Reservoir Media(RSVR) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Reservoir Media, Inc Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Reservoir Media, Inc. and its subsidiaries for the three months ended June 30, 2025 and 2024, including statements of loss, comprehensive income (loss), balance sheets, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items Condensed Consolidated Statements of Loss This statement details the company's revenues, costs, operating income, and net loss for the specified periods Condensed Consolidated Statements of Loss | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Revenues | $37,164,293 | $34,316,843 | | Total costs and expenses | $31,717,599 | $29,355,310 | | Operating income | $5,446,694 | $4,961,533 | | Interest expense | $(6,295,958) | $(5,059,398) | | Net loss | $(643,725) | $(453,177) | | Net loss attributable to Reservoir Media, Inc. | $(555,659) | $(346,655) | | Basic Loss per common share | $(0.01) | $(0.01) | | Diluted Loss per common share | $(0.01) | $(0.01) | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents the net loss and other comprehensive income (loss) components, including translation adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Net loss | $(643,725) | $(453,177) | | Translation adjustments | $4,052,168 | $34,852 | | Total comprehensive income (loss) | $3,408,443 | $(418,325) | | Total comprehensive income (loss) attributable to Reservoir Media, Inc. | $3,496,509 | $(311,803) | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific dates Condensed Consolidated Balance Sheets | Metric | June 30, 2025 ($) | March 31, 2025 ($) | | :------------------------------------ | :-------------- | :------------- | | Total current assets | $69,472,071 | $79,284,295 | | Intangible assets, net | $721,795,939 | $719,673,219 | | Total assets | $856,976,183 | $865,127,010 | | Total current liabilities | $53,702,656 | $65,837,252 | | Secured line of credit | $387,367,065 | $388,134,754 | | Total liabilities | $486,867,682 | $498,927,228 | | Total shareholders' equity | $370,108,501 | $366,199,782 | Condensed Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income (loss) Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | June 30, 2025 ($) | March 31, 2025 ($) | | :-------------------------------------------------------------------------------- | :------------ | :------------- | | Common Stock Shares Outstanding | 65,491,183 | 65,239,735 | | Common Stock Amount | $6,550 | $6,524 | | Additional paid-in capital | $344,646,039 | $344,145,789 | | Retained earnings | $22,591,911 | $23,147,570 | | Accumulated other comprehensive income (loss) | $1,630,061 | $(2,422,107) | | Total Reservoir Media, Inc. shareholders' equity | $368,874,561 | $364,877,776 | | Total shareholders' equity | $370,108,501 | $366,199,782 | - Shareholders' equity increased by $3,908,719 from March 31, 2025, to June 30, 2025, primarily due to other comprehensive income of $4,052,168, partially offset by a net loss of $555,659 attributable to Reservoir Media, Inc[16] Condensed Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $6,014,143 | $8,555,704 | | Net cash used for investing activities | $(9,659,342) | $(1,898,661) | | Net cash used for financing activities | $(2,509,368) | $(8,414,724) | | Decrease in cash and cash equivalents | $(6,528,996) | $(1,773,509) | | Cash and cash equivalents end of period | $14,857,144 | $16,358,506 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, segment information, and specific financial statement line items - The Company operates in two reportable segments: Music Publishing and Recorded Music, involving the acquisition and management of music catalogs and artist agreements[22] - Revenue recognition for both segments is based on legally enforceable rights and obligations, identifying performance obligations, and recognizing revenue when control of services/goods is transferred, with royalty revenue recognized upon sale or usage[29] Revenue by Type (Three Months Ended June 30) | Revenue by Type | 2025 ($) | 2024 ($) | | :---------------------- | :----------- | :----------- | | Music Publishing | | | | Digital | $14,310,164 | $14,634,703 | | Performance | $4,784,639 | $5,134,426 | | Synchronization | $4,153,411 | $2,811,017 | | Mechanical | $621,622 | $668,973 | | Other | $1,063,630 | $751,174 | | Total Music Publishing | $24,933,466 | $24,000,293 | | Recorded Music | | | | Digital | $8,035,214 | $6,558,170 | | Physical | $1,071,879 | $1,352,341 | | Neighboring rights | $1,072,507 | $1,106,350 | | Synchronization | $264,723 | $613,643 | | Total Recorded Music | $10,444,323 | $9,630,504 | | Other revenue | $1,786,504 | $686,046 | | Total revenue | $37,164,293 | $34,316,843 | - The Company completed acquisitions totaling $3,791,366 in Q2 2025, significantly higher than $801,315 in Q2 2024, primarily for publishing and recorded music catalogs[34] Intangible Assets (Net) | Intangible Assets | June 30, 2025 ($) | March 31, 2025 ($) | | :------------------------------------ | :-------------- | :------------- | | Publishing and recorded music catalogs | $885,775,201 | $875,475,723 | | Artist management contracts | $989,087 | $933,733 | | Gross intangible assets | $886,764,288 | $876,409,456 | | Accumulated amortization | $(164,968,349) | $(156,736,237) | | Intangible assets, net | $721,795,939 | $719,673,219 | - Amortization expense for intangible assets increased by 14.8% YoY to $7,262,026 for the three months ended June 30, 2025, from $6,326,863 in the prior year[35] - The Senior Credit Facility was amended on June 3, 2025, increasing the revolving credit commitment from $450 million to $550 million and resetting the incremental borrowing capacity to $150 million[40] Interest Rate Swaps Outstanding (June 30, 2025) | Effective Date | Notional Amount at June 30, 2025 ($) | Pay Fixed Rate Maturity | | :--------------- | :------------------------------- | :---------------------- | | September 30, 2024 | $100,000,000 | 2.946% December 2027 | | September 30, 2024 | $50,000,000 | 3.961% December 2027 | - Income tax benefit decreased to $271,066 (29.6% effective tax rate) for Q2 2025 from $293,968 (39.3% effective tax rate) for Q2 2024, reflecting changes in loss before income taxes and the mix of income from multiple tax jurisdictions[46][103] - Share-based compensation expense decreased by 11% YoY to $1,133,552 for Q2 2025 from $1,273,674 for Q2 2024[52] - The Company had 65,369,891 basic and diluted weighted average common shares outstanding for Q2 2025[55] - The Company is exposed to credit risk, interest rate risk (partially hedged by swaps), and foreign exchange risk[56][57][58] - The Company's CODM evaluates segment performance based on Operating Income Before Depreciation and Amortization (OIBDA)[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of Reservoir Media, Inc.'s financial performance and condition for the three months ended June 30, 2025, compared to the same period in 2024, covering revenue trends, cost structures, operating income, and non-GAAP financial measures, along with an assessment of liquidity and capital resources, highlighting key drivers of changes in financial results and future outlook Business Overview This section describes Reservoir Media, Inc.'s operational structure, including its Music Publishing and Recorded Music segments - Reservoir Media, Inc. operates as an independent music company with two primary reportable segments: Music Publishing and Recorded Music, in addition to a management business and a rights management entity in the Middle East[68][69] - The Music Publishing segment generates revenue from five main sources: Digital, Performance, Synchronization, Mechanical, and Other, by acquiring interests in music catalogs and signing songwriters[70][75] - The Recorded Music segment focuses on acquiring sound recording catalogs, discovering and developing artists, and marketing/distributing music, with revenues from Digital, Physical, Neighboring Rights, and Synchronization[73][79] Use of Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures like OIBDA and Adjusted EBITDA for performance evaluation - The Company uses non-GAAP financial measures such as OIBDA, OIBDA Margin, EBITDA, and Adjusted EBITDA to evaluate operations and performance, providing additional insights beyond U.S. GAAP measures[107] - OIBDA (Operating Income Before Depreciation and Amortization) is considered an important indicator of operational strengths, while Adjusted EBITDA further excludes non-cash charges, foreign exchange gains/losses, interest rate swap losses, equity-based compensation, and unusual items[108][109] Results of Operations This section analyzes the company's consolidated financial performance, including revenue, expenses, and net loss, for the reporting period Consolidated Income Statement Summary (Three Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | $ Change (in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :------- | :------- | | Revenues | $37,164 | $34,317 | $2,847 | 8% | | Total costs and expenses | $31,718 | $29,355 | $2,362 | 8% | | Operating income | $5,447 | $4,962 | $485 | 10% | | Interest expense | $(6,296) | $(5,059) | $(1,237) | 24% | | Gain (loss) on foreign exchange | $1,095 | $(59) | $1,155 | NM | | Loss on fair value of swaps | $(997) | $(490) | $(507) | 103% | | Net loss attributable to Reservoir Media, Inc. | $(556) | $(347) | $(209) | 60% | - Total revenues increased by 8% YoY to $37.16 million, driven by a 4% increase in Music Publishing and an 8% increase in Recorded Music revenues[82] - Music Publishing revenues increased by $933 thousand (4%), primarily due to a $1,342 thousand increase in synchronization revenue and a $312 thousand increase in other revenue, partially offset by decreases in performance and digital revenue[84] - Recorded Music revenues increased by $814 thousand (8%), mainly due to a $1,477 thousand increase in digital revenue from catalog acquisitions and streaming growth, partially offset by decreases in synchronization and physical revenue[86] - Cost of revenue decreased by 1% YoY to $13.19 million, primarily due to a decrease in writer royalties and other publishing costs, despite an increase in artist royalties and other recorded music costs[88] - Amortization and depreciation expense increased by 15% YoY to $7.31 million, mainly due to the acquisition of additional music catalogs[91] - Total administration expenses increased by 16% YoY to $11.21 million, driven by increases in Other administration expenses (151%), Music Publishing (5%), and Recorded Music (12%) segments, reflecting inflation and investments[93][94][95][96] - Operating income increased by 10% YoY to $5.45 million, with the operating income margin rising to 15% from 14%, due to increased revenues and a lower cost of revenue as a percentage of revenues[97] - Interest expense increased by 24% YoY to $6.30 million, primarily due to higher debt balances from catalog acquisitions and increased effective interest rates on hedged borrowings[98] - The Company reported a net loss of $644 thousand for Q2 2025, an increase from $453 thousand in Q2 2024, mainly due to higher interest expense and loss on fair value of swaps, partially offset by improved foreign exchange results and operating income[105] Non-GAAP Reconciliations This section provides reconciliations of non-GAAP financial measures, such as OIBDA and Adjusted EBITDA, to their most directly comparable GAAP measures Consolidated OIBDA (Three Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | $ Change (in thousands) | % Change | | :------------------------ | :-------------------- | :-------------------- | :------- | :------- | | Revenues | $37,164 | $34,317 | $2,847 | 8% | | Cost of revenue | $13,193 | $13,281 | $(88) | (1)% | | Administration expenses | $11,211 | $9,689 | $1,522 | 16% | | OIBDA | $12,760 | $11,346 | $1,414 | 12% | | OIBDA Margin | 34% | 33% | | | - Consolidated OIBDA increased by 12% YoY to $12.76 million, with OIBDA Margin rising to 34% from 33%, driven by increases in both Music Publishing OIBDA (12%) and Recorded Music OIBDA (9%)[112][113][115] Adjusted EBITDA Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | $ Change (in thousands) | % Change | | :------------------------------ | :-------------------- | :-------------------- | :------- | :------- | | Net loss | $(644) | $(453) | $(191) | 42% | | Income tax benefit | $(271) | $(294) | $23 | (8)% | | Interest expense | $6,296 | $5,059 | $1,237 | 24% | | Amortization and depreciation | $7,314 | $6,385 | $929 | 15% | | EBITDA | $12,695 | $10,697 | $1,998 | 19% | | (Gain) loss on foreign exchange | $(1,095) | $59 | $(1,155) | NM | | Loss on fair value of swaps | $997 | $490 | $507 | 103% | | Non-cash share-based compensation | $1,134 | $1,274 | $(140) | (11)% | | Other (income) expense, net | $164 | $100 | $64 | 64% | | Adjusted EBITDA | $13,895 | $12,620 | $1,274 | 10% | - Adjusted EBITDA increased by 10% YoY to $13.90 million, primarily due to increased revenues, partially offset by higher administration expenses[116] Liquidity and Capital Resources This section assesses the company's ability to generate and manage cash flows, including debt levels, borrowing capacity, and compliance with financial covenants - As of June 30, 2025, the Company had $387.37 million in debt (net of deferred financing costs) and $14.86 million in cash and cash equivalents[117] Cash Flow Summary (Three Months Ended June 30) | Cash Flow Activity | 2025 ($ in thousands) | 2024 ($ in thousands) | $ Change (in thousands) | % Change | | :------------------------ | :-------------------- | :-------------------- | :------- | :------- | | Operating activities | $6,014 | $8,556 | $(2,542) | (30)% | | Investing activities | $(9,659) | $(1,899) | $(7,760) | NM | | Financing activities | $(2,509) | $(8,415) | $5,906 | (70)% | - Cash provided by operating activities decreased by 30% YoY to $6.01 million, mainly due to cash used for working capital, particularly timing of royalty payments and advance recoupments[121] - Cash used for investing activities significantly increased by $7.76 million to $9.66 million, primarily driven by higher acquisitions of music catalogs[122] - Cash used for financing activities decreased by 70% YoY to $2.51 million, mainly reflecting a decrease in net repayments of the secured line of credit[123] - The Senior Credit Facility's revolving credit commitment increased to $550 million, with $158.17 million remaining borrowing availability as of June 30, 2025[127][126] - The Company was in compliance with all financial covenants (fixed charge coverage ratio and consolidated senior debt to library value ratio) and non-financial covenants under the Senior Credit Facility as of June 30, 2025[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Reservoir Media, Inc. is not required to provide detailed quantitative and qualitative disclosures about market risk - The Company is exempt from providing detailed market risk disclosures as it qualifies as a smaller reporting company[144] Item 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and procedures and the status of remediation efforts for previously identified material weaknesses in internal control over financial reporting, with one related to the third-party Recorded Music royalty system remaining - Disclosure controls and procedures were deemed ineffective as of June 30, 2025, due to an unremediated material weakness in internal controls over financial reporting[145] - The remaining material weakness is related to the improper design of control activities for the third-party Recorded Music royalty system[146] - Management is actively implementing a remediation plan, including training, policy enhancements, new controls, and improved documentation, with ongoing evaluation of effectiveness[147][148] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The Company is subject to various legal claims and contingencies in the normal course of business but does not believe any current proceedings would have a material adverse effect on its financial position, results of operations, or cash flows - The Company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations[153] Item 1A. Risk Factors There have been no material changes to the Company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended March 31, 2025 - No material changes to the Company's risk factors have occurred since the Annual Report on Form 10-K filed on March 31, 2025[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reports no previously undisclosed unregistered sales of equity securities during the three months ended June 30, 2025 - No unregistered sales of equity securities occurred during the three months ended June 30, 2025, that have not been previously disclosed[155] Item 3. Defaults Upon Senior Securities The Company reports no defaults upon senior securities - There were no defaults upon senior securities[156] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[157] Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter[158] Item 6. Exhibits This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report, including organizational documents, credit agreement amendments, and certifications - Key exhibits include the Third Amendment to the Fourth Amended and Restated Credit Agreement, dated June 3, 2025, and certifications from the CEO and CFO[161]