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Item 7. Management’s Discussion and Analysis

2025-05-28 compared with 2024-05-30 · 144 added, 145 removed, 237 unchanged (55% of the section changed)

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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.

RMM is one of the world’s leading independent music companies.

We operate a music publishing business, a recorded music business, a management business and a rights management entity in the Middle East.

Our fiscal year ends on March 31.

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We are an independent music company operating in music publishing and recorded music.

We represent over 150,000 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:

Both of our business areas are populated with hit songs dating back to the early 1900s and represent an array of artists across genres and geography.

Consistent with how we classify and operate our business, our company is organized in two reportable segments:

Music Publishing and Recorded Music.

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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 nonaffiliated licensees and sub-publishers.

We own or control rights to more than 150,000 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.

We own or control rights to a vast collection of musical compositions, including numerous pop hits, American standards, and motion picture and theatrical compositions.

Assembled over many years, our catalog represents 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.

In addition to the catalog, we represent many active songwriters who are consistently generating new music.

Music Publishing revenues are derived from five main sources:

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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;

● Writer Royalties and Other Publishing Costs ––the 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, all of which are classified as cost of revenue;

● 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.

Our Recorded Music business consists of three types of sound recording rights 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 (“ Current Artist ”).

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.

The second is the active marketing, promotion, distribution, sale and license of previously recorded and subsequently acquired catalog recordings (the “ Catalog ”).

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.

We also manage some select Catalog recorded music under our Philly Groove Records and Reservoir Records labels.

Our recorded music businesses are both primarily handled by our Chrysalis Records label based in London and our Tommy Boy label based in New York City.

In addition, we own and manage some select Catalog recorded music under our Philly Groove Records and Reservoir Recordings labels.

We have a small roster of Current Artists for whom we release new music.

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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Chrysalis Records and Tommy Boy catalogues are distributed via our agreements with MERLIN, AMPED, Proper 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.

Through our distribution network, our music is 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 to download services.

We also license music digitally to fitness platforms such as Apple Fitness+, Equinox, Hydrow and Peloton and to social media outlets, such as Facebook, Instagram, TikTok and Snap.

Recorded Music revenues are derived from four main sources:

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● 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;

● Neighboring Rights –– the rightsholder 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;

● 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

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● 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 product costs to manufacture, package and distribute products to wholesale and retail distribution outlets, all of which are classified as cost of revenue;

● 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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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.

GAAP, a reconciliation to GAAP measures and a discussion of the reasons why management believes this information is useful to them and may be useful to investors.

Results of Operations

Income Statement

Our income statement was composed of the following amounts (in thousands):

Our income statement was comprised of the following amounts (in thousands):

Costs and expenses:

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Interest expense

Loss on early extinguishment of debt

(Loss) gain on foreign exchange

(Loss) gain on fair value of swaps

Gain (loss) on foreign exchange

Loss on fair value of swaps

Other income (expense), net

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Income tax expense

Net income attributable to noncontrolling interests

Net loss (income) attributable to noncontrolling interests

Net income attributable to Reservoir Media, Inc.

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Our revenues were composed of the following amounts (in thousands):

Our revenues were comprised of the following amounts (in thousands):

Revenue by Type

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Total Revenue

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.

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 revenues increased by $13,850 thousand, or 10%, during Fiscal 2025 compared to Fiscal 2024, driven by a 12% increase in Music Publishing revenue, a 4% increase in Recorded Music revenue, and a 12% increase in Other revenue related to the Company’s artist management business.

Music Publishing revenues represented 68% and 66% of total revenues during Fiscal 2025 and Fiscal 2024, respectively.

Recorded Music revenues represented 28% and 29% of total revenues during Fiscal 2025 and Fiscal 2024, respectively.

and international revenues represented 59% and 41% of total revenues, respectfully, during Fiscal 2025 and Fiscal 2024.

Total digital revenues increased by $12,786 thousand, or 16%, during Fiscal 2025 compared to Fiscal 2024.

Total digital revenues represented 54% and 55% of consolidated revenues for Fiscal 2024 and Fiscal 2023, respectively.

Total digital revenues represented 58% and 54% of consolidated revenues during Fiscal 2025 and Fiscal 2024, respectively.

Music Publishing revenues increased by $11,219 thousand, or 12%, during Fiscal 2025 compared to Fiscal 2024.

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.

This increase in Music Publishing revenue was mainly driven by revenue from the existing catalog, which benefitted from price increases at multiple music streaming services that contributed to an increase in digital revenue, and acquisitions of catalogs.

Additionally, synchronization revenue increased during Fiscal 2025, driven primarily by the timing of licenses.

These factors were partially offset by a decrease in performance revenue, partially due to the timing of hit songs.

On a geographic basis, U.S.

Music Publishing revenues represented 58% of total Music Publishing revenues for Fiscal 2024 compared to 60% for Fiscal 2023.

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

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

Music Publishing revenues represented 58% of total Music Publishing revenues during Fiscal 2025 and Fiscal 2024.

International Music Publishing revenues represented 42% of total Music Publishing revenues during Fiscal 2025 and Fiscal 2024.

Recorded Music revenues increased by $1,884 thousand, or 4%, during Fiscal 2025 compared to Fiscal 2024.

This increase in Recorded Music revenue includes royalty recoveries during Fiscal 2025 related to underreported usage for music catalogs (the “ Royalty Recovery ”).

In addition to the Royalty Recovery, Recorded Music revenue also benefited from continued growth at music streaming services and price increases at multiple music streaming services, and the acquisition of new catalogs.

These increases were partially offset by a decrease in physical revenue after robust sales of new De La Soul releases in Fiscal 2024.

On a geographic basis, U.S.

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

Our cost of revenues was composed of the following amounts (in thousands):

Recorded Music revenues represented 55% of total Recorded Music revenues during Fiscal 2025 and Fiscal 2024.

International Recorded Music revenues represented 45% of total Recorded Music revenues during Fiscal 2025 and Fiscal 2024.

Cost of Revenue

Our cost of revenue was comprised of the following amounts (in thousands):

Writer royalties and other publishing costs

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Total cost of revenue

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 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.

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.

Cost of revenue increased by $1,952 thousand, or 4%, during Fiscal 2025 compared Fiscal 2024, primarily as a result of an increase in revenues.

Cost of revenue as a percentage of revenues decreased to 36% during Fiscal 2025 from 38% during Fiscal 2024, reflecting decreases in cost of revenue as a percentage of revenue for the Music Publishing and Recorded Music segments, as well as an increase in Other revenue related to the Company’s artist management business, which does not have a corresponding cost of revenue.

Writer royalties and other publishing costs for the Music Publishing segment increased by $3,294 thousand, or 8%, during Fiscal 2025 compared to Fiscal 2024, primarily as a result of the increase in Music Publishing revenues.

Writer royalties and other publishing costs as a percentage of Music Publishing revenues decreased to 42% during Fiscal 2025 from 44% during Fiscal 2024, driven primarily by the change in the mix of revenues by type and songwriting clients with their specific contractual royalty rates being applied to the revenues.

Artist royalties and other recorded music costs for the Recorded Music segment decreased by $1,342 thousand, or 10%, during Fiscal 2025 compared to Fiscal 2024, primarily as a result of the decrease in physical sales.

Artist royalties and other recorded music costs as a percentage of Recorded Music revenues decreased to 28% during Fiscal 2025 from 32% during Fiscal 2024, driven primarily by the change in the mix of sales by type to a lower percentage of physical sales, which carry higher costs than other types of revenues, and the Royalty Recovery, which did not have a corresponding cost of revenue.

Amortization and Depreciation

Our amortization and depreciation expenses are composed of the following amounts (in thousands):

Our amortization and depreciation expenses are comprised of the following amounts (in thousands):

Music Publishing amortization and depreciation

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Total amortization and depreciation

Amortization and depreciation expense increased by $2,911 thousand, or 13%, during Fiscal 2024 compared to Fiscal 2023, driven by increases in both the Music Publishing and Recorded Music segments.

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 $461 thousand, or 8%, during Fiscal 2024 compared to Fiscal 2023, primarily due to the acquisition of additional music catalogs.

Amortization and depreciation expense increased by $1,313 thousand, or 5%, during Fiscal 2025 compared to Fiscal 2024, primarily driven by the acquisition of additional music catalogs.

Administration Expenses

Our administration expenses are composed of the following amounts (in thousands):

Our administration expenses are comprised of the following amounts (in thousands):

Music Publishing administration expenses

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Total administration expenses

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.

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 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.

Total administration expenses were relatively flat during Fiscal 2025 compared to Fiscal 2024, reflecting the nonrecurrence of $2,700 thousand related 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 ”), partially offset by an increase in costs to support the Company’s growth, as well as an increase in Other administration expenses.

Expressed as a percentage of revenues, administration expenses decreased to 25% during Fiscal 2025 from 27% during Fiscal 2024, primarily as a result of the nonrecurrence of the Recoupable legal fee write-off and improved operating leverage as revenues increased.

Music Publishing administration expenses decreased by $535 thousand, or 2%, during Fiscal 2025 compared to Fiscal 2024.

Expressed as a percentage of revenues, Music Publishing administration expenses decreased to 23% during Fiscal 2025 from 26% during Fiscal 2024, primarily as a result of the nonrecurrence of the Recoupable legal fee write-off.

Recorded Music administration expenses decreased by $383 thousand, or 4%, during Fiscal 2025 compared to Fiscal 2024.

Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 21% during Fiscal 2025 from 23% during Fiscal 2024, primarily due to taking advantage of operating leverage on the Recorded Music platform.

Other administration expenses increased by $1,018 thousand, or 21%, during Fiscal 2025 compared to Fiscal 2024, primarily due to selling expenses associated with our artist management business, consisting mostly of manager compensation.

Operating Income

Operating income increased by $10,485 thousand, or 43%, during Fiscal 2025 compared to Fiscal 2024, primarily driven by revenue growth, an improvement in cost of revenue as a percentage of revenues and the nonrecurrence of the Recoupable legal fee write-off.

Operating income margin (operating income expressed as a percentage of revenues) increased to 22% during Fiscal 2025 compared to 17% during Fiscal 2024, primarily as a result of an improvement in cost of revenue as a percentage of revenues, the nonrecurrence of the Recoupable legal fee write-off and improved operating leverage as revenues increased.

Music Publishing operating income increased by $8,736 thousand, or 88%, during Fiscal 2025 compared to Fiscal 2024, primarily driven by revenue growth, an improvement in cost of revenue as a percentage of revenues and the nonrecurrence of the Recoupable legal fee write-off.

Music Publishing operating income margin increased to 17% during Fiscal 2025 compared to 10% during Fiscal 2024, primarily as a result of an improvement in cost of revenue as a percentage of revenues, the nonrecurrence of the Recoupable legal fee write-off and improved operating leverage as revenues increased.

Recorded Music operating income increased by $2,021 thousand, or 15%, during Fiscal 2025 compared to Fiscal 2024, primarily driven by revenue growth, an improvement in cost of revenue as a percentage of revenues and a decrease in Administration expenses.

Recorded Music operating income margin increased to 34% during Fiscal 2025 compared to 31% during Fiscal 2024, primarily as a result of an improvement in cost of revenue as a percentage of revenues and improved operating leverage as revenues increased.

Interest Expense

Interest expense increased by $795 thousand, or 4% during Fiscal 2025 compared to Fiscal 2024.

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 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.

(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.

The increase in interest expense was driven primarily by an increase in borrowings due to use of funds in acquisitions of music catalogs and writer signings and an increase in effective interest rates.

The Company’s interest expense increased on the portions of its borrowings that are hedged beginning in October 2024, as its previous swap contracts matured on September 30, 2024, and new swap contracts became effective on the same date.

These factors were partially offset by the nonrecurrence of $620 thousand incurred in connection with settlement of the Royalty Dispute described in Note 16, “ Contingencies and Commitments ” to the accompanying consolidated financial statements.

Gain (Loss) on Foreign Exchange

Gain on foreign exchange was $578 thousand during Fiscal 2025 compared to a loss on foreign exchange of $102 thousand during Fiscal 2024.

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

Loss on Fair Value of Swaps

Loss on fair value of swaps was $4,214 thousand during Fiscal 2025 compared to $1,125 thousand during Fiscal 2024.

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

This change was driven primarily by the September 2024 decrease in the Secured Overnight Financing rate (“ SOFR ”), as well as the time value of the swaps that expired on September 30, 2024, partially offset by marking to market our current interest rate swap hedges.

Other Income (Expense), Net

Other income, net during Fiscal 2025 consisted of a $104 thousand gain recorded on the disposal of an equity investment during the period (the “ Investment Gain ”) and the Company’s share of proceeds related to underreported usage for acquired music catalogs that pertained to periods prior to the Company’s acquisition of the music catalogs, which totaled $823 thousand (the “ Recovery Income ”).

These factors were partially offset by a $500 thousand impairment of an investment (the “ 2025 Investment Write-down ”) and the Company’s share of loss recorded by an equity method investment (the “ EMI Loss ”).

Other expense, net during Fiscal 2024

consisted primarily of a $991 thousand impairment to write-down an equity investment to its estimated fair value (the “ 2024 Investment Write-down ”).

See Note 2, “ Summary of Significant Accounting Policies – Investments in Equity Affiliates ” to the accompanying consolidated financial statements for discussion about the Investment Gain, 2025 Investment Write-down and 2024 Investment Write-down.

Income Tax Expense

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 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.

Income tax expense increased to $2,141 thousand during Fiscal 2025 compared to $335 thousand during Fiscal 2024.

The increase in the income tax expense during Fiscal 2025 was primarily due to the increase of income before income taxes, partially offset by a lower effective income tax rate.

The Company’s effective income tax rate during Fiscal 2025 was 21.7% compared to 28.6% during Fiscal 2024.

The decrease in the effective income tax rate during Fiscal 2025 reflects the non-recurrence of incremental tax expense due to a non-deductible impairment charge to write-down an equity investment in the U.K.

to its estimated fair value, which increased the Company’s effective income tax rate by 21.1% during Fiscal 2024.

Additionally, the Fiscal 2025 effective income tax rate reflects return to provision reconciliation related to certain international tax liabilities, as well as an increase in earnings, which reduced the relative impact of statutory limitations on certain deductions.

These factors were partially offset by the non-recurrence of an incremental tax benefit arising from a change in estimate of the applicable tax rate used to measure the Company’s state and local deferred tax liabilities in the U.S., which decreased the Company’s effective income tax rate by 34.6% during Fiscal 2024.

Net income increased by $6,894 thousand, to $7,731 thousand during Fiscal 2025 compared to $837 thousand during Fiscal 2024, driven primarily by a $10,485 thousand increase in operating income and a $1,419 increase in other income (expense), net during 2025.

These factors were partially offset by a $3,089 thousand increase in Loss on fair value of swaps and a $1,806 thousand increase in income tax expense during Fiscal 2025.

Non-GAAP Reconciliations

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Amortization and depreciation expenses

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.

OIBDA increased by $11,798 thousand, or 24%, during Fiscal 2025 compared to Fiscal 2024, driven by an $8,460 thousand increase in Music Publishing OIBDA and a $3,609 thousand increase in Recorded Music OIBDA.

Expressed as a percentage of revenue, OIBDA

Margin increased to 39% during Fiscal 2025 from 34% during Fiscal 2024, primarily as a result of a decrease in cost of revenue as a percentage of revenues, the nonrecurrence of the Recoupable legal fee write-off and improved operating leverage as revenues increased.

Music Publishing OIBDA increased by $8,460 thousand, or 29%, during Fiscal 2025 compared to Fiscal 2024.

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.

Expressed as a percentage of revenue, Music Publishing OIBDA Margin increased to 35% during Fiscal 2025 compared to 30% during Fiscal 2024, reflecting a decrease in cost of revenue as a percentage of revenues, the nonrecurrence of the Recoupable legal fee write-off and improved operating leverage as revenues increased.

Recorded Music OIBDA increased by $3,609 thousand, or 19% during Fiscal 2025 compared to Fiscal 2024.

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.

Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 51% during Fiscal 2025 from 45% during Fiscal 2024, reflecting a decrease in cost of revenue as a percentage of revenues and improved operating leverage as revenues increased.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

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Amortization and depreciation

Loss on early extinguishment of debt (a)

Loss (gain) on foreign exchange (b)

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

Non-cash share-based compensation (d)

Recoupable legal fee write-off (e)

Other income (expense), net (f)

(Gain) loss on foreign exchange (a)

Loss on fair value of swaps (b)

Non-cash share-based compensation (c)

Recoupable legal fee write-off (d)

Other (income) expense, net (e)

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 loss (gain) on foreign exchange fluctuations.

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

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

(b) Reflects the non-cash loss or (gain) on the mark-to-market of interest rate swaps.

2021 Omnibus Incentive Plan.

(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.

(d) 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.

(e) Reflects the Investment Gain, Recovery Income, 2025 Investment Write-down and EMI Loss during Fiscal 2025 and reflects the 2024 Investment Write-down during Fiscal 2024.

Consolidated Adjusted EBITDA increased by $10,102 thousand, or 18%, during Fiscal 2025 compared to Fiscal 2024, primarily as a result of revenue growth, a decrease in cost of revenue as a percentage of revenues and improved operating leverage as revenues increased.

Liquidity and Capital Resources

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Operating Activities

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 $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.

Cash provided by operating activities was $45,279 thousand during Fiscal 2025 compared to $36,193 thousand during Fiscal 2024.

The primary driver of the $9,086 thousand increase in cash provided by operating activities during Fiscal 2025 as compared to Fiscal 2024 was an increase in earnings.

This factor was partially offset by a reduction in cash provided by working capital, driven primarily by the timing of collections of accounts receivable and payments of accounts payable.

Investing Activities

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.

Cash used for investing activities was $96,719 thousand during Fiscal 2025 compared to $50,553 thousand during Fiscal 2024.

The increase in cash used for investing activities was primarily due to an increase in acquisitions of music catalogs.

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 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.

Cash provided by financing activities was $54,518 thousand during Fiscal 2025 compared to $17,560 thousand during Fiscal 2024.

The increase in cash provided by financing activities in Fiscal 2025 reflects a $32,000 thousand increase in borrowings used for investing activities and a $6,000 thousand decrease in repayments towards the secured line of credit.

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

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, 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.

RMM is a borrower under a revolving credit agreement (as amended or supplemented from time to time, the “ RMM Credit Agreement ”) governing RMM’s Senior Credit Facility.

The maturity date of the loans advanced under the Senior Credit Facility is December 16, 2027.

The interest rate on borrowings under the Senior Credit Facility is equal to, at our option, either the sum of a base rate plus a margin of 1.00% or the sum of a Secured Overnight Financing Rate (“ 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.

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.

The Senior Credit Facility also includes an “accordion feature” that permits RMM to seek additional commitments in an amount not to exceed $150,000 thousand.

Subject to market conditions, we expect to continue to take opportunistic steps to extend our maturity dates and reduce related interest expense.

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Events of Default

The Senior Credit Facility includes customary events of default, including nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, certain bankruptcy or insolvency events, certain ERISA events and certain material judgments, in each case, subject to customary thresholds, notice and grace period provisions.

The Senior Credit Facility includes customary events of default, including nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, certain bankruptcy or insolvency events, certain Employee Retirement Income Security Act (“ ERISA ”) events and certain material judgments, in each case, subject to customary thresholds, notice and grace period provisions.

Covenant Compliance

The Senior Credit Facility contains financial covenants that requires us, on a consolidated basis with our subsidiaries, to maintain, (i) a fixed charge coverage ratio of not less than 1.10:1.00 for each four fiscal quarter period, and (iii) a consolidated senior debt to library value ratio of no greater than 0.45:1.00, subject to certain adjustments.

The Senior Credit Facility contains financial covenants that requires us, on a consolidated basis with our subsidiaries, to maintain, (i) a fixed charge coverage ratio of not less than 1.10:1.00 for each four fiscal quarter period, and (ii) a consolidated senior debt to library value ratio of no greater than 0.45:1.00, subject to certain adjustments.

Non-compliance with the fixed charge coverage ratio and consolidated senior debt to library value ratio could result in the lenders, subject to customary cure rights, requiring the immediate payment of all amounts outstanding under the Senior Credit Facility, which could have a material adverse effect on our business, cash flows, financial condition and results of operations.

As of March 31, 2024, with a fixed charge coverage ratio of 3.67x and a consolidated senior debt to library value ratio less than 30%, we were in compliance with both of the financial covenants under the Senior Credit Facility.

As of March 31, 2025, with a fixed charge coverage ratio of 3.67x and a consolidated senior debt to library value ratio less than 30%, we were in compliance with both of the financial covenants and all non-financial covenants under the Senior Credit Facility.

Interest Rate Swaps

At March 31, 2024, RMM had the following interest rate swaps outstanding, under which it pays a fixed rate and receives 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:

At March 31, 2025, RMM had the following interest rate swaps outstanding, under which it pays a fixed rate and receives 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 Senior Credit Facility (in thousands):

Effective Date

March 31, 2025

March 10, 2022

September 30, 2024

March 10, 2022

September 2024

December 2027

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.

The Company will pay a fixed rate of 3.961% and receive a floating interest from the counterparty based on SOFR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.

Our ability to pay dividends is restricted by covenants in the Senior Credit Facility.

We did not pay any dividends to stockholders during Fiscal 2024.

On September 30, 2024, three previous interest rate swaps expired with original notional amounts of $8,875 thousand, $88,098 thousand and $53,030 thousand, respectively.

Through the expiration date of these previous interest rate swaps, RMM paid fixed rates of 1.53%, 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.

Our ability to pay dividends to Reservoir Media, Inc.’s shareholders is restricted by covenants in the Senior Credit Facility.

We did not pay any dividends to Reservoir Media, Inc.’s shareholders during Fiscal 2025.

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.

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Firm Commitments

The following table summarizes Reservoir Media Management’s aggregate contractual obligations as of March 31, 2024, and the estimated timing and effect that such obligations are expected to have on liquidity and cash flow in future periods.

The following table summarizes the Company’s aggregate contractual obligations as of March 31, 2025, and the estimated timing and effect that such obligations are expected to have on liquidity and cash flow in future periods.

Firm Commitments and Outstanding Debt

(in thousands)

Revolving Credit

Interest on Revolving Credit (1)

Secured line of credit

Interest on secured line of credit (1)

Operating leases

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(1) Interest obligations under the Credit Facility are based on principal amounts outstanding and interest rates in effect as of March 31, 2025.

Interest does not include amortization of deferred financing costs.

Interest does not include amortization of deferred financing costs or effects of interest rate swaps.

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

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(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

We believe that the following accounting policies involve a high degree of judgment and complexity.

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.

Critical Accounting Policies and Estimates

We believe that the following accounting policies and estimates involve a high degree of judgment and complexity.

Accordingly, these are the policies and estimates 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, “ Summary of Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2025 and 2024, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies.

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Revenue and Cost Recognition

As required by Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 606, Revenue from Contracts with Customers (“ ASC 606 ”), Reservoir recognizes revenue when, or as, control of the promised services or goods is transferred to its customers and in an amount that reflects the consideration Reservoir is contractually due in exchange for those services or goods.

As required by Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 606, Revenue from Contracts with Customers (“ ASC 606 ”), Reservoir recognizes revenue when, or as, control of the promised services or goods is transferred to its customers and in an amount that reflects the consideration to which Reservoir is expected to be entitled in exchange for those services or goods.

Music Publishing

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Royalties are recognized as the sale or usage occurs based upon usage reports and, when these reports are not available, royalties are estimated based on historical data, such as recent royalties reported, company-specific information with respect to changes in repertoire, industry information and other relevant trends.

Synchronization revenue is typically recognized as revenue when control of the license is transferred to the customer in accordance with ASC 606.

Synchronization revenue is typically recognized as revenue when the customer has a right to access the license, which is when control is transferred to the customer.

Recorded Music

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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.

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

There are instances where such data is not available to be processed and royalty cost calculations may be complex or involve judgments about significant volumes of data to be processed and analyzed.

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Under ASC 928, Reservoir capitalizes as assets certain advances, which it believes are recoverable from future royalties to be earned by the recording artist or songwriter, when paid.

Recoverability is assessed upon initial commitment of the advance based upon Reservoir’s forecast of anticipated revenue from the sale of future and existing albums or musical compositions.

Recoverability is assessed upon initial commitment of the advance based upon Reservoir’s forecast of

anticipated revenue from the sale of future and existing sound recordings or musical compositions.

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 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.

In determining whether the advance is recoverable, Reservoir evaluates the current and past popularity of the songwriter or recording artist, the sales or license 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.

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This assessment requires an evaluation of whether the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, resulting in an asset acquisition or, if not, resulting in a business combination.

If treated as an asset acquisition, the assets are recorded on a relative fair value basis in accordance with Reservoir’s accounting policies and related acquisition costs are capitalized as part of the asset.

In a business combination, Reservoir recognizes identifiable assets acquired, liabilities assumed, and non-controlling interests at their fair values at the acquisition date.

If treated as an asset acquisition, the assets are recorded on a relative fair value basis and related acquisition costs are capitalized as part of the asset.

If treated as a business combination, Reservoir recognizes identifiable assets acquired, liabilities assumed, and non-controlling interests at their fair values at the acquisition date.

Any consideration paid in excess of the net fair value of the identifiable assets and liabilities acquired in a business combination is recorded to goodwill and acquisition-related costs are expensed as incurred.

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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