New York-based Reservoir Media generated revenues of $33.3 million in calendar Q3 2022 (its fiscal Q2 2023), up 10% compared to the $30.3 million generated by the company in calendar Q3 2021 (Reservoir’s fiscal Q2 2022).
That’s according to new investor filings for the three months to end of September, published by the publicly-traded music company on Tuesday (November 8).
Reservoir says that this increase was primarily driven by strong growth in both its recorded music and publishing segments, highlighted by 11% growth in the Recorded Music segment, “inclusive of the acquisitions of various catalogs”.
On an organic basis (i.e. discounting acquisitions), Reservoir says that its overall revenues grew by 6% YoY in calendar Q3.
Commenting on these results in a statement issued on Tuesday, Golnar Khosrowshahi, Founder and Chief Executive Officer of Reservoir, said the “music industry continues to experience strong secular tailwinds, which should allow it to overcome any impacts from the macroeconomic downturn”.
Reservoir’s Chief Financial Officer Jim Heindlmeyer said in a statement that the company will “continue to execute against our capital deployment target of $100 million toward strategic M&A for the year”.
Founder and CEO Golnar Khosrowshahi revealed in June that Reservoir expects to deploy over $100 million in new capital in fiscal 2023.
Key publishing and recorded music catalog acquisitions announced by Reservoir recently include the catalog of swing artist Louis Prima and Lebanese label and music publisher, Voice of Beirut in conjunction with MENA-based music publisher and music company PopArabia.
Music Publishing
Digging deeper into Reservoir’s filing reveals that its Music Publishing revenue in calendar Q3 was $24.1 million, an increase of 9% YoY compared to $22.1 million in calendar Q3, 2021.
The key driver behind Reservoir’s Music Publishing segment in calendar Q3 was Digital revenue, which generated $13.2 million in calendar Q3, up 15% YoY.
Other highlights within Reservoir’s Publishing segment included its performance and synchronisation revenues, which generated $4.4 million and $4.4 million, respectively in calendar Q3, which was up 1% and 6% YoY, respectively.
Recorded Music
The company’s total recorded music revenues in calendar Q3 were $8.9 million, an increase of 11% YoY compared to $8 million in calendar Q3 last year.
Reservor says that this improvement “was largely driven by assets under the Tommy Boy label”, which it acquired in a deal valued at approximately $100 million in June 2021.
Reservoir’s recorded music revenues were also driven by “strong Digital and Synchronization revenue growth”, the company noted in its investor filing on Tuesday, adding however that this growth was partially offset by lower Physical revenue.
‘Digital’ contributed $6.3 million to Reservoir’s recorded music revenues in calendar Q3 2022, up 35% YoY.
Physical revenue was down 66%, from $2.5 million in calendar Q3 last year, to $900,000 in calendar Q3 2022.
Commenting on the company’s physical revenues during the company’s earnings call on Tuesday, Jim Heindlmeyer, Reservoir’s Chief Financial Officer said: “Our physical revenue is dependent on our release schedule”.
He added: “We had a strong release schedule last year, relative to a more light release schedule this year. We are looking forward to Record Store Day in our third quarter this year and we expect physical sales to be strong as we move through the rest of the year.”
In terms of profitability, Reservoir reports that its operating income (see below) in calendar Q3 was $6.6 million, down 15% YoY compared to its operating income of $7.8 million in its fiscal Q2 2022 (calendar Q3 2021).
OIBDA (operating income before depreciation and amortization) in calendar Q3 decreased 5% to $12 million, compared to $12.5 million in the prior year quarter.
Adjusted EBITDA in calendar Q3 (Reservoir’s fiscal Q2 2023) was up 1% YoY to $12.8 million, versus $12.7 million in calendar Q3 2021.
“Our second fiscal quarter financial results are a testament to the strength and consistency of our business model, and we have raised guidance for the year to reflect our momentum.”
Golnar Khosrowshahi, Reservoir
Golnar Khosrowshahi, Founder and Chief Executive Officer of Reservoir, said: “Our second fiscal quarter financial results are a testament to the strength and consistency of our business model, and we have raised guidance for the year to reflect our momentum.
“We delivered double-digit top-line growth while also signing multiple high-profile creators to our talented roster and catalog across both our Recording and Publishing segments.
Added Khosrowshahi: “The music industry continues to experience strong secular tailwinds, which should allow it to overcome any impacts from the macroeconomic downturn.
“We’re seeing a vibrant resurgence in live performances, growing opportunities for synchronization, and an increase in subscribers to streaming content services.
“Our value enhancement initiatives, combined with our diversified portfolio of award-winning songwriters and artists, strategically positions Reservoir to continue to benefit from industry momentum, while we concurrently work to generate considerable long-term value for our roster and shareholders.
“Our strategy continues to support strong, consistent financial performance, and we expect to execute on accretive business development opportunities that will further bolster our roster, leverage our scale, and create value for our shareholders.”
“We will also continue to execute against our capital deployment target of $100 million toward strategic M&A for the year.”
Jim Heindlmeyer, Reservoir
Jim Heindlmeyer, Chief Financial Officer of Reservoir, said: “We are pleased with the financial performance and execution against our strategic initiatives in the second fiscal quarter.
“As a result of our strong execution and expected growth going forward, we are raising both revenue and adjusted EBITDA guidance for the full fiscal year.
“We will also continue to execute against our capital deployment target of $100 million toward strategic M&A for the year and will remain disciplined as we evaluate future accretive business development opportunities.”Music Business Worldwide
