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RM

Reservoir Media, Inc. (RSVR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered strong top- and bottom-line growth: revenue $42.3M (+19% YoY; +16% organic), OIBDA $16.3M (+26% YoY), and Adjusted EBITDA $17.3M (+26% YoY); diluted EPS was $0.08 versus ($0.05) a year ago .
  • Both segments grew: Music Publishing revenue +16% YoY to $26.9M; Recorded Music +20% to $12.0M, aided by streaming price increases and a royalty recovery on underreported usage .
  • Management raised FY25 guidance for the second consecutive quarter to Revenue $155–$158M and Adjusted EBITDA $61.5–$64.5M (midpoints +8% and +13% YoY), citing resilient cash flows and a robust M&A pipeline .
  • Stock-relevant narrative: CFO said results “exceeded our internal expectations,” margin expansion continued, and royalty audits/recoveries may lift ongoing catalog earnings; interest-rate risk partly hedged ($150M through Dec 2027) .

What Went Well and What Went Wrong

What Went Well

  • Strong consolidated execution: “another strong period of growth across both the top and bottom lines” with Adjusted EBITDA up 26% YoY; raised guidance reflects confidence heading into Q4 .
  • Segment momentum and margin expansion: Recorded Music OIBDA rose 37% with margin expanding to 53% on revenue growth and higher gross margin (benefiting from royalty recovery) .
  • Strategic catalog additions: Lastrada Entertainment catalog acquisition and extended deal with producer/songwriter Serban Cazan; CEO emphasized off‑market deals and disciplined cost management as key differentiators .

What Went Wrong

  • Neighboring rights softness: Recorded Music neighboring rights revenue declined 7% YoY in Q3; management highlighted timing/hit-driven lumpiness and periodic retroactive cleanups .
  • Higher administration expense: Admin expenses rose 17% YoY in Q3; CFO noted variable manager compensation tied to higher management revenue as a primary driver .
  • Increased leverage and lower liquidity vs. March: Net Debt rose to $354.0M and total available liquidity decreased to $92.0M as the revolver funded stepped-up M&A .

Financial Results

Consolidated performance vs. prior quarters

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($M)$34.3 $40.7 $42.3
Net (Loss)/Income ($M)($0.5) $0.2 $5.3
Diluted EPS ($)($0.01) $0.00 $0.08
OIBDA ($M)$11.3 $16.6 $16.3
Adjusted EBITDA ($M)$12.6 $17.6 $17.3
Revenue YoY (%)+8% +6% +19%

Segment breakdown – totals

SegmentQ1 FY25 Revenue ($M)Q2 FY25 Revenue ($M)Q3 FY25 Revenue ($M)Q1 OIBDA ($M)Q2 OIBDA ($M)Q3 OIBDA ($M)
Music Publishing$24.0 $28.6 $26.9 $6.8 $11.0 $9.1
Recorded Music$9.6 $10.7 $12.0 $4.5 $5.4 $6.4

Music Publishing – revenue mix

Revenue TypeQ1 FY25 ($M)Q2 FY25 ($M)Q3 FY25 ($M)
Digital$14.6 $15.6 $16.7
Performance$5.1 $5.1 $4.4
Synchronization$2.8 $5.8 $4.1
Mechanical$0.7 $1.1 $0.9
Other$0.8 $1.0 $0.8
Total$24.0 $28.6 $26.9

Recorded Music – revenue mix

Revenue TypeQ1 FY25 ($M)Q2 FY25 ($M)Q3 FY25 ($M)
Digital$6.6 $7.2 $8.1
Physical$1.4 $1.5 $2.0
Neighboring Rights$1.1 $1.1 $0.9
Synchronization$0.6 $0.9 $1.0
Total$9.6 $10.7 $12.0

KPIs and capital structure

KPIQ1 FY25Q2 FY25Q3 FY25
Cash from Operations YTD ($M)$8.6 $21.9 $33.1
Cash & Equivalents ($M)$16.4 $21.1 $17.8
Revolver Availability ($M)$121.2 $121.2 $74.2
Total Liquidity ($M)$137.6 $142.3 $92.0
Total Debt ($M)$324.1 $324.5 $371.8
Net Debt ($M)$307.8 $303.4 $354.0
Diluted Shares (avg)64,970,693 65,837,273 66,106,474

Estimates (Street consensus)

  • S&P Global consensus estimates were unavailable at time of analysis due to API request limits; estimate comparisons are therefore not included.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY25 (post-Q1)$148–$152 $148–$152 Maintained
Adjusted EBITDA ($M)FY25 (post-Q1)$58–$61 $58–$61 Maintained
Revenue ($M)FY25 (post-Q2)$148–$152 $150–$153 Raised
Adjusted EBITDA ($M)FY25 (post-Q2)$58–$61 $59–$62 Raised
Revenue ($M)FY25 (post-Q3)$150–$153 $155–$158 Raised
Adjusted EBITDA ($M)FY25 (post-Q3)$59–$62 $61.5–$64.5 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Streaming price increases/digital mixDriving Publishing digital growth; Physical declines from prior De La Soul releases Continued benefit across segments; part of +20% Publishing digital and Recorded digital growth Positive momentum sustained
Royalty audit/recoveryNoted swap fair value impacts; no audit detail in Q1/Q2 release Specific royalty recovery boosted Recorded Music revenue and margins; could lift ongoing royalties Structural tailwind post-resolution
M&A pipeline/off‑market dealsSnoop Dogg/Death Row, k.d. lang deals, catalog buys; confidence in portfolio Pipeline “remains robust,” off‑market strategy emphasized; new Lastrada and Lebo M acquisitions Active deployment continues
Cost discipline/operating leverageOIBDA and Adjusted EBITDA expansion; nonrecurrence of legal fee write-off boosted margins “Exceeded internal expectations” with margin expansion; variable manager comp raised OpEx Margin expansion amid revenue growth
Neighboring rights volatilityMixed; physical declines impacted mix Timing-driven, hit-dependent, lumpiness acknowledged; more direct deals pursued Variable but being optimized
Interest-rate risk managementSwaps rolled off in Sept; swap loss impacted Q2 ~$150M debt hedged through Dec 2027; under 50% hedged; evaluating further hedges Hedge coverage extended
Industry structureN/AGenerally optimistic on Spotify–UMG direct deal implications for industry Potentially constructive

Management Commentary

  • CEO: “our third fiscal quarter marks another strong period of growth across both the top and bottom lines… Reservoir consistently ushers in accretive opportunities… we continue to maximize the impact these deals… with prudent cost management” .
  • CFO: “another robust quarter, exceeding our internal expectations… raising our fiscal 2025 guidance… focus on maintaining operating leverage through cost controls on higher revenues” .
  • CFO on liquidity and leverage: total liquidity $92M; Net Debt $354M as of Dec 31; active capital deployment toward accretive catalogs .

Q&A Highlights

  • OpEx drivers: Variable compensation tied to management revenue was the most significant factor behind higher administration expenses; driven by stronger revenue .
  • M&A pipeline: Robust and heavily off‑market; no change in seller appetite or deal volume; focus on high‑quality assets on both publishing and recorded sides .
  • Royalty recovery: While partly one‑time, resolving underreported usage should elevate ongoing royalties on the affected catalog .
  • Neighboring rights: Timing of hits and retroactive cleanups create quarterly lumpiness; pursuing more direct deals to maximize revenue .
  • Interest-rate hedging: ~$150M hedged through Dec 2027; currently under 50% of outstanding debt; management continuously evaluates further hedges .
  • Industry deal context: Optimism that the Spotify–UMG direct deal terms could translate positively across the industry .

Estimates Context

  • Wall Street consensus (S&P Global) for EPS, revenue, and EBITDA was unavailable due to daily request limits at the time of retrieval; as a result, formal “vs estimates” comparisons are not included. Management indicated Q3 results exceeded internal expectations, which contributed to the FY25 guidance raise .

Key Takeaways for Investors

  • Momentum and guidance: Strong Q3 execution and a second consecutive guidance raise are positive catalysts; midpoints imply FY25 Revenue +8% and Adjusted EBITDA +13% YoY .
  • Margin expansion: OIBDA margin rose to 38% and Recorded Music OIBDA margin to 53% on revenue growth and royalty recovery; Publishing OIBDA margin steady at 34% .
  • Royalty audits can reset earnings power: The Q3 royalty recovery boosted revenue/margins and is expected to lift ongoing royalties in the affected catalog, supporting multi‑quarter earnings quality .
  • Leverage and liquidity trade‑off: Net Debt increased to $354.0M and liquidity fell to $92.0M amid stepped-up acquisitions; investors should monitor revolver usage and swap impacts on interest expense .
  • Rate risk mitigated but not eliminated: ~$150M hedged through Dec 2027; under 50% of debt hedged—further hedging depends on market conditions .
  • Digital tailwinds: Streaming price increases and catalog streaming strength underpin organic growth across segments .
  • Near-term trading setup: Raised guidance and margin strength are supportive; watch for Q4 seasonality and any normalization of one‑time items (e.g., royalty recovery) .