Earnings call transcript: Reservoir Media Q1 2025 reveals slight revenue beat

Reservoir Media reported its first-quarter earnings for fiscal year 2026, revealing a slight beat on revenue expectations. The company posted a net loss of $600,000, with revenue reaching $37.2 million, surpassing the forecasted $36.88 million. Despite the revenue beat, the company’s stock saw a decline of 1.37% in pre-market trading, closing at $7.81. According to InvestingPro analysis, the company maintains a GOOD overall financial health score, with particularly strong metrics in growth potential. The stock is currently trading near its Fair Value, suggesting balanced market pricing.

Key Takeaways

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• Reservoir Media’s Q1 FY2026 revenue reached $37.2 million, an 8% year-over-year increase.
• The company reported a net loss of $600,000, translating to an EPS of -$0.01.
• Stock price declined by 1.37% in pre-market trading, closing at $7.81.
• The company maintained its full-year revenue guidance of $164-$169 million.
• The deal pipeline exceeds $1 billion, indicating strong future growth potential.

Company Performance

Reservoir Media demonstrated steady growth in its Q1 FY2026, driven by increases in both music publishing and recorded music revenues. The company reported an 8% growth in total revenue, with music publishing revenue rising by 4% and recorded music revenue increasing by 8%. The company’s focus on expanding its recorded music platform and investing in immersive entertainment has contributed to its positive performance.

Financial Highlights

• Revenue: $37.2 million (8% YoY growth)
• Music Publishing Revenue: $24.9 million (4% increase)
• Recorded Music Revenue: $10.4 million (8% increase)
• OIBDA: $12.8 million (12% YoY increase)
• Adjusted EBITDA: $13.9 million (10% increase)
• Net Loss: $600,000

Earnings vs. Forecast

Reservoir Media’s Q1 FY2026 earnings per share (EPS) came in at -$0.01, slightly missing the forecast of $0. The revenue of $37.2 million exceeded expectations by 0.87%, marking a positive surprise for investors. This slight revenue beat indicates a stronger-than-expected performance in the company’s core business segments.

Market Reaction

Despite the revenue beat, Reservoir Media’s stock price fell by 1.37% in pre-market trading, closing at $7.81. This decline might reflect investor concerns over the reported net loss and the negative EPS, which missed forecasts. The stock’s current price remains closer to its 52-week low of $6.56, indicating potential volatility.

Outlook & Guidance

Reservoir Media maintained its full-year revenue guidance of $164-$169 million and adjusted EBITDA guidance of $68-$72 million. The company anticipates continued growth in digital revenue, bolstered by Spotify’s price increases and a balanced M&A pipeline. The global immersive entertainment market, expected to reach $473 billion by 2030, presents significant growth opportunities.

Executive Commentary

CEO Gulnar Khosrowshahi remarked, "Fiscal twenty twenty-six is shaping up to be an important year for Reservoir." This sentiment was echoed by CFO Jim Heindelmeyer, who noted that the increase in management revenue is a key driver of growth. The company’s strategic investments and acquisitions, such as the purchase of Fools Gold Records, underscore its commitment to expanding its market presence.

Risks and Challenges

With a current ratio of 1.2 and an Altman Z-Score of 2.84, the company maintains adequate financial stability despite market challenges. These metrics, along with detailed risk assessments, are available through InvestingPro’s extensive financial analysis tools.

• Economic Uncertainty: Macroeconomic pressures could affect consumer spending on entertainment.
• Competitive Market: Intense competition in the music industry may impact market share.
• Digital Revenue Fluctuations: Variability in digital revenue could affect financial stability.
• M&A Integration: Challenges in integrating acquisitions could impact operational efficiency.

Q&A

During the earnings call, analysts focused on the company’s investment in Lightroom and its implications for future growth. Questions also centered on the timing of digital revenue and the company’s M&A strategy, highlighting the importance of organic and off-market deals in Reservoir Media’s growth plans.

Full transcript - Reservoir Media Inc (RSVR) Q1 2026:

Conference Operator: Greetings, and welcome to the Reservoir Media Q1 Fiscal Year twenty twenty six Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Jackie Marcus.

Please go ahead.

Jackie Marcus, Investor Relations, Reservoir Media: Thank you, operator. Good morning, everyone, and thank you for participating in today’s earnings conference call. Reservoir Media issued a press release with results for its 2026 ended 06/30/2025, earlier this morning. If you did not receive a copy of our earnings press release, you may access it from the Investor Relations section of our website at investors.reservoirmedia.com. With me on today’s call are Gulnar Khosrowshahi, Founder and Chief Executive Officer and Jim Heindelmeyer, Chief Financial Officer.

As a reminder, this call is being simultaneously webcast and will be recorded and archived on the Investor Relations section of our website. Before I turn the call over to Golnar and Jim, I’d like to note that today’s discussion will contain forward looking statements that reflect the current views of Reservoir Media about our business, financial performance and future events and, as such, involve certain risks and uncertainties. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs, and projections will result or be achieved. Please refer to our earnings press release and our filings with the Securities and Exchange Commission for more information on the specific risks, uncertainties and other factors that could cause our actual results to differ materially from our expectations, beliefs and projections described in today’s discussion.

Any forward looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events except to the extent required by applicable law. In addition to financial results presented in accordance with generally accepted accounting principles, we plan to present during this call certain financial measures that do not conform to US GAAP if we believe they are useful to investors or if we believe they will help investors to better understand our performance or business trends. Reconciliations of these non GAAP financial measures to the nearest comparable GAAP measures are included in our earnings press release. I would now like to turn the call over to Goulnar.

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Thank you, Jackie. Good morning, everyone, and thank you for joining us today. Our financial results in the first fiscal quarter put us in line with our full year projections with top line growth of 8%, 5% coming organically. We continue to see healthy demand for our portfolio across music publishing and recorded music. Fiscal twenty twenty six is shaping up to be an important year for Reservoir.

We are actively advancing a robust pipeline of acquisition opportunities and continuing to diversify our portfolio in ways that enhance long term value. This positions us well to execute on our strategic growth objectives. Just last month, we announced an investment in London based entertainment company Lightroom, which develops and exhibits IP led immersive entertainment experiences. Since its flagship London venue opened in February 2023, Lightroom has stood out as a premier provider of immersive entertainment combining exceptional storytelling with a scalable IP driven product model. Lightroom’s programming to date has featured an impressive slate of a list collaborators, including Tom Hanks, Coldplay, David Hockney, Anna Wintour, and Hans Zimmer.

The global immersive entertainment industry as a whole was valued at 133,000,000,000 in 2024 and is expected to reach 473,000,000,000 by twenty twenty twenty thirty. This partnership diversifies Reservoir’s investment portfolio into the high growth immersive entertainment vertical and unlocks additional value from our IP’s use as the foundation for future shows. Immersive experiences built around music are particularly attractive to the growing super fan market of highly engaged music fans, which has risen to 20% of paid streaming subscribers in The US as of the 2024 according to Luminate. We are pleased to be supporting Lightroom’s efforts and look forward to helping bring future shows to life. On the recorded music side of the business, we furthered our commitment to expanding this segment with the addition of independent label Fools Gold Records.

Reservoir acquired the master rights to the catalogs of five of the label’s artists and will also exclusively market and distribute all other existing and future recordings on Fools Gold, including sub label A Track and Friends. Fools Gold earned its reputation as a taste maker indie label across dance, electronic, and hip hop with hits by Kit Cudi, Danny Brown, and A track. The deal includes A track’s era defining remix of the Yeah Yeah Yeah’s, Heads Will role, and his duo, Ducksauce’s viral Grammy nominated single, Barbara Streisand. This acquisition follows our recent addition of UK based label New State as well as a new partnership with Nashville based label Off Road Records. Together, these moves reflect our focused strategy to build and strengthen Reservoir’s recorded music platform with commercially relevant assets.

These labels are also all notably independent. And through these deals, we continue to champion the value and influence of indie music on a global scale. We are solidly scaling this segment of our business, and we believe it represents a meaningful opportunity for long term value creation. Sustained client retention also continues to be a key driver of our long term growth and operational stability. A few weeks ago, we announced the extension of our publishing deal with Grammy award winning songwriter producer Chris Riddick Tynes, who has been a part of the Reservoir family since 2020.

Chris cowrote and coproduced SZA’s single Snooze, which took home the 2024 Grammy for best r and b song and contributed to the success of her six time platinum selling and number one album SOS. Earlier this spring, the album broke the record for most total weeks at number one on Billboard’s top r and b hip hop albums chart, beating out the long standing record holder, Michael Jackson’s thriller. More recently, Chris co wrote Kehlani’s hit single, Folded, which debuted at number seven on Billboard’s Hot R and B songs and marks the biggest debut of her career to date. We also recently extended our agreement with music icon, Joni Mitchell. Reservoir entered into an administration agreement with Joni in 2021, and it has been an incredible few years witnessing new generations of fans discovering Joni’s magic through her triumphant return to the stage.

We have been honored to support her during this time. Being in business with creators whose music is culturally impactful continues to be a hugely rewarding aspect of our business, and we look forward to our ongoing partnerships with them. I will now turn the call over to Jim to discuss our first fiscal quarter financial results in greater detail. Jim?

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: Thank you, Gomer, and good morning, everyone. Our first fiscal quarter results met our internal expectations and demonstrate both the strength of our existing portfolio and our success with our acquisitions of new assets. Revenue for the first fiscal quarter was $37,200,000 a 5% year over year improvement on an organic basis and an 8% increase when including acquisitions. This was led by the 8% growth in our Recorded Music segment and the 4% increase we had in Music Publishing. Turning to our operating expenses, the total cost of revenue decreased 1% compared to the prior year quarter, while our administration expenses and amortization and depreciation costs grew 1615%, respectively, versus the prior year.

Looking at operating performance for the first quarter, OIBDA was $12,800,000 an increase of 12% year over year, and adjusted EBITDA was up 10% to $13,900,000 compared to our Q1 in fiscal twenty twenty five. The increases in OIBDA and adjusted EBITDA were due to higher revenues and stronger gross margins, partially offset by an increase in administration expenses, impacted by inflationary pressures and higher expenses associated with increased management revenue. Interest expense was $6,300,000 for the quarter versus $5,100,000 in the prior year, driven primarily by a higher debt balance due to the use of funds and acquisitions of music catalogs and writer signings as well as an increase in effective interest rates. Net loss for the first quarter was approximately $600,000 compared to a net loss of $500,000 in the 2025. The decrease was impacted by the higher loss on the fair value of our interest rate hedges.

This resulted in a diluted loss per share for the quarter of $01 the same as the prior year quarter. Our weighted average diluted outstanding share count during the quarter was approximately 65,000,000. Now let’s dive into our segment review for the quarter. Music Publishing had a 4% increase in revenue versus the prior year quarter at $24,900,000 largely due to an increase in synchronization revenue driven by the timing of licenses and an increase in other publishing revenue primarily attributable to acquired stage rights. These increases were partially offset by a decrease in performance revenue resulting from the timing of hit songs and a decrease in digital revenue due to the timing of receipts from various revenue sources.

Moving to our Recorded Music segment, we had an 8% increase to $10,400,000 in revenue compared to our Q1 last year. This was driven by an increase in digital revenue due to the continued growth at music streaming services and the acquisition of catalogs. The increase in digital revenue was partially offset by a decrease in synchronization revenue driven by the timing of licenses as well as a decrease in physical revenue. Turning to our balance sheet. As of 06/30/2025, cash provided by operating activities was $6,000,000 which was a decrease of $2,500,000 compared to the year ago quarter, primarily due to the timing of royalty payments.

We had total available liquidity of $173,000,000 consisting of $14,800,000 of cash on hand and $158,200,000 available under our revolver. We ended the quarter with total debt of $387,400,000 which was net of $4,500,000 of deferred financing costs, and thus, we maintained $372,500,000 of net debt. That compares to net debt of $366,700,000 as of 03/31/2025. I would also like to note that in early June, we amended our senior credit facility to increase our revolving credit commitment from $450,000,000 to $550,000,000 giving us greater flexibility to execute on transactions as the opportunities arise. Consistent with our prior first quarter earnings calls, we are maintaining our recently announced full year guidance ranges.

To remind everyone, our revenue guidance range stands at $164,000,000 to $169,000,000 and at the midpoint implies growth of 5% versus fiscal twenty twenty five. We similarly reiterate our adjusted EBITDA guidance range of $68,000,000 to $72,000,000 which signals growth of 7% over the prior year at the midpoint of that range. We continually review our forecast for the full year and look forward to providing an update during our Q2 earnings call. As we look forward to the rest of fiscal twenty twenty six, we will remain disciplined in our capital deployment strategy and value enhancement efforts that will enable us to achieve our forecasted revenue and adjusted EBITDA guidance for the full year. With that, I’ll now pass the call back to Goldnar.

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Thank you, Jim. The investments made in just the first quarter are a strong start to what will be an important year ahead for Reservoir. From our entry into a new vertical with Lightroom to the addition of Fools Gold and the resigning of our valued clients, we have a well earned reputation as an innovative music company that believes in the value and importance of our creators’ work. Our financial performance in the first fiscal quarter is the best indicator that our strategy is working. And with a deal pipeline of over a billion dollars, we are excited about what is to come.

With that, we will now open the line for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue.

And our first question comes from Griffin Boss with B. Riley Securities.

Griffin Boss, Analyst, B. Riley Securities: Hi, good morning. Thanks for taking my questions. So first, I want to dig into the Lightroom investment. Is there any more color you could provide about the size of this investment or your stake in Adventure? And also related, did did you go into this with any certain IP in mind that you knew you would want to monetize through these immersive experiences, or is it more so opportunistic to to enter this this this industry?

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Good morning, Griffin. I’ll answer the second part of your question first. I think there is there are a number of targets that we would like to collaborate with Lightwork on around which we can develop content that are existing clients or catalogs that are represented here. But at the same time, what you said is accurate in that this is an opportunistic endeavor such that we foresee future content development based on future m and a and deals that we do there. So that’s how we’re approaching that, and I will let Jim answer the first part of your question.

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: Yeah. You you’ll see a little bit more detail on that, I suppose, in the the 10 q when it comes out later today. But, you know, this is an investment that puts us at, you know, a a a single digit equity stake in the business. We are not a majority owner of the business, but it’s a a business that, as Golar said, we believe is very synergistic to, to our asset base, and we look forward to working with them.

Griffin Boss, Analyst, B. Riley Securities: Okay. Got it. Thank you. And then switching gears to the digital revenue. I just wanna confirm.

I know, Jim, you discussed that that was primarily due to timing of receipts. So I just wanna confirm that that wasn’t a result of any, you know, particular weakness at at at certain, certain DSPs or or anything like that.

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: No. Not at all. It’s not something that’s indicative of a a trend that we see going forward. This is really the result of, you know, certain DSPs that from time to time make adjustments. Maybe that is a benefit in one quarter, in this case, benefit, let’s say, in the prior year quarter, and it doesn’t repeat again in this quarter.

These things aren’t always routine in terms of every quarter, every year, you get the same types of adjustments or cleanups. And that’s really one of the things that’s impacting it in this quarter. It’s nothing that we see as as being a trend that’s concerning for us.

Griffin Boss, Analyst, B. Riley Securities: Okay. Understood. That that makes sense. And then just last for me, and I’ll I’ll I’ll hand it over. But for the administrative expenses, I I understand that those were higher given the the the higher management revenue.

But in in terms of the inflationary pressures there, so should we think of those as kind of structurally higher going forward given those inflationary pressures?

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: Well, I you know, I think that largely the inflationary pressures we’re we’re talking about, you know, the our normal compensation and and the the increases that folks get annually, as well as, our vendors and different technology that we use and maybe inflationary pressures on costs. The the reality is that the the bulk of that increase is driven by the increased management revenue. I think that on our our largest segment being music publishing, our increases in administration expenses were about 5%. So we’re we’re doing what we can to control those costs.

Griffin Boss, Analyst, B. Riley Securities: Okay. Great. Thanks for taking my questions. Good to see the progress.

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Thank you. Thanks.

Conference Operator: Our next question comes from Richard Baldry with Roth Capital Partners.

Richard Baldry, Analyst, Roth Capital Partners: Thanks. Your blended gross margins were near sort of an all time record in what’s seasonally typically a slow quarter. Can you talk about any underlying trends there, whether that’s mix driven or the different international geographies you’re moving into, how sustainable those trends or extensible that is? Thanks.

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: Yeah. There’s a a little bit there. You know, you you see lower, physical revenue on the recorded side. That’s a pretty, high cost revenue stream for us. So as as that’s a little lower, we we have a little bit of of margin benefit there.

And then beyond that, it’s it really comes down to the the mix of assets that’s that’s driving the the revenue. So in this quarter, we had a little bit of improvement, I think, in both segments. Recorded part, really, as I touched on with the fiscal revenue coming down as a percentage of the total. On the publishing side, it really comes down to the mix of catalogs that are driving that that revenue.

Richard Baldry, Analyst, Roth Capital Partners: And I I think a lot of the the revenue rec in the first quarter tends to be sort of, discretionary on the part of your end customers. They’re sort of estimating where maybe second, fourth quarters are really audited. So do you think over the course of the year, does the the digital growth sort of mirror the rest of the business? So we probably see sort of, call it, catch up in the second quarter when they actually have to audit and come up with, you know, pretty hard hard and fast numbers as opposed to the looser numbers in the first quarter.

Jim Heindelmeyer, Chief Financial Officer, Reservoir Media: Yeah. Well, I I do think that in the first quarter here, certainly on the on the publishing side, this is not a a trend. The fact that digital was was down a couple points there, we do expect that to to move back to growth as we move through the rest of the year. And beyond that, I I would say that, you know, there’s a lot of good news happening. You saw the Spotify news yesterday with price increases in a number of markets, and and that will certainly benefit us on the digital side on on both segments of the business as we move through the rest of this year.

Richard Baldry, Analyst, Roth Capital Partners: Maybe last for me would be, looking into the M and A pipeline, are there any notable changes there, whether that’s geographic, genres, whatever, where you think you’ll be headed or between Publishing or Recording sides of business?

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: It’s an even split right now. The volume is still there. So that just having that robust volume is is a good indicator for us as far as what the opportunities are before us between now and the end of the fiscal year. I think looking backwards, we’ve been a little bit more focused on the recorded side, but that has been less a strategic focus and more a result of the best deals that we are presented with, and we have to be opportunistic about that. Other than that, I would say that the pipeline is strong.

The mix is even, and we are going after the transactions that provide us with the highest returns.

Richard Baldry, Analyst, Roth Capital Partners: And maybe last, again for me. Remind us, you know, how many of your deals really sort of are organically sourced from the relationship side of the table versus how much you find yourself in sort of, like, open market bidding type situations?

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: I think I’d add another category in that. I’d say organically sourced Uh-huh. Off processes and perhaps off market. But, you know, off market doesn’t necessarily have to be organic, but certainly places us us out of an auction process. I don’t have the exact figures in front of me, but I would say that our more substantial deals are a result of off market relationships.

And a very small portion of the transactions that we complete are through auction processes. We try to stay away from those. And then the organic transactions, they may be higher in number, but not necessarily translating into higher in dollar amount. And that’s just because there are a lot of organic deals that we do with people who are presently represented on the roster. So if I were to sort of split these up and assign numbers, I’d say the majority share is definitely off market on a value basis.

Conference Operator: Great. Thanks.

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Thank you, Rich.

Conference Operator: This now concludes our question and answer session. I would like to turn the floor back over to Gulner Khosrowshahi for closing comments.

Gulnar Khosrowshahi, Founder and Chief Executive Officer, Reservoir Media: Thank you, operator. Fiscal year twenty twenty six is progressing in line with our expectations, putting us firmly on track to achieve our full year guidance. I’m optimistic about the coming quarters, and I’m confident that the best is still to come for our organization. We appreciate your support and interest in Reservoir, and I look forward to sharing our second fiscal quarter results with you this fall. Thank you very much.

Conference Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines, have a wonderful day.

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