Greetings, and welcome to the Reservoir Media Q1 Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Jackie Marcus. Please go ahead.

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 first quarter of fiscal year 2026 ended June 30, 2025, 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. Our financial results in the first fiscal quarter put us in line with our full year projections with top line growth of 8%, 5% coming organically. We continue to see healthy demand for our portfolio across Music Publishing and Recorded Music. Fiscal 2026 is shaping up to be an important year for Reservoir. We are actively advancing a robust pipeline of acquisition opportunities and continuing to diversify our portfolio in ways that enhance long-term value. This positions us well to execute on our strategic growth objectives. Just last month, we announced an investment in London-based entertainment company, Lightroom, which develops and exhibits IP- led immersive entertainment experiences. Since its flagship London venue opened in February of 2023, Lightroom has stood out as a premier provider of immersive entertainment, combining exceptional storytelling with a scalable IP-driven product model. Lightroom's programming to date has featured an impressive slate of A-list collaborators, including Tom Hanks, Coldplay, David Hockney, Anna Wintour and Hans Zimmer. The global immersive entertainment industry as a whole was valued at $133 billion in 2024 and is expected to reach $473 billion by 2030. This partnership diversifies Reservoir's investment portfolio into the high-growth immersive entertainment vertical and unlocks additional value from our IP's use as the foundation for future shows. Immersive experiences built around music are particularly attractive to the growing superfan market of highly engaged music fans, which has risen to 20% of paid streaming subscribers in the U.S. as of the end of 2024 according to Luminate. We are pleased to be supporting Lightroom's efforts and look forward to helping bring future shows to life. On the Recorded Music side of the business, we furthered our commitment to expanding this segment with the addition of…

Thank you, Golnar, and good morning, everyone. Our first fiscal quarter results met our internal expectations and demonstrate both the strength of our existing portfolio and our success with our acquisitions of new assets. Revenue for the first fiscal quarter was $37.2 million, a 5% year-over-year improvement on an organic basis and an 8% increase when including acquisitions. This was led by the 8% growth in our Recorded Music segment and the 4% increase we had in Music Publishing. Turning to our operating expenses. The total cost of revenue decreased 1% compared to the prior year quarter, while our administration expenses and amortization and depreciation costs grew 16% and 15%, respectively, versus the prior year. Looking at operating performance for the first quarter. OIBDA was $12.8 million, an increase of 12% year-over-year and adjusted EBITDA was up 10% to $13.9 million compared to our Q1 in fiscal 2025. The increases in OIBDA and adjusted EBITDA were due to higher revenues and stronger gross margins, partially offset by an increase in administration expenses, impacted by inflationary pressures and higher expenses associated with increased management revenue. Interest expense was $6.3 million for the quarter versus $5.1 million in the prior year, driven primarily by a higher debt balance due to the use of funds and acquisitions of music catalogs and writer signings as well as an increase in effective interest rates. Net loss for the first quarter was approximately $600,000 compared to a net loss of $500,000 in the first quarter of fiscal 2025. The decrease was impacted by the higher loss on the fair value of our interest rate hedges. This resulted in a diluted loss per share for the quarter of $0.01, the same as the prior year quarter. Our weighted average diluted outstanding share count during the quarter was…

Thank you, Jim. The investments made in just the first quarter are a strong start to what will be an important year ahead for Reservoir. From our entry into a new vertical with Lightroom to the addition of Fool's Gold and the re-signing of our valued clients, we have a well-earned reputation as an innovative music company that believes in the value and importance of our creators' work. Our financial performance in the first fiscal quarter is the best indicator that our strategy is working. And with a deal pipeline of over $1 billion, we are excited about what is to come. With that, we will now open the line for questions.

[Operator Instructions] And our first question comes from Griffin Boss with B. Riley Securities.

So first, I want to dig into the Lightroom investment. Is there any more color you could provide about the size of this investment or your stake in that venture? And also related, did you go into this with any certain IP in mind that you knew you would want to monetize through these immersive experiences? Or is it more so opportunistic to enter this industry?

I'll answer the second part of your question first. I think there is -- there are a number of targets that we would like to collaborate with Lightroom on around, which we can develop content that are existing clients or catalogs that are represented here. But at the same time, what you said is accurate in that this is an opportunistic endeavor such that we foresee future content development based on future M&A and deals that we do there. So that's how we're approaching that, and I will let Jim answer the first part of your question.

Yes. You'll see a little bit more detail on that, I suppose, in the 10-Q when it comes out later today. But this is an investment that puts us at a single-digit equity stake in the business. We are not a majority owner of the business, but it's a business that, as Golnar said, we believe, is very synergistic to our asset base, and we look forward to working with them.

Okay. Got it. And then switching gears to the Digital revenue. I just want to confirm, I know, Jim, you discussed that, that was primarily due to timing of receipts. So I just want to confirm that, that wasn't a result of any particular weakness at certain DSPs or anything like that?

No, not at all. It's not something that's indicative of a trend that we see going forward. This is really the result of certain DSPs that from time to time make adjustments. Maybe that is a benefit in one quarter, in this case, benefit, let's say, in the prior year quarter, and it doesn't repeat again in this quarter. These things aren't always routine in terms of every quarter, every year, you get the same types of adjustments or cleanups. And that's really one of the things that's impacting it in this quarter. It's nothing that we see as being a trend that's concerning for us.

Okay. Understood. That makes sense. And then just last for me and I'll hand it over. But for the administrative expenses, I understand that those were higher given the higher management revenue. But in terms of the inflationary pressures there, so should we think of those as kind of structurally higher going forward given those inflationary pressures?

Well, I think largely, the inflationary pressures we're talking about, our normal compensation and the increases that folks get annually as well as our vendors and different technology that we use and maybe inflationary pressures on those costs. The reality is that the bulk of that increase is driven by the increased management revenue. I think that on our largest segment being Music Publishing, our increases in administration expenses were about 5%. So we're doing what we can to control those costs.

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

Your blended gross margins were near sort of an all-time record in what's seasonally typically a slow quarter. Can you talk about any underlying trends there, whether that's mix driven or the different international geographies you're moving into, how sustainable those trends or extensible that is?

Yes, there's a little bit there. You see lower physical revenue on the recorded side. That's a pretty high cost revenue stream for us. So as that's a little lower, we have a little bit of margin benefit there. And then beyond that, it really comes down to the mix of assets that's driving the revenue. So in this quarter, we had a little bit of improvement, I think, in both segments, recorded part really, as I touched on with the fiscal revenue coming down as a percentage of the total. And on the publishing side, it really comes down to the mix of catalogs that are driving that revenue.

And I think a lot of the revenue rec in the first quarter tends to be sort of discretionary on the part of your end customers. They're sort of estimating where maybe second and fourth quarters are really audited. So do you think over the course of the year, does the Digital growth sort of mirror the rest of the business? So we probably see sort of, call it, catch-up in the second quarter when they actually have to audit and come up with pretty hard and fast numbers as opposed to the looser numbers in the first quarter?

Yes. Well, I do think that in the first quarter here, certainly on the publishing side, this is not a trend, the fact that Digital was down a couple of points there. We do expect that to move back to growth as we move through the rest of the year. And beyond that, I would say that there's a lot of good news happening. You saw the Spotify news yesterday with price increases in a number of markets, and that will certainly benefit us on the Digital side on both segments of the business as we move through the rest of this year.

Maybe last for me would be looking into the M&A pipeline, are there any notable changes there, whether that's geographic genres, whatever, where you think you'll be headed or between publishing or recording sides of the business?

It's an even split right now. The volume is still there. So that -- just having that robust volume is a good indicator for us as far as what the opportunities are before us between now and the end of the fiscal year. I think looking backwards, we've been a little bit more focused on the recorded side, but that has been less a strategic focus and more a result of the best deals that we are presented with and we have to be opportunistic about that. Other than that, I would say that the pipeline is strong, the mix is even, and we are going after the transactions that provide us with the highest returns.

And maybe last again for me. Can you remind us how many of your deals really sort of are organically sourced from the relationship side of the table versus how much you find yourself in sort of like open market bidding-type situations?

I think I'd add another category in that I'd say organically sourced processes and perhaps off market, but off market doesn't necessarily have to be organic but certainly places us out of an auction process. I don't have the exact figures in front of me, but I would say that our more substantial deals are a result of off-market relationships. And as a very small portion of the transactions that we complete are through auction processes, we try to stay away from those. And then the organic transactions, they may be higher in number but not necessarily translating into higher in dollar amount, and that's just because there are a lot of organic deals that we do with people who are presently represented on the roster. So if I were to sort of split these up and assign numbers, I'd say the majority share is definitely off market on a value basis.

This now concludes our question-and-answer session. I would like to turn the floor back over to Golnar Khosrowshahi for closing comments.

Thank you, operator. Fiscal year 2026 is progressing in line with our expectations, putting us firmly on track to achieve our full year guidance. I'm optimistic about the coming quarters, and I'm confident that the best is still to come for our organization. We appreciate your support and interest in Reservoir, and I look forward to sharing our second fiscal quarter results with you this fall. Thank you very much.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.