Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reservoir Media Inc (RSVR, Financial) posted total revenue of $34.3 million for the first quarter of fiscal 2025, up 8% including acquisitions and 6% on an organic basis.
- Music publishing segment saw a 15% increase in revenue, driven by digital and performance-based revenues.
- Adjusted EBITDA increased by 25% to $12.6 million, showcasing effective cost management and revenue efficiencies.
- Synchronization revenue in recorded music grew by 87%, with standout placements in high-profile media.
- Reservoir Media Inc (RSVR) continues to attract high-caliber talent and assets, enhancing its global and diverse team.
Negative Points
- Recorded music segment experienced a 7% decline in revenue compared to the prior year quarter.
- Net loss for the first quarter was approximately $500,000, compared to net income of $200,000 in the first quarter of fiscal 2024.
- Interest expense increased to $5.1 million from $4.7 million in the prior year, driven by higher SOFR rates.
- The company faces ongoing litigation and advocacy challenges related to Spotify's reclassification of its primary subscription tier.
- Operating expenses, including administration and amortization costs, grew by 6% and 5% respectively, adding pressure on margins.
Q & A Highlights
Q: Can you give more color on the magnitude of catalog purchases and additions to royalty advances in the quarter?
A: This was a relatively quiet quarter for us with respect to both catalog acquisitions and advances. However, we have a robust pipeline and several deals that we are excited about closing in the coming weeks. (Jim Heindlmeyer, CFO)
Q: Is the pipeline still around $1 billion and 120-plus opportunities?
A: Yes, it is slightly over $1 billion, and we have several near-term opportunities that we are very excited about. (Golnar Khosrowshahi, CEO)
Q: Were there any one-time items that contributed to the first quarter outperformance in digital revenue?
A: There were no particular one-time items; the growth was primarily due to price increases from DSPs. (Jim Heindlmeyer, CFO)
Q: Can you discuss the growth characteristics you're seeing internationally versus the US?
A: We remain optimistic about international opportunities, particularly in mature markets like the UK and Europe, as well as emerging markets in Southeast Asia, South Asia, and the Middle East. (Jim Heindlmeyer, CFO)
Q: Can you quantify the impact of Spotify's bundling drag and its legal status?
A: Billboard estimated the impact to be about $150 million annually to the industry, with Reservoir's share being around $1.2 million to $1.5 million annually. We have built this into our forecast and will continue to advocate for our songwriters. (Jim Heindlmeyer, CFO; Golnar Khosrowshahi, CEO)
Q: How often do you expect one-off events like the De La Soul launch to occur?
A: Such events are outliers and not frequent. We don't foresee executing a similar scale event in the next one or two quarters. (Golnar Khosrowshahi, CEO)
Q: Are there any changes in seasonality or OpEx trends for the rest of the year?
A: We are right-sized with respect to our infrastructure, and the current OpEx run rate is expected to continue. Revenue seasonality has been flattened due to improved accrual processes. (Jim Heindlmeyer, CFO)
Q: Can you discuss the M&A pipeline and its characteristics?
A: We are excited about the pipeline, which includes off-market deals at attractive multiples. The short-term pipeline consists of transactions in the seven to eight-figure range, with a mix of recorded, publishing, and film score assets. (Golnar Khosrowshahi, CEO)
Q: What has been driving the decrease in cost of revenue despite revenue growth?
A: The shift away from physical revenue on the recorded side, which carries a higher cost, was the biggest driver. Additionally, the mix of acquired assets with higher margins contributed to the improvement. (Jim Heindlmeyer, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
