Reservoir Media, Inc. (RSVR, RSVRW Q1 FY2025 earnings call

• Reservoir marked the third anniversary of NASDAQ listing and attracted high-caliber talent and assets. - Music Publishing saw 25% increase in adjusted EBITDA with top line growth from digital and performance-based revenues. - Recorded Music had 87% growth in synchronization revenue and 17% growth in digital revenue. - Highlighted success of Reservoir writers' songs like Steph Jones' 'Espresso' and Dua Lipa's album. - Signed new artists like Wrabel, Aaron Zuckerman, and Lewis Thompson. - Early investment in emerging markets led to signing of popular regional acts.

For the first quarter, total revenue was $34.3 million. At the segment level, Music Publishing had a 15% increase in revenue to $24 million. Recorded Music had a 7% decline to $9.6 million. Music Publishing's revenue contribution was significant, driven by acquisitions of catalogs and revenue from existing catalogs benefiting from price increases at multiple music streaming services. Recorded Music's decline was offset by an 87% increase in synchronization revenue and 17% growth in digital revenue.

• Maintained full year revenue guidance range of $148 million to $152 million, implying 4% growth vs fiscal 2024. - Maintained adjusted EBITDA guidance range of $58 million to $61 million, signaling 7% growth over prior year. - Focused on executing strategy to deliver consistent cash flows to achieve forecasted guidance.

• Impact of Spotify's bundling, estimated to be a headwind of $1.2 million to $1.5 million annually for Reservoir. - Uncertainty around litigation related to Spotify's actions. - Cyclicality in deal flow, with capital deployment not always even quarter-over-quarter.

Q: Give more color on magnitude of catalog purchases and addition to royalty advances in the quarter?

A: This was a quiet quarter for catalog acquisitions and advances, but there's a robust pipeline with deals to close in coming quarters.

Q: Talk about growth characteristics internationally vs U.S.?

A: Internationally has mature markets and opportunities in Southeast Asia, South Asia, Middle East, and India with anticipated growth ramping up.

Q: Scope of impact of Spotify bundling drag?

A: Billboard estimated $150 million annual impact to industry, Reservoir estimated $1.2M-$1.5M annual impact, built into forecast.

Q: Recorded Music revenues down but profitability contribution up?

A: De La Soul launch was an outlier event, not frequent occurrence.

Q: OpEx trend and seasonality?

A: Infrastructure rightsized, OpEx run rate expected, revenue cyclicality improved with better accrual process.

Q: M&A pipeline?

A: Excited about short-term pipeline with deals in 7-8 figures, diversified assets, no material contraction in pricing.

Q: Cost of revenue down despite revenue growth?

A: Shift away from physical revenue on recorded side, higher cost of physical, and mix of assets improving gross margin