Warner Music Group

None of the warning signs we check for were found.

We look for five warning signs: doubt it can keep going, weak checks on its own accounts, a notice that its past accounts can't be relied on, a change of auditor, and one customer bringing in a big share of sales. We don't check lawsuits, investigations or debt yet.

We checked the auditor's report, internal controls, restatement notices, auditor changes and big customers in the 10-K filed 20 Nov 2025, plus the 10-Q filed 5 Aug 2026 and 13 later 8-Ks.

• It carries a lot of debt: 6.7× its equity.

Whether the price already reflects the risks is what the deep dive is for.

• If we acquire, combine with or invest in other businesses, we will face risks inherent in such transactions.

  Could happen

  We have entered into a joint venture with Bain Capital Special Situations, LP (“Bain”), pursuant to which we and Bain each own a 50% membership interest in Beethoven JV 1 LLC, a Delaware limited liability company (“WMBC”). WMBC will acquire, own, manage, sell and exploit rights in seasoned recorded music and music publishing catalogs, which may include catalogs currently owned by the Company. Subject to certain limited exceptions, each of the Company and Bain will offer to WMBC the right of first opportunity to acquire all or any part of any catalogs that the Company or Bain or their respective affiliates is considering acquiring where such acquisition meets specified financial and other criteria. This joint venture, and its right of first opportunity, may limit our ability to acquire and derive income streams from certain catalogs, and as a result, affect our prospects and financial results. Pursuant to the joint venture, we are also required to pay Bain a preferred return on the equity it invests in WMBC prior to the Company earning a return on its investment in the joint venture. If we sell existing catalogs owned by the Company to the joint venture, we will only own 50% of those catalogs and WMBC will need to pay a preferred return to Bain before we receive any return on our investment, which may reduce our future earnings or cash flows.

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• Our substantial leverage on a consolidated basis could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness.

  Could happen

  In February 2025, we acquired Tempo Music and the Company now holds approximately $311 million of asset-based securities due November 2050 (“Asset-Based Notes”) issued by a subsidiary of Tempo Music and secured only by certain music rights owned by Tempo Music and is nonrecourse to the Company and its subsidiaries, other than Tempo Music. In addition, in connection with the joint venture we entered into with Bain in June 2025, we entered into a credit facility pursuant to which WMBC can borrow up to $500 million to fund acquisitions of catalogs, which debt will be consolidated on our balance sheet.

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• Digital piracy and streaming manipulation has and may continue to adversely impact our business.

  Could happen

  A substantial portion of our revenue comes from the distribution of music which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” There is also a threat from organized industrial piracy. Additionally, in its Global Music Report 2025, IFPI noted the danger of “streaming manipulation,” where bad actors upload tracks to digital music services that are produced using generative AI tools and then use “bots” to generate artificial streams of those tracks, which ultimately diverts royalties from legitimate copyright holders.

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• We have engaged in substantial restructuring activities in the past, and may need to implement further restructurings in the future and our restructuring efforts may not be successful or generate expected cost savings.

  On July 1, 2025, the Company announced a strategic restructuring plan (the “2025 Restructuring Plan”) designed to free up funds to invest in music and to accelerate the Company’s long-term growth. The Plan is expected to be fully implemented by the end of calendar year 2026. The Company expects to incur total charges of approximately $200 million on a pre-tax basis or approximately $150 million on an after-tax basis. Approximately $170 million of the charges will be for severance payments and other related termination costs and approximately $30 million of certain other charges. The Company anticipates that the Plan will result in cash expenditures of approximately $200 million of which $170 million is expected to be paid by the end of fiscal year 2026. For the fiscal year ended September 30, 2025, total severance and other termination costs recorded in connection with the 2025 Strategic Restructuring Plan were $90 million, of which $74 million of expense was recognized in our Recorded Music segment, $5 million was recorded in our Music Publishing segment, and $11 million was recognized in Corporate. Additionally, for the fiscal year ended September 30, 2025, the Company recognized $28 million of impairment losses, of which $6 million of expense was recognized in our Recorded Music segment and $22 million was recognized in Corporate. Impairment charges recognized primarily relate to impairments of operating lease right-of-use assets that are no longer in use and royalty advances based on operational changes in the intended use of these assets.

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