Reservoir Media (RSVR) Q4 FY26 earnings call: guidance and Q&A

Seeking more context on the size, scale, and financial impact of the Viral Wave catalog and business.

Viral Wave is an established distribution business with existing clients and headcount, which Reservoir plans to expand upon. It's a lower-margin business but is expected to expand opportunities in the MENA region.

“it is a business that comes with a stable of existing clients and existing relationships and existing product, hence the headcount. and we plan on expanding on that, but it's an investment in an entity that is already an established business.”

asked by Griffin Boss · answered by Golnar Khosrowshahi

Inquiring about the reason for the implied slight step down in EBITDA margin for FY27.

The slight step down is due to the lower-margin Viral Wave acquisition and continued investments in the frontline of the recorded music business.

“not that viral wave is the most significant piece certainly of our consolidated financials, but it is a lower-margin business. So that slightly impacts that, and we are continuing to make some investments on the frontline side of the recorded business, and that is certainly an area where we are very cautious about the revenue and conservative with respect to the cost associated with it.”

asked by Griffin Boss · answered by Jim Heindlmeyer

Asking for management's general expectations regarding the CRB proceedings over the next couple of years.

Management remains optimistic about reaching an agreement and a positive impact on the share of income for songwriters and publishers, but this optimism is not baked into their forecasts.

“I think we remain optimistic, but that's not optimism that we bake into our own forecast. We do, however, remain optimistic [ Insofar ] as getting to an agreement and having a positive impact of the share of income for songwriters and publishers.”

asked by Griffin Boss · answered by Golnar Khosrowshahi

Inquiring if the record high blended gross margins are sustainable or an outlier, considering the Viral Wave headwind.

The higher gross margin in FY26 was due to acquisitions where Reservoir retained 100% of revenue. While not expecting significant percentage changes, opportunities for slight increases exist depending on acquisition types. Viral Wave will impact gross margins negatively in FY27.

“It's a result of some of the acquisitions that we did to the extent that we are acquiring assets where we may retain 100% of the revenue. That's obviously going to have a positive impact on our overall gross margin.”

asked by Richard Baldry · answered by Jim Heindlmeyer

Asking if international operations are currently a headwind to adjusted EBITDA due to lack of scale.

International operations would have a lower EBITDA margin if isolated, but they are a very small part of the overall business, so the impact is limited.

“I think if you were to isolate just our kind of international operations, certainly, it would be a lower EBITDA margin than our core business. But again, even though we are excited about these regions, and we see a lot of growth opportunity there. It's a very small part of our overall business.”

asked by Richard Baldry · answered by Jim Heindlmeyer

Asking about the expected seasonality of top and bottom lines for FY27 and if it's changing.

Revenue is expected to be pretty flat quarter-to-quarter, with spikes sometimes occurring due to non-seasonal events like royalty recoveries, rather than typical seasonality.

“I'd like to think that it's pretty flat quarter-to-quarter. We do sometimes have -- have things that impact and cost spikes in our revenue. It's less about seasonality, though, more about it could be -- in the prior year, we had the royalty recovery wasn't anything to do with seasonality.”

asked by Richard Baldry · answered by Jim Heindlmeyer

Asking how much of the FY27 revenue and earnings guidance assumes organic growth, streaming pricing tailwinds, or expected acquisitions.

Organic growth is expected to be pretty steady at mid-single digits. Guidance is conservative, projecting decay on new copyrights and not baking in future frontline successes, though the company has a track record of achieving them.

“I think that from an organic growth standpoint, we expect things to be pretty steady, kind of mid-single digits. We are always tough looking at our catalog at a pretty granular level. So to the extent that we have frontline successes in 1 year, we don't necessarily project those frontline successes going into the next year. We will project the decay that's expected on those new or young copyrights.”

asked by Richard Baldry · answered by Jim Heindlmeyer