RESERVOIR MEDIA, INC. The following discussion and analysis of
As disclosed in Note 19, "Correction of Prior Period Errors" to our consolidated
financial statements, the Company's consolidated financial statements as of and
for the three months ended
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are not historical facts, and are intended to be covered
by the safe harbor created thereby. All statements, other than statements of
historical fact included in this Quarterly Report including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"predict," "project," "target," "goal," "intend," "continue," "could," "may,"
"might," "shall," "should," "will," "would," "plan," "possible," "potential,"
"estimate," "seek" and variations and similar words and expressions are intended
to identify such forward-looking statements, but the absence of these words does
not mean that a statement is not forward-looking. In addition, any statements
that refer to expectations, projections, forecasts or other characterizations of
future events or circumstances, including any underlying assumptions, are
forward-looking statements. Such forward-looking statements relate to future
events or future performance, but reflect management's current expectations,
projections and beliefs based on information currently available. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about the Company that may cause its actual business, financial
condition, results of operations, performance and/or achievements to be
materially different from any future business, financial condition, results of
operations, performance and/or achievements expressed or implied by these
forward-looking statements. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those described under "Risk
Factors" and "Cautionary Note Regarding Forward-Looking Statements" in the
Company's Annual Report on Form 10-K (the "Annual Report") filed with the
Introduction
We are a holding company that conducts substantially all of our business
operations through
This management's discussion and analysis of financial condition and results of operations is organized as follows:
Business Overview--This section provides a general description of our business,
? as well as a discussion of factors that we believe are important in
understanding our results of operations and comparability and in anticipating
future trends.
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Results of Operations--This section provides an analysis of our consolidated
? and operating segment results of operations for the three months ended
2022 and
Liquidity and Capital Resources--This section provides an analysis of our cash
flows for the three months
? discussion of our liquidity and capital resources as of
discussion of our liquidity and capital resources includes recent debt
financings and a summary of the key debt covenant compliance measures under our
debt agreements. Business Overview
We are an independent music company operating in music publishing and recorded music. We represent over 140,000 copyrights in our publishing business and over 36,000 master recordings in our recorded music business. Both of our business areas are populated with hit songs dating back to the early 1900s representing an array of artists across genre and geography. Consistent with how we classify and operate our business, our company is organized in two operating and reportable segments: Music Publishing and Recorded Music. A brief description of each segment's operations is presented below.
Music Publishing Segment
Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter or engaging in those activities for other rightsholders, our Music Publishing business garners a share of the revenues generated from use of the musical compositions.
The operations of our Music Publishing business are conducted principally
through RMM, our global music publishing company headquartered in
Music Publishing revenues are derived from five main sources:
Digital--the rightsholder receives revenues with respect to musical
? compositions embodied in recordings distributed in streaming services, download
services and other digital music services;
Performance--the rightsholder receives revenues if the musical composition is
performed publicly through broadcast of music on television, radio and cable
? and in retail locations (e.g., bars and restaurants), live performance at a
concert or other venue (e.g., arena concerts and nightclubs), and performance
of music in staged theatrical productions;
Synchronization--the rightsholder receives revenues for the right to use the
? musical composition in combination with visual images such as in films or
television programs, television commercials and video games;
Mechanical--the rightsholder receives revenues with respect to musical
? compositions embodied in recordings sold in any machine-readable format or
configuration such as vinyl, CDs and DVDs; and
? Other--the rightsholder receives revenues for use in sheet music and other
uses.
The principal costs associated with our Music Publishing business are as follows:
Writer Royalties and Other Publishing Costs--the artist and repertoire ("A&R")
? costs associated with (i) paying royalties to songwriters, co-publishers and
other copyright holders in connection with income generated from the uses of
their works and (ii) signing and developing songwriters; and
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? Administration Expenses--the costs associated with general overhead, and other
administrative expenses, as well as selling and marketing.
Recorded Music Segment
Our Recorded Music business consists of three primary areas of sound recording ownership. First is the active marketing, promotion, distribution, sale and licensing of newly created frontline sound recordings from Current Artists that we own and control. This is a new area of focus for us and does not yet produce significant revenue. The second is the active marketing, promotion, distribution, sale and license of previously recorded and subsequently acquired Catalog recordings. The third is acquisition of full or partial interests in existing record labels, sound recording catalogs or income rights to a royalty stream associated with an established recording artist or producer contract in connection with existing sound recordings. Acquisition of these income participation interests are typically in connection with recordings that are owned, controlled, and marketed by other record labels.
Our Current Artist and Catalog recorded music businesses are both primarily
handled by our Chrysalis Records label based in
Our Current Artist and Catalog recorded music distribution is handled by a
network of distribution partners. Chrysalis Records current artist releases are
distributed through PIAS while our Chrysalis Records and
Through our distribution network, our music is being sold in physical retail
outlets as well as in physical form to online physical retailers, such as
amazon.com, and distributed in digital form to an expanding universe of digital
partners, including streaming services such as Amazon, Apple, Deezer,
SoundCloud, Spotify,
Recorded Music revenues are derived from four main sources:
? Digital--the rightsholder receives revenues with respect to streaming and
download services;
? Physical--the rightsholder receives revenues with respect to sales of physical
products such as vinyl, CDs and DVDs;
Neighboring Rights--the rightsholder also receives royalties if sound
? recordings are performed publicly through broadcast of music on television,
radio, and cable, and in public spaces such as shops, workplaces, restaurants,
bars and clubs; and
Synchronization--the rightsholder receives royalties or fees for the right to
? use sound recordings in combination with visual images such as in films or
television programs, television commercials and video games.
The principal costs associated with our Recorded Music business are as follows:
Artist Royalties and Other Recorded Costs--the A&R costs associated with (i)
paying royalties to recording artists, producers, songwriters, other copyright
? holders and trade unions, (ii) signing and developing recording artists and
(iii) creating master recordings in the studio; and product costs to
manufacture, package and distribute products to wholesale and retail
distribution outlets; and
Administration Expenses--the costs associated with general overhead and other
? administrative expenses as well as the costs associated with the promotion and
marketing of recording artists and music, including costs to produce music
videos for promotional purposes and artist tour support.
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Business Combination
On
The Business Combination was accounted for as a reverse capitalization. Under
this method of accounting, ROCC was treated as the "acquired" company for
accounting purposes, and the Business Combination was accounted as the
equivalent of RHI issuing stock for the net assets of ROCC, accompanied by a
recapitalization. RHI is deemed to be the accounting predecessor of the combined
business and the successor
COVID-19 Pandemic
In
Factors Affecting Results of Operations and Comparability
Throughout our history, we have constantly acquired new assets and subsidiaries
and signed new writers and more recently new recording artists. These investing
activities have had the largest impact on our growth over time. We have also
invested in our operations to create a platform for the Music Publishing and
Recorded Music segments to scale and grow. We did not complete any individually
significant acquisition transactions during the three months ended
Use of Non-GAAP Financial Measures
We prepare our financial statements in accordance with accounting principles
generally accepted in
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