Reservoir profits rise on streaming, sync revenue

Reservoir Media reported higher quarterly profits and revenue on Tuesday (Nov. 8) as the acquisition of the “Sing, Sing, Sing” legend Louis Prime‘s catalog and Lebanese label The voice of Beirut helped boost the company’s growth forecast for the entire year.

From July to September, Reservoir’s net income rose 3% to $4.5 million, or $0.07 per share, while top-line revenue rose 10% to $33.3 million from the year-ago quarter. Executives said they now expect both revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to rise 11% for the full fiscal year 2023. For revenue, that’s a range of $118 million to $122 million, and for adjusted EBITDA, a closely watched measure of profitability, that will range between $45 million and $47 million.

“While the broader economy faces challenges, the music industry as a whole remains healthy,” Golnar KhosrowshahiReservoir founder and CEO said on a call with analysts.

Reservoir is midway through fiscal 2023, when it aims to spend $100 million on strategic acquisitions. In addition to acquiring Prima’s published and recorded music catalogs and Voice of Beirut, Reservoir signed publishing deals with Naughty by nature‘s KayGee, writer-producer Nick Lee and country singer-songwriter Brit Taylor.

“We are pleased with the quality and volume of deals that we have executed in the last few months,” Khosrowshahi said, adding that they have a pipeline of about $2.1 billion of potential deals “at various stages of development.”

Music publishing revenue rose 9% to $24.1 million in the quarter, driven by a 15% increase in digital revenue and a 6% increase in sync revenue.

Recorded music revenue rose 11% to $8.9 million, helped mainly by assets under the Tommy Boy label as well as increased digital and sync revenue.

In recorded music, digital revenue rose 35% to $6.3 million, while sync revenue rose 224% to top $1 million. Physical revenue fell 66% to $900,000 as vinyl and CD sales fell on a lighter release schedule this quarter, executives said.

Operating income decreased 15% to $6.6 million and OIBDA (operating income before depreciation and amortization) decreased 5% to $12.0 million due to higher expenses from employee wages and operating a public company.

“We are confident in our long-term ability to grow our top line at a faster rate than our costs going forward,” Jim HeindlmeyerReservoir’s CFO said on the call.

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