Greetings, and welcome to Reservoir Media Third Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jackie Marcus. Thank you. You may begin.

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 2025 ended December 31, 2024, 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 note that today's discussion will contain forward-looking statements that reflect the 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 this 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 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 U.S. 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.

Thank you, Jackie. Good morning, everyone, and thank you for joining us today to discuss our results for the third quarter of fiscal year 2025. I'm pleased to share that Reservoir posted another strong quarter across both the top and bottom lines. Our total revenue of $42.3 million represented a 19% improvement over this time last year, driven by a 16% improvement in music publishing revenue and a 20% improvement in recorded music revenue. The caliber of our roster, the demand for their content and our ability to capture the usage of that content has accelerated our growth. Further, our commitment to cost containment and closely managing our business operations led to an adjusted EBITDA of $17.3 million, representing a 26% improvement from the year ago quarter. Jim will discuss our financial results in greater detail later in the call. Looking back on the first three quarters of the fiscal year, we have continued to focus on growing and diversifying our portfolio of music and our roster of creators. We've done this by consistently executing on off-market deals brought in through our extensive relationships across the industry. These relationships remain an important differentiator for the company and a key contributor to our successful execution of M&A. Year-to-date, we have deployed over $70 million across catalog acquisitions, and we have also added to our active frontline roster with notable talent such as Snoop Dogg and k.d. lang. We expect to remain active in the market through year-end. Last quarter, we announced the acquisition of the rights to the catalog of Grammy Award-winning legendary South African composer, Lebohang Morake, professionally known as Lebo M. Lebo is best known as the voice and spirit of the Lion King and he wrote and performed the opening of the legendary song Circle of Life, among…

Thank you, Golnar, and good morning, everyone. Our third quarter results embodied another robust quarter, exceeding our internal expectations for the period and giving us confidence to raise our fiscal 2025 guidance range as we head into Q4. The success of our affiliated roster of talent and the work of the Reservoir team has allowed us to succeed financially, further aided by our focus on maintaining our notable operating leverage through cost controls on our higher revenues. Revenue for the third fiscal quarter was $42.3 million, a 16% year-over-year improvement on an organic basis and a 19% increase when including acquisitions. This was led by a 16% increase in music publishing revenue and a 20% increase in recorded music revenue that was mainly driven by price increases at multiple music streaming services, a royalty recovery related to underreported usage from a specific music catalog and acquisitions of catalogs. Total costs increased 13%, compared to the prior year quarter due to a 17% increase in administration expenses, a 14% increase in cost of revenue and a 6% increase in amortization and depreciation expenses. This supported expanding gross margins, given our 19% revenue growth. Turning to operating performance for the third quarter. OIBDA was $16.3 million an increase of 26% year-over-year and adjusted EBITDA was also up 26% year-over-year to $17.3 million. Both the OIBDA and adjusted EBITDA benefited from revenue growth and an improved gross margin. Interest expense was $5.8 million for the quarter, an increase of $405,000 from the prior year due to an increase in borrowings to support our M&A strategy and effective interest rates. Net income for the third quarter was approximately $5.3 million compared to a net loss of $2.9 million in the third quarter of fiscal 2024. The increase was attributable to improved gross margin and…

At this time, we'll be conducting a question and answer session. [Operator Instructions] Our first question comes from Griffin Boss with B. Riley Securities. Please proceed with your question.

Hi. Good morning, and thanks for taking my questions. Great to see the progress. I'll just start out on OpEx real quick. The outsized administration or administrative expenses, were there any one-time items included in that? Or can we look at this as kind of a structurally higher level given the larger catalog after what seemed to be a material M&A spend in the third quarter?

Yes. The one thing that I would note in our operating expense is the component of operating expense related to our management revenue. We obviously compensate our artist managers. And as that revenue increases, the compensation to those managers increases. So that's probably the most significant variable that probably caused that OpEx to be higher during the quarter. On the positive side, it's being driven by higher revenue. So that's probably an important component to note.

Okay, super helpful, thanks, Jim. And then just on the same lines regarding the catalog acquisitions and signings. Is there any update you could provide on the pipeline? I know Golnar, you mentioned this a lot of this was off-market. But just given the significant draw on the facility, curious if your pipeline or outlook for future M&A opportunities has changed at all?

Good morning. No, it has not. The pipeline remains robust, and we continue to be excited about the opportunities that are before us. We continue to have that populated with more off-market deals, and that's a strategy that we've been able to execute on successfully for many years now.

Okay, great, thanks for that. And then one more, if I could squeeze in quickly. Just more broadly, I'm curious, obviously, there's been a lot of talk about the Spotify Universal deal. To the extent you can discuss it as it relates to Reservoir. Just curious if that was surprising to see this direct deal get done between the 2 parties and whether or not you have any insights as it relates to Reservoir or the industry in general going forward?

We don't have any insight as it relates to us specifically, but I'm generally optimistic about the terms of that deal and how it could potentially translate across the industry.

Okay, fair enough. Thanks for taking my questions. Appreciate it.

Thank you so much, Griffin.

Our next question comes from Richard Baldry with ROTH Capital Partners. Please proceed with your question.

Thanks and congrats on great quarter. Sort of curious, the guidance implies sequential down in what's usually your strongest quarter. So can you maybe talk a little bit about some of the one-time impacts in 3Q like the royalty recovery that, I guess, aren't repeatable and how much maybe you think that's just conservatism? Thanks.

Hi, Rich, thanks for the question. And yes, I think that certainly, we're always looking at items that impact the comparability quarter-to-quarter and from time-to-time, we do have items that are a little bit more one-time in nature, although something like a royalty recovery will likely lead to higher ongoing royalties as we resolve something that should have been always resolved in our favor. But as we resolve it, it will result in potentially higher earnings on that catalog going forward. So that's a positive part there. I think the other piece of your question is, we always build in, I think, an appropriate level of conservatism to our guidance. I don't think that we are necessarily overly conservative, but there is a component of that, that probably affects it.

Thanks. Can you talk about the factors that drive the neighboring rights issues. It seems like with pricing increasing and other things that, that sort of would grow with those. So just help me understand sort of what impacts that on a quarter-to-quarter basis a little better?

Yes. On neighboring rights is very -- you can think about it similar to the performance revenue on the publishing side. It's really public performance on the recorded music side of things. And that's going to be a little bit more impacted by the -- could be the timing of hits will certainly impact neighboring rights. It's also a component of our revenue that does lend itself to periodic retroactive cleanups from the sources that pay us neighboring rights revenue that can create a little bit of lumpiness quarter-to-quarter in that revenue stream. But broadly, we're very happy with where we are with neighboring rights. We have done a few more direct deals in that area, and we're very optimistic about where we are with maximizing our revenue in that area.

Thanks. And we seem to be going into sort of a sideways rate environment. How do you think about hedging as you're deploying capital now? It's sort of hard to guess where rates may be headed? And maybe talk about how much of your debt is hedged and for how long it to give us sort of a backdrop of that?

Sure. We have typically taken an approach of hedging, not quite 50% of our outstanding debt. With the uptick in M&A this past quarter, our debt obviously increased a bit, and we are still sitting at $150 million hedged. So again, under 50% right now. Our view, we constantly evaluate whether it makes sense to put on a further hedge. And that's something that we will continue to do. We haven't pulled the trigger on that recently, but we're currently sitting there with that $150 million hedged through the current maturity of our facility, which is in December of 2027. So it goes out quite a bit from where we are right now.

And last for me, a bit of a repeat of some things. But can you talk a little bit about sort of the deal pipeline? Any changes to that as maybe given any sort of macro backdrops or anything to discuss there? Thanks.

Good morning. There's really nothing new to discuss on that front. We see a very good mix of deals before us, which are comprised of high-quality assets, both on the recorded and publishing side, and we don't really see much of a change in volume or seller appetite to transact. So we're generally quite optimistic about the pipeline.

Great. Thanks.

Thank you.

[Operator Instructions] Our next question comes from Alex Fuhrman with Craig-Hallum Capital Group. Please proceed with your question.

Hey, guys. Thanks very much for taking my question and congratulations on all of your recent awards. Wanted to ask about the organic revenue growth, 16%. That's a really big number. I know obviously, revenues can fluctuate quarter-to-quarter. But I was particularly interested, Golnar, on what you said on the call that you've been doing a better job. It sounds like if I'm hearing you correctly, both Reservoir and the industry of identifying revenues that you're owed, as well as collecting them. Has that been causing growth across the industry to accelerate a little bit. Can you talk a little bit more about that, please?

Yes. Alex, so I think with respect to the organic growth for the quarter, we certainly had a positive impact from the royalty recovery as a result of a royalty audit that we have been conducting for years. And we do that from time to time. And to the extent that we are able to recover money that was and has been owed to us, and it will obviously increase our ongoing revenue for the catalogs that we work on there. That's a really positive thing, and we certainly benefited from that this quarter. And I think more broadly, we continue to benefit from the work that our sync and marketing teams do with our catalog as well as the more broad industry impacts that are leading to higher organic revenue.

Okay, that's really helpful. Thank you very much.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Golnar Khosrowshahi for closing comments.

Thank you, operator, and thanks, everyone, for joining us this morning. As we enter the final quarter of our fiscal year, Reservoir remains well positioned to achieve the goals we have stated time and again, to continue to build scale and grow our business through thoughtful capital deployment. We look forward to returning in a few months to provide an overview of the fiscal year. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.