Music rights firm Reservoir Media has posted double-digit income and EBITDA development for its 2023 fiscal yr, a hit that may be chalked as much as strategically sound M&A exercise, and a dedication to variety in its funding technique.
The New York-headquartered firm introduced Wednesday (Could 31) that it had clocked income of USD $122.3 million for fiscal 2023, which for Reservoir ended on March 31, 2023.
That’s a slight beat excessive finish of the vary it forecast in its fiscal Q2 2023 name, when it anticipated income to come back in at $118 million to $122 million for the fiscal yr. It marks a 13% enhance over fiscal 2022. On an natural foundation (i.e., stripping out M&A exercise), it marked an 8% enhance.
Working earnings got here in at $21.1 million, up 9% YoY.
Reservoir experiences each OIBDA (working earnings earlier than depreciation and amortization), which got here in at $43.1 million, up 12% YoY, and EBITDA, which got here in at $46.3 million, additionally up 12% YoY.
Web earnings for the fiscal yr took a success, coming in at $2.8 million, in comparison with $13.1 million in fiscal 2022. Reservoir CFO Jim Heindlmeyer attributed this to a lower within the achieve on truthful worth of swaps, a one-time tax expense associated to a change within the UK tax price, increased curiosity bills and a $914,000 loss on the early extinguishment of debt.
Earnings per share got here in at $0.04 for fiscal 2023, in comparison with $0.22 in fiscal 2022.
Reservoir’s music publishing section clocked $83.8 million in income for the fiscal yr, a 9% YoY enhance, led by 18% development in each digital and synch.
Its recorded music section generated $34.8 million in income, an 18% YoY enhance, pushed primarily by digital (up 25% YoY) and neighboring rights (a small a part of general income, however nonetheless up 45% YoY).
Numbers for fiscal This autumn have been considerably weaker than the FY numbers, which Reservoir Founder and CEO Golnar Khosrowshahi attributed to “a troublesome year-over-year comparable attributable to an distinctive fourth quarter in fiscal 2022.”
Whole income got here in at $34.8 million in fiscal This autumn, a 1% decline from $35.1 million in fiscal This autumn 2022. Music publishing income got here in at $23.2 million, down 8% YoY, whereas recorded music income got here in at $10.8 million, up 10% YoY.
OIBDA for the fiscal quarter rose 3% YoY to $14.4 million, whereas adjusted EBITDA fell 2% YoY to $15.2 million. Web earnings fell to $2.2 million, in comparison with $8.9 million in fiscal This autumn 2022.
“We proceed to ship on our targets and are inspired by the momentum in our enterprise and the broader music trade over the previous fiscal yr. We remained steadfast in our disciplined strategy to capital deployment with strategic investments to drive our future development in addition to creating worth for our roster of artists,” Khosrowshahi mentioned in a press release.
“Bringing Grammy-winning hip-hop trio De La Soul’s iconic catalog to all streaming platforms for the primary time ever showcased our efficient worth enhancement initiatives, as we deployed our workforce and sources to drive worth via a number of avenues.”
Khosrowshahi added: “We proceed to be the popular accomplice of excellent legacy artists, together with lately introduced offers with jazz legend Sonny Rollins, Rock and Roll and Grammy Corridor of Fame inductee Dion, and multi-Platinum hip-hop producer Mannie Recent, which can carry vital development alternatives for his or her catalogs and create new listeners and followers. Our workforce’s means to accomplice with each legacy and rising artists to drive value-additive offers is key to our success and popularity as a caretaker of our artists’ our bodies of labor.”
On the corporate’s earnings name Wednesday, Heindlmeyer introduced Reservoir’s outlook for fiscal 2024, calling for income of between $127 million and $132 million, the mid-point of which might imply a 6% YoY enhance. He predicted adjusted EBITDA within the $49 million-$52 million vary, which on the mid-point would imply a 9% YoY enhance.
“Our workforce’s means to accomplice with each legacy and rising artists to drive value-additive offers is key to our success and popularity as a caretaker of our artists’ our bodies of labor.”
Golnar Khosrowshahi, Reservoir Media
“As we sit up for what’s in retailer for fiscal 2024, we anticipate to shut a number of accretive offers that can increase and diversify our portfolio of belongings. We’re additionally centered on successfully managing our working bills to additional enhance margins all year long,” Heindlmeyer mentioned on the decision.
Reservoir performed a name with analysts on Wednesday (Could 31) following the publication of its outcomes. MBW listened in, and listed below are among the highlights:
1. Reservoir desires to be ‘the most important holder of Arabic music copyrights’
Reservoir’s Founder and CEO devoted time on the earnings name to the corporate’s acquisitions within the Center East and South Asia.
“We… broadened our rising market portfolio with the signing of Arab famous person Mohamed Ramadan, Egyptian label 100COPIES, Lebanese music firm Voice of Beirut, Indian rappers MC Altaf and D’Evil, and producer Stunnah Beatz,” mentioned Khosrowshahi.
“Increasing our portfolio in these vital rising markets, however particularly throughout the Center East, is extremely vital to our general technique and a key differentiator for us,” she added.
“With our community and talent to buy content material at engaging multiples, this area presents vital alternative as we work to turn out to be the most important holder of Arabic music copyrights.”
Reservoir, at the side of MENA-based music writer and music firm PopArabia acquired Lebanese label and music writer, Voice of Beirut in September.
Reservoir mentioned on the time that the acquisition builds on its rising markets technique, “additional diversifying the corporate’s music rights within the fast-growing MENA area”.
Reservoir and PopArabia acquired Egyptian label 100COPIES in Could final yr, and in addition fashioned a three way partnership with the corporate to signal and develop Egyptian expertise.
2. Range is a key driver of the corporate’s success
Lately, we’ve heard many companies extol the advantages of variety – be it demographic, or geographic, or by way of an funding portfolio.
However Reservoir Media resides proof of this adage, because the agency’s execs be aware its capability to put money into totally different markets all over the world, and in vastly totally different genres, as a key approach to keep the enterprise’s power in potential future financial upheavals.
“We’ve not solely grown our catalog in fiscal 2023, however I’m actually happy about how we’ve added variety throughout heroes and genres, which additional insulates our enterprise from broader market swings. Total, we’ve got not slowed down in our plans to construct upon our strong roster of gifted artists and creators,” Khosrowshahi mentioned on the decision.
That catalog is one thing to behold: In keeping with an investor factsheet the corporate printed earlier this yr, Reservoir had spent $695 million on music catalog M&A as of the top of 2022.
Apart from the acquisition of De La Soul’s catalog, which introduced the hip-hop group’s music to streaming platforms for the primary time, Khosrowshahi harassed Reservoir’s take care of hip-hop producers Marley Marl and Mannie Recent.
“We’ve not solely grown our catalog in fiscal 2023, however I’m actually happy about how we’ve added variety throughout heroes and genres, which additional insulates our enterprise from broader market swings.”
Golnar Khosrowshahi, Reservoir Media
Reservoir additionally expanded its portfolio of songwriter and producer Dennis Lambert’s work, giving the corporate rights to such hits as Jefferson Starship’s We Constructed This Metropolis and Nightshift by the Commodores.
Plus, the corporate expanded its nation music roster with a publishing take care of Christian Stalnecker, who co-wrote the hit Thank God by Kane Brown and Katelyn Brown.
“We additionally proceed to bolster our catalog with the additions of jazz legend Sonny Rollins; swing icon Louis Prima; and Rock and Roll Corridor of Famers, Matt Sorum, Phil Manzanera and Dion,” Khosrowshahi famous.
Nevertheless it’s not simply style variety that issues to Reservoir; geographic variety is a serious a part of the corporate’s technique.
In addition to the formidable goal Reservoir has set for its MENA acquisitions, Khosrowshahi emphasised “a notable enlargement of our rights into Latin American music” with the latest conclusion of a take care of Miami Sound Machine co-founder and lead songwriter Kiki Garcia, who wrote the band’s hit tune Conga.
3. AI isn’t a menace to Reservoir’s enterprise mannequin – it’s a possibility
Whereas some music trade insiders have raised considerations in regards to the influence of AI on the trade – particularly on the subjects of unauthorized AI-generated tracks that steal artists’ voices, and using copyrighted materials to coach AI to create music – Reservoir Media sees the know-how as a possibility.
Whereas she stresses that he desires to “ensure that all these points are addressed,” Khosrowshahi says she doesn’t consider that AI “poses a direct problem to our enterprise of monetizing musical artistry.”
“Machine studying has the potential for use as a device within the trade in novel methods, enhancing upon our processes and creating better efficiencies, notably in micro-licensing and metadata administration.”
Golnar Khosrowshahi, Reservoir Media
“Auto-generated music facsimiles and composites may have a spot available in the market and it will likely be thrilling to see what kinds that takes and the way creators incorporate AI to tell and improve their work,” Khosrowshahi mentioned.
“Additional, machine studying has the potential for use as a device within the trade in novel methods, enhancing upon our processes and creating better efficiencies, notably in micro-licensing and metadata administration.
“Our workforce is working to grasp the potential alternatives for AI in addition to making certain our artists are correctly compensated for his or her work by this new know-how.”
4. Reservoir expects slower income development for 2024… or are they simply managing expectations?
Reservoir’s name for slower income development in fiscal 2024 – the expected 6% enhance in its high line is lower than half the 13% development it noticed in fiscal 2023 – stunned a minimum of one analyst on the earnings name.
Requested by Alex Fuhrman of Craig-Hallum Capital Group in regards to the causes for the conservative forecast, Heindlmeyer responded with a remark that implies the corporate could be managing expectations.
“We wish to be life like in what we information to, however we at all times attempt to do higher than the place we set that bar,” he mentioned.
Heindlmeyer recommended that Reservoir could also be extra centered on natural development going ahead, regardless of a still-ambitious M&A agenda.
Referring to Reservoir’s $100 million buy of Tommy Boy Data in 2021 – the corporate that helped launch the careers of Queen Latifah, Coolio, De La Soul and Naughty By Nature, amongst others – Heindlmeyer mentioned: “With respect to among the alternatives over the previous couple of years, when we’ve got an acquisition like a Tommy Boy, the place possibly we noticed a possibility for vital worth enhancement, that’s definitely going to permit us to … present outcomes which have actually good natural development.”
However that doesn’t imply Reservoir is completed with M&A. “We’re at all times on the lookout for these sorts of [M&A] alternatives,” Heindlmeyere mentioned.
In keeping with Khosrowshahi, Reservoir is 250 potential targets for offers, with a present worth of over $1.9 billion.
Commenting on the dimensions of the person offers, Khosrowshahi added: “For probably the most half, we’re extra of these offers which have traditionally been in our candy spot that’s across the type of $40 million to $60 million vary, however there are a few extra sizable transactions in there.”Music Enterprise Worldwide