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Reservoir Profits Climb on Streaming, Synch Revenues

Reporting its third-quarter earnings, the company raised its full-year fiscal 2023 growth forecast.

Reservoir Media reported higher quarterly profits and revenues on Tuesday (Nov. 8), as the acquisition of “Sing, Sing, Sing” legend Louis Prima’s catalog and Lebanese label Voice of Beirut helped boost the company’s full-year growth forecast.

From July to September, Reservoir’s net income rose 3% to $4.5 million, or $0.07 per share, while top-line revenues rose 10% to $33.3 million from the year-ago quarter. Executives said they now expect both revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) to rise by 11% for the full fiscal year of 2023. For revenue, that is a range of between $118 million and $122 million, and for adjusted EBITDA, a closely watched metric of profitability, that will range between $45 million and $47 million.

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“While the broader economy is facing challenges, the music industry as a whole remains healthy,” Golnar Khosrowshahi, Reservoir founder and chief executive, said on a call with analysts.

Reservoir is mid-way through the fiscal year 2023, during which it aims to spend $100 million on strategic acquisitions. In addition to acquiring Prima’s publishing and recorded music catalogs and the Voice of Beirut, Reservoir signed publishing deals with Naughty By Nature’s KayGee, writer-producer Nick Lee and country singer-songwriter Brit Taylor.

“We are pleased by the quality and volume of deals that we have executed in the past few months,” Khosrowshahi said, adding they have a pipeline of around $2.1 billion of prospective deals “at various stages of development.”

Music publishing revenue rose 9% to $24.1 million for the quarter, driven by a 15% increase in digital revenues and a 6% increase in synchronization revenues.

Recorded music revenues rose 11% to $8.9 million, helped largely by assets under the Tommy Boy label as well as increased digital and synchronization revenues.

Within recorded music, digital revenues rose by 35% to $6.3 million, while synch revenues surged 224% to top $1 million. Physical revenues fell 66% to $900,000 as vinyl and CD sales fell on a lighter release schedule this quarter, executives said.

Operating income fell 15% to $6.6 million and OIBDA (operating income before depreciation and amortization) fell 5% to $12.0 million on higher expenses from employee compensation and running a public business.

“We are confident in our long-term ability to grow our top line at a faster past than our costs moving forward,” Jim Heindlmeyer, Reservoir’s CFO, said on the call.