What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-05-30 compared with 2023-05-31 · 84 added, 113 removed, 298 unchanged (40% of the section changed)

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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 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.

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● 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.

Business Combination

On July 28, 2021 (the “ Closing Date ”), we consummated a business combination (the “ Business Combination ”) between Roth CH Acquisition II Co.

(“ ROCC ”), Roth CH II Merger Sub Corp., a wholly-owned subsidiary of ROCC, and Reservoir Holdings, Inc.

In connection with the consummation of the Business Combination, “Roth CH Acquisition II Co.” was renamed “Reservoir Media, Inc.” 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 previous periods will be disclosed in future periodic reports filed with the SEC.

See Note 3, “ Business Combination and PIPE Investment ” to the accompanying consolidated financial statements for additional information with respect to the Business Combination and related transactions.

COVID-19 Pandemic

The COVID-19 pandemic that emerged in 2020 has 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 Fiscal 2023.

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

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Loss on early extinguishment of debt

Gain on foreign exchange

Gain on fair value of swaps

(Loss) gain on foreign exchange

(Loss) gain on fair value of swaps

Other income (expense), net

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Total Revenue

Total revenues increased by $14,446 thousand, or 13%, during Fiscal 2023 compared to Fiscal 2022, driven by an 18% increase in Recorded Music revenue, a 9% increase in Music Publishing revenue and a 188% increase in Other revenue related to the Company’s artist management business, reflecting strong touring and merchandise revenue in a post-COVID environment.

Total revenues increased by $22,569 thousand, or 18%, during Fiscal 2024 compared to Fiscal 2023, driven by a 22% increase in Recorded Music revenue, a 15% increase in Music Publishing revenue and a 74% increase in Other revenue related to the Company’s artist management business.

Music Publishing revenues represented 66% and 69% of total revenues for Fiscal 2024 and Fiscal 2023, respectively.

Recorded Music revenues represented 29% and 28% of total revenues for Fiscal 2024 and Fiscal 2023, respectively.

Other revenue represented 3% and 1% of total revenues for Fiscal 2023 and Fiscal 2022, respectively.

and international revenues represented 59% and 41%, respectively of total revenues for Fiscal 2023.

and international revenues represented 53% and 47%, respectively of total revenues Fiscal 2022.

The shift in mix between Music Publishing and Recorded Music and the shift in geographic mix are both primarily attributable to the Tommy Boy Acquisition.

Additionally, the shift in geographic mix is partly the result of an updated estimate of U.S.

mechanical royalties related to the recent CRB ruling and an unfavorable impact on Chrysalis revenue from the change in the GBP to U.S.

dollar exchange rate.

and international revenues represented 59% and 41% of total revenues for Fiscal 2024 and Fiscal 2023.

The shift in mix between Music Publishing and Recorded Music was driven primarily by the significant physical sales in the Recorded Music segment during Fiscal 2024.

Total digital revenues increased by $11,410 thousand, or 17%, during Fiscal 2024 compared to Fiscal 2023.

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Music Publishing revenues increased by $12,359 thousand, or 15%, during Fiscal 2024 compared to Fiscal 2023.

This increase in Music Publishing revenue was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which led to increases in digital revenue, synchronization revenue, mechanical revenue and performance revenue.

These increases were partially offset by a decrease in other revenue, reflecting the nonrecurrence of revenues recognized in the prior year from Dubai Expo.

This increase in Music Publishing revenue was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which benefitted from higher royalty rates and price increases at multiple music streaming services, and led to increases in digital revenue and performance revenue.

These factors were partially offset for digital revenue by the nonrecurrence of $2,100 thousand recognized during Fiscal 2023

for estimated retroactive U.S.

royalties related to the 2022 CRB ruling.

Music Publishing revenues in Fiscal 2024 also reflected a decrease in other revenue from PopArabia, which was impacted by the nonrecurrence of World Cup-related activities that occurred during Fiscal 2023, and a decrease in synchronization revenue, which was impacted by the writers’ and actors’ strikes in Hollywood.

On a geographic basis, U.S.

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International Music Publishing revenues represented 42% of total Music Publishing revenues for Fiscal 2024 compared to 40% for Fiscal 2023.

The shift in geographic mix is primarily the result of an updated estimate of U.S.

mechanical royalties related to the recent CRB ruling, as well as an increase in U.S.

synchronization revenue.

Recorded Music revenues increased by $7,542 thousand, or 22%, during Fiscal 2024 compared Fiscal 2023.

This increase in Recorded Music revenue was driven in part by the acquisition of Tommy Boy in June 2021, which contributed $15,165 to Recorded Music revenue during Fiscal 2023 compared to $10,799 thousand during Fiscal 2022.

Digital revenue increased by $4,563 thousand primarily due to the acquisition of Tommy Boy and due to the continued growth at music streaming services.

Increases in neighboring rights and synchronization revenue were also primarily due to the acquisition of Tommy Boy.

The $364 thousand decrease in physical revenue primarily reflects the more significant release schedule in Fiscal 2022 than Fiscal 2023.

This increase in Recorded Music revenue was driven primarily by increases in digital revenue and physical revenue.

Digital revenue increased by $3,955 thousand primarily due to continued growth at music streaming services and price increases at multiple music streaming services.

The $2,942 thousand increase in physical revenue was primarily due to De La Soul releases for Tommy Boy and the timing of Chrysalis’ release schedule.

On a geographic basis, U.S.

Recorded Music revenues represented 55% of total Recorded Music revenues for Fiscal 2023 compared to 54% for Fiscal 2022.

International Recorded Music revenues represented 45% of total Recorded Music revenues for Fiscal 2023 compared to 46% for Fiscal 2022.

Recorded Music revenues represented 55% of total Recorded Music revenues for Fiscal 2024 and Fiscal 2023.

International Recorded Music revenues represented 45% of total Recorded Music revenues for Fiscal 2024 and Fiscal 2023.

Cost of Revenues

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Cost of revenues increased by $7,492 thousand, or 16%, during Fiscal 2024 compared Fiscal 2023.

Cost of revenues as a percentage of revenues decreased to 39% for Fiscal 2023 compared to 41% for Fiscal 2022, reflecting a small margin increase for Recorded Music, as discussed below, and an increase in Other revenue.

Writer royalties and other publishing costs for the Music Publishing segment increased by $3,057 thousand, or 9%, during Fiscal 2023 compared Fiscal 2022.

Writer royalties and other publishing costs as a percentage of Music Publishing revenues were 46% for Fiscal 2023 and Fiscal 2022.

Cost of revenues as a percentage of revenues decreased to 38% for Fiscal 2024 compared to 39% for Fiscal 2023, reflecting a margin increase driven by Music Publishing and an increase in Other revenue, partially offset by a margin decrease for Recorded Music.

Writer royalties and other publishing costs for the Music Publishing segment increased by $3,335 thousand, or 9%, during Fiscal 2024 compared to Fiscal 2023.

Writer royalties and other publishing costs as a percentage of Music Publishing revenues decreased to 44% during Fiscal 2024 compared to 46% during Fiscal 2023, due primarily to the change in the mix of revenue by type to a higher percentage of performance revenues, which carry lower costs than other types of revenue.

Artist royalties and other recorded music costs for the Recorded Music segment increased by $4,157 thousand, or 44%, during Fiscal 2024 compared to Fiscal 2023.

This increase was due primarily to increased revenue from the acquisition of Tommy Boy.

Artist royalties and other recorded music costs as a percentage of Recorded Music revenues decreased to 27% for Fiscal 2023 compared to 30% for Fiscal 2022.

The increase in margins was due primarily to a decrease in physical revenue, which carries a higher cost of revenue than other revenue types.

Additionally, margins were affected by a change in the general mix of earnings by type and artists with their specific contractual royalty rates being applied to the revenues.

Artist royalties and other recorded music costs as a percentage of Recorded Music revenues increased to 32% for Fiscal 2024 compared to 27% for Fiscal 2023.

The increase in artist royalties and other recorded music costs and decrease in margins were due primarily to the change in the mix of sales by type to a higher percentage of physical sales, which carry higher costs than other types of revenue.

Amortization and Depreciation

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Music Publishing amortization and depreciation expense increased by $2,445 thousand, or 15%, during Fiscal 2024 compared to Fiscal 2023, primarily due to the acquisition of additional music catalogs.

Recorded Music amortization and depreciation increased by $308 thousand, or 6%, during Fiscal 2023 compared to Fiscal 2022, primarily due to the acquisition of Tommy Boy.

Recorded Music amortization and depreciation increased by $461 thousand, or 8%, during Fiscal 2024 compared to Fiscal 2023, primarily due to the acquisition of additional music catalogs.

Administration Expenses

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Total administration expenses increased by $8,648 thousand, or 28%, during Fiscal 2024 compared to Fiscal 2023, reflecting increases in both the Music Publishing and Recorded Music segments, as well as an increase in Other administration expenses.

Expressed as a percentage of revenues, administration expenses increased to 25% for Fiscal 2023 from 23% for Fiscal 2022, due to increased administration expenses associated with being a public company for a full year, an increase in share-based compensation expense and increased costs related to establishing a U.S.

Recorded Music platform due to the acquisition of Tommy Boy.

Approximately $2,700 thousand of the increase relates to the write-off of recoupable legal expenses and attorneys’ fees incurred in connection with the Royalty Dispute described in Note 16, “ Contingencies and Commitments ” to the accompanying consolidated financial statements (the “ Recoupable legal fee write-off ”).

Expressed as a percentage of revenues, administration expenses increased to 27% for Fiscal 2024 from 25% for Fiscal 2023, primarily as a result of the Recoupable legal fee write-off.

Music Publishing administration expenses increased by $5,354 thousand, or 27%, during Fiscal 2024 compared to Fiscal 2023.

Expressed as a percentage of revenues, Music Publishing administration expenses increased to 24% for Fiscal 2023 from 22% for Fiscal 2022, driven primarily by increased administration expenses associated with being a public company for a full year and an increase in share-based compensation expense.

Recorded Music administration expenses increased by $1,160 thousand, or 16%, during Fiscal 2023 compared to Fiscal 2022, primarily due to increases at Chrysalis Records and the acquisition of Tommy Boy.

Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 24% for Fiscal 2023 from 25% for Fiscal 2022, primarily due to taking advantage of operating leverage on the Recorded Music platform, partially offset by increased administration expenses associated with being a public company for a full year.

Other administration expenses increased by $1,737 thousand, or 188%, during Fiscal 2023 compared to Fiscal 2022, primarily due to selling expenses associated with our artist management business.

Expressed as a percentage of revenues, Music Publishing administration expenses increased to 26% for Fiscal 2024 from 24% for Fiscal 2023, primarily as a result of the Recoupable legal fee write-off.

Recorded Music administration expenses increased by $1,196 thousand, or 14%, during Fiscal 2024 compared to Fiscal 2023.

Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 23% for Fiscal 2024 from 24% for Fiscal 2023.

Other administration expenses increased by $2,098 thousand, or 79%, during Fiscal 2024 compared to Fiscal 2023, primarily due to selling expenses associated with our artist management business, consisting mostly of manager compensation.

Interest Expense

Interest expense increased by $6,332 thousand, or 43% during Fiscal 2024 compared to Fiscal 2023.

This increase was driven by increased debt balances due to the use of funds in catalog acquisitions and writer signings and increases in LIBOR/SOFR.

In connection with the Second Amendment of the RMM Credit Agreement on December 16, 2022, the indexed interest rate in the RMM Credit Agreement was modified from LIBOR to SOFR effective on the amendment date.

Approximately $620 thousand of this increase was incurred in connection with settlement of the Royalty Dispute described in Note 16, “ Contingencies and Commitments ” to the accompanying consolidated financial statements.

The remaining increase was primarily driven by increased debt balances due to use of funds in acquisitions of music catalogs and writer signings, as well as an increase in SOFR.

Loss on Early Extinguishment of Debt

In connection with the Second Amendment of the RMM Credit Agreement in December 2022, the Company recorded a loss on early extinguishment of debt of $914 thousand, which reflects the write-off of a portion of unamortized debt issuance costs.

Gain on Foreign Exchange

Gain on foreign exchange was $269 thousand for Fiscal 2023 compared to $331 thousand for Fiscal 2022.

In connection with the Second Amendment of the RMM Credit Agreement in December 2022, the Company recorded a loss on early extinguishment of debt of $914 thousand in Fiscal 2023, which reflects the write-off of a portion of unamortized debt issuance costs.

(Loss) Gain on Foreign Exchange

Loss on foreign exchange was $102 thousand during Fiscal 2024 compared to a gain on foreign exchange of $269 thousand during Fiscal 2023.

This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely British pound sterling and euro.

Gain on Fair Value of Swaps

Gain on fair value of swaps decreased by $5,793 thousand during Fiscal 2023 compared to Fiscal 2022.

(Loss) Gain on Fair Value of Swaps

Loss on fair value of swaps was $1,125 thousand during Fiscal 2024 compared to a gain on fair value of swaps of $2,765 thousand during Fiscal 2023.

This change was due to the marking to market of our interest rate swap hedges.

Income Tax Expense

Income tax expense increased to $5,625 thousand during Fiscal 2023 compared to $4,253 thousand during Fiscal 2022.

Income tax expense decreased to $335 thousand during Fiscal 2024 compared to $5,625 thousand during Fiscal 2023.

The effective income tax rate during Fiscal 2024 was 28.6% compared to 66.9% during Fiscal 2023.

The increase in income tax expense during Fiscal 2023 was driven primarily by incremental tax expense of $3,659 thousand due to the increase in the value of deferred tax liabilities arising from a change in estimate of the applicable tax rate used to measure our international deferred tax liabilities in the United Kingdom, which increased our effective tax rate by 39.0%.

The increase in the effective income tax rate also reflects changes in the mix of income from multiple tax jurisdictions.

Net income decreased by $10,349 thousand, or 79%, during Fiscal 2023 compared to Fiscal 2022, driven primarily by a $5,793 thousand decrease in gain on fair value of swaps, a $3,885 thousand increase in interest expense, a $1,372 thousand increase in income tax expense and a $914 thousand loss on early extinguishment of debt in Fiscal 2023.

These factors were partially offset by a $1,705 thousand increase in operating income.

The decrease in the effective income tax rate during Fiscal 2024 was driven primarily by the nonrecurrence of incremental tax expense of $3,559 thousand during Fiscal 2023 due to the increase in the value of deferred tax liabilities arising from a change in estimate of the applicable tax rate used to measure our international deferred tax liabilities in the United Kingdom, which increased our effective tax rate by 39.0% during Fiscal 2023.

Additionally, during Fiscal 2024 the Company changed its estimate of the applicable tax rate used to measure its state and local deferred tax liabilities in the United States resulting in incremental tax benefit of $405 thousand due to the decrease in the value of deferred tax liabilities, which decreased our effective tax rate by 34.6% during Fiscal 2024.

These factors were partially offset by the impact of incremental tax expense of $248 thousand during the fiscal year ended March 31, 2024 due to an impairment charge of $991 thousand to writedown an equity investment to its estimated fair value, which is not deductible for United Kingdom income tax purposes and increased our effective tax rate by 21.1% during Fiscal 2024.

Net income decreased by $1,942 thousand, or 70%, during Fiscal 2024 compared to Fiscal 2023, driven primarily by a $6,332 thousand increase in interest expense, a $3,890 thousand decrease in gain on fair value of swaps and a $1,072 increase in other expense, net.

These factors were partially offset by a $5,290 thousand decrease in income tax expense, $3,518 thousand increase in operating income and the nonrecurrence of a $914 thousand loss on early extinguishment of debt in Fiscal 2023.

Non-GAAP Reconciliations

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EBITDA is defined as earnings (net income or loss) before net interest expense, income tax (benefit) expense, non-cash depreciation of tangible assets and non-cash amortization of intangible assets and is used by management to measure operating performance of the business.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or expenses such as, among others, (1) any non-cash charges (including any impairment charges and loss on early extinguishment of debt), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or expenses such as, among others, (1) any non-cash charges (including any impairment charges, loss on early extinguishment of debt and to write-down an equity investment to its fair value), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items.

Adjusted EBITDA is a key measure used by our management to understand and evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.

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We use OIBDA as our primary measure of financial performance.

The following table reconciles operating income to OIBDA (in thousands):

The following tables reconcile operating income to OIBDA (in thousands):

Operating income

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Amortization and depreciation expenses

Consolidated OIBDA increased by $4,758 thousand, or 12%, during Fiscal 2023 compared to Fiscal 2022, driven by a 25% increase in Recorded Music OIBDA.

Additionally, Other OIBDA related to the Company’s artist management business increased by $632 thousand during Fiscal 2023 compared to Fiscal 2022, driven by strong touring and merchandise revenue.

Expressed as a percentage of revenue, OIBDA Margin decreased to 35% for Fiscal 2023 from 36% for Fiscal 2022, primarily because of increased administration expenses associated with being a public company for a full year, an increase in share-based compensation expense and increased costs related to acquisitions, partially offset by revenue growth.

Consolidated OIBDA increased by $6,429 thousand, or 15%, during Fiscal 2024 compared to Fiscal 2023, driven by a $3,671 thousand increase in Music Publishing OIBDA, a $2,188 thousand increase in Recorded Music OIBDA and a $570 thousand increase in Other OIBDA related to the Company’s artist management business.

Expressed as a percentage of revenue, OIBDA Margin decreased to 34% for Fiscal 2024 from 35% for Fiscal 2023, primarily as a result of the Recoupable legal fee write-off.

Music Publishing OIBDA increased by $3,671 thousand, or 15%, during Fiscal 2024 compared to Fiscal 2023.

Expressed as a percentage of revenue, Music Publishing OIBDA Margin decreased to 30% in Fiscal 2023 from 32% in Fiscal 2022.

The decreases in Music Publishing OIBDA and OIBDA Margin reflect increased administration expenses associated with being a public company for a full year, partially offset by revenue growth.

Expressed as a percentage of revenue, Music Publishing OIBDA Margin was 30% in Fiscal 2024 and Fiscal 2023, reflecting revenue growth offset by the Recoupable legal fee write-off.

Recorded Music OIBDA increased by $2,188 thousand, or 13% during Fiscal 2024 compared to Fiscal 2023.

Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 49% during Fiscal 2023 from 46% in Fiscal 2022.

These increases reflect increases at Chrysalis Records and the acquisition of Tommy Boy, improved operating leverage on the Recorded Music platform as a result of growth and a decrease in physical revenue, which carries a higher cost of revenue than other revenue types, partially offset by increased administration expenses associated with being a public company for a full year.

Expressed as a percentage of revenue, Recorded Music OIBDA Margin decreased to 45% during Fiscal 2024 from 49% in Fiscal 2023.

This decrease was primarily driven by the change in the mix of sales by type to a higher percentage of physical sales.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

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Loss on early extinguishment of debt (a)

Gain on foreign exchange (b)

Gain on fair value of swaps (c)

Loss (gain) on foreign exchange (b)

Loss (gain) on fair value of swaps (c)

Non-cash share-based compensation (d)

Other income (expense), net

Recoupable legal fee write-off (e)

Other income (expense), net (f)

Adjusted EBITDA

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(a) Reflects the loss on a portion of unamortized debt issuance costs in connection with the Second Amendment to the RMM Credit Agreement.

(b) Reflects the gain on foreign exchange fluctuations.

(b) Reflects the loss (gain) on foreign exchange fluctuations.

(d) Reflects non-cash stock-based compensation expense related to the Reservoir Media, Inc.

2021 Omnibus Incentive Plan.

Consolidated Adjusted EBITDA increased by $5,071 thousand, or 12%, during Fiscal 2023 compared to Fiscal 2022, driven primarily by an increase in revenue, partially offset by increases in cost of revenue and administration expenses, including increased administration expenses associated with being a public company for a full year.

Adjusted EBITDA Margin was 38% for Fiscal 2023 and Fiscal 2022, which is the net result of improved operating leverage offset by twelve months of public company costs in Fiscal 2023 with only eight months of public company costs in Fiscal 2022.

(e) Reflects the write-off of recoupable legal expenses and attorneys’ fees incurred in connection with the Royalty Dispute described in Note 16, “ Contingencies and Commitments ” to the accompanying consolidated financial statements.

(f) Includes a $991 thousand impairment to write-down an equity investment to its estimated fair value, as described in Note 2, “ Summary of Significant Accounting Policies – Investments in Equity Affiliates ” to the accompanying consolidated financial statements.

Consolidated Adjusted EBITDA increased by $9,308 thousand, or 20%, during Fiscal 2024 compared to Fiscal 2023, primarily as a result of revenue growth, partially offset by increases in cost of revenue and administration expenses.

Adjusted EBITDA Margin was 38% for Fiscal 2024 and Fiscal 2023.

Liquidity and Capital Resources

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As of March 31, 2024, we had $330,792 thousand of debt (net of $5,037 thousand of deferred financing costs) and $18,132 thousand of cash and equivalents.

We used a portion of the proceeds from the Business Combination and PIPE Investment to repay $80,600 thousand of debt (amounts to related parties) associated with the Tommy Boy acquisition and $55,000 thousand of debt under the Senior Credit Facility.

The following table summarizes our historical cash flows (in thousands).

Cash provided by (used in):

Cash provided by (used for):

Operating activities

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Cash provided by operating activities was $36,193 thousand for Fiscal 2024 compared to $31,204 thousand for Fiscal 2023.

The primary driver of the $18,725 thousand increase in cash provided by operating activities during Fiscal 2023 as compared to Fiscal 2022 was a decrease in net cash used for working capital, primarily related to royalty advances (net of recoupments), accounts receivable and the timing of payments of accounts payable and accrued liabilities.

The primary driver of the $4,989 thousand increase in cash provided by operating activities during Fiscal 2024 as compared to Fiscal 2023 was net cash provided by working capital in Fiscal 2024 compared to net cash used for working capital in Fiscal 2023.

This change in cash provided by (used for) working capital was primarily related to royalty advances (net of recoupments), accounts receivable and the timing of payments of accounts payable and accrued liabilities.

Investing Activities

Cash used in investing activities was $72,231 thousand for Fiscal 2023 compared to $196,823 thousand for Fiscal 2022.

The decrease in cash used in investing activities was primarily due to decreased acquisitions of music catalogs compared to Fiscal 2022, which included the acquisition of Tommy Boy on June 2, 2021 for approximately $100 million.

Cash used for investing activities was $50,553 thousand for Fiscal 2024 compared to $72,231 thousand for Fiscal 2023.

The decrease in cash used for investing activities was primarily due to decreased acquisitions of music catalogs compared to Fiscal 2023.

Financing Activities

Cash provided by financing activities was $17,560 thousand for Fiscal 2024 compared to $38,462 thousand for Fiscal 2023.

The decrease in cash provided by financing activities in Fiscal 2023 primarily reflects the Business Combination and PIPE Investment that occurred in Fiscal 2022.

The decrease in cash provided by financing activities in Fiscal 2024 was primarily driven by $16,000 thousand of secured line of credit repayments in Fiscal 2024 and a $8,183 thousand decrease in proceeds from borrowings under the secured line of credit, partially offset by a $3,494 thousand decrease in deferred financing costs paid.

Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and cash equivalents and funds available for drawing under our Senior Credit Facility (as described below).

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Debt Capital Structure

Since 2014, RMM has been the borrower under a revolving credit and term loan agreement (the “ Prior Credit Facility ”) with SunTrust Bank (Truist Bank) as the administrative agent and lead arranger.

The Prior Credit Facility has been amended and restated a number of times since 2014, generally leading to extensions of maturity dates and increases in the facility size.

On July 28, 2021, in connection with the consummation of the Business Combination, RMM amended and restated the Prior Credit Facility by entering the Fourth Amended and Restated Credit Agreement (the “ RMM Credit Agreement ”), providing RMM with a senior secured credit facility in an aggregate amount of $248,750 thousand.

On December 7, 2021, RMM entered into an amendment (the “ First Amendment ”) to the RMM Credit Agreement.

The First Amendment amended the RMM Credit Agreement to increase RMM’s senior secured revolving credit facility from $248,750 thousand to an aggregate amount of $350,000 thousand (the “ Senior Credit Facility ”).

RMM is a borrower under a revolving credit agreement (the “ RMM Credit Agreement ”) governing RMM’s secured line of credit (the “ Senior Credit Facility ”), as amended and refinanced in connection with the consummation of the Business Combination.

On December 16, 2022, RMM entered into an amendment (the “ Second Amendment ”) to the RMM Credit Agreement.

The Second Amendment amended the RMM Credit Agreement to (i) increase RMM’s senior secured revolving credit facility from $350,000 thousand to $450,000 thousand, (ii) increase the incremental borrowing available under the facility’s accordion feature from $50,000 thousand to $150,000 thousand, (iii) extend the maturity date of the loans advanced under the RMM Credit Agreement from October 16, 2024 to December 16, 2027, (iv) modify the interest rate to be equal to either the sum of a base rate plus a margin of 1.00% or the sum of a SOFR rate plus a margin of 2.00%, in each case subject to a 0.25% increase based on a consolidated net senior debt to library value ratio, (v) remove the existing total leverage ratio financial covenant of no greater than 7.50:1.00 (net of up to $20,000 thousand of certain cash balances) as of the end of each fiscal quarter, (vi) reduce the minimum required fixed charge coverage ratio financial covenant to 1.10:1.00 and (vii) modify the consolidated senior debt to library value ratio financial covenant to 0.450, subject to certain adjustments.

In connection with the Second Amendment, RMM recorded a loss on early extinguishment of debt of approximately $914 thousand that reflects the write-off of a portion of unamortized previous debt issuance costs and capitalized approximately $3,500 thousand in new debt issuance costs.

In connection with the Second Amendment, during Fiscal 2023, RMM recorded a loss on early extinguishment of debt of approximately $914 thousand that reflects the write-off of a portion of unamortized previous debt issuance costs and capitalized

approximately $3,500 thousand in new debt issuance costs.

RMM is also required to pay an unused fee in respect of unused commitments under the Senior Credit Facility, if any, at a rate of 0.25% per annum.

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September 2024

On March 10, 2022, two previous interest rate swaps expired with original notional amounts of $40,228 thousand and $59,325 thousand.

Those interest rate swaps were replaced by two new swaps with original notional amounts of $88,090 thousand and $8,875 thousand which add to a third interest rate swap with an original notional amount of $53,030 thousand.

All three current interest rate swaps mature on September 30, 2024, and RMM pays fixed rates of 1.533%, 1.422% and 0.972%, respectively, to the counterparty and received a floating interest payment from the counterparty based on SOFR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

In April 2023, the Company added an additional interest rate swap in the amount of $100 million.

September 30, 2024

December 2027

September 30, 2024

December 2027

In February 2024, the Company entered into an interest rate swap in the amount of $50,000,000, which is reflected in the table above.

This swap has an effective date of September 30, 2024, which coincides with the expiration of the Company’s existing swaps, and a maturity date of December 16, 2027, which corresponds to the maturity date of the loans advanced under the RMM Credit Agreement.

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Management believes that funds generated from our operations, borrowings under the Senior Credit Facility and available cash and equivalents will be sufficient to fund our debt service requirements, working capital requirements and capital expenditure requirements for the foreseeable future.

However, our ability to continue to fund these items and to reduce debt may be affected by general economic, financial, competitive, legislative and regulatory factors, as well as other industry-specific factors such as the ability to control music piracy and the continued transition from physical to digital formats in the recorded music and music publishing industries.

It could also be affected by the severity and duration of natural or man-made disasters, including pandemics such as the COVID-19 pandemic.

It could also be affected by the severity and duration of natural or human-made disasters, including pandemics.

We and our affiliates continue to evaluate opportunities to, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to pay dividends or prepay outstanding debt or repurchase or retire our outstanding debt.

The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded

from available cash or from additional borrowings or equity raises.

The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings or equity raises.

In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity, and other factors, we may seek to refinance the Senior Credit Facility with existing cash and/or with funds provided from additional borrowings.

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The following is a description of our firmly committed contractual obligations as of March 31, 2024:

(1) Interest obligations under the Credit Facility are presented in consideration of 5.00% as a substitute for SOFR, plus 2.00%.

These obligations have been presented based on the principal amounts due as of March 31, 2023.

Amounts do not include any unamortized deferred financing costs.

(1) Interest obligations under the Credit Facility are based on principal amounts outstanding and interest rates in effect as of March 31, 2024.

Interest does not include amortization of deferred financing costs.

(2) The Company routinely enters into long-term commitments with songwriters and recording artists for the future delivery of music.

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Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly.

(3) The Company routinely enters into asset acquisition agreements and less often share purchase agreements, which can have deferred minimum funding commitments and other related obligations, which are reflected in the table above.

(3) The Company routinely enters into asset acquisition agreements, which can have deferred minimum funding commitments and other related obligations, as reflected in the table above.

Critical Accounting Policies

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Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations.

See Note 2 to the Company’s consolidated financial statements for the fiscal years ended March 31, 2023 and 2022, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies.

See Note 2, “ Summary of Significant Accounting Policies ” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2024 and 2023, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies.

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and related notes thereto.

The future effects of the COVID-19 pandemic on our results of operations, cash flows and financial position are unclear.

However, we believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements.

We believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements.

Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

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Reservoir incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our music publishing copyrights and recorded music catalogue.

Royalties are calculated using negotiated rates in accordance with recording artist and songwriter contracts.

Royalties are calculated using negotiated rates in accordance with songwriter and recording artist contracts.

Calculations are based on revenue earned or user/usage measures or a combination of these.

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Reservoir regularly updates the recoverability assessment as additional data is available.

In determining whether the advance is recoverable, Reservoir evaluates the current and past popularity of the recording artist or songwriter, the sales history of the recording artist or songwriter, the initial or expected commercial acceptability of the product, the current and past popularity of the genre of music that the product is designed to appeal to, and other relevant factors.

Advances vary in both amount and expected life based on the underlying recording artist or songwriter.

In determining whether the advance is recoverable, Reservoir evaluates the current and past popularity of the songwriter or recording artist, the sales history of the songwriter or recording artist, the initial or expected commercial acceptability of the product, the current and past popularity of the genre of music that the product is designed to appeal to, and other relevant factors.

Advances vary in both amount and expected life based on the underlying songwriter or recording artist.

To the extent that a portion of an outstanding advance is no longer deemed recoverable, that amount will be expensed in the period the determination is made.

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New Accounting Pronouncements

See Note 2, “ Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2023 and 2022, contained in Part II, Item 8 of this Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis