Good morning, everyone, and thank you for participating in today's conference call to discuss Reservoir Media's financial results for the third quarter of fiscal year 2024 ended December 31, 2023. After this speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Ms. Jackie Marcus with the Alpha IR Group, who will review our agenda today and the company's forward-looking statements. Jackie?

Thank you, operator. Good morning, everyone, and thank you for participating in today's earnings conference call. Reservoir Media issued a press release with results for its third quarter of fiscal 2024 ended December 31, 2023, earlier this morning. If you did not receive a copy of our earnings press release, you may access it from the Investor Relations section of our website at investors.reservoir-media.com. With me on today's call are Golnar Khosrowshahi, Founder and Chief Executive Officer, and Jim Heindlmeyer, Chief Financial Officer. As a reminder, this call is being simultaneously webcast and will be recorded and archived on the Investor Relations section of our website. Before I turn the call over to Golnar and Jim, I'd like to take a note that today's discussion will contain forward-looking statements that reflect current views of Reservoir Media about our business, financial performance and future events and, as such, involve certain risks and uncertainties. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will result or be achieved. Please refer to our earnings press release and our filings with the Securities and Exchange Commission for more information on the specific risks, uncertainties and other factors that could cause our actual results to differ materially from our expectations, beliefs and projections described in today's discussion. Any forward-looking statements that we make on the call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In addition to the financial results presented in accordance with generally accepted accounting principles, we plan to present during this call certain financial measures that do not conform to US GAAP if we believe they are useful to investors or if we believe they will help investors to better understand our performance or business trends. Reconciliations of these non-GAAP financial measures to the nearest comparable GAAP measures are included in our earnings press release. I would now like to turn the call over to Golnar. Golnar?

Thank you, Jackie. Good morning, everyone, and thank you for joining us today. Before diving into our performance in the third fiscal quarter, I want to take a moment to recognize our songwriters and artists who brought home Grammy Awards this past Sunday. Our roster earned an impressive 39 Grammy nominations across 28 categories and contributed to 10 wins, including Joni Mitchell's Best Folk Album, a sweep by Killer Mike across the 3 rap categories and best R&B song for Khris Riddick-Tynes collaboration Snooze by SZA. Their nominations and wins are a testament to the caliber of talent we represent at Reservoir. Beyond these accolades, another marker of success for our roster is seen by consumption and activity on the charts. As reported by Billboard's publishers quarterly, Reservoir earned a hot 100 top 10 market share for the three quarters reported so far for calendar 2023. One of our top consumed songs, Snooze by SZA, co-written and co-produced by Khris Riddick-Tynes, was a hot 100 chart staple over the last year, generating over 0.5 billion on-demand audio streams alone. These achievements validate the talent and consistency of our roster and confirm the effectiveness of our team's strategy in signing and developing today's top hit-makers. Moving to our operational and financial performance in the third fiscal quarter, we continue to report strong growth numbers, underpinned by healthy organic growth mirroring that of the wider music industry. Luminate, the industry standard measurement platform for tracking music sales, streams, downloads and airplay, issued its year-end music report, which highlighted 34% year-over-year volume growth for total on-demand song streams globally in 2023. This includes over 13% year-over-year volume growth in US catalog total album consumption as well as an 11% growth in current total album consumption. As hip-hop celebrated its 50th anniversary, the genre…

Thank you, Golnar, and good morning, everyone. We're pleased to report another quarter of strong financial results, headlined by meaningful revenue growth in both of our business segments and our fifth consecutive quarter of double-digit adjusted EBITDA improvement. Our accomplishments in the quarter represent Reservoir's commitment to consistent growth on both top and bottom lines. Turning to our fiscal third quarter results. Revenue for the quarter was $35.5 million, which was a 19% increase versus the prior year quarter when including acquisitions. This was driven by growth in both business segments, highlighted by a 32% year-over-year increase in Recorded Music. Turning to our operating expenses for the quarter. Our overall cost of revenue increased 13% versus the prior year quarter, driven by higher revenue for the quarter. Amortization and depreciation costs increased 14% year-over-year, driven by our continued catalog acquisitions. Company administration expenses increased 17% versus the prior year period, primarily due to higher compensation costs, increased marketing spend for Recorded Music and higher fees for artists and managers associated with the higher revenue in that segment. In the third quarter, OIBDA increased 27% year-over-year to $12.9 million. For those of you who are newer to our business model, OIBDA is a common non-GAAP KPI used in the music industry that stands for operating income before depreciation and amortization. Adjusted EBITDA increased 25% compared to the year to $13.7 million. The increases in both OIBDA and adjusted EBITDA were driven by strong revenue growth or partially offset by higher administrative expenses. Interest expense was $5.4 million for the third quarter compared to $4.1 million in the same period last year. Net loss for the third quarter of fiscal 2024 was $2.9 million versus $4.1 million in the prior year quarter. This resulted in a net loss per share of $0.05.…

Thank you, Jim. As we look ahead, we remain committed to operating the business with rigor as we navigate a dynamic economic backdrop and as the music industry continues to grow. We are confident in our ability to achieve our financial targets, which have been raised and narrowed on both revenue and adjusted EBITDA. Our pipeline remains very active globally and across both business segments. With the support of consistent and predictable cash flows, we anticipate continuing to execute deals well within our expected return profile. With that, we will now open the line for questions.

[Operator Instructions] And our first question coming from the line of Richard Baldry with ROTH MKM. Your line is open.

Thanks. Given the focus on international, can you maybe talk about what you're seeing there that's attractive? Is it the greater growth opportunities? Or are there the pace of their organic growth or deal terms themselves on initiation? Or is it really a blend of the both? And then maybe you can talk about whether there's a bias internationally toward either recording or publishing. Thanks.

Good morning, Rich. I think it's a combination of all of the factors that you mentioned. We are able to execute in those markets at very attractive pricing, which makes for attractive returns. There is the promise of future growth that we are intrigued by as subscription numbers grow, as access to platforms develops. So that makes it significantly attractive to us. The thesis being that we would like to be in a position to be content owners in the international markets on the cusp and ahead of how these markets grow and consumption grows and streaming grows, which will then translate into the associated revenues, and that's what makes it captivating for us.

And can you talk about sort of the go-to-market model in all those countries? Do you have the feet on the ground? Is it something that can be done remotely? Do you feel like you have adequate resources in the right regions? Or do you need to sort of add to that as you get better with more reps and more and more deals in those regions?

We generally subscribe to the idea that you have to have feet on the ground and develop relationships with people and move those relationships forward. I'm not really a big fan of doing business by proxy in those markets. Hence, our operation at PopArabia, which allows us to really extend that reach in the MENA region as well as in India, where we do represent talent and have already begun developing that business. So it's -- because this is very much a relationship-driven business with artists and catalog sellers, et cetera, it's important to have feet on the ground, and we have had those feet on the ground for several years now. So we are very well positioned to execute there.

And maybe looking at the organic growth side of the table, can you maybe estimate or qualitatively even, how far into recognizing royalty rate increases from the various CRB settlements, et cetera? Do you feel like you're -- that's a rolling sort of recognition is my understanding. Do you feel like you're halfway into that? Is that still a pretty good tailwind for '24, '25? How do we think about that as a driver?

Yeah. I think -- this is Jim, Rich. So I think when we think about those rate increases, we're still comparing the current quarter of December '23 against December '22. December '22, we were still in a position of really estimating and accruing what we thought that final quarter of CRB III would be. We obviously have much more visibility and real data in the current year where we're being accounted under the CRB IV rates. So there's still a little bit of that -- of those tailwinds that are helping in our organic growth in the current quarter. And I think that we will continue to potentially see that going into, let's say, Q1 of next year, our June quarter, as we look forward to the full resolution of the CRB III rate increase where the DSPs will, within the next couple of days, be remitting that money to the MLC and it will flow through to rights holders a few months after that. So once we see those true-ups, my expectation is that as we work through that, that will kind of be the end of that lumpiness, if you will, related to the rate increase there.

Thanks. last one for me. Q4 has typically been very seasonally strong. The guidance sort of implies it's more sideways this year. Are there any unusual onetime impacts in Q3 that we should think about taking out that would explain that or think just typical conservatism?

Yeah. I think that I've mentioned this on some of our previous calls, but one of our ongoing focuses is improving how we handle accruals. You're obviously aware that in this business, there can be some significant lags in how revenue is accounted to us. And we have an ongoing goal of improving the accuracy of our accruals. And as we go through that, that will naturally lead to some flattening of our quarter-over-quarter fluctuations. And I think that that's partly what we are seeing is, if you go back a couple of years, you will see much higher spikes in the September and March quarter and lower valleys in the June and December quarters. And now we're seeing a little bit of a smoother quarter-over-quarter cadence with our revenue. There's nothing in particular in the third quarter that I think needs to be called out. And that's also part of the reason why when you see our adjusted guidance, you really see that the third quarter performance reflected in our increases for the full year guidance.

Great. Thanks and congrats on a good quarter.

Thank you.

Thank you.

Thank you. And our next question is coming from the line of Alex Fuhrman with Craig-Hallum. Your line is open.

Great. Thanks very much for taking my question here. Jim, it's crossed my mind here that since Reservoir has been a public company, you've often reported a very strong Q1 or Q3 and then gone on to caution investors that you really view your business in two halves and that, to some extent, the strong quarter may have pulled some revenue and earnings out of the upcoming quarter. Can you talk a little bit about what makes this quarter different and what really gives you the confidence to be pretty significantly raising your full year guidance here?

Well, we're only one quarter until the end of the year. So obviously, as we get closer to the end of the year, we have more confidence in where we will end the year. And I think that that's something that we will continue. As we get close to the end of the year, we will always have better visibility and higher confidence in where we will end the year. I think that with respect to Q3, we really just saw a very strong performance, whether it's in the Digital revenue type or in Synchronization, where we had very strong revenue related to advertising. And that's not something that we look at as being pulled forward from Q4. So we remain confident in how we will do in Q4, and we were able to raise our guidance to reflect the outperformance in Q3.

Okay. That's really helpful. Thank you. And then, Golnar, there's been a lot of headlines recently about the use of music on social media and TikTok, in particular. Has there been any change to how your music is used or paid for on social media? And do you see maybe opportunities for the industry to better monetize that channel over time?

Good morning, Alex. I think social media, fill in the blank, as far as the platform goes has been an area where we have historically partnered with the NMPA and ensured the use -- that the use of music is legally licensed and fairly compensated for. We stand with the NMPA and in this latest action with -- Universal's latest action with TikTok. And we stand with our songwriters, obviously, and rights holders. It's always going to be an issue in the sense that these are platforms where the content is being distributed some -- a lot of times, many times before the legal licensing actually is put in place. And that is a battle that we will continue to fight such that we can get to a place where we're actually compensated and the music is legally licensed. And we have quite a bit of history showing that, that can happen and that these platforms can continue to thrive using the music that is both through user-generated content as well as other kinds of content that results in additional revenue for us.

Okay. That’s really helpful, Golnar. Appreciate that insight.

Thank you, Alex.

Thank you. And our next question coming from the line of Dan Day with B. Riley Securities. Your line is open.

Yeah. Good morning guys. Thanks for taking the question. Just a couple for me. The bigger DSP, Spotify, a couple of others, they put through a lot of rate hikes throughout 2023. I appreciate the color on the CRB tailwinds. Just whether you think these were fully reflected in the December quarter, the rate hikes I'm referring to? Or do you think there's still some tailwinds as these price hikes get pushed out to more and more subscribers?

How are you doing Dan? It's Jim here. So I think with respect to the -- there's kind of two parts to your question. On the price increases, we're obviously very happy with what's happened over the past year with those price increases, and we are looking forward to maybe a more regular cadence of price increases. Having gone 10, 12 years with no price increase, we are certainly looking forward to more regular improvements there. With the rates, as I mentioned earlier, I think that we are still seeing some tailwinds in the quarter as we are currently being accounted under the CRB IV rates and comparing that to the prior year, where we were really estimating under the CRB III rates. And so while there's a little bit of tailwind there in this quarter, we think that those tailwinds will be fully reflected when we get the final CRB III true-ups, which we are looking forward to in the coming months as the DSPs work with the MLC to push that money through.

Okay. Great. Another question for me, kind of higher level one. Just wondering how you're either currently using or thinking about using any of these generative AI tools maybe to enhance the productivity of your roster of songwriters, anything you're investing behind there? And just really anything else you think worth mentioning about generative AI and its current or potential future impact on the songwriting industry would be great.

Sure. I think there are a lot of tools that enhance efficiencies insofar as production goes, and we are seeing these develop in the studio. And we have songwriters who are already using these tools, not in a way that is threatening to the existence of the songwriter and of themselves. And I think there's a little bit of noise and misinterpretation around that side of things in that there are a lot of positive outcomes that are -- that we are seeing as a result of these tools. We are obviously very well informed about the developments, legal developments insofar as how these tools are using existing IP. And that is an area that we will champion the rights of our songwriters as well as ourselves to ensure that IP is not being used to develop new IP that is based on that existing product. And compensation for that and recognition of that is obviously very important for us. And then internally in the business, we are using all kinds of AI tools in -- through our marketing department, through our deal team, et cetera, and we are seeing some greater efficiencies there.

All right. Great. Appreciate it and I’ll turn it over.

Thanks, Dan.

Thanks, Dan.

Thank you. I'm not showing any further questions in the queue at this time. I will now turn the call back over to Golnar Khosrowshahi for any closing remarks.

Thank you, operator, and to everyone who joined us today. We are proud of and honored to work with some of music's most important songwriters, producers and artists across genres and eras. And we look forward to updating you on our full fiscal year performance. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.