported by our long-term strategy, enduring structural changes, a focused capital allocation framework, and a disciplined execution already underway. Moving on, we continue to make great progress on our three strategic priorities, growing our share, increasing the value of music, and becoming more efficient. First, growing our share. We're focused on sustainable market share growth, and year-to-date, our overall U.S. streaming share and our U.S. new release streaming share are up. We're achieving this through intensified focus across our portfolio. We're developing the next wave of talent like Bella Kay and Stella Lefty, who recently broke into the Billboard Hot 100 top three. We're amplifying breakthrough stars like Sombr, PinkPantheress, and Alex Warren, as well as hit-makers like Kehlani and Charli XCX, who just became the first British female artist ever to land two U.K. number one albums in the same year. We're also continuing to attract new superstar talent, with Miley Cyrus recently signing to Atlantic Records and signaling that her next project is underway. Under Elliot Grainge's leadership, Atlantic's share of new releases has ballooned, jumping to the number two spot on Billboard mid-year report, up from the number four spot in 2024, reflecting the label's creative renewal. Globally, "Dai Dai," Burna Boy's official FIFA World Cup collab with Shakira, became the number one song in the world, topping both the Spotify and Billboard global charts for multiple weeks. Meanwhile, Madonna's new album, "Confessions on a Dance Floor," debuted at number one in the U.S. and U.K., leading the way for the 17% growth in our physical revenue in the quarter. The successful release of her album is a true company effort, as she's signed to us for both recorded music and publishing. We're proud stewards of her amazing catalog, which is seeing record new audience growth, particularly with people under age 35, who now make up to 60% of her Spotify streams. Leveraging our frontline approach to marketing our top 500 off-roster catalog artists is driving market share gains year-over-year. As I've talked about before, our teams are also expertly using proprietary AI tools across our entire catalog of over 1 million songs to detect opportunities, to optimize all of our music for streaming services, and using automated workflows to fuel long-tail performance. We're able to give all of our musical gems the care and attention they deserve, something that was humanly impossible a year ago. More specifically, we're utilizing AI to create new marketing content derived from our catalog, like motion art, lyric videos, and visualizers to drive engagement. We've built a proprietary marketing identification model that helps us prioritize opportunities to drive user engagement and revenue. A quick example. Using these tools, we were able to boost Chris Rainbow's 1979 recording, "Be Like a Woman," from just 50,000 streams in all of 2025 to over 140 million streams so far this year. Our ability to effectively deploy end-to-end automation across our catalog represents a tremendous untapped opportunity that we will continue to build towards. We're proud of the fact that our share improvements to date have been largely organic, differentiating us from some of our peers. We're now taking steps to accelerate and fortify these gains through disciplined, patient, and return-focused M&A. For example, our joint venture with Bain Capital has deployed $650 million in catalog acquisitions and has a strong pipeline for the future. We've expanded our distribution business through the acquisition of independent music platform Revelator. Distribution is an important part of the ecosystem. We're taking a thoughtfully balanced build-and-buy approach, which is driving profitable growth in this area. Our ADA distribution business is already large and growing and profitable. Under Alejandro Duque's leadership, we've exported the best practices from our successful business in Latin America, where distribution deals are the norm, and are applying these learnings to power our distribution across the globe. In addition, by embedding and integrating Revelator's cutting-edge tools, ADA will enhance its value proposition for artists and labels with next-generation digital distribution, rights management, royalty accounting, and real-time analytics. Our momentum in the space is attracting new partners. We recently signed a global distribution deal with GoDigital Music, an independent music group bringing over 85,000 new tracks into the ADA ecosystem. We also inked a distribution partnership with AIM Music, a newly founded Berlin-based independent label. Our publishing business continues its winning streak, growing 11% this quarter. Recent highlights include Raye releasing a self-penned U.K. number one album, superstar songwriter Amy Allen contributing to Olivia Rodrigo's number one global smash, "Drop Dead," and Ilya contributing to Ariana Grande's Billboard Hot 100 number one single, "hate that i made you love me." We've renewed deals with Billboard's 2026 Country Hitmaker of the Year, Riley Green, and Latin Grammy-winning global Spanish superstar Quevedo, a testament to the best-in-class reputation that Warner Chappell has built over the years. Next, turning to increasing the value of music. As you know, I've always championed the deal structures that better reflect the true value of music. Just over two years ago, we took a much more proactive approach to pricing. Fast-forward to today, we, along with our DSP partners, have evolved the industry standard to contractual wholesale rate increases occurring in a much more regular cadence, providing us, the rights holders, with greater baseline certainty. This also benefits the DSPs, which are taking the opportunity to increase subscription prices while innovating to provide new offerings to their consumers. It's truly a win for everyone. The latest proof point in this evolution is our renewed deal with Apple, which completes alignment across all of our major DSP partners around contractual PSM increases, giving us better visibility into our outlook. The success of our strategy is evidenced by the marked acceleration in our subscription streaming growth, which we expect to be resilient for the years to come. AI creates a new incremental vector to increase the value of music, we've taken a leadership role to capitalize on the new opportunities it is unlocking. We've developed new monetization frameworks like our partnerships with Suno, Stability AI, KLAY, and Udio, expect our licensing deals to contribute materially to our subscription streaming revenue growth starting in fiscal 2027. As we continue to explore opportunities to partner with traditional DSPs on AI tiers, we're thinking holistically about our relationships to ensure the right deal terms are in place, including guardrails and protections for our artists and songwriters This not only unlocks industry-wide growth, but also enables our partners to innovate, providing fans with new ways to engage with their favorite artists and songs. On the regulatory front, we've been actively working with governments around the world to craft AI policies that protect free market licensing and resist weakening of copyright. In the last quarter, we've seen some key wins. As a result of intense lobbying efforts at the highest levels of government, Chile again rejected the introduction of a new text and data mining exception that would have allowed AI developers to use copyrighted content to train their systems without a license. In July, Australian Prime Minister Albanese rejected a proposal from AI developers that would have shielded them from liability for copyright infringement. Now, onto the third priority of becoming more efficient. Our strategic reorganization, investments in technology, and the continued successful rollout of our financial transformation program have enabled us to consistently deliver strong growth while cutting costs and increasing margins. We're integrating AI to optimize revenue growth and increase productivity while leveraging AI across our functional departments, including finance, legal, and HR, to streamline workflows, accelerate decision-making, and reduce our spend. Our cost savings initiatives are progressing on schedule, we have the organizational structure in place to continue transforming WMG into a more efficient and technology-enabled music company. We have an exciting release schedule ahead, including new music from Alex Warren, Sombr, David Guetta, Ravyn Lenae, Myke Towers, Teddy Swims, Tinashe, Dan + Shay, Miley Cyrus, and many more. With strong momentum driven by our creative success and execution across our strategic, financial, and operational priorities, we have set ourselves up for sustainable growth that will continue to be supported by a capital allocation program with clearly defined return thresholds across organic and inorganic investments, driving the value of music across tiers and platforms, and disciplined cost management that drives strong margin expansion and cash flow delivery. I will now pass it over to Lou. Thank you, Robert. For the fifth consecutive quarter, we have delivered growth in line with or better than our sustainable growth model and targets of high single-digit revenue growth and double-digit Adjusted OIBDA growth. Q3 was another quarter of healthy top and bottom-line performance, anchored by the PSM increases and sustained global share progress that drove revenue growth. We also saw continued margin expansion as cost savings delivery and operating leverage resulted in margin improvement. Our strong business momentum continued this quarter with the delivery of impressive results as total revenue grew 9%, or 11% on an adjusted basis. Recorded music revenue grew 9%, led by subscription streaming growth of 12% on an adjusted basis. Subscription growth reflects the benefit of PSM increases, stable global market share trends, and subscriber growth. Ad-supported streaming revenue was very strong and grew 10% on an adjusted basis, driven by an overall healthy ad market supported by increased ad spending related to the FIFA World Cup and improved deal economics. Physical revenue increased 17%, driven by strong releases in the quarter as well as catalog and carryover success. Artist services and expanded rights revenue increased 15%, driven by concert promotion revenue primarily in Japan, as well as higher merchandising revenue, while licensing revenue decreased 1%. Recorded music Adjusted OIBDA increased 16%, with a margin of 25.3%, an increase of 150 basis points. Music publishing total revenue increased 11%, driven by 14% streaming growth due to continued market growth and the impact of new deals and renewals. Sync revenue increased 7%, and mechanical revenue increased 19%, while performance revenue decreased 2%. Music publishing Adjusted OIBDA increased 14%, with a margin of 28.9%, an increase of 70 basis points. Total company Adjusted OIBDA growth was 15%, and margin expanded by 100 basis points. Adjusted for notable items, Adjusted OIBDA growth was 18%, and margin expanded 130 basis points. The increase reflects revenue mix, operating leverage, and cost savings delivery. Adjusted net income and Adjusted EPS increased 21%. We generated operating cash flow growth of 209% in the third quarter, and for the last nine months, our conversion ratio was 55% of Adjusted OIBDA. As of June 30th, we had a cash balance of $618 million, total debt of $4.7 billion, and net debt of $4.1 billion. In conclusion, we are incredibly optimistic about the future and laser-focused on delivering on our targets of high single-digit revenue growth, double-digit Adjusted OIBDA and Adjusted EPS growth, and 50%-60% operating cash flow conversion. We remain on track to deliver margin expansion at the high end of our 150 to 200 basis points target in fiscal 2026, and we continue to target margins in the mid-20s in the short term and high-20s over the long term. With that, we will take your questions. Thank you. If you would like to ask a question, please press *1 on your telephone keypad. If you would like to withdraw your question, simply press *1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Clay Griffin with MoffettNathanson. Your line is open Thank you. Good afternoon. For Robert, I wanted to ask about the impact of Armin's departure. He obviously helped shape a clear narrative to investors and his arrival coincided with the more consistent results. What does his leaving the company mean for the future? Sure. Thank you, Clay. First, I want to say I appreciate Armin's contributions to the company, which are long-lasting, and particularly to the finance organization, where he helped sharpen our focus around capital allocation, improved our forecasting, and as you say, Clay, investor messaging. All of those are deeply institutionalized in our company now, I'm very confident about them continuing exactly as they are. In terms of our improved performance, it's a result of a multi-year strategy that really started in 2023. If you look back, we've done two restructurings between fiscal 2023 and 2024, which totaled $300 million. We took it out of the business and promptly reinvested it into technology, but mostly into A&R, in order to drive growth. We've seen the fruits of that labor starting to kick in mid-fiscal 2025. In 2024, we also started, in fiscal 2024, we started bold leadership changes. A good example is Elliot Grainge taking over Atlantic, Kevin Gore taking over global catalog, then last year, Alejandro Duque taking over ADA in addition to his lifetime opportunity. All of these leadership changes have contributed to rapid innovation and growth. Lastly, also in fiscal 2024, Carletta and her team started to devise a strategy for changing our pricing with the DSPs, that is something that we've obviously been talking about for quite some time. In my earlier remarks, I spoke about our Apple deal, which really is a really nice bookmark to having all of our major DSPs aligned around this. We had a strategy around these three points that we've been delivering on, you're starting to see the fruit of that labor through continued strong performance over the last five quarters. It's providing us with better visibility, which provides you with better visibility into our results. I really have to say that this kind of progress, having that kind of strategy and that kind of progress, is a result of an incredible roster of talent that we have, which is both artistic as well as executive, our growth strategy and underlying momentum remain really firmly intact. Thanks, Robert. Appreciate that. Sure. Your next question comes from Benjamin Black with Deutsche Bank. Your line is open. Good afternoon, everyone. Thank you for taking the question. One for Robert. Market share in the U.S. was pretty weak according to the Luminate data. It doesn't seem like your results reflect that. I guess, what are we missing, and can you perhaps explain that dynamic for us? Thank you. Yeah, sure. You're missing full visibility. That's what it is. We had a great quarter. We run a global business. We first and foremost look at global metrics. However, those are not publicly available to you, which is why you can only look at the U.S. ones. Obviously, we're seeing a much more favorable impact in our global market share, and that is reflected in our results, as you say. Furthermore, we look at fiscal year to date impact. If you look at the publicly disclosed metrics on U.S. streaming share, we're up 0.3 percentage points, and on U.S. streaming new release share, we're up 0.8 percentage points. Obviously, there's lumpiness to the business quarter-to-quarter, but we look at things more long-term and make sure that we're trending in the right direction. If you look at the last three years in the global market share, we've made a very significant improvement. Again, it's showing up in our business results. I think the more important message here is that we've been able to accomplish all of this largely organically, which is different from our peers. I would say the only acquisition that you can probably say that has played some impact was on our 10K acquisition, but actually, most of the growth came after the acquisition, so it really counts more as organic as well. How do we do it? Really, there are four things that I think help us achieve this. One, capital allocation discipline across the entire portfolio. Two, we have a strong pipeline management for A&R and acquisitions. Three, driving audience historic catalog with focus optimization, as I spoke about in my opening remarks. Four, building out distribution infrastructure, which helps us scale the business. Now we can accelerate all of this through M&A together with our partners at Bain as well. Looking forward, I'm very confident due to our growth-oriented culture that is humming across all cylinders, and I'm confident in the direction and the growth of market share over the long term into the future. We have an exciting slate ahead of us with Alex Warren, Sombr, David Guetta, Ravyn Lenae, and many more. Great. Thank you for that context. Very helpful. Sure. Your next question comes from Michael Morris with Guggenheim Securities. Your line is open. Thank you. Good afternoon. Robert, I wanted to follow up on the Apple announcement that you made. It's good to hear that you reached that renewal. Can you share some more color on your collaboration with these DSP partners, how you justify these per-subscriber minimum increases that you're able to achieve, and how does this renewal with Apple, that you said it's the final one, how does this impact your outlook for the business? Thank you. Yeah. One, again, it's so great to be able to look back to the moment when we started to think about this and cook up the strategy, which was back in 2024, and started to work on it, put it in place in 2025, then it started to kick in a year later. Sequencing, every time you make a big change like this, it's really hard to sequence things and make sure people feel it's done fairly. We've navigated all of these complexities to the extent that now we have PSM increases across 88% of our subscription streaming revenue, which I really feel proud of, because two years ago it was zero. Big credit goes to Carletta Higginson and her team on this, because they've done an incredible job. Big credit goes to our partners. Our DSP partners are acting like partners, not adversaries. It's really a sign of a healthy industry when you reach an equilibrium between the supplier and the buyer, in this case, in a mutually beneficial way, because we know we need each other for the future, we just need to find the right ways to drive value. I think we found it. I feel very grateful to our partners and to our teams. When you think about the incredible value that music provides, it's all the music ever made in the past, as well as in the future, for one low monthly fee. Of course, that fee once in a while should go up. It also goes up with added functionality, et cetera. We're working with our partners to increase all kinds of features that are added to delight consumers. Overall, I'm just delighted by our collaboration. I'll let Lou take the other part of the question. On outlook, I'll just reiterate that we've got confidence in the targets we've set out of high single-digit top-line growth, obviously that is anchored by a growth in paid streaming, the double-digit Adjusted OIBDA and Adjusted EPS growth, and on the cash side, the 50%-60% operating cash flow conversion. While we're not providing guidance as it relates to streaming, we do have high confidence in continued growth. We believe we can do that in a few ways. We expect to continue to benefit from the growth in global subscribers, which will continue. We have delivered consistent market share performance. We are very excited about the Q4 release schedule, which Robert alluded to. We continue to see market share growth across global catalog. With the price increases, the contractual wholesale price increases across our largest DSPs, we believe that this contributed about 3.5% percentage point growth impact to subscription streaming within the quarter. As far as outlook for Q4, we do expect the price increases to continue to flow through and are anticipating a slightly accelerated performance through Q4, which will include the impact of the Apple deal. In addition to that, we also have growth opportunities around both organic and inorganic investments in core. We've got the Beethoven joint venture with Bain. That has additional capacity, and as we deploy more capital in that fund, we should expect revenue upside in future periods. We've got the expanded distribution through our acquisition of Revelator, which increases our capacity. That should start to show up at the end of the calendar year. Finally, we've got new licensing deals with AI companies, most notably Suno, and we expect that to provide nice contributions starting next fiscal year. Through all these areas, really, we're definitely excited about the opportunity ahead, and we remain confident that we can continue to deliver growth consistent with the targets we've outlined. Thank you. Appreciate that. Your next question comes from Peter Supino with Wolfe Research. Your line is open. Hi, good afternoon. I wanted to ask about Suno. If you could update us on the timing of that relationship and whether Suno might benefit from Spotify's, not whether, but when Suno might benefit from Spotify's new product rollout. Sure. One, on Suno, the plan remains exactly as it was, which is for them to transition to a license model later this year. There's no change in the timing. Everything's on schedule, which is great. Lou just mentioned we expect material revenue contributions from our AI licensing sources in the fiscal 2027 year. Obviously, some of that is underpinned by Suno. There was also the Munich court decision last week, which effectively confirmed the Warner Music Group contract and strategy, which has committed Suno to transition to a license model. We're very thankful to the court to confirm our strategy. I want to pause on this a little bit and say one thing, which is the creative industry goes through transitions like this once in a while. In mid 1950s, none of the movie studios have ever licensed anything or worked with the television industry, which was just rising, NBC, CBS, the broadcast networks just came along and they wouldn't work with them because they feared that it was entirely substitutive to the movie industry until Walt Disney was a little bit over his skis, spending a lot of money trying to build what now is known as Disneyland. At that time it was just a plan. They needed more capital. At that time, they decided to go to ABC and strike a production deal, for The Wonderful World of Disney. That cash helped them complete Disneyland. Of course, through that, they uncovered one of the greatest sources of revenue and profits for the entertainment industry, which came from the television industry. I thought it's such an incredible analogy to what we're going through with AI. It's really important that we step back, look and think holistically, and work towards a better future that respects artists, songwriters, and it delivers a lot of value to consumers and to copyright holders and ultimately to investors. Overall. This call is for immediate. Sorry. Excuse me, Robert, I didn't mean to interrupt you. Yeah. Oh, sorry. Okay. Anyway, we're excited by this and I'm very, very happy that it's happening. In terms of Spotify, as you know, I'm a huge champion of anything that is increasing the value of music and better reflecting value of music. We don't comment on any negotiations in progress, but we're very supportive of Spotify's efforts. I think what Gustav and Alex are doing is very thoughtful and we'll share more once there's something to announce. Perfect. That was my follow-up question. Thank you. All right. Your next question comes from Kutgun Maral with Evercore ISI. Your line is open. Great. Thanks for taking the question. Robert, I wanted to follow up on your perspectives on AI. Every platform is leaning into AI, and it seems clear that we're fast approaching a point where some of these tools can be deployed more broadly and potentially gain mainstream adoption. With that, can you expand on some of your earlier comments on how you're working with DSPs on AI protections specifically? Thank you. Yeah, sure. As you know, both from my shareholder letter and my letter when we did AI deals and whenever we talk internally and externally, protecting artists and songwriters is our top priority, right? Because it's obviously very sensitive and very personal. It's important. Our excitement around AI is underpinned by responsibility as well, right? It doesn't work without it, which means protecting them. We are better suited to do this than any individual is on their own or any small organization on their own. So, for instance, we have agreements with our distributors to very effectively take down deepfakes. They are not legally required to do that. Nevertheless, through our relationships, both contractual as well as personal, we now have it in our contractual agreements that artists are protected this way, which is great. The DSPs are our partners. The social platforms are our partners. We've also expanded the number of deals where fully gen AI content must be identified and removed from pro rata share. Right? We're getting at this from multiple angles, and we're very focused on this, because it is important, and it's part of the duty that we have towards artists and songwriters. Really the best way to also think about where the current state of this is Deezer who's most transparent with metrics publicly, with metrics around this. There's 90,000 tracks, AI-generated tracks uploaded every day, which is more than 50% of the daily uploads, but the consumption is somewhere between 1% and 3% and the monetization is a fraction of that. We're staying on top of it from metric standpoint, from protection standpoint, from contractual standpoint. This is the core of what we do. That's great. Thank you. Your next question comes from David Karnovsky with JP Morgan. Your line is open. Great. Thank you. Maybe two for Lou. First, can you dissect the RM subscription streaming growth of 12%? I think you mentioned some components, but wanted to see if you could give a full breakdown. Then can you also provide any color on your ad-supported growth, which I think was higher than both UMG and Spot, and how should we think about the outlook for this line? Absolutely. Thanks for the question, David. We did have solid subscription and ad-supported streaming growth in the quarter. If we went to deconstruct the growth of 12% on the subscription side, you'll see there are really three main items, and this is consistent with what we've talked about in prior quarters. First is we saw roughly 6%-7% growth come from subscriber growth. Second, pricing contributed a bit more this quarter at about 3.5%, which I alluded to earlier. Then third, we believe that market share contributed a difference of roughly 1%, which is steady on a global basis and really a testament to the disciplined capital allocation approach that we've had across vintages, across both new release and catalog. We did see some slight deceleration of growth from prior quarter, which was due to a tough comp, which we called out in the last call. We said it was approximately 2%-3%. If you were to take that out of the equation, you would see that our growth was consistent quarter-over-quarter. To reiterate, we're seeing a shift from volume-led growth historically, to now both volume and value led growth with price increases, and that's driving the strong performance in the quarter. As Robert had alluded to, it's part of our successful strategy. On the ad-supported side, we did see an uplift in ad-supported growth at 10%, which was incredibly healthy within the quarter, and that's on an adjusted basis. We are seeing great trends, healthy trends within ad-supported market, and we've got some improved DSP deal economics, which certainly contributed to the strong growth. Q3 was elevated at 10% due to the benefit from ad spending around the World Cup within the quarter, which obviously is not recurring. If you look back to the prior quarter, we also had some elevated growth due to an easier comp in the prior quarter. We expect that the ad-supported growth will normalize in Q4 as we look forward, probably more in the mid-single-digit growth, which is more reflective of the underlying ad trends and more consistent with what we printed in Q1. Thanks. Thank you. Your next question comes from Kannan Venkateshwar with Barclays. Your line is open. Thank you. Lou, maybe one more for you, which is on margins. You give us your near-term and long-term outlooks, but could you help us with the building blocks to achieve your long-term targets? Over the course of this year, you've been trending better than your short-term targets, especially for 2026. Is it possible that you may end up higher than the high end of your guidance over the course of this year? Maybe one question for Robert, which is when you look at something like Spotify's Remix tier, how do you think about the risks and the opportunities? How do you balance both sides of the equation and what are you actually seeking from these deals from your perspective? Thank you. I'll take the first part on margin outlook. We obviously had very healthy margin delivery in the quarter. We had 130 basis point improvement on an adjusted basis. We are really happy with the progress we've made to date and over the last five quarters as we continue to grow the business in a more profitable way. The margin progression is really one of the key metrics that we're driving and helping to drive shareholder value, and we've made a ton of progress on that front. There's really no change in the outlook. We said it in the prepared remarks, we still expect to hit the high end of the range of 150 to 200 basis points for this year. As far as the components of margin expansion, it really comes from several areas. First, we've continued to focus on profitable growth throughout the company, the sustainable growth model is really institutionalized within the company and the operators appreciate the need to do that because it allows them to reinvest in the company to drive growth. Second is the continued benefit we've seen from the restructuring plan, most recently the 2025 plan. We are on track to realize the $200 million of savings this year and $300 million on an annualized basis in 2027, we'll see some uplift in margin next year for the effect of that restructuring plan. A significant portion of that, of course, goes to operating results in OpEx. Third is the growth in catalog. Catalog is a higher margin business for us. It's about two-thirds of our overall revenue, a significant driver of growth. We've seen market share gains in global catalog and this business is one that we feel we can continue to grow. Then finally, I guess also on the catalog front, we also expect to start seeing more of the benefit from the Bain joint venture. We clearly are focused on acquiring high-value assets and catalogs that have growth potential, we expect that to also contribute nicely to margin. Then sort of the final point that I'll bring up is just on expanded distribution. That's obviously, in comparison, a lower margin business for us. We are taking a more measured approach to build profitable business. We're not looking to do low-margin deals and to buy share. We're really taking a more measured approach and focused on driving the business to higher margins. We think overall, we have a ton of confidence in sustaining our margin expansion, not only this year as we deliver and move towards the mid-20s margin, but also over the longer term as we drive to higher margins in the high 20s. Before I answer your question, I just want to add something to Lou, which is, what I think is entirely underappreciated is the fact that we've been growing at a very healthy clip while cutting costs. We've been expanding margin, and which is a very, very hard thing to do. Nevertheless, that's what we're doing, and it's part of a multi-year strategy that we set in place. At that time, we don't have the clear conviction and confidence to tell you that's exactly what it's going to be, but definitely that was our plan, and now we have the confidence to say that's what it is and that's what it will be. It's really great to be able to say that. On your question around the risks from something like the Remix tier on Spotify. Number 1, this fits into my second priority, which is increasing the value of music. You know that. You've heard it from me 1 million times. One lever. Different partners will execute differently, right? We have to be obviously flexible as it relates to how our partner wants to execute on increasing the value and on the AI, because that fits their platform. That's number 1. ARPU, moving ARPU up is generally one simple lever, and I think the way Alex and Gustav are thinking about it is thoughtful. We're supportive, and this will be incremental. Our whole point of doing these deals is to drive incremental value, incremental ARPU, and greater user engagement, and stickiness overall with subscriptions. We are laser-focused on this. We're excited about the opportunity, and it's great to have partners that are engaging on this. Thank you. Your next question comes from Cameron Mansson-Perrone with Morgan Stanley. Your line is open. Thanks. Robert, earlier you mentioned capital allocation across the whole portfolio as a key driver for growing share over time. I was wondering if you could update us on whether we should expect any impacts to your kind of general framework or approach when it comes to investment returns. Within that, Lou just touched on the Bain JV and the $650 million you've put to work there. Any color on hurdle rates or targets for acquisitions made through that partnership would be helpful. Thanks. Sure. Thank you. No, we're always ready and flexible to pivot when things don't work. Currently, things are working, so there's no change to our approach. We are very focused on our portfolio across organic and inorganic investments, we've really institutionalized a global deal evaluation and investment process across both recorded music and publishing. I don't mean separately, I mean all together. Together across those two business lines and together across all labels and all countries. We're truly evaluating our entire global portfolio and target the highest ROI opportunities. If a budget is higher in one place and lower in another one, and the lower budget territory or label has a greater ROI opportunity, we rapidly shift dollars. We're optimizing our spend in this way. This approach so far has been able to generate us returns of roughly 20% on our investments. That is really what we're targeting with Bain as well. We don't deviate in our approach with Bain to our own internal one. It's one and the same process. Obviously, I'm happy that we've been able to deploy $650 million against the $1.65 billion in capacity. The focus is the same, which is iconic high-margin catalogs with growth potential. Return threshold is the same as the one I just mentioned. We also must have dedicated growth plans for each transaction, right? That we add incremental value and, de-risk for anything unexpected. Quite happy with all of this progress, very confident in our pipeline, which will help us drive profitable growth and continue on our amazing journey. That's helpful. Thanks. Your last question will come from Rich Greenfield with LightShed Partners. Your line is open. Yeah, thanks for taking the question. I got a couple, Robert. Universal and Merlin have opted into Spotify's coming AI tier. You've done a deal with KLAY, with the other labels. I'm sort of wondering, is there anything unique to what Spotify wants to do with AI versus KLAY that gives you reservations? Because it seems like they're ready to go. They'd like more labels, and it seems right up your alley of finding new ways of generating incremental revenue. Then sort of a broader industry topic. DSP-paid subscribers always seems like a positive for Warner Music and your other label peers versus ad tier subscribers. Spotify recently rolled out this thing, Spotify Reserve, in partnership with Live Nation. I'm wondering, in theory, getting more of your artists to want to do Reserve ticketing, and I know that's on the touring side, but it seems like the more artists that work with Reserve, not only does it make the fan happy, but it makes the label more money. It makes the artist more money. It seems like a win-win all around. Is there anything I'm missing on why labels, specifically Warner, wouldn't be excited, and your artists wouldn't be excited about getting tickets in the hands of actual fans versus ticket brokers? Sure. Thanks, Rich. First, on your Spotify question. Yeah, by the way, as I mentioned earlier on the call, we're supportive of what Alex and Gustav at Spotify are working on, and Charlie. We're happy, we're actually very happy that UMG and Merlin are on board. I just can't comment on our negotiation. We're supportive, so there is no philosophical disconnect here. On your other question, we are always interested in anything that is increasing the value of music, as I said before. That can take on many different permutations, whether it's ARPU increase, whether it's more engagement features, et cetera. There's also a capacity. We are doing so many things at this company in order to drive the results that we have. We can't do everything all at once. We prioritize on the highest ROI opportunities very quickly, and we work through those. It doesn't mean that our posture on some of the other ones is a negative one. We just might not have been able to get to it just yet. That's all. Well, let me just rephrase the KLAY question in a different way. KLAY hasn't launched either- Nor has Spotify's with Universal and Merlin. Is it just that artists are nervous to do this? I'm just trying to figure out what's the roadblock. Obviously, artists have to opt in. Are artists just not interested in opting in, or is it just taking a lot longer than we should have normally expected? We just haven't done our agreement yet. That's all there is to it. No, I don't mean with Spotify. I meant with KLAY. Oh, sorry. launched their product either. No one has launched this AI product yet. Is it just artists aren't ready for this? What it takes is operationalizing the permissioning process. That's really what it is. Right. It's a bit complex, and it's laborious, and we're all working through it. It is something that we all have to go through and we are going through. Again, it's not a statement on whether it's good or bad, positive or negative, but it's just an operational activity that every content provider has to go through in order to enable its partners. That's it, and we're in the midst of it. That's really all that's to it. Thank you. Really helpful. That is all the time we have for questions. I'll turn the call to Robert Kyncl for closing remarks. Thank you all for dialing in. I just want to reiterate what I said in the beginning, which is our long-term strategy is working. We've transformed the company over the last three years. We've done lots of difficult things, restructurings that got reinvested, restructurings that got dropped to the bottom line, both leadership changes, restructuring our pricing relationship with the DSPs. There's a strategy here that was set in motion, and it's delivering results. We have an amazing team of executives who are rowing in the same direction, driving growth, driving efficiency, and our industry is very resilient. We're really excited about our output and our continued performance, and we look forward to speaking with you next quarter. Thank you very much. This concludes today's conference call. Thank you for joining. You may now disconnect.