RESERVOIR MEDIA, INC.

(RSVR)
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Delayed Nasdaq  -  04:00 2022-08-17 pm EDT
6.390 USD   -2.29%
08/15RESERVOIR MEDIA : Submission of Matters to a Vote of Security Holders - Form 8-K
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08/15RESERVOIR MEDIA, INC. : Submission of Matters to a Vote of Security Holders (form 8-K)
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08/05RESERVOIR MEDIA, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)
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RESERVOIR MEDIA, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/05/2022 | 04:10pm EDT

The following discussion and analysis of Reservoir Media, Inc.'s financial condition and results of operations should be read in conjunction with Reservoir Media, Inc.'s condensed consolidated financial statements, including the accompanying notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). Certain statements contained in the discussion and analysis set forth below include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Unless the context otherwise requires, the terms "we," "us," "our," the "Company" and "Reservoir" refer collectively to Reservoir Media, Inc. and its consolidated subsidiaries.

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 June 30, 2021, have been revised to give effect to the correction of certain accounting errors identified during the financial reporting process as of and for the fiscal year ended March 31, 2022. As a result, the Management's Discussion and Analysis of the Company's Financial Condition and Results of Operations set forth below has been revised to give effect to the correction of these errors.

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 U.S. Securities and Exchange Commission (the "SEC") on June 21, 2022 and the Company's other filings with the SEC. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Introduction

We are a holding company that conducts substantially all of our business operations through Reservoir Media Management, Inc. ("RMM") and RMM's subsidiaries. Our activities are generally organized into two operating segments: Music Publishing and Recorded Music. Operations of the Music Publishing segment involve the acquisition of interests in music catalogs from which royalties are earned as well as signing songwriters to exclusive agreements, which gives us an interest in the future delivery of songs. Operations of the Recorded Music segment involve the acquisition of sound recording catalogs as well as the discovery and development of recording artists and the marketing, distribution, sale and licensing of the music catalogs.

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 June 30,

2022 and June 30, 2021.

Liquidity and Capital Resources--This section provides an analysis of our cash

flows for the three months June 30, 2022 and June 30, 2021, as well as a

? discussion of our liquidity and capital resources as of June 30, 2022. The

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 New York City, with operations in multiple countries through various subsidiaries, affiliates and non-affiliated licensees and sub-publishers. We own or control rights to more than 140,000 musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions. Assembled over many years, our current award-winning active songwriters exceed 100, while the catalog includes over 5,000 clients representing a diverse range of genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, techno, alternative and gospel.

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 London and our Tommy Boy record label based in New York City. In the United States, we also manage some select Catalog recorded music under our Philly Groove Records and Reservoir Records labels. We also own income participation interests in recordings by The Isley Brothers, The Commodores, Wisin and Yandel, Alabama and Travis Tritt, and an interest in the Loud Records catalog containing recordings by the Wu-Tang Clan. Our core Catalog includes recordings under the Chrysalis Records label by artists such as Sinéad O'Connor, The Specials, Generation X and The Waterboys, as well as recordings under the Tommy Boy record label by artists such as De La Soul, Coolio, House of Pain, Naughty By Nature, and Queen Latifah.

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 Tommy Boy catalogs are distributed via our membership with MERLIN, AMPED and other partners.

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, Tencent Music Entertainment Group and YouTube, radio services such as iHeart Radio and SiriusXM, and download services. We also license music digitally to fitness platforms such as Apple Fitness+, Equinox, Hydrow and Peloton and social media outlets, such as Facebook, Instagram, TikTok and Snap.

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 July 28, 2021 (the "Closing Date"), we consummated the previously announced business combination (the "Business Combination") by and among Roth CH Acquisition II Co., a Delaware corporation ("ROCC"), Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC ("Merger Sub") and Reservoir Holdings, Inc., a Delaware corporation ("RHI"). On the Closing Date, Merger Sub merged with and into RHI, with RHI surviving as a wholly-owned subsidiary of ROCC (the "Business Combination"). In connection with the consummation of the Business Combination, "Roth CH Acquisition II Co." was renamed "Reservoir Media, Inc." effective as of the Closing Date. Our common stock, $0.0001 par value per share (the "Common Stock") and warrants are traded on The Nasdaq Stock Market LLC ("NASDAQ") under the ticker symbols "RSVR" and "RSVRW," respectively.

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 SEC registrant, meaning that RHI's financial statements for periods prior to the closing date are disclosed in periodic reports filed with the SEC. See Note 4, "Business Combination and PIPE Investment" to the accompanying unaudited condensed consolidated financial statements for additional information with respect to the Business Combination and related transactions.

COVID-19 Pandemic

In January 2020, a new strain of coronavirus, COVID-19, was identified in Wuhan, China. In March 2020, the World Health Organization declared a global pandemic. The global pandemic and governmental responses thereto have disrupted physical and manufacturing supply chains and required the closures of physical retailers. Additionally, stay-at-home orders, limited indoor and outdoor gatherings and other restrictions have negatively affected our business in other ways, such as, making it impossible to hold live concert tours, delaying the release of new recordings and disrupting the production and release of motion pictures and television programs. However, the disruption from the COVID-19 pandemic may have accelerated growth of other revenue streams such as fitness and interactive gaming (including augmented reality and virtual reality).

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 June 30, 2022. On June 2, 2021, we acquired, through a membership interest purchase agreement, Tommy Boy Music, LLC ("Tommy Boy"), a 40-year-old record label, which included a diverse catalog of primarily recorded music rights and some music publishing rights.

Use of Non-GAAP Financial Measures

We prepare our financial statements in accordance with accounting principles generally accepted in the United States ("U.S. GAAP" or "GAAP"). However, this Management's Discussion and Analysis of Financial Condition and Results of Operations also contains certain non-GAAP financial measures to assist readers in understanding our performance. Non-GAAP financial measures either exclude or include amounts that are not reflected in the most directly comparable measure calculated and presented in accordance with GAAP. Where non-GAAP financial measures are used, we have provided the most directly comparable measures calculated and presented in accordance with U.S. GAAP, a reconciliation to GAAP measures and a discussion of the reasons why management believes this information is useful to it and may be useful to investors.


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Financials (USD)
Sales 2023 119 M - -
Net income 2023 8,27 M - -
Net Debt 2023 218 M - -
P/E ratio 2023 44,6x
Yield 2023 -
Capitalization 411 M 411 M -
EV / Sales 2023 5,28x
EV / Sales 2024 4,49x
Nbr of Employees 78
Free-Float 45,5%
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Mean consensus BUY
Number of Analysts 2
Last Close Price 6,39 $
Average target price 12,33 $
Spread / Average Target 93,0%
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Golnar Winston Khosrowshahi Chief Executive Officer & Director
Rell Quentin Lafargue President, Chief Operating Officer & Director
Jim Heindlmeyer Chief Financial Officer
Ezra S. Field Chairman
Adam L. Rothstein Independent Director
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