Reservoir Media, Inc. Q4 FY2025 earnings call

• Reservoir's fiscal 2025 performance exceeded guidance, with top-line annual revenue growth of 10%, 18% improvement in adjusted EBITDA, and over $115 million towards acquisitions and advances.
• Strategic off-market M&A drove growth, including signing deals with Snoop Dogg and k.d. lang, acquiring Lastrada Entertainment's catalog, and buying New State and its recorded music catalog.
• Recorded music segment showed continued growth in the fourth quarter and full fiscal year, with operational leverage to drive organic growth and integrate acquisitions.
• Committed to organic growth, with successful sync placements in the fourth quarter and active songwriters achieving top 10 US market share.
• International expansion: Established PopArabia in the Middle East and launched PopIndia in Mumbai, focusing on signing regional talent and acquiring catalogs.

For the fourth quarter, Music Publishing generated revenue of $27.9 million, a 6% increase including acquisitions compared to the same period last year. Digital revenue in Music Publishing increased $600,000 to $13.6 million (5%), performance revenue decreased 13% to $6.5 million, and synchronization revenue was $5.5 million, a 51% increase. Recorded Music segment had revenue of $12 million in the fourth quarter, a 7% increase versus the prior year quarter. Digital revenue in Recorded Music increased 19%, physical revenue decreased 26%, synchronization revenue decreased 29%, and neighbouring rights increased 15% to $1.1 million. For the full fiscal year 2025, Music Publishing revenue rose 12% compared to the prior year, driven by price increases of streaming services and catalog expansion. Recorded Music revenues increased 4% due to user growth, price increases of streaming services, and royalty recoveries, partially offset by a decrease in physical sales.

• Fiscal 2026 revenue expected in the range of $164 million to $169 million.
• Adjusted EBITDA expected in the range of $68 million to $72 million.
• Strong pipeline of potential acquisitions and focus on driving organic growth from existing catalog.

None specifically detailed in the transcript beyond general forward-looking statement risks involving uncertainties that could cause actual results to differ from expectations.

Q: Adding the India operation, are you seeing markedly better ROIs in international geographies or is it still pretty one-off deals that are driving investments?

A: Golnar Khosrowshahi states they see better opportunities and volume in emerging markets like India and the Middle East with better ROIs and less competition.

Q: How do you look at sort of revenue seasonality in 2026? Does it get back to regular cadence?

A: Jim Heindlmeyer expects to get back to a cadence where second and fourth quarters may be slightly higher than first and third quarters, evaluating accruals to reflect revenue accurately by quarter.

Q: Could you talk a little bit about where you're hedged and strategy on interest rates near to intermediate term?

A: Jim Heindlmeyer mentions $150 million hedged, constantly evaluating if additional hedges are needed as debt ticks up with M&A activity.

Q: Can you talk a little bit more about how much capital you're targeting to deploy in 2026?

A: Golnar Khosrowshahi says they are opportunistic with deal flow, and Jim Heindlmeyer notes projecting around $50 million free cash flow in fiscal 2026 for ongoing M&A and writer signings.

Q: When you mentioned $150 million number, was that for the year or fourth quarter? And how much allocated to Lastrada in fourth quarter?

A: Golnar Khosrowshahi states $115 million was for the year, with details on allocation to Lastrada.

Q: How does India stack up to other regions in terms of monetization and growth?

A: Golnar Khosrowshahi explains emerging markets like India have significant growth potential due to population and subscription opportunities, differing from advanced markets like the US and Western Europe in saturation and growth rates.

Q: Is the organic growth rate of the current catalog mid-single-digit going forward?

A: Jim Heindlmeyer mentions conservatism in guidance due to not projecting specific hits, being prudent with projections and updating guidance as the year progresses