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What changed in Reservoir Media, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Reservoir Media, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+357 added−407 removedSource: 10-K (2023-05-31) vs 10-K (2022-06-21)

Top changes in Reservoir Media, Inc.'s 2023 10-K

357 paragraphs added · 407 removed · 313 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

139 edited+16 added−35 removed45 unchanged
Biggest changeAs a result, global music companies and music rightsholders are more valuable than ever. We excel in the independent sector because of our value enhancement practice. Our unparalleled creative team, alongside our exceptional synchronization and marketing teams, sources and signs songwriters and artists to our active roster, which creates new opportunities for the existing catalog of copyrights.
Biggest changeOur creative team sources and signs songwriters and artists to our active roster, and our synchronization and marketing teams create new opportunities for the catalog of copyrights, enhancing their value. Our M&A practice contributes to the growth of our business by identifying potential acquisition targets and pursuing those that are complementary to our business.
In addition to their growing popularity with consumers, these music emerging monetization platforms are now proactively engaging with the music entertainment industry to properly compensate rightsholders for use of music. For example, in July 2020, TikTok announced a multi-year agreement with the U.S. National Music Publishers’ Association (NMPA) which also covers past use of musical works.
In addition to their growing popularity with consumers, these emerging music monetization platforms are now proactively engaging with the music entertainment industry to properly compensate rightsholders for use of music. For example, in July 2020, TikTok announced a multi-year agreement with the U.S. National Music Publishers’ Association (NMPA), which also covers past use of musical works.
Our frontline recording artists’ contracts generally provide for more favorable terms to the recording artist, entitling us to a set a number of albums and an exclusive license to exploit those albums for a fixed period of time. In contrast, our catalog recording artists’ contracts typically grant us ownership for the duration of copyright.
Our frontline recording artists’ contracts generally provide for more favorable terms to the recording artist, entitling us to a set number of albums and an exclusive license to exploit those albums for a fixed period of time. In contrast, our catalog recording artists’ contracts typically grant us ownership for the duration of copyright.
Thus far, music companies have only participated in limited ways, such as one-off virtual concert events on platforms such as Roblox and Fortnite. In the coming years, new platforms like Meta will increase the pie, and music companies will increase their share of it through more broad catalog licenses and participation in derivative virtual goods and interactive experiences.
Thus far, music companies have only participated in limited ways, such as one-off virtual concert events on platforms like Roblox and Fortnite. In the coming years, platforms like Meta will increase the pie, and music companies will increase their share of it through more broad catalog licenses and participation in derivative virtual goods and interactive experiences.
The strength of our business is in our community - our team, our roster of talent, and bringing music to those with limited access to it. Internally, this means that we have a diverse workforce with a culture of accountability and inclusiveness.
The strength of our business is in our community - our team, our roster of talent and our commitment to bringing music to those with limited access to it. Internally, this means that we have a diverse workforce with a culture of accountability and inclusiveness.
We expect our licensing volume to increase and also extend to new market entrants in this area, in addition to new digital platforms across social media, non-fungible tokens (“ NFTs ”) and other categories, such as online gaming platforms.
We expect our licensing volume to increase and extend to new market entrants in this area, in addition to new digital platforms across social media, non-fungible tokens (“ NFTs ”) and other categories, such as online gaming platforms.
For example, with the increased penetration of in-home fitness products and the ongoing proliferation of new novel access points like video gaming and social media platforms, we quickly developed relationships and secured placements and other valuable positioning at these platforms. We apply a comprehensive and bespoke approach to marketing and promoting our recording artists and their music.
For example, with the increased penetration of in-home fitness products and the ongoing proliferation of new novel access points like video gaming and social media platforms, we quickly developed relationships and secured placements and other valuable positioning on these platforms. We apply a comprehensive and bespoke approach to marketing and promoting our recording artists and their music.
This enabled us to be in business with one of the most prolific contemporary composers and also to complement our music catalog with music for film.
This enabled us to be in business with one of the most prolific contemporary composers and complement our music catalog with music for film.
Music publishers generally receive royalties pursuant to public performance, digital, mechanical, synchronization and other licenses. In the United States, music publishers collect and administer mechanical royalties, and statutory rates are established pursuant to the U.S. Copyright Act of 1976, as amended, for the royalty rates applicable to musical compositions for sale and licensing of recordings embodying those musical compositions.
Music publishers generally receive royalties pursuant to public performance, digital, mechanical, synchronization and other licenses. In the U.S., music publishers collect and administer mechanical royalties, and statutory rates are established pursuant to the U.S. Copyright Act of 1976, as amended, for the royalty rates applicable to musical compositions for sale and licensing of recordings embodying those musical compositions.
To this end, we acquired a stake in PopArabia in January 2020 with a focus on signing artists, acquiring catalogs and establishing a rights management company in the Middle East and North Africa region. We have executed on these strategic initiatives and expect substantial growth from PopArabia in the years to come.
To this end, we acquired a stake in PopArabia in January 2020 with a focus on signing artists, acquiring catalogs and establishing a rights management company in the Middle East and North Africa (“ MENA ”) region. We have executed on these strategic initiatives and expect substantial growth from PopArabia in the years to come.
The small size of our team allows us to be nimble and the geographic distribution enables us to look at music through a culturally relevant lens as required by different regions. A Broad Universe of Opportunity Albums, singles, videos and songs are still the primary drivers for our business.
The small size of our team allows us to be nimble and the geographic distribution enables us to look at music through a culturally relevant lens as necessitated by different regions. A Broad Universe of Opportunity Albums, singles, videos and songs are still the primary drivers for our business.
To a lesser extent, we compete with the way consumers use their disposable income for media and entertainment, however many of these alternatives present an opportunity for monetization for our business ( e.g. , television, motion pictures, and video games - all of which contain and license music). The music publishing industry is highly competitive and dominated by three companies.
To a lesser extent, we compete with the way consumers use their disposable income for media and entertainment, however many of these alternatives present an opportunity for monetization for our business ( e.g. , television, motion pictures, and video games - all of which contain and license music). 14 Table of Contents The music publishing industry is highly competitive and dominated by three companies.
No two artists are the same and our individualized marketing plans reflect this. For our Music Publishing business, our goal is to promote our songwriter’s interest in their music, enhance the value of those copyrights and promote their work and legacies as creators.
No two artists are the same, and our individualized marketing plans reflect this. For our Music Publishing business, our goal is to promote our songwriters’ interest in their music, enhance the value of those copyrights and promote their work and legacies as creators.
In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, the member states of the European Union are required to calculate the life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.
In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, the member states of the EU are required to calculate the life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.
We are interested in seeing how listening habits will shift over time, as consumers balance the time they spend listening to music versus time allocated to other kinds of content, such as podcasts or social media platforms.
We are interested in seeing how listening habits will shift over time, as consumers balance the time they spend listening to music with the time allocated to other kinds of content, such as podcasts or social media platforms.
Embrace Commercial Innovation with New Digital Distributors and Partners Over the past two years, we have seen significant licensing growth from in-home fitness platforms, with new licenses issued to Peloton, Hydrow and Apple Fitness+.
Embrace Commercial Innovation with New Digital Distributors and Partners Over the past several years, we have seen significant licensing growth from in-home fitness platforms, with new licenses issued to Peloton, Hydrow and Apple Fitness+.
Throughout the world, each synchronization license is generally subject to negotiation with a prospective licensee, and music publishers pay a contractually required percentage of synchronization income to the songwriters or their heirs and to any co-publishers. We acquire copyrights or portions of copyrights and administration rights from songwriters or other third-party holders of rights in musical compositions.
Throughout the world, each synchronization license is generally subject to negotiation with a prospective licensee, and music publishers pay a contractually required percentage of synchronization income to the songwriters or their heirs and to any co-publishers. 9 Table of Contents We acquire copyrights or portions of copyrights and administration rights from songwriters or other third-party holders of rights in musical compositions.
We defend and protect our songwriters’ and recording artists’ creative output by remaining vigilant in the collection of different types of royalties around the world and defending against illegitimate and illegal uses of our owned and controlled copyrights.
We defend and protect our songwriters’ and recording artists’ creative output by remaining vigilant in the collection of diverse types of royalties around the world and defending against illegitimate and illegal uses of our owned and controlled copyrights.
See “— Intellectual Property - Copyrights .” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the United States only) after a set period of time.
See “— Intellectual Property - Copyrights .” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the U.S. only) after a set period of time.
See “— Intellectual Property - Copyrights .” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the United States only) after a set period of time.
See “— Intellectual Property - Copyrights .” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the U.S. only) after a set period of time.
We harness our collective years of experience and the countless transactions executed to gather the insights needed to make meaningful commercial decisions grounded in data-based discipline. Most importantly, we are nimble and quickly adapt to changes in how music is consumed to maximize the opportunities for our songwriters and recording artists.
We harness our collective years of experience and the countless transactions executed to gather the insights needed to make meaningful commercial decisions grounded in data-based discipline. Most importantly, we are nimble, which allows us to adapt quickly to changes in how music is consumed to maximize the opportunities for our songwriters and recording artists.
We also sell 13 Table of Contents traditional physical formats through both the online distribution arms of traditional retailers, such as walmart.com, and traditional online physical retailers, such as amazon.com. Streaming services stream our music on an ad-supported or paid subscription basis. In addition, downloading services download our music on a per-album or per-track basis.
We also sell traditional physical formats through both the online distribution arms of traditional retailers, such as walmart.com, and traditional online physical retailers, such as amazon.com. Streaming services stream our music on an ad-supported or paid subscription basis. In addition, downloading services download our music on a per-album or per-track basis.
Listenership While we are firmly rooted in the music business, we also acknowledge that we are, more broadly, in the business of listenership and are interested in owning content to which people are actively or passively listening. As such, we will continue to evaluate 9 Table of Contents opportunities that allow us to own film score and production music content.
Listenership While we are firmly rooted in the music business, we also acknowledge that we are, more broadly, in the business of listenership and are interested in owning content to which people are actively or passively listening. As such, we will continue to evaluate opportunities that allow us to own film score and production music content.
Examples of music that generate music publishing revenue include, among others: Performance - performance of the song to the general public ● Broadcast of musical compositions on television, radio and cable ● Live performance at a concert or other venue ( e.g. , arena concerts, nightclubs) ● Broadcast of musical compositions at sporting events, restaurants or bars ● Performance of musical compositions in staged theatrical productions Digital - licensing of recorded music in various digital formats and digital performance of musical compositions to the general public ● Streaming and download services Mechanical - sale of recorded music in various physical formats ● Vinyl, CDs and DVDs Synchronization - use of the musical composition in combination with visual images ● Films or television programs ● Television commercials ● Video games ● Merchandising, toys or novelty items Other ● Licensing of copyrights for use in printed sheet music 11 Table of Contents In the United States, mechanical royalties are collected directly by music publishers, from The Mechanical Licensing Collective, the nonprofit organization designated by the U.S.
Examples of music that generate music publishing revenue include, among others: Performance - performance of the song to the general public ● Broadcast of musical compositions on television, radio and cable ● Live performance at a concert or other venue ( e.g. , arena concerts, nightclubs) ● Broadcast of musical compositions at sporting events, restaurants or bars ● Performance of musical compositions in staged theatrical productions Digital - licensing of recorded music in various digital formats and digital performance of musical compositions to the general public ● Streaming and download services Mechanical - sale of recorded music in various physical formats ● Vinyl, CDs and DVDs Synchronization - use of the musical composition in combination with visual images ● Films or television programs ● Television commercials ● Video games ● Merchandising, toys or novelty items Other ● Licensing of copyrights for use in printed sheet music In the U.S., mechanical royalties are collected directly by music publishers, from The Mechanical Licensing Collective (the “ MLC ”), the nonprofit organization designated by the U.S.
In the recorded music segment, during 2019, we acquired London-based Blue Raincoat Music Ltd and Chrysalis Records Ltd. This acquisition added significant recorded music operations to our business, and added the sound recordings of Sinead O’Connor, The Specials, Generation X, The Waterboys, and Go West.
In the Recorded Music segment, during 2019, we acquired London-based Blue Raincoat Music Ltd and its label platform Chrysalis Records Ltd. This acquisition added significant recorded music operations to our business, and added the sound recordings of Sinead O’Connor, The Specials, Generation X, The Waterboys and Go West.
We negotiate recording contracts with recording artists that define our rights to use the recording artists’ music. For recordings that we acquire as part of a catalog acquisition, we do not have the ability to negotiate these recording artists’ contracts and, as a result, we step into the position of the previous catalog owner.
We negotiate recording contracts with recording artists that define our rights to use the recording artists’ music. For recordings that we acquire as part 11 Table of Contents of a catalog acquisition, we do not have the ability to negotiate these recording artists’ contracts and, as a result, we step into the position of the previous catalog owner.
Representative Sample of Songwriters and Recording Artists Our Music Publishing business includes musical compositions by: ● Global superstars Migos, 2 Chainz, A Boogie Wit Da Hoodie, Killer Mike, Ben Harper, Twysted Genius, David Guetta, and Scott Stapp ● Internationally renowned music icons, including Joni Mitchell, The Isley Brothers, John Denver, Sheryl Crow, Nick Drake, Travis Tritt, a-ha, Billy Strayhorn and Hoagy Carmichael ● Award-winning hitmakers, such as Ali Tamposi, Jamie Hartman, James Fauntleroy, Oak Felder, Lauren Christy, Nitin Sawhney, and The Orphanage ● Acclaimed film composers Hans Zimmer and Henry Jackman Our Recorded Music business includes music from: ● Legacy acts, such as De La Soul, Naughty By Nature, Queen Latifah, Coolio, Sinéad O’Connor, Generation X, House of Pain, The Specials, The Stylistics, and The Delfonics. ● Contemporary talent, including Laura Marling, Liz Phair, Emeli Sandé, Levi Hummon, and William the Conqueror Competition We believe we are a competitive force in the music publishing and recorded music industries because of our strong reputation among creators and content owners and our value enhancement capabilities.
Representative Sample of Songwriters and Recording Artists Our Music Publishing business includes musical compositions by: ● Global superstars Offset, 2 Chainz, A Boogie Wit Da Hoodie, Killer Mike, Ben Harper, David Guetta, and Scott Stapp ● Internationally renowned music icons, including Joni Mitchell, The Isley Brothers, Sonny Rollins, John Denver, Sheryl Crow, Louis Prima, Nick Drake, Travis Tritt, a-ha, Billy Strayhorn and Hoagy Carmichael ● Award-winning hitmakers, such as Ali Tamposi, Jamie Hartman, Oak Felder, Lauren Christy, Nitin Sawhney, and The Orphanage ● Acclaimed film composers Hans Zimmer and Henry Jackman Our Recorded Music business includes music from: ● Legacy acts, such as De La Soul, Naughty By Nature, Queen Latifah, Coolio, Sinéad O’Connor, Generation X, House of Pain, The Specials, The Stylistics and The Delfonics. ● Contemporary talent, including Ben Harper, Laura Marling, Liz Phair, Emeli Sandé, Levi Hummon and William The Conqueror Competition We believe we are competitive in the music publishing and recorded music industries because of our strong reputation among creators and content owners and our value enhancement capabilities.
We are award-winning and were twice named Publisher of the Year by the Music Business Worldwide’s A&R Awards and twice named Independent Publisher of the Year at the Music Week Awards, most recently in 2022. In addition, our Founder and CEO Golnar Khosrowshahi was named Executive of the Year at the 2022 Billboard Women In Music Awards.
We were twice named Publisher of the Year by Music Business Worldwide’s A&R Awards and twice named Independent Publisher of the Year at the Music Week Awards, most recently in 2022. In addition, our Founder and CEO Golnar Khosrowshahi was named Executive of the Year at the 2022 Billboard Women in Music Awards.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed, will be available to you free of charge through the Investors section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (the “ SEC ”).
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed, are available free of charge through the Investors section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (the “ SEC ”).
The frontline Recorded Music business line was established in 2019 when we acquired Chrysalis Records and relaunched it as an active frontline record label signing and developing new talent. Our first frontline release went on to receive critical acclaim, a Mercury Award shortlist nomination and a Grammy nomination.
The frontline Recorded Music business line was 12 Table of Contents established in 2019 when we acquired Chrysalis Records and relaunched it as an active frontline record label, signing and developing new talent. Our first frontline release went on to receive critical acclaim, a Mercury Award shortlist nomination and a Grammy nomination.
In the European Union, the term of copyright for sound recordings lasts for 70 years from the date of release in respect of sound recordings that were still in copyright on November 1, 2013 and for 50 years from date of release in respect of sound recordings the copyright in which had expired by that date.
In the EU, the term of copyright for sound recordings lasts for 70 years from the date of release in respect of sound recordings that were still in copyright on November 1, 2013 and for 50 years from date of release in respect of sound recordings the copyright in which had expired by that date.
This includes improving the way digital music services procure mechanical licenses, requiring digital radio services, such as SiriusXM and Pandora, to make royalty payments to recording artists for recordings before 1972, and providing for direct payments of royalties owed to producers, mixers and engineers when their original works are streamed on non-interactive webcasting services. Also in 2018, the U.S.
This includes improving the way digital music services procure mechanical licenses, requiring digital radio services, such as SiriusXM and Pandora, to make royalty payments to recording artists for recordings before 1972, and providing for direct payments of royalties owed to producers, mixers and engineers when their original works are streamed on non-interactive webcasting services.
According to Statista, as of April 2022, five out of the top ten most followed accounts on Twitter belonged to musicians and, according to YouTube, the majority of videos that have achieved more than one billion lifetime views, as well as the majority of the most popular videos of all time, include music.
According to Statista, as of January 2023, five out of the top ten most followed accounts on Twitter belonged to musicians and, according to YouTube, the majority of videos that have achieved more than one billion lifetime views, as well as the majority of the most popular videos of all time, include music.
We maximize the value of our catalog of recorded music through new marketing initiatives and we use our catalog as a source of material to curate re-releases, compilations, box sets and special package releases, which provide consumers with incremental exposure to familiar music and recording artists.
Our strategy is to maximize the value of our catalog of recorded music through innovative marketing initiatives and we use our catalog as a source of material to curate re-releases, compilations, box sets and special package releases, which provide consumers with incremental exposure to familiar music and recording artists.
Our human capital resources objectives include attracting, developing, and retaining personnel and enhancing diversity and inclusion in our workforce to foster community, collaboration, and creativity among our employees, and support our ability to grow our business.
Our human capital resources objectives include attracting, developing and retaining personnel and enhancing diversity and inclusion in our workforce to foster community, collaboration and creativity among our employees, while supporting our ability to grow our business.
Today, our active roster is responsible for some of the biggest hits by some of the most well-known artists around the world. Through the initiatives above, we have deployed over $650 million in capital and currently represent over 140,000 copyrights in our publishing business and over 36,000 master recordings in our recorded music business.
Today, our active roster is responsible for some of the biggest hits by some of the most well-known artists around the world. Through the initiatives above, we have deployed over $722 million in capital through acquisitions and currently represent over 150,000 copyrights in our publishing business and over 36,000 master recordings in our recorded music business.
This acquisition included evergreen hits, such as “Take Me Home, Country Roads,” and extended our portfolio back to the 1930s with titles by legendary jazz musician Duke Ellington such as “Take The A Train.” In 2015, the opportunity arose for us to invest in the royalty streams of Hans Zimmer’s portfolio of film scores dating back to 1989’s “Driving Miss Daisy” and including greats such as “The Lion King,” “Gladiator,” the “Dark Knight” franchise, and others.
This acquisition included evergreen hits, such as “Take Me Home, Country Roads,” and extended our portfolio back to the 1930s with titles by legendary jazz musician Duke Ellington, such as “Take The A Train.” In 2015, the opportunity arose for us to invest in the royalty streams of Hans Zimmer’s portfolio of film scores dating back to 1989’s “Driving Miss Daisy” and including greats such as The Lion King , Gladiator , the Dark Knight franchise and others.
Well-Positioned to Capitalize on the Growth of the International Music Industry Driven by Streaming As the global music industry continues to benefit from a sustained expansion, our catalog of evergreen hits and active artist and songwriter roster with expertise in chart-topping hip-hop and pop music positions us to capitalize on the positive industry tailwinds.
Well-Positioned to Capitalize on the Growth of the International Music Industry Driven by Streaming As the global music industry continues to benefit from a sustained expansion, we believe our catalog of evergreen hits and active artist and songwriter roster with expertise in chart-topping music positions us to capitalize on the positive industry tailwinds.
Following the acquisition of TVT Music Publishing, we acquired Philly Groove Records, which brought in our first recorded music assets and additional publishing hits, including the Delfonics’ “Ready or Not” which has been covered by artists ranging from The Fugees to Missy Elliot. In 2012, we acquired the 30,000 copyright-strong Reverb Music and its roster of active songwriters.
Following the acquisition of TVT Music Publishing, we acquired Philly Groove Records, which brought in our first recorded music assets and additional publishing hits, including the Delfonics’ “Ready or Not,” which has been covered by artists ranging from The Fugees to Missy Elliot. 3 Table of Contents In 2012, we acquired the 30,000 copyright-strong Reverb Music and its roster of active songwriters.
Our Employees, Culture, Values and Human Capital Resources As of March 31, 2022, we employed approximately 78 persons worldwide, including temporary and part-time employees as well as employees that were added through acquisitions.
Our Employees, Culture, Values and Human Capital Resources As of March 31, 2023, we employed approximately 92 persons worldwide, including temporary and part-time employees, as well as employees that were added through acquisitions.
Assembled over decades, our award-winning catalog included over 5,000 clients as of March 31, 2022 and boasted 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.
Assembled over decades, our award-winning catalog includes over 5,000 clients as of March 31, 2023 and boasts 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.
Specifically, the European Union Copyright Directive was designed to limit safe harbors from liability for copyright infringement and to ensure that rightsholders and recording artists are remunerated fairly when their music is shared online by user-uploaded content services such as YouTube.
In 2019, the EU passed legislation to protect music rightsholders and recording artists. Specifically, the European Union Copyright Directive was designed to limit safe harbors from liability for copyright infringement and to ensure that rightsholders and recording artists are remunerated fairly when their music is shared online by user-uploaded content services, such as YouTube.
Whether it is an up-and-coming songwriter making music in their bedroom, a superstar artist selling out stadiums or an icon looking to curate a legacy, we offer tailored support and resources. We are not just searching for immediate hits. We scout and sign talent with the market potential for longevity and lasting impact.
Whether it is an up-and-coming songwriter making music in their bedroom, a globally-known superstar artist, or an icon looking to curate a legacy, we offer tailored support and resources. We are not only searching for immediate hits. We scout and sign talent with the market potential for longevity and lasting impact.
In the United States, copyright protection generally lasts for 95 years from first publication or 120 years from creation, whichever expires first, for works created on or after January 1, 1978 as “works made for hire” ( e.g. , works of employees or certain specially commissioned works).
In the U.S., copyright protection generally lasts for 95 years from first publication or 120 years from creation, whichever expires first, for works created on or after January 1, 1978 as “works made for hire” ( i.e. , works of employees or certain specially commissioned works).
Longstanding collaborations between our clients and our creative and A&R teams who nurture their talents and careers have resulted in numerous chart-topping hits of critical and commercial acclaim. Our creative and A&R teams are further complemented by our marketing services team who provide high-touch, bespoke services.
Longstanding collaboration between our clients and our creative and A&R teams, who nurture their talents and careers, has resulted in numerous chart-topping hits of critical and commercial acclaim. Our creative and A&R teams are further complemented by our marketing services team, which provides high-touch, bespoke services.
According to Music & Copyright, Sony Music Publishing, Universal Music Publishing and Warner Chappell Music accounted for 60% of the global music publishing revenues in 2021. There are many smaller participants that collectively accounted for the remaining 40% of the global music publishing revenues in 2021.These participants also include individual songwriters who self-publish their work.
According to Music & Copyright, Sony Music Publishing, Universal Music Publishing and Warner Chappell Music accounted for approximately 60% of the global music publishing revenues in 2022. There are many smaller participants, including individual songwriters who self-publish their work, that collectively accounted for the remaining approximately 40% of the global music publishing revenues.
Our Recorded Music business is home to Chrysalis Records and Philly Groove Records representing artists like The Delfonics, Sinead O’Connor and Generation X, as well as recordings under the Tommy Boy record label, which we acquired in June 2021, including artists such as De La Soul, Coolio, House of Pain, Naughty By Nature, and Queen Latifah..
The Recorded Music business is home to Chrysalis Records and Philly Groove Records, representing recordings by De La Soul, Ben Harper, The Delfonics, Sinead O’Connor and Generation X, as well as Tommy Boy Records, which we acquired in June 2021 and includes artists such as Queen Latifah, House of Pain, Naughty By Nature and Coolio.
The operations of our Music Publishing business are conducted through all of our offices as well as through various subsidiaries and sub-publishers. We owned or controlled rights to more than 140,000 compositions as of March 31, 2022, including numerous pop hits, American standards and motion picture and theatrical compositions.
The operations of our Music Publishing business are conducted through all our offices, as well as various subsidiaries and sub-publishers. We own or control rights to more than 150,000 compositions as of March 31, 2023, including numerous pop hits, American standards and motion picture and theatrical compositions.
Our forward-thinking and nimble marketing team has significant experience across Music Publishing and Recorded Music, which allows us to successfully execute long-term campaigns, while adapting quickly to changes in the marketplace. Global Reach and Local Expertise Our team is distributed across our offices from Los Angeles to Abu Dhabi and operates cohesively as a global team.
Our marketing team has extensive experience across music publishing and recorded music, which allows us to successfully execute long-term campaigns, while adapting quickly to changes in the marketplace. 13 Table of Contents Global Reach and Local Expertise Our team is distributed across our offices from Los Angeles to Abu Dhabi and operates cohesively as a global team.
In the United States, public performance income is administered and collected by 10 Table of Contents music publishers and their performing rights organizations and, in most countries outside the United States, collection, administration and allocation of both mechanical and performance income are undertaken and regulated by governmental or quasi-governmental authorities.
In the U.S., public performance income is administered and collected by music publishers and their performing rights organizations and, in most countries outside the U.S., collection, administration and allocation of both mechanical and performance income are undertaken and regulated by governmental or quasi-governmental authorities.
As of March 31, 2022, none of our employees in the United States were subject to a collective bargaining agreement, although certain employees in our non-domestic subsidiaries were covered by national labor agreements.
As of March 31, 2023, none of our employees in the U.S. were subject to a collective bargaining agreement, although certain employees in our non-domestic subsidiaries were covered by national labor agreements.
This catalog further diversified our holdings into the United Kingdom, and added film and television music, such as the theme for the “Got Talent” franchise.
This catalog further diversified our holdings in the United Kingdom (“ U.K. ”) and added film and television music, such as the theme for the “Got Talent” franchise.
We also acquired the FS Media collection of catalogs in 2014, thereby adding what is considered to be the best of American music with the catalogs of Sheryl Crow, John Denver, Billy Strayhorn, Evanescence and Creed to the repertoire.
We also acquired the FS Media collection of catalogs in 2014, thereby adding high quality American music with the catalogs of Sheryl Crow, John Denver, Billy Strayhorn, Evanescence and Creed to the repertoire.
This includes access to a multitude of songwriters’ rooms and recording studios around the globe with more to come. 14 Table of Contents Our Songwriter and Recording Artist Value Proposition Reservoir’s success is a result of our unparalleled team which not only attracts top tier talent to our roster, but helps them build and sustain long and lucrative careers.
This includes access to a multitude of recording studios around the globe with more to come. Our Songwriter and Recording Artist Value Proposition We believe Reservoir’s success is a result of our team, which not only attracts top tier talent to our roster, but also helps that talent build and sustain long and lucrative careers.
To this end, we expect to continue to explore these alternative avenues in the business of listenership, making investments in companies such as Audio Up Inc, a company in which we invested in April 2021, focusing on original podcast content featuring premium music.
To this end, we expect to continue to explore these alternative avenues in the business of listenership, making investments such as our April 2021 investment in Audio Up Media a company focused on original podcast content featuring premium music.
In 2018, the United States enacted the Music Modernization Act (the “ MMA ”), which resulted in reforms to music licensing through the regulation of digital music services’ relationship to content owners.
Music Modernization Act (the “ MMA ”) In 2018, the U.S. enacted the MMA, which resulted in reforms to music licensing through the regulation of digital music services’ relationships to content owners.
Outside of these three companies, the landscape is highly fragmented with numerous participants that collectively accounted for approximately 28% of the global recorded music market in 2021. 16 Table of Contents Intellectual Property Copyrights Our business, like that of other companies involved in the music entertainment industry, rests on our ability to maintain rights in sound recordings and musical compositions through copyright protection.
Outside of these three companies, the landscape is highly fragmented with numerous participants that collectively accounted for approximately 30% of the global recorded music market in 2022. Intellectual Property Copyrights Our business rests on our ability to maintain rights in musical compositions and sound recordings through copyright protection.
Music Publishing Music publishing is an intellectual property business focused on generating revenues from uses of the musical composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter, or engaging in those activities for other rightsholders, our Music Publishing business garners a share of the revenues generated from use of the musical compositions.
Music Publishing In return for promoting, placing, marketing and administering the creative output of a songwriter, or engaging in those activities for other rightsholders, our Music Publishing business garners a share of the revenues generated from use of the musical compositions.
See “ Risk Factors - Risks Related to Intellectual Property and Data Security - Reservoir faces a potential loss of catalog to the extent that its recording artists have a right to recapture rights in their recordings under the U.S.
See “ Risk Factors - Risks Related to Intellectual Property and Data Security - Reservoir faces a potential loss of catalog to the extent that its recording artists have a right to recapture rights in their recordings under the U.S. Copyright Act .” Recorded Music Our Recorded Music business consists of three types of sound recording rights ownership.
Our Growth Strategies M&A We plan to continue to execute on our highly disciplined and sophisticated approach to M&A strategy of acquiring high-quality copyrights and recordings including complicated transactions on an off-market basis at an attractive return and capitalizing on upside potential with our value enhancement capabilities.
We plan to continue to execute on our highly disciplined and sophisticated approach to M&A strategy of acquiring high-quality copyrights and recordings, including executing complicated transactions on an off-market basis at an attractive return and capitalizing on upside potential with our value enhancement capabilities. 8 Table of Contents Active Songwriter and Artist Roster We will continue to expand our active songwriter and artist roster.
Our strategy is equally focused on the active issuance of licenses, and the pursuit of copyright infringement, with an eye on resolution and the establishment of mechanisms for future licensing and monetization. NFTs continue to be a developing area of licensing and opportunity.
Our strategy is equally focused on the active issuance of licenses, and the pursuit of copyright infringement, with an eye on resolution and the establishment of mechanisms for future licensing and monetization.
The recorded music industry is also highly competitive and subject to changing consumer preferences. In 2021, the three largest recorded music companies - Universal Music Group, Sony Music Entertainment and Warner Music Group - accounted for approximately 72% of the global recorded music revenues, according to public company filings and the IFPI.
The recorded music industry is also highly competitive and dominated by three companies. In 2022, the three largest recorded music companies - Universal Music Group, Sony Music Entertainment and Warner Music Group - accounted for approximately 70% of the global recorded music revenues, according to public company filings and the IFPI.
The term of copyright in the European Union for musical compositions in all member states lasts for the life of the author plus 70 years. This is also true for the United Kingdom.
The term of copyright in the EU for musical compositions in all member states lasts for the life of the author plus 70 years. This is also true for the U.K.
The European Union also harmonized the copyright term for joint musical works.
The EU also harmonized the copyright term for joint musical works.
Music Publishing The music publishing industry involves the licensing and acquisition of rights in musical compositions from content owners ( e.g. publishers, songwriters, composers and other rightsholders).
Music Publishing The music publishing industry involves the identification and development of songwriters to create, market and promote compositions, as well as licensing and acquisition of rights in musical compositions from content owners ( e.g., publishers, songwriters, composers and other rightsholders).
According to Luminate, over 96% of the U.S. population aged 13 to 55 years uses a streaming service to listen to music in a typical week and 89% of the “Baby Boomer” generation aged 55 years and over have made the switch to streaming.
All generations are leveraging streaming to increase their engagement with music. According to Luminate, over 96% of the U.S. population aged 13 to 55 years uses a streaming 4 Table of Contents service to listen to music in a typical week and 89% of the “Baby Boomer” generation aged 55 years and over have made the switch to streaming.
We have Board representation at leading industry non-profits in the United States, Canada and the United Kingdom including MusiCares, Songwriters Hall of Fame, Silkroad, the National Music Publishers Association and the Independent Music Publishers International Forum where we lead the charge on advocating for songwriter rights, artist rights, and fair compensation.
We have Board representation at leading industry non- profits across the globe including MusiCares, Songwriters Hall of Fame, Silkroad, the National Music Publishers Association, Mechanical Licensing Collective, International Confederation of Music Publishers (“ ICMP ”), and the Independent Music Publishers International Forum, where we lead the charge on advocating for songwriter rights, artist rights and fair compensation.
Within our Recorded Music business, we have successfully completed and integrated the acquisitions of Chrysalis Records in the United Kingdom and Tommy Boy in the United States and expect to be well-positioned to ingest additional master recordings into our platform.
Within our Recorded Music business, we have successfully completed and integrated the acquisitions of Chrysalis Records in the U.K. and Tommy Boy Records in the U.S. and expect to be well-positioned to ingest additional master recordings into our platform resulting in operating leverage as we scale.
Item 1. Business Our Company Reservoir Media, Inc., together with its wholly-owned subsidiaries (the “ Company ”, “ we ”, “ our ”, “ us ” and “ Reservoir ”), is one of the world’s leading independent music companies. Reservoir is a top 10 music publisher by global revenue according to Billboard.
Item 1. Business Our Company Reservoir Media, Inc., together with its wholly-owned subsidiaries (the “ Company ”, “ we ”, “ our ”, “ us ” and “ Reservoir ”), is one of the world’s leading independent music companies.
Established in 2007, we have grown through acquisitions. We made a firm commitment in the early days to be an active music company, one that owns and administers rights, and we looked to build our business based on long-term ownership of rights.
Established in 2007, we have grown through acquisitions. We made a firm commitment in the early days to be an active music company, one that owns and administers rights, and we looked to build our business based on long-term ownership of rights. Our publishing portfolio is approximately 90% owned for life of copyright, as well as 96% owned versus administered.
Joint Ventures We have entered into various contractual joint venture arrangements pursuant to which we or certain of our subsidiaries jointly acquire publishing, administration, songwriting, recording and related rights and interests with third parties.
See “ Risk Factors - Risks Related to Intellectual Property and Data Security .” 15 Table of Contents Joint Ventures We have entered into various contractual joint venture arrangements pursuant to which we or certain of our subsidiaries jointly acquire publishing, administration, songwriting, recording and related rights and interests with third parties.
Our Competitive Strengths Value Enhancement Our synchronization team is comprised of 10 people worldwide dedicated to marketing and licensing our music for use in films, trailers, television shows, advertisements and video games. For the year ended March 31, 2022, our synchronization income, which includes traditional synchronization income and digital synchronization income, accounted for 22% of our total revenues.
Our synchronization team is comprised of 11 people worldwide dedicated to marketing and licensing our music for use in films, trailers, television shows, advertisements and video games. For the year ended March 31, 2023, our synchronization income accounted for 15% of our total revenues.
Our service on these boards has resulted in over $13 million in settlements over the last five years, and we will continue to look at digital platforms that are distributing content while infringing on music copyrights.
Our service on these boards has resulted in over $13 million in settlements over the last five years, and we will continue to look at digital platforms that are distributing content while infringing on music copyrights. We additionally support numerous charitable organizations founded by our roster, including Creative Waves Foundation, TRU Foundation and Sharethewrd.
Copyright Office to distribute mechanical royalties for streaming and downloads pursuant to the Music Modernization Act (the “ MLC ”), recorded music companies or via The Harry Fox Agency, a non-exclusive licensing agent affiliated with the Society of European Stage Authors and Composers (“ SESAC ”).
Copyright Office to distribute mechanical royalties for streaming and downloads pursuant to the MMA, recorded music companies or via The Harry Fox Agency, a non-exclusive licensing agent affiliated with the Society of European Stage Authors and Composers (“ SESAC ”). Outside the U.S., mechanical royalties are collected directly by music publishers or from collecting societies.
Our outstanding M&A practice contributes to the growth of our business by identifying potential acquisition targets and pursuing those that are complementary to our business. 3 Table of Contents Our History On July 28, 2021 (the “ Closing Date ”), we consummated the previously announced business combination (the “ Business Combination ”) by and among Roth CH Acquisition II Co., a Delaware corporation (“ ROCC ”), Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“ Merger Sub ”) and Reservoir Holdings, Inc., a Delaware corporation (“ RHI ”).
Our History On July 28, 2021 (the “ Closing Date ”), we consummated the previously announced business combination (the “ Business Combination ”) by and among Roth CH Acquisition II Co., a Delaware corporation (“ ROCC ”), Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“ Merger Sub ”) and Reservoir Holdings, Inc., a Delaware corporation (“ RHI ”).
Works created and published or registered in the United States prior to January 1, 1978 generally enjoy copyright protection for 95 years, subject to compliance with certain statutory provisions including notice and renewal. Additionally, the MMA extended federal copyright protection in the United States to sound recordings created prior to February 15, 1972.
Works created and published or registered in the U.S. prior to January 1, 1978 generally enjoy copyright protection for 95 years, subject to compliance with certain statutory provisions including notice and renewal.
Our staff provides their time at leading global educational institutions in order to invest in the next generation of business leaders. Our founder and CEO Golnar Khosrowshahi lectured at Columbia Business School for the Foundations of Entrepreneurship class, while other staff members have lectured or taught at New York University, Syracuse University, and Buckinghamshire New University, among others.
Our founder and CEO Golnar Khosrowshahi lectured at Columbia Business School for the Foundations of Entrepreneurship class, while other staff members have lectured or taught at New York University, Syracuse University and Buckinghamshire New University, among others.
This has contributed to a 16% year-over-year growth of physical album sales, which is the first time physical has grown as a format in 20 years according to the IFPI. In addition to record stores, people are returning to gyms, bars, restaurants, and other retail outlets that have reinstituted their music licenses as they reopen locations.
This contributed to a 16% year-over-year growth of physical album sales in 2021, which was sustained again with 4% continued growth in 2022, according to the IFPI. In addition to record stores, people continued to return to gyms, bars, restaurants and other retail outlets that have reinstituted their music licenses as they reopen locations.
Although there is no assurance that any future trademark applications, even for major trademarks, will register, we endeavor to register our major trademarks in those countries where we believe the protection of such trademarks is important for our business. Our major trademarks include the “Reservoir” name and circular “R” logo with blue stripe.
Trademarks We consider our trademarks to be valuable assets to our business. We endeavor to register our major trademarks in those countries where we believe the protection of such trademarks is important for our business. Our major trademarks include the “Reservoir” name and circular “R” logo with blue stripe.
In addition, on June 2, 2021, we entered into a membership interest purchase agreement to acquire U.S. based record label and music publishing company Tommy Boy Music, LLC (“ Tommy Boy ”), which helped launch the careers of Queen Latifah, Afrika Bambaataa, Digital Underground, Coolio, De La Soul, House of Pain and Naughty By Nature. 4 Table of Contents In the past five years, we have focused on being a wholistic music company and have strategically expanded to include management services through Big Life Management and Blue Raincoat Artists in the United Kingdom.
In addition, in June 2021, we entered into a membership interest purchase agreement to acquire United States (“ U.S. ”)based record label and music publishing company Tommy Boy Music, LLC (“ Tommy Boy ”), which helped launch the careers of Queen Latifah, Afrika Bambaataa, Digital Underground, Coolio, De La Soul, House of Pain and Naughty By Nature.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our results of operations, financial position and prospects may suffer. 32 Table of Contents If we or our service providers do not maintain the security of information relating to our customers, employees and vendors and our music, security information breaches through cyber security attacks or otherwise could damage our reputation with customers, employees, vendors and artists, and we could incur substantial additional costs, become subject to litigation and our results of operations and financial condition could be adversely affected.
Biggest changeIf we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property 28 Table of Contents (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our results of operations, financial position and prospects may suffer.
There also could be a negative reaction in the financial markets due to a loss of investor confidence and the reliability of our consolidated financial statements. Confidence in the reliability of our consolidated financial statements also could suffer if we or our independent registered public accounting firm continue to report a material weakness in our internal controls over financial reporting.
There also could be a negative reaction in the financial markets due to a loss of investor confidence and the reliability of our consolidated financial statements. Confidence in the reliability of our consolidated financial statements could also suffer if we or our independent registered public accounting firm continue to report a material weakness in our internal controls over financial reporting.
As a result, our results of operations can be affected not only by general industry trends, but also by trends, developments or other events in individual countries, including: ● limited legal protection and enforcement of intellectual property rights; ● restrictions on the repatriation of capital; ● fluctuations in interest and foreign exchange rates; ● differences and unexpected changes in regulatory environment, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations; 21 Table of Contents ● varying tax regimes which could adversely affect our results of operations or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by subsidiaries and joint ventures; ● exposure to different legal standards and enforcement mechanisms and the associated cost of compliance; ● difficulties in attracting and retaining qualified management and employees or rationalizing our workforce; ● tariffs, duties, export controls and other trade barriers; ● global economic and retail environment; ● longer accounts receivable settlement cycles and difficulties in collecting accounts receivable; ● recessionary trends, inflation and instability of the financial markets; ● higher interest rates; and ● political instability.
As a result, our results of operations can be affected not only by general industry trends, but also by trends, developments or other events in individual countries, including: ● limited legal protection and enforcement of intellectual property rights; ● restrictions on the repatriation of capital; ● fluctuations in interest and foreign exchange rates; 18 Table of Contents ● differences and unexpected changes in regulatory environment, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations; ● varying tax regimes which could adversely affect our results of operations or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by subsidiaries and joint ventures; ● exposure to different legal standards and enforcement mechanisms and the associated cost of compliance; ● difficulties in attracting and retaining qualified management and employees or rationalizing our workforce; ● tariffs, duties, export controls and other trade barriers; ● global economic and retail environment; ● longer accounts receivable settlement cycles and difficulties in collecting accounts receivable; ● recessionary trends, inflation and instability of the financial markets; ● higher interest rates; and ● political instability.
Furthermore, future acquisitions could pose numerous additional risks to our business, cash flows, financial condition and results of operations, including: ● potential disruption of our ongoing business and distraction of management; ● potential loss of songwriters or recording artists from our rosters; 25 Table of Contents ● difficulty integrating the acquired businesses or segregating assets to be disposed of; ● exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition, disposition and/or against any businesses we may acquire; ● reputational or other damages to our business as a result of a failure to consummate such a transaction for, among other reasons, failure to gain antitrust approval; ● changing our business profile in ways that could have unintended consequences and challenges in achieving strategic objectives, cost savings and other anticipated benefits; ● difficulty in maintaining controls, procedures and policies during the transition and integration; ● challenges in integrating the new workforce and the potential loss of key employees, particularly those of the acquired business; and ● use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.
Furthermore, future acquisitions could pose numerous additional risks to our business, cash flows, financial condition and results of operations, including: ● potential disruption of our ongoing business and distraction of management; ● potential loss of songwriters or recording artists from our rosters; 22 Table of Contents ● difficulty integrating the acquired businesses or segregating assets to be disposed of; ● exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition, disposition and/or against any businesses we may acquire; ● reputational or other damages to our business as a result of a failure to consummate such a transaction for, among other reasons, failure to gain antitrust approval; ● changing our business profile in ways that could have unintended consequences and challenges in achieving strategic objectives, cost savings and other anticipated benefits; ● difficulty in maintaining controls, procedures and policies during the transition and integration; ● challenges in integrating the new workforce and the potential loss of key employees, particularly those of the acquired business; and ● use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.
While physical revenue streams — mechanical revenue in our music publishing business (the “ Music Publishing business ”) and physical revenue in our recorded music business (the “ Recorded Music business ”)— have declined significantly over the last decade, the virus outbreak has resulted in declines in our physical revenue streams related to disruptions in manufacturing and physical supply chains, the mandated closure of physical retailers, the requirement that people stay in their homes and our decisions to delay the release of new recordings from artists with a more physical consumer base.
While physical revenue streams — mechanical revenue in our Music Publishing business and physical revenue in our Recorded Music business — have declined significantly over the last decade, the virus outbreak has resulted in declines in our physical revenue streams related to disruptions in manufacturing and physical supply chains, the mandated closure of physical retailers, the requirement that people stay in their homes and our decisions to delay the release of new recordings from artists with a more physical consumer base.
We engage in a wide array of online activities and are thus subject to a broad range of related laws and regulations including, for example, those relating to privacy, consumer protection, data retention and data protection, online behavioral advertising, geo-location tracking, text messaging, e-mail advertising, mobile advertising, content regulation, defamation, age verification, the protection of children online, social media and other Internet, mobile and online-related prohibitions and restrictions.
We engage in a wide array of online activities globally and are thus subject to a broad range of related laws and regulations including, for example, those relating to privacy, consumer protection, data retention and data protection, online behavioral advertising, geo-location tracking, text messaging, e-mail advertising, mobile advertising, content regulation, defamation, age verification, the protection of children online, social media and other Internet, mobile and online-related prohibitions and restrictions.
The cessation or significant delay in the production of motion pictures and television programs has negatively affected synchronization revenue in our Music Publishing business and licensing revenue in our Recorded Music business. It has been widely reported that advertisers have reduced their advertising spend as a result of the COVID-19 pandemic.
The cessation or significant delay in the production of motion pictures and television programs negatively affected synchronization revenue in our Music Publishing business and licensing revenue in our Recorded Music business. It has been widely reported that advertisers reduced their advertising spend as a result of the COVID-19 pandemic.
Our substantial indebtedness could: ● require us to dedicate a substantial portion of cash flow from operations to payments in respect of our indebtedness, thereby reducing the availability of cash flow to fund working capital, potential acquisition opportunities and other general corporate purposes; 29 Table of Contents ● increase the amount of interest that we have to pay, because most of our borrowings are at variable rates of interest, which will result in higher interest payments if interest rates increase and, if and when we are required to refinance any of our indebtedness, an increase in interest rates would also result in higher interest costs; ● increase our vulnerability to adverse general economic or industry conditions; ● require refinancing, which we may not be able to do on reasonable terms; ● limit our flexibility in planning for, or reacting to, competition and/or changes in our business or the industry in which we operate; ● limit our ability to borrow additional funds; ● restrict us from making strategic acquisitions or necessary divestitures or otherwise exploiting business opportunities; and ● place us at a competitive disadvantage compared to our competitors that have less debt and/or more financial resources.
Our substantial indebtedness could: ● require us to dedicate a substantial portion of cash flow from operations to payments in respect of our indebtedness, thereby reducing the availability of cash flow to fund working capital, potential acquisition opportunities and other general corporate purposes; ● increase the amount of interest that we have to pay, because most of our borrowings are at variable rates of interest, which will result in higher interest payments if interest rates increase and, if and when we are required to refinance any of our indebtedness, an increase in interest rates would also result in higher interest costs; ● increase our vulnerability to adverse general economic or industry conditions; ● require refinancing, which we may not be able to do on reasonable terms; ● limit our flexibility in planning for, or reacting to, competition and/or changes in our business or the industry in which we operate; ● limit our ability to borrow additional funds; ● restrict us from making strategic acquisitions or necessary divestitures or otherwise exploiting business opportunities; and ● place us at a competitive disadvantage compared to our competitors that have less debt and/or more financial resources.
This could materially adversely affect our business, cash flows, financial condition and results of operations and lead to a decline in the market price of our Common Stock and Warrants. 24 Table of Contents A significant portion of our revenues are subject to rate regulation either by government entities or by local third-party collecting societies throughout the world and rates on other income streams may be set by governmental proceedings, which may limit our profitability.
This could materially adversely affect our business, cash flows, financial condition and results of operations and lead to a decline in the market price of our Common Stock and Warrants. 21 Table of Contents A significant portion of our revenues are subject to rate regulation either by government entities or by local third-party collecting societies throughout the world and rates on other income streams may be set by governmental proceedings, which may limit our profitability.
As a result, matters impacting our internal controls over financial reporting may cause us to be unable to report our consolidated financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable Nasdaq listing rules, which may result in a breach of the covenants under our $350 million senior secured revolving credit facility (the “ Senior Credit Facility ”) or future financing arrangements.
As a result, matters impacting our internal controls over financial reporting may cause us to be unable to report our consolidated financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable Nasdaq listing rules, which may result in a breach of the covenants under our $450 million senior secured revolving credit facility (the “ Senior Credit Facility ”) or future financing arrangements.
It has delayed the release of new recordings by impeding the types of collaboration among artists, songwriters, producers, musicians, engineers and studios which are necessary for the delivery of those recordings.
It delayed the release of new recordings by impeding the types of collaboration among artists, songwriters, producers, musicians, engineers and studios which are necessary for the delivery of those recordings.
In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses. These rules and regulations result in our incurring legal and financial compliance costs and will make some activities more time-consuming and costly.
In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will continue to increase our general and administrative expenses. These rules and regulations result in our incurring legal and financial compliance costs and will make some activities more time-consuming and costly.
Government intervention in the music streaming business could have an adverse effect on our business, cash flows, financial condition and results of operations. 26 Table of Contents If our songwriters and recording artists are characterized as employees, we would be subject to employment and withholding liabilities.
Government intervention in the music streaming business could have an adverse effect on our business, cash flows, financial condition and results of operations. 23 Table of Contents If our songwriters and recording artists are characterized as employees, we would be subject to employment and withholding liabilities.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this Annual Reporting on Form 10-K and other periodic reports and proxy statements.
Even after we no longer qualify as an emerging growth company, we may continue to qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this Annual Report on Form 10-K and other periodic reports and proxy statements.
As of March 31, 2022, our outstanding Warrants included 5,750,000 publicly-traded warrants (the “ Public Warrants ”), which were issued during ROCC’s initial public offering on December 15, 2020, and 137,500 warrants sold in a private placement to ROCC’s sponsor (the “ Private Warrants ”).
As of March 31, 2023, our outstanding Warrants included 5,750,000 publicly-traded warrants (the “ Public Warrants ”), which were issued during ROCC’s initial public offering on December 15, 2020, and 137,500 warrants sold in a private placement to ROCC’s sponsor (the “ Private Warrants ”).
These risks include, but are not limited to, the following: ● the impact of the COVID-19 pandemic on our business, cash flows, financial condition and results of operations; ● market competition, including, among others, competition against other music publishing companies and record companies; ● our ability to identify, sign and retain songwriters and recording artists; ● the increased expenses associated with being a public company; ● our international operations, which subject us to the trends and developments of other countries, as well as the fluctuations of the currency exchange rate; ● our ability to attract and retain key personnel, as well as the ability of our management team to effectively manage our transition to a public company in accordance with SEC and Nasdaq requirements; ● risks associated with strategic acquisitions or other transactions, including, among others, business acquisitions, combinations, investments and joint ventures; ● the impact of digital music services on our marketing and distribution and the possible changes in the terms of the licensing agreements with such services, including, among others, those governing royalty rates; ● the impact of legislation that may limit or result in the unenforceability of our contracts with certain artists; ● the possibility that streaming adoption or revenues may grow less rapidly or level off in the future; ● our ability to implement, maintain, and improve effective internal controls; Risks Related to Intellectual Property and Data Security ● our ability to obtain, maintain, protect and enforce our intellectual property rights; ● our involvement in intellectual property litigation, including, among others, any assertions or allegations of infringement or violation of intellectual property rights by third parties; ● the impact of digital piracy on our business, cash flows, financial condition and results of operations; ● our ability to maintain and protect the information security relating to our customers, employees, vendors and our music; ● the impact of evolving laws and regulations relating to, among others, data privacy, consumer protection and data protection, as well as the rights granted to songwriters and recording artists under the U.S.
These risks include, but are not limited to, the following: Risks Related to Our Business and Operations ● market competition, including, among others, competition against other music publishing companies and record companies; 16 Table of Contents ● our ability to identify, sign and retain songwriters and recording artists; ● the increased expenses associated with being a public company; ● our international operations, which subject us to the trends and developments of other countries, as well as the fluctuations of the currency exchange rate; ● the impact of the COVID-19 pandemic or any other outbreak of contagious disease or other widespread natural disaster on our business, cash flows, financial condition and results of operations; ● our ability to attract and retain key personnel, as well as the ability of our management team to effectively manage our transition to a public company in accordance with SEC and Nasdaq requirements; ● risks associated with strategic acquisitions or other transactions, including, among others, business acquisitions, combinations, investments and joint ventures; ● the impact of digital music services on our marketing and distribution and the possible changes in the terms of the licensing agreements with such services, including, among others, those governing royalty rates; ● the impact of legislation that may limit or result in the unenforceability of our contracts with certain songwriters or artists; ● the possibility that streaming adoption or revenues may grow less rapidly or level off in the future; ● our ability to implement, maintain, and improve effective internal controls; Risks Related to Intellectual Property and Data Security ● our ability to obtain, maintain, protect and enforce our intellectual property rights; ● our involvement in intellectual property litigation, including, among others, any assertions or allegations of infringement or violation of intellectual property rights by third parties; ● the impact of digital piracy on our business, cash flows, financial condition and results of operations; ● our ability to maintain and protect the information security relating to our customers, employees, vendors and our music; ● the impact of evolving laws and regulations relating to, among others, data privacy, consumer protection and data protection, as well as the rights granted to songwriters and recording artists under the U.S.
Mechanical royalties and performance royalties are two of the main sources of income to our Music Publishing business and mechanical royalties are a significant expense to our Recorded Music business. In the United States, mechanical royalty rates are set every five years pursuant to an administrative process under the U.S.
Mechanical royalties and performance royalties are two of the main sources of income to our Music Publishing business and mechanical royalties are a significant expense to our Recorded Music business. In the U.S., mechanical royalty rates are set every five years pursuant to an administrative process under the U.S.
Upon any such termination, we may be required to either negotiate a new or reinstated agreement with less favorable terms or otherwise lose our rights to use the licensed trademarks. 31 Table of Contents Our involvement in intellectual property litigation could adversely affect our business, cash flows, financial condition and results of operations.
Upon any such termination, we may be required to either negotiate a new or reinstated agreement with less favorable terms or otherwise lose our rights to use the licensed trademarks. Our involvement in intellectual property litigation could adversely affect our business, cash flows, financial condition and results of operations.
However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company,” as defined in the JOBS Act. We may be unable to maintain the listing of our securities on Nasdaq in the future.
However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company,” as defined in the JOBS Act. 25 Table of Contents We may be unable to maintain the listing of our securities on Nasdaq in the future.
Our Music Publishing business competes not only with other music publishing companies, but also with songwriters who publish their own works and companies in other industries that may choose to sign direct deals with songwriters or music publishing companies.
Our music publishing business (the “ Music Publishing business ”) competes not only with other music publishing companies, but also with songwriters who publish their own works and companies in other industries that may choose to sign direct deals with songwriters or music publishing companies.
The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination 18 Table of Contents with other events or circumstances, may adversely affect our business, financial condition and results of operations, in which case the trading price of our Common Stock and Warrants could decline and you could lose all or part of your investment.
The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect our business, financial condition and results of operations, in which case the trading price of our Common Stock and Warrants could decline and you could lose all or part of your investment.
The results of our strategy and the success of our implementation of this strategy will not be known for some time in the future. If we are 22 Table of Contents unable to implement our strategy successfully or properly react to changes in market conditions, our business, cash flows, financial condition and results of operations could be adversely affected.
The results of our strategy and the success of our implementation of this strategy will not be known for some time in the future. If we are unable to implement our strategy successfully or properly react to changes in market conditions, our business, cash flows, financial condition and results of operations could be adversely affected.
Globally, many government and consumer agencies have also called for new regulation and changes in industry practices with respect to information collected from consumers, electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising.
Globally, many government and consumer agencies have also called 29 Table of Contents for new regulation and changes in industry practices with respect to information collected from consumers, electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising.
As a result, capital appreciation, if any, of our Common Stock or Warrants would be your sole source of gain on an investment in our Common Stock or Warrants for the foreseeable future. The future sales of shares by our stockholders and future exercise of registration rights may adversely affect the market price of our Common Stock and Warrants.
As a result, capital appreciation, if any, of our Common Stock or Warrants would be your sole source of gain on an investment in our Common Stock or Warrants for the foreseeable future. The future sales of shares by our stockholders may adversely affect the market price of our Common Stock and Warrants.
Our management determined that material weaknesses existed in the internal controls over financial reporting while preparing our consolidated financial statements as of March 31, 2022 and 2021.
Our management determined that material weaknesses existed in the internal controls over financial reporting while preparing our consolidated financial statements as of March 31, 2023 and 2022.
This right does not apply to works that are “works made for hire.” Since the enactment of the Sound Recordings Act of 1971, as amended, which first accorded federal copyright protection for sound recordings in the United States, virtually all of our agreements with recording artists provide that such recording artists render services under a work-made-for-hire relationship.
This right does not apply to works that are “works made for hire.” Since the enactment of the Sound Recordings Act of 1971, as amended, which first accorded federal copyright protection for sound recordings in the U.S., virtually all of our agreements with recording artists provide that such recording artists render services under a work-made-for-hire relationship.
In June 2019, the Antitrust Division of the Department of Justice opened a review of its consent decrees with ASCAP and BMI to determine whether the decrees should be maintained in their current form, modified or terminated. Outside the United States, mechanical and performance royalty rates are typically negotiated on an industry-wide basis.
In June 2019, the Antitrust Division of the Department of Justice opened a review of its consent decrees with ASCAP and BMI to determine whether the decrees should be maintained in their current form, modified or terminated. Outside the U.S., mechanical and performance royalty rates are typically negotiated on an industry-wide basis.
In most territories outside the United States, mechanical royalties are based on a percentage of wholesale prices for physical product and based on a percentage of consumer prices for digital formats. The mechanical and performance royalty rates set pursuant to such processes may adversely affect us by limiting our ability to increase the profitability of our Music Publishing business.
In most territories outside the U.S., mechanical royalties are based on a percentage of wholesale prices for physical product and based on a percentage of consumer prices for digital formats. The mechanical and performance royalty rates set pursuant to such processes may adversely affect us by limiting our ability to increase the profitability of our Music Publishing business.
Our Recorded Music business competes not only with other recorded music companies, but also with recording artists who may choose to distribute their own works (which has become more practicable as music is distributed online rather than physically) and companies in other industries (such as Spotify) that may choose to sign direct deals with recording artists or recorded music companies.
Our recorded music business (the “ Recorded Music business ”) competes not only with other recorded music companies, but also with recording artists who may choose to distribute their own works (which has become more practicable as music is distributed online rather than physically) and companies in other industries that may choose to sign direct deals with recording artists or recorded music companies.
If streaming adoption or revenues grows less rapidly or levels off, our prospects, business, cash flows, financial condition and results of operations may be adversely affected. Streaming revenues are important because they have offset declines in downloads and physical sales and represent a growing area of our Music Publishing business and Recorded Music business.
If streaming adoption or revenues grow less rapidly or level off, our prospects, business, cash flows, financial condition and results of operations may be adversely affected. Streaming revenues are important because they have offset declines in downloads and physical sales and represent a growing area of our Music Publishing business and Recorded Music business.
To the extent the COVID-19 pandemic adversely affects our business, cash flows, financial condition or results of operations, it may also have the effect of heightening other risks described in this section.
To the extent the COVID-19 pandemic continues to adversely affect our business, cash flows, financial condition or results of operations, it may also have the effect of heightening other risks described in this section.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay acquisitions, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
If our cash flows and capital resources are insufficient to service our 26 Table of Contents indebtedness, we may be forced to reduce or delay acquisitions, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
The holders of the majority of the Founder Shares, the Private Units and any working capital loans made to us are entitled to 36 Table of Contents make up to two demands that we register such securities.
The holders of the majority of the Founder Shares, the Private Units and any working capital loans made to us are entitled to make up to two demands that we register such securities.
A substantial portion of our revenue comes from the distribution of music, which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” In its Engaging with Music 2021 report, the IFPI surveyed 43,000 people to examine the ways in which music consumers aged 16 to 64 engaged with recorded music across 21 countries.
A substantial portion of our revenue comes from the distribution of music, which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” In its Engaging with Music 2022 report, the IFPI surveyed 44,000 people to examine the ways in which music consumers aged 16 to 64 engaged with recorded music across 22 countries.
The reporting currency for our consolidated financial statements is the U.S. dollar. We have substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars. To prepare our consolidated financial statements, we must translate those assets, liabilities, revenues and expenses into U.S. dollars at then-applicable exchange rates.
The reporting currency for our consolidated financial statements is the U.S. dollar. We have substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars, principally the British pound sterling and euro. To prepare our consolidated financial statements, we must translate those assets, liabilities, revenues and expenses into U.S. dollars at then-applicable exchange rates.
Our Recorded Music business and Music Publishing business is to a large extent dependent on technological developments, including access to and selection and viability of new technologies, and is subject to potential pressure from competitors as a result of their technological developments.
Our Recorded Music business and Music Publishing business is to a significant extent dependent on technological developments, including access to and selection and viability of innovative technologies, and is subject to potential pressure from competitors as a result of their technological developments.
The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected.
The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected.
The trading market for our Common Stock and Warrants will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts.
If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline. The trading market for our Common Stock and Warrants will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts.
Our substantial indebtedness could adversely affect our business, cash flows, financial condition and results of operations. We entered into an amendment to the Senior Credit Facility to, among other things, increase the revolving credit commitment to $350 million which is expected to mature in October 2024.
Our substantial indebtedness could adversely affect our business, cash flows, financial condition and results of operations. We entered into an amendment to the Senior Credit Facility to, among other things, increase the revolving credit commitment to $450 million, which is scheduled to mature in December 2027.
We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States.
We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting 20 Table of Contents policies, practices or internal controls over financial reporting required of public companies in the U.S.
It is important as revenues continue to shift from physical to diversified distribution channels that we receive fair value for all of the uses of our intellectual property as our business model now depends upon multiple revenue streams from multiple sources.
Copyright Act unless rates are determined through industry negotiations. It is important as revenues continue to shift from physical to diversified distribution channels that we receive fair value for all the uses of our intellectual property as our business model now depends upon multiple revenue streams from multiple sources.
We will remain an emerging growth company until the earlier of (i)(x) December 15, 2025, (y) the date on which we have total annual gross revenue of at least $1.07 billion, or (z) the date on which we are deemed to be a large accelerated filer, which means the market value of shares of our Common Stock and Warrants that are held by non-affiliates exceeds $700 million as of the prior September 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earlier of (i)(x) December 15, 2025, (y) the date on which we have total annual gross revenue of at least $1.07 billion, or (z) the date on which we are deemed to be a large accelerated filer, which means the market value of shares of our Common Stock and Warrants that are held by non-affiliates exceeds $700 million as of the prior September 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. 32 Table of Contents In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Our results of operations and cash flows in any reporting period may be materially affected by the timing of releases and advance payments and minimum guarantees, which may result in significant fluctuations from period to period, which may have an adverse impact on the price of our Common Stock or Warrants.
Our results of operations and cash flows in any reporting period may be materially affected by the timing of releases and advance payments and minimum guarantees, which may result in significant fluctuations from period to period, which may have an adverse impact on the price of our Common Stock or Warrants. 31 Table of Contents Volatility in our stock price could subject us to securities class action litigation.
Each of these initiatives requires sustained management focus, organization and coordination over significant periods of time. Each of these initiatives also requires success in building relationships with third parties and in anticipating and keeping up with technological developments and consumer preferences and may involve the implementation of new business models or distribution platforms.
Each of these initiatives also requires success in building relationships with third parties and in anticipating and keeping up with technological developments and consumer preferences and may involve the implementation of new business models or distribution platforms.
We expect to increase revenues and cash flow through a business strategy which requires us, among others, to continue to maximize the value of our music, to significantly reduce costs to maximize flexibility and adjust to new realities of the market, to continue to act to contain digital piracy and to diversify our revenue streams into growing segments of the music entertainment business by continuing to capitalize on digital distribution and emerging technologies.
We expect to increase revenues and cash flow through a business strategy which requires us, among others, to continue to maximize the value of our music, to significantly reduce costs to maximize flexibility and adjust to new realities of the market, to continue to act to contain digital piracy and to diversify our revenue streams into growing segments of the music entertainment business by continuing to capitalize on digital distribution and emerging technologies. 19 Table of Contents Each of these initiatives requires sustained management focus, organization and coordination over significant periods of time.
The market price of our Common Stock and Warrants may be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following: ● the impact of the COVID-19 pandemic on our business, cash flows, financial condition and results of operations; ● our quarterly or annual earnings or those of other companies in our industry compared to market expectations; ● the size of our public float; ● our inability to maintain the listing of our Common Stock and Warrants on Nasdaq; ● our inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among others, competition, our ability to grow and manage growth profitably and retain our key employees; ● coverage by or changes in financial estimates by securities or industry analysts or failure to meet their expectations; ● changes in accounting standards, policies, guidance, interpretations or principles; ● changes in senior management or key personnel; ● changes in applicable laws or regulations; 34 Table of Contents ● risks relating to the uncertainty of our projected financial information; ● risks related to the organic and inorganic growth of our business and the timing of expected business milestones; and ● changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
The market price of our Common Stock and Warrants may be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following: ● our quarterly or annual earnings or those of other companies in our industry compared to market expectations; ● the size of our public float; ● our inability to maintain the listing of our Common Stock and Warrants on Nasdaq; ● coverage by or changes in financial estimates by securities or industry analysts or failure to meet their expectations; ● changes in accounting standards, policies, guidance, interpretations or principles; ● changes in senior management or key personnel; ● changes in applicable laws or regulations; ● risks relating to the uncertainty of our projected financial information; 30 Table of Contents ● risks related to the organic and inorganic growth of our business and the timing of expected business milestones; and ● changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
Our executive officers and management team have limited experience in managing a publicly traded company. Our management team may not effectively or efficiently manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws.
Our management team may not effectively or efficiently manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws.
Governments could enact new legislation or could make regulatory determinations that affect the terms of our contracts with songwriters and recording artists. Some songwriter and recording artist groups, particularly in Europe, are urging governments to intervene in the music streaming business in ways that could affect the terms agreed in our contracts with them.
Some songwriter and recording artist groups, particularly in Europe, are urging governments to intervene in the music streaming business in ways that could affect the terms agreed in our contracts with them.
Our inability to generate sufficient cash flow to satisfy our debt service or other obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could have a material adverse effect on our business, cash flows, financial condition and results of operations. 30 Table of Contents Provisions in the Charter and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our inability to generate sufficient cash flow to satisfy our debt service or other obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could have a material adverse effect on our business, cash flows, financial condition and results of operations.
The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting. As a result, we incur significant legal, accounting and other expenses that we did not previously incur.
The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting. As a result, we incur significant legal, accounting and other expenses that we did not previously incur.
Additionally, changes in law may be implemented, or changes in interpretation of such laws may occur, that may affect our ability to obtain, maintain, protect or enforce our intellectual property rights. Failure to obtain, maintain, protect or enforce our intellectual property rights could harm our brand or brand recognition and adversely affect our business, financial condition and results of operation.
Failure to obtain, maintain, protect or enforce our intellectual property rights could harm our brand or brand recognition and adversely affect our business, financial condition and results of operation.
If these services were to fail to include our music on playlists, change the position of our music on playlists or give us less marketing space, it could adversely affect our business, cash flows, financial condition and results of operations. 27 Table of Contents Under our license agreements and relevant statutes, we receive royalties from digital music services in order to stream or otherwise offer our music.
If these services were to fail to include our music on playlists, change the position of our music on playlists or give us less marketing space, it could adversely affect our business, cash flows, financial condition and results of operations.
The changes broaden the applicability of COPPA, including by expanding the definition of “personal information” subject to the rule’s parental consent and other obligations. 33 Table of Contents Our business, including our ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices.
Our business, including our ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices.
Copyright Act; 19 Table of Contents Risks Related to Our Common Stock and Warrants ● the volatility of our stock prices, which could subject us to securities class action litigation; ● negative reports published by securities or industry analysts, or the lack of research or reports published by such analysts; ● the potential exercise and/or redemption of our Warrants; and ● future sales by our stockholders and the potential exercise of their registration rights.
Copyright Act; Risks Related to Our Common Stock and Warrants ● the volatility of our stock prices, which could subject us to securities class action litigation; ● negative reports published by securities or industry analysts, or the lack of research or reports published by such analysts; ● the potential exercise and/or redemption of our Warrants; and ● future sales by our stockholders. 17 Table of Contents Risks Related to Our Business and Operations We may be unable to compete successfully in the highly competitive markets in which we operate and may suffer reduced profits as a result.
Our entire management team and many of our other employees will need to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company. 28 Table of Contents In addition, the need to establish the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, which could prevent us from improving our business, financial condition, cash flows and results of operations.
In addition, the need to establish the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, which could prevent us from improving our business, financial condition, cash flows and results of operations.
If the mechanical and performance royalty rates are set too high, it may also adversely affect us by limiting our ability to increase the profitability of our Recorded Music business.
If the mechanical and performance royalty rates are set too high, it may also adversely affect us by limiting our ability to increase the profitability of our Recorded Music business. In addition, the rates that our Recorded Music business receives in the U.S. for webcasting and satellite radio are set every five years by an administrative process under the U.S.
Of those surveyed, 30% had used illegal or unlicensed methods to listen to or download music, and 14% had used unlicensed social media platforms for music purposes, the leading form of music piracy. Organized industrial piracy may also lead to decreased revenues.
Of those surveyed, 30% had used illegal or unlicensed methods to listen to or download music and 17% had used an unlicensed mobile app to illegally download music. Organized industrial piracy may also lead to decreased revenues.
Beginning with our second annual report following the Business Combination, we will be required to provide a management report on internal control over financial reporting.
Beginning with this annual report, we are required to provide a management report on internal control over financial reporting.
These new and evolving laws (including the European Union General Data Protection Regulation effective on May 25, 2018 and the California Consumer Privacy Act effective on January 1, 2020) are likely to result in greater compliance burdens for companies with global operations.
In addition, privacy and data security laws and regulations around the world are being implemented rapidly and evolving. These new and evolving laws (including the European Union General Data Protection Regulation effective on May 25, 2018) have resulted in greater compliance burdens for companies with global operations.
Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us or our songwriters, artists or key personnel could adversely affect our business.
Failure to be accurately paid our royalties may adversely affect our business, cash flows, financial condition and results of operations. 24 Table of Contents Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us or our songwriters, artists or key personnel could adversely affect our business.
While we have instituted plans to remediate these issues and continue to take remediation steps, including hiring additional personnel and implementing new processes and controls in connection with financial reporting, we continued to have a limited number of personnel with the level of GAAP accounting knowledge, specifically related to complex accounting transactions, commensurate with our financial reporting requirements.
We have instituted plans to remediate these issues and continue to take remediation steps, including hiring additional personnel and implementing new processes and controls in connection with financial reporting.
Any failure by our management team to perform as expected may have a material adverse effect on our business, cash flows, financial condition and results of operations. Past performance by our management team and their affiliates may not be indicative of future performance of an investment in us.
Any failure by our management team to perform as expected may have a material adverse effect on our business, cash flows, financial condition and results of operations. Our management team has limited experience in operating a public company. Our executive officers and management team have limited experience in managing a publicly traded company.
The Private Warrants are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
The Private Warrants are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, cash flows, financial condition and results of operations. If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, cash flows, financial condition and results of operations.
Risks Related to Our Business and Operations Our business, cash flows, financial condition and results of operations are expected to continue to be adversely impacted by the COVID-19 pandemic. The COVID-19 pandemic has had and will have an adverse effect on our business, cash flows, financial condition and results of operations.
Our business, cash flows, financial condition and results of operations have been adversely impacted by the COVID-19 pandemic and any future outbreak of contagious disease or other widespread natural disaster could materially and adversely affect our business. The COVID-19 pandemic has had an adverse effect on our business, cash flows, financial condition and results of operations.
The bill was withdrawn in April 2021, but may be reintroduced during a subsequent legislative session. The repeal of subsection (b) of Section 2855 and/or the passage of legislation similar to Section 2855 by other states could materially adversely affect our business, cash flows, financial condition and results of operations.
The repeal of subsection (b) of Section 2855 and/or the passage of legislation similar to Section 2855 by other states could materially adversely affect our business, cash flows, financial condition and results of operations. Governments could enact new legislation or could make regulatory determinations that affect the terms of our contracts with songwriters and recording artists.
As a result, we may not be paid appropriately for our music. Failure to be accurately paid our royalties may adversely affect our business, cash flows, financial condition and results of operations.
As a result, we may not be paid appropriately for our music.
It has made it more difficult for artists to engage in marketing efforts around the release of their new recordings which, in some cases, has led to our decisions to delay the release of those recordings.
The COVID-19 pandemic suspended live concert tours, adversely impacting our concert promotion business and its sale of tour merchandise and made it more difficult for artists to engage in marketing efforts around the release of their new recordings.
As a result of the Business Combination, we became subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations.
The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations. As a result of the Business Combination, we became subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act.
If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants. 35 Table of Contents Due to the nature of our business, our results of operations, cash flows and the trading price of our Common Stock and Warrants may fluctuate significantly from period to period.
Due to the nature of our business, our results of operations, cash flows and the trading price of our Common Stock and Warrants may fluctuate significantly from period to period.
The foregoing and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risks described in this Annual Report, and any of these impacts could materially adversely affect our business, cash flows, financial condition and results of operations.
In addition, any future pandemic or outbreak of contagious disease like the COVID-19 pandemic or other widespread natural disaster could impact our business in a similar way and could have a material adverse effect on our results of operations and financial condition.
Removed
Our management of the impact of the COVID-19 pandemic has required, and will continue to require, significant investment of time by our management and employees. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic and the resulting governmental and other measures.
Added
The bill was withdrawn in April 2021, but a similar bill was reintroduced in February 2022 and was rejected by the California State Senate in June 2022.
Removed
Stay at home orders, limited indoor and outdoor gatherings and other restrictions have negatively affected our business in other ways. The COVID-19 pandemic has suspended live concert tours, adversely impacting our concert promotion business and its sale of tour merchandise.
Added
Under our license agreements and relevant statutes, we receive royalties from digital music services in order to stream or otherwise offer our music.
Removed
The severity and the duration of the COVID-19 pandemic is difficult to predict but it is expected that the COVID-19 pandemic will continue to materially and adversely affect the global economy, creating risks around the timing and collectability of our accounts receivable and leading to a decline in consumer discretionary spending which, in turn, could have a negative impact on our business, cash flows, financial condition and results of operations.
Added
Our entire management team and many of our other employees will need to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company.
Removed
Given the uncertainty around the extent and timing of the potential future spread or mitigation of the COVID-19 virus and around the imposition or relaxation of protective measures, we cannot, at this time, reasonably estimate the impact to our future business, cash flows, financial condition and results of operations. 20 Table of Contents We may be unable to compete successfully in the highly competitive markets in which we operate and may suffer reduced profits as a result.
Added
Provisions in the Charter and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Removed
Information regarding performance by, or businesses associated with, our management team or businesses associated with them is presented for informational purposes only. Past performance by our management team is not a guarantee of success with respect to any acquisition that we may consummate or strategy that we may implement.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePursuant to the New HQ Lease agreement, the lease is estimated to commence during the Company’s third or fourth quarter of the fiscal year ending March 31, 2023 and consists of a 130-month lease term. We also occupy other office space domestically in Nashville, Tennessee and Los Angeles, California and occupy office space internationally in Toronto, London and Abu Dhabi.
Biggest changeWe also occupy other office space domestically in Nashville, Tennessee and Los Angeles, California and occupy office space internationally in Toronto, London and Abu Dhabi. Our office space is leased under operating leases.
Our office space is leased under operating leases. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed. ​ 37 Table of Contents
We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed. ​
Item 2. Properties Our corporate headquarters are located in New York City at 75 Varick Street, 9th Floor, New York, NY and consist of 6,022 square feet of leased office space under a lease that expires on October 31, 2022.
Item 2. Properties Our corporate headquarters are located in New York City at 200 Varick Street, Suite 801A, New York, NY where we currently lease approximately 12,000 square feet under a lease agreement that expires August 2033.
Removed
In April 2022, the Company entered into an agreement for its new headquarter office facility consisting of 12,470 square feet of leased office space at 200 Varick Street, Suite 801A, New York, NY (the “ New HQ Lease ”).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeGiven the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on our financial results.
Biggest changeGiven the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on our financial results. Item 4. Mine Safety Disclosures Not applicable. ​ 33 Table of Contents PART II
Item 3. Legal Proceedings We are subject to claims and contingencies in the normal course of business. We believe that losses resulting from these matters that existed at March 31, 2022, if any, would not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
Item 3. Legal Proceedings We are subject to claims and contingencies in the ordinary course of business. We believe that losses resulting from these matters that existed at March 31, 2023, if any, would not have a material adverse effect on our business, cash flows, financial condition and results of operations.
Removed
See Note 17, “ Contingencies and Commitments ,” to the accompanying consolidated financial statements included in Part II, Item 8 “ Financial Statements and Supplementary Data ” of our Annual Report for more information on certain legal proceedings. Item 4. Mine Safety Disclosures Not applicable. ​ 38 Table of Contents PART II
Added
Even if any particular litigation or claim is not resolved in a manner that is adverse to our interests, such litigation can have a negative impact on us because of defense and settlement costs, diversion of management resources from our business, and other factors.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Equity Securities There have been no other unregistered sales of equity securities during the year ended March 31, 2022, which have not been previously disclosed on a Current Report on Form 8-K. Item 6. [Reserved] ​
Biggest changeRecent Sales of Unregistered Equity Securities There have been no other unregistered sales of equity securities during the year ended March 31, 2023, which have not been previously disclosed on a Current Report on Form 8-K.
Prior to that date, and before the completion of the Business Combination with ROCC, the units, common stock and warrants of ROCC traded on the Nasdaq under the ticker symbols “ROCCU” “ROCC” and “ROCCW,” respectively. On June 13, 2022, there were 18 registered holders of record of our Common Stock and Warrants.
Prior to that date, and before the completion of the Business Combination with ROCC, the units, common stock and warrants of ROCC traded on the Nasdaq under the ticker symbols “ROCCU” “ROCC” and “ROCCW,” respectively. On May 26, 2023, there were 16 registered holders of record of our Common Stock and Warrants.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRecorded Music revenues are derived from four main sources: ● Digital ––the rightsholder receives revenues with respect to streaming and download services; ● Physical ––the rightsholder receives revenues with respect to sales of physical products such as vinyl, CDs and DVDs; 41 Table of Contents ● 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; and ● 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.
Biggest changeRecorded Music revenues are derived from four main sources: ● Digital ––the rightsholder receives revenues with respect to streaming and download services; ● 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; and 36 Table of Contents ● 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 The principal costs associated with our Recorded Music business are as follows: ● 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 ● 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.
Non-compliance with the leverage ratio, 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.
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.
Music Publishing revenues are derived from five main sources: ● Performance ––the rightsholder receives revenues if the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations ( e.g. , bars and restaurants), live performance at a concert or other venue ( e.g. , arena concerts and nightclubs), and performance of music in staged theatrical productions; ● Digital ––the rightsholder receives revenues with respect to musical compositions embodied in recordings distributed in streaming services, download services and other digital music services; 40 Table of Contents ● Mechanical ––the rightsholder receives revenues with respect to musical compositions embodied in recordings sold in any machine-readable format or configuration such as vinyl, CDs and DVDs; ● Synchronization ––the rightsholder receives revenues for the right to use the musical composition in combination with visual images such as in films or television programs, television commercials and video games; and ● Other ––the rightsholder receives revenues for use in sheet music and other uses.
Music Publishing revenues are derived from five main sources: ● Digital ––the rightsholder receives revenues with respect to musical compositions embodied in recordings distributed in streaming services, download services and other digital music services; ● Performance ––the rightsholder receives revenues if the musical composition is performed publicly through broadcast of music on television, radio and cable and in retail locations ( e.g. , bars and restaurants), live performance at a concert or other venue ( e.g. , arena concerts and nightclubs), and performance of music in staged theatrical productions; ● Synchronization ––the rightsholder receives revenues for the right to use the musical composition in combination with visual images such as in films or television programs, television commercials and video games; and 35 Table of Contents ● Mechanical ––the rightsholder receives revenues with respect to musical compositions embodied in recordings sold in any machine-readable format or configuration such as vinyl, CDs and DVDs; ● Other ––the rightsholder receives revenues for use in sheet music and other uses.
Our core Catalog includes recordings under the Chrysalis Records label by artists such as Sinéad O’Connor, The Specials, Generation X and The Waterboys, as well as recordings under the Tommy Boy record label by artists such as De La Soul, Coolio, House of Pain, Naughty By Nature and Queen Latifah.
Our core Catalog includes recordings under the Chrysalis Records label by artists such as Sinéad O’Connor, The Specials, Generation X and The Waterboys, and De La Soul, as well as recordings under the Tommy Boy record label by artists such as House of Pain, Naughty By Nature, and Queen Latifah.
However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses and other non-operating income (loss).
However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses and other non-operating income.
The Prior Credit Facility has been amended and restated a number of times since 2014, generally leading to extensions of maturity dates and increases in the facility size. 51 Table of Contents On July 28, 2021, in connection with the consummation of the Business Combination, RMM amended and restated the Prior Credit Facility by entering the Fourth Amended and Restated Credit Agreement (the “ RMM Credit Agreement ”), providing RMM with a senior secured credit facility in an aggregate amount of $248,750 thousand.
The Prior Credit Facility has been amended and restated a number of times since 2014, generally leading to extensions of maturity dates and increases in the facility size. 46 Table of Contents On July 28, 2021, in connection with the consummation of the Business Combination, RMM amended and restated the Prior Credit Facility by entering the Fourth Amended and Restated Credit Agreement (the “ RMM Credit Agreement ”), providing RMM with a senior secured credit facility in an aggregate amount of $248,750 thousand.
We represent over 140,000 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.
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.
See Note 2 to the Company’s consolidated financial statements for the fiscal years ended March 31, 2022 and 2021, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies.
See Note 2 to the Company’s consolidated financial statements for the fiscal years ended March 31, 2023 and 2022, contained in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies.
Under this method of accounting, ROCC was treated as the “acquired” company for accounting purposes, and the Business Combination was accounted as the equivalent of RHI issuing stock for the net assets of ROCC, accompanied by a recapitalization.
The Business Combination was accounted for as a reverse capitalization. Under this method of accounting, ROCC was treated as the “acquired” company for accounting purposes, and the Business Combination was accounted as the equivalent of RHI issuing stock for the net assets of ROCC, accompanied by a recapitalization.
Unless otherwise noted, all references to Fiscal 2022 represent the fiscal year ended March 31, 2022 and all references to Fiscal 2021 represent the fiscal year ended March 31, 2021. Business Overview We are an independent music company operating in music publishing and recorded music.
Unless otherwise noted, all references to Fiscal 2023 represent the fiscal year ended March 31, 2023 and all references to Fiscal 2022 represent the fiscal year ended March 31, 2022. Business Overview We are an independent music company operating in music publishing and recorded music.
We own or control rights to more than 140,000 musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.
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.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or expenses such as, among others, (1) any non-cash charges (including any impairment charges), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude items or expenses such as, among others, (1) any non-cash charges (including any impairment charges and loss on early extinguishment of debt), (2) any net gain or loss on foreign exchange, (3) any net gain or loss resulting from interest rate swaps, (4) equity-based compensation expense and (5) certain unusual or non-recurring items.
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 non-affiliated licensees and sub-publishers.
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.
New Accounting Pronouncements See Note 2, “ Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2022 and 2021, contained in Part II, Item 8 of this Form 10-K. ​ 56 Table of Contents
New Accounting Pronouncements See Note 2, “ Significant Accounting Policies” to the accompanying consolidated financial statements for the fiscal years ended March 31, 2023 and 2022, contained in Part II, Item 8 of this Form 10-K. ​ 51 Table of Contents
Results of Operations Income Statement Our income statement was composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ vs.
Results of Operations Income Statement Our income statement was composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ ​ Fiscal Fiscal vs.
We also license music digitally to fitness platforms such as Apple Fitness+, Equinox, Hydrow and Peloton and social media outlets, such as Facebook, Instagram, Snapchat, TikTok and Triller.
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.
We did not pay any dividends to stockholders during Fiscal 2022. 53 Table of Contents Summary 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.
We did not pay any dividends to stockholders during Fiscal 2023. Summary 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.
Expressed as a percentage of revenues, administration expenses increased to 23% for Fiscal 2022 from 19% for Fiscal 2021, due to administration expenses associated with being a public company, an increase in share-based compensation expense and increased costs related to establishing a U.S. Recorded Music platform due to the acquisition of Tommy Boy.
Expressed as a percentage of revenues, administration expenses increased to 25% for Fiscal 2023 from 23% for Fiscal 2022, due to increased administration expenses associated with being a public company for a full year, an increase in share-based compensation expense and increased costs related to establishing a U.S. Recorded Music platform due to the acquisition of Tommy Boy.
Cost of Revenues Our cost of revenues was composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
Cost of Revenues Our cost of revenues was composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ Fiscal Fiscal vs.
Administration Expenses Our administration expenses are composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
Administration Expenses Our administration expenses are composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ Fiscal Fiscal vs.
The following table reconciles operating income to OIBDA (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
The following table reconciles operating income to OIBDA (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ Fiscal Fiscal vs.
The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings or equity raises.
The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded 48 Table of Contents from available cash or from additional borrowings or equity raises.
Business Combination On July 28, 2021 (the “ Closing Date ”), we consummated the previously announced business combination (the “ Business Combination ”) by and among Roth CH Acquisition II Co., a Delaware corporation (“ ROCC ”), Roth CH II Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCC (“ Merger Sub ”) and Reservoir Holdings, Inc., a Delaware corporation (“ RHI ”).
Business Combination On July 28, 2021 (the “ Closing Date ”), we consummated a business combination (the “ Business Combination ”) between Roth CH Acquisition II Co. (“ ROCC ”), Roth CH II Merger Sub Corp., a wholly-owned subsidiary of ROCC, and Reservoir Holdings, Inc. (“ RHI ”).
Gain (Loss) on Foreign Exchange Gain on foreign exchange was $331 thousand for Fiscal 2022 compared to a loss on foreign exchange of $911 thousand for Fiscal 2021. This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely British pound sterling and euro.
Gain on Foreign Exchange Gain on foreign exchange was $269 thousand for Fiscal 2023 compared to $331 thousand for Fiscal 2022. This change was due to fluctuations in the two foreign currencies we are directly exposed to, namely British pound sterling and euro.
Reconciliations of OIBDA to operating income and EBITDA and Adjusted EBITDA to net income are provided below. 47 Table of Contents We consider operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“ OIBDA ”) to be an important indicator of the operational strengths and performance of our businesses and believe this non-GAAP financial measure provides useful information to investors because it removes the significant impact of amortization from our results of operations and represents our measure of segment income.
We consider operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“ OIBDA ”) to be an important indicator of the operational strengths and performance of our businesses and believe this non-GAAP financial measure provides useful information to investors because it removes the significant impact of amortization from our results of operations and represents our measure of segment income.
Our Current Artist and Catalog recorded music distribution is handled by a network of distribution partners. Chrysalis Records Catalog releases are distributed through AWAL while our Chrysalis Records Current Artist releases are distributed through PIAS. Tommy Boy Music Catalog releases are distributed via our membership with MERLIN, AMPED and other partners.
Our Current Artist and Catalog recorded music distribution is handled by a network of distribution partners. Chrysalis Records current frontline releases are distributed through Secretly Distribution, with prior frontline releases distributed via PIAS. Chrysalis Records and Tommy Boy catalogues are distributed via our agreements with MERLIN, AMPED, Proper and other partners.
Recorded Music administration expenses increased by $3,052 thousand, or 73%, during Fiscal 2022 compared to Fiscal 2021, primarily due to increases at Chrysalis Records and the acquisition of Tommy Boy.
Recorded Music administration expenses increased by $1,160 thousand, or 16%, during Fiscal 2023 compared to Fiscal 2022, primarily due to increases at Chrysalis Records and the acquisition of Tommy Boy.
Consolidated Adjusted EBITDA increased by $9,373 thousand, or 29%, during Fiscal 2022 compared to Fiscal 2021, driven primarily by an increase in revenue, partially offset by increases in cost of revenue and administration expenses, including administration expenses associated with being a public company.
Consolidated Adjusted EBITDA increased by $5,071 thousand, or 12%, during Fiscal 2023 compared to Fiscal 2022, driven primarily by an increase in revenue, partially offset by increases in cost of revenue and administration expenses, including increased administration expenses associated with being a public company for a full year.
These factors were partially offset by a $1,899 thousand increase in interest expense and $2,107 increase in income tax expense. Non-GAAP Reconciliations We use certain financial information, such as OIBDA, OIBDA Margin, EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA, which are non-GAAP financial measures, which means they have not been prepared in accordance with U.S. GAAP.
These factors were partially offset by a $1,705 thousand increase in operating income. 42 Table of Contents Non-GAAP Reconciliations We use certain financial information, such as OIBDA, OIBDA Margin, EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, which means they have not been prepared in accordance with U.S. GAAP.
If it is determined that events and circumstances warrant a revision to the remaining period of amortization, an asset’s remaining useful life would be changed, and the remaining carrying amount of the asset would be amortized prospectively over that revised remaining useful life. Off-Balance Sheet Arrangements As of March 31, 2022, we had no off-balance sheet arrangements.
If it is determined that events and circumstances warrant a revision to the remaining period of amortization, an asset’s remaining useful life would be changed, and the remaining carrying amount of the asset would be amortized prospectively over that revised remaining useful life.
These investing activities have had the largest impact on our growth over time. We have also invested in our operations to create a platform for the Music Publishing and Recorded Music segments to scale and grow.
These investing activities have had the largest impact on our growth over time. We have also invested in our operations to create a platform for the Music Publishing and Recorded Music segments to scale and grow. We did not complete any individually significant acquisition transactions during Fiscal 2023.
In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs.
In addition, Adjusted EBITDA is not the same as net income or cash flow provided by operating activities as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. 43 Table of Contents Reconciliation of Operating Income to OIBDA We use OIBDA as our primary measure of financial performance.
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.
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.
Interest Rate Swaps At March 31, 2022, 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 LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement: ​ ​ ​ ​ ​ ​ ​ ​ ​ Notional ​ ​ ​ ​ Amount at ​ Pay Fixed ​ ​ Effective Date ​ March 31, 2022 ​ Rate ​ Maturity March 10, 2022 ​ $ 8,750,000 1.602 % September 2024 March 10, 2022 ​ $ 88,039,137 1.492 % September 2024 December 31, 2021 ​ $ 53,210,863 1.042 % September 2024 ​ On March 10, 2022, two previous interest rate swaps expired with original notional amounts of $40,228,152 and $59,325,388.
Interest Rate Swaps At March 31, 2023, 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Notional ​ ​ ​ ​ Amount at ​ Pay Fixed ​ ​ Effective Date ​ March 31, 2023 ​ Rate ​ Maturity March 10, 2022 ​ $ 8,250 1.533 % September 2024 March 10, 2022 ​ $ 87,800 1.422 % September 2024 December 31, 2021 ​ $ 53,950 0.972 % September 2024 ​ On March 10, 2022, two previous interest rate swaps expired with original notional amounts of $40,228 thousand and $59,325 thousand.
As of March 31, 2022, remaining borrowing availability under the Senior Credit Facility was $74,354 thousand. We use cash generated from operations to service outstanding debt, consisting primarily of interest payments through maturity, and we expect to continue to refinance and extend maturity on the Senior Credit Facility for the foreseeable future.
We use cash generated from operations to service outstanding debt, consisting primarily of interest payments through maturity, and we expect to continue to refinance and extend maturity on the Senior Credit Facility for the foreseeable future.
Music Publishing amortization and depreciation expense increased by $2,020, or 17%, during Fiscal 2022 compared to Fiscal 2021, primarily due to the acquisition of additional music catalogs. Recorded Music amortization and depreciation increased by $2,933, or 132%, during Fiscal 2022 compared to Fiscal 2021, primarily due to Tommy Boy.
Music Publishing amortization and depreciation expense increased by $2,752 thousand, or 20%, during Fiscal 2023 compared to Fiscal 2022, primarily due to the acquisition of additional music catalogs. Recorded Music amortization and depreciation increased by $308 thousand, or 6%, during Fiscal 2023 compared to Fiscal 2022, primarily due to the acquisition of Tommy Boy.
Revenue and Cost Recognition Revenues 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.
Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. 49 Table of Contents Revenue and Cost Recognition Revenues 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.
(b) Reflects the non-cash gain on the mark-to-market of interest rate swaps. (c) Reflects non-cash stock-based compensation expense related to the Reservoir Media, Inc. 2021 Omnibus Incentive Plan. (d) Reflects loan forgiveness for the entire amount borrowed under the Paycheck Protection Program.
(b) Reflects the gain on foreign exchange fluctuations. (c) Reflects the non-cash gain on the mark-to-market of interest rate swaps. (d) Reflects non-cash stock-based compensation expense related to the Reservoir Media, Inc. 2021 Omnibus Incentive Plan.
Because of these limitations, such non-GAAP financial measures should be considered alongside other financial performance measures and other financial results presented in accordance with GAAP.
Because of these limitations, such non-GAAP financial measures should be considered alongside other financial performance measures and other financial results presented in accordance with GAAP. Reconciliations of OIBDA to operating income and EBITDA and Adjusted EBITDA to net income are provided below.
Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 25% for Fiscal 2022 from 32% for Fiscal 2021, primarily due to taking advantage of operating leverage on the Recorded Music platform, partially offset by new administration expenses associated with being a public company. 46 Table of Contents Interest Expense Interest expense increased by $1,899 thousand, or 21%, during Fiscal 2022 compared to Fiscal 2021.
Expressed as a percentage of revenue, Recorded Music administration expenses decreased to 24% for Fiscal 2023 from 25% for Fiscal 2022, primarily due to taking advantage of operating leverage on the Recorded Music platform, partially offset by increased administration expenses associated with being a public company for a full year.
Recorded Music OIBDA increased $8,532 thousand, or 170% during Fiscal 2022 compared to Fiscal 2021. Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 46% during Fiscal 2022 from 38% in Fiscal 2021.
Expressed as a percentage of revenue, Recorded Music OIBDA Margin increased to 49% during Fiscal 2023 from 46% in Fiscal 2022.
Total digital revenues represented 52% of consolidated revenues for Fiscal 2022 and Fiscal 2021. Music Publishing revenues increased by $10,997 thousand, or 17%, during Fiscal 2022 compared to Fiscal 2021.
Total digital revenues represented 55% and 52% of consolidated revenues for Fiscal 2023 and Fiscal 2022, respectively. 39 Table of Contents Music Publishing revenues increased by $6,763 thousand, or 9%, during Fiscal 2023 compared to Fiscal 2022.
Through the expiration date of these previous interest rate swaps, RMM paid fixed rates of 2.812% and 2.972%, respectively, to the counterparty and received a floating interest payment from the counterparty based on LIBOR with reference to notional amounts adjusted to match the original scheduled principal repayments pursuant to the indenture agreement.
All three current interest rate swaps mature on September 30, 2024, and RMM pays fixed rates of 1.533%, 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.
U.S. and international revenues represented 49% and 51%, respectively of total revenues Fiscal 2021. The shift in mix between Music Publishing and Recorded Music and the shift in geographic mix are both primarily attributable to the Tommy Boy Acquisition. Total digital revenues increased by $13,686 thousand, or 32%, during Fiscal 2022 compared to Fiscal 2021.
U.S. and international revenues represented 59% and 41%, respectively of total revenues for Fiscal 2023. U.S. and international revenues represented 53% and 47%, respectively of total revenues Fiscal 2022. The shift in mix between Music Publishing and Recorded Music and the shift in geographic mix are both primarily attributable to the Tommy Boy Acquisition.
Recorded Music revenues increased by $16,432 thousand, or 126%, during Fiscal 2022 compared Fiscal 2021. This increase in Recorded Music revenue was driven in part by the acquisition of Tommy Boy in June 2021, which contributed $10,799 thousand to Recorded Music revenue during Fiscal 2022.
This increase in Recorded Music revenue was driven in part by the acquisition of Tommy Boy in June 2021, which contributed $15,165 to Recorded Music revenue during Fiscal 2023 compared to $10,799 thousand during Fiscal 2022. Digital revenue increased by $4,563 thousand primarily due to the acquisition of Tommy Boy and due to the continued growth at music streaming services.
Gain on Fair Value of Swaps Gain on fair value of swaps increased by $5,570 thousand during Fiscal 2022 compared to Fiscal 2021. This change was due to a rising forward yield curve for LIBOR and the marking to market of our interest rate swap hedges.
Gain on Fair Value of Swaps Gain on fair value of swaps decreased by $5,793 thousand during Fiscal 2023 compared to Fiscal 2022. This change was due to the marking to market of our interest rate swap hedges. Income Tax Expense Income tax expense increased to $5,625 thousand during Fiscal 2023 compared to $4,253 thousand during Fiscal 2022.
Contractual and Other Obligations Firm Commitments The following table summarizes Reservoir Media Management’s aggregate contractual obligations as of March 31, 2022, and the estimated timing and effect that such obligations are expected to have on liquidity and cash flow in future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than 1 ​ ​ ​ ​ After 5 ​ ​ Firm Commitments and Outstanding Debt ​ Year ​ 2-3 Years ​ 4-5 Years ​ Years ​ Total ​ ​ (in thousands) Revolving Credit ​ $ — $ 275,646 ​ $ — ​ $ — ​ $ 275,646 Interest on Revolving Credit (1) ​ 8,958 ​ 13,842 ​ — ​ — ​ 22,800 Operating leases (2) ​ 759 ​ 1,084 ​ 646 ​ — ​ 2,489 Artist, songwriter and co-publisher commitments (3) ​ 2,913 ​ 1,250 ​ — ​ — ​ 4,163 Asset acquisition and share purchase acquisition commitments (4) ​ 12,273 ​ 426 ​ 426 ​ 160 ​ 1,012 Total firm commitments and outstanding debt ​ $ 24,903 ​ $ 292,248 ​ $ 1,072 ​ $ 160 ​ $ 306,110 ​ The following is a description of our firmly committed contractual obligations as of March 31, 2022: (1) Interest obligations under the Credit Facility are presented in consideration of 1.0% as a substitute for LIBOR, plus 2.25%.
Contractual and Other Obligations Firm Commitments The following table summarizes Reservoir Media Management’s aggregate contractual obligations as of March 31, 2023, and the estimated timing and effect that such obligations are expected to have on liquidity and cash flow in future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than ​ ​ ​ ​ After 5 ​ ​ Firm Commitments and Outstanding Debt ​ 1 Year ​ 2-3 Years ​ 4-5 Years ​ Years ​ Total ​ ​ (in thousands) Revolving Credit ​ $ — $ — ​ $ 317,828 ​ $ — ​ $ 317,828 Interest on Revolving Credit (1) ​ 22,248 ​ 44,496 ​ 38,096 ​ — ​ 104,840 Operating leases ​ 1,212 ​ 2,577 ​ 1,814 ​ 4,842 ​ 10,445 Artist, songwriter and co-publisher commitments (2) ​ 2,414 ​ 160 ​ — ​ — ​ 2,574 Asset acquisition and share purchase acquisition commitments (3) ​ 9,883 ​ 400 ​ 358 ​ — ​ 10,641 Total firm commitments and outstanding debt ​ $ 35,757 ​ $ 47,633 ​ $ 358,096 ​ $ 4,842 ​ $ 446,328 ​ The following is a description of our firmly committed contractual obligations as of March 31, 2023: (1) Interest obligations under the Credit Facility are presented in consideration of 5.00% as a substitute for SOFR, plus 2.00%.
Unless the context otherwise requires, the terms “ we ,” “ us ,” “ our, ” the “ Company ” and “ Reservoir ” refer collectively to Reservoir Media, Inc. and its consolidated subsidiaries.
Unless the context otherwise requires, the terms “ we ,” “ us ,” “ our, ” the “ Company ” and “ Reservoir ” refer collectively to Reservoir Media, Inc. and its consolidated subsidiaries. Introduction We are a holding company that conducts substantially all of our business operations through Reservoir Media Management, Inc. (“ RMM ”) and RMM’s subsidiaries.
Our common stock, $0.0001 par value per share (the “ Common Stock ”) and warrants are traded on The Nasdaq Stock Market LLC (“ NASDAQ ”) under the ticker symbols “RSVR” and “RSVRW,” respectively. The Business Combination was accounted for as a reverse capitalization.
In connection with the consummation of the Business Combination, “Roth CH Acquisition II Co.” was renamed “Reservoir Media, Inc.” Our common stock, $0.0001 par value per share (the “ Common Stock ”) and warrants are traded on The Nasdaq Stock Market LLC (“ NASDAQ ”) under the ticker symbols “RSVR” and “RSVRW,” respectively.
The primary driver of the $2,236 thousand decrease in cash provided by operating activities during Fiscal 2022 as compared to Fiscal 2021 was an increase in cash used for working capital, primarily used for royalty advances (net of recoupments), partially offset by higher earnings.
The primary driver of the $18,725 thousand increase in cash provided by operating activities during Fiscal 2023 as compared to Fiscal 2022 was a decrease in net cash used for working capital, primarily related to royalty advances (net of recoupments), accounts receivable and the timing of payments of accounts payable and accrued liabilities.
Such commitments generally become due only upon delivery or release and Reservoir’s acceptance of albums from the artists or future musical compositions by songwriters and publishers. Based on contractual obligations, and management’s estimate of aggregate firm commitments to such talent approximates $4,163 thousand as of March 31, 2022.
Such commitments generally become due only upon delivery or release and Reservoir’s acceptance of future musical compositions by songwriters and publishers or albums from the artists.
Writer royalties and other publishing costs for the Music Publishing segment increased by $6,484 thousand, or 22%, during Fiscal 2022 compared Fiscal 2021. Writer royalties and other publishing costs as a percentage of Music Publishing revenues increased to 46% for Fiscal 2022 from 44% for Fiscal 2021.
Writer royalties and other publishing costs as a percentage of Music Publishing revenues were 46% for Fiscal 2023 and Fiscal 2022. Artist royalties and other recorded music costs for the Recorded Music segment increased by $743 thousand, or 9%, during Fiscal 2023 compared to Fiscal 2022. This increase was due primarily to increased revenue from the acquisition of Tommy Boy.
Liquidity and Capital Resources Capital Resources As of March 31, 2022, we had $269,856 thousand of debt (net of $5,790 thousand of deferred financing costs) and $17,814 thousand of cash and equivalents.
Liquidity and Capital Resources Capital Resources As of March 31, 2023, we had $311,492 thousand of debt (net of $6,337 thousand of deferred financing costs) and $14,902 thousand of cash and equivalents.
Fiscal 2021 ​ Fiscal Fiscal ​ ​ ​ ​ 2022 2021 $ Change % Change Music Publishing amortization and depreciation ​ $ 13,769 ​ $ 11,749 ​ $ 2,020 17 % Recorded Music amortization and depreciation ​ 5,155 ​ 2,222 ​ 2,933 132 % Other amortization and depreciation ​ 98 ​ 106 ​ (8) (8) % Total amortization and depreciation ​ $ 19,022 ​ $ 14,077 ​ $ 4,945 35 % ​ Amortization and depreciation expense increased by $4,945 thousand, or 35%, during Fiscal 2022 compared to Fiscal 2021, driven by increases in both the Music Publishing and Recorded Music segments.
Fiscal 2022 ​ 2023 2022 $ Change % Change Music Publishing amortization and depreciation ​ $ 16,521 ​ $ 13,769 ​ $ 2,752 20 % Recorded Music amortization and depreciation ​ 5,463 ​ 5,155 ​ 308 6 % Other amortization and depreciation ​ 90 ​ 98 ​ (8) (8) % Total amortization and depreciation ​ $ 22,075 ​ $ 19,022 ​ $ 3,053 16 % ​ Amortization and depreciation expense increased by $3,053 thousand, or 16%, during Fiscal 2023 compared to Fiscal 2022, driven by increases in both the Music Publishing and Recorded Music segments.
These increases were partially offset by a decrease in performance revenue. On a geographic basis, U.S. Music Publishing revenues represented 52% of total Music Publishing revenues for Fiscal 2022 compared to 51% for Fiscal 2021. International Music Publishing revenues represented 48% of total Music Publishing revenues for Fiscal 2022 compared to 49% for Fiscal 2021.
On a geographic basis, U.S. Music Publishing revenues represented 60% of total Music Publishing revenues for Fiscal 2023 compared to 52% for Fiscal 2022. International Music Publishing revenues represented 40% of total Music Publishing revenues for Fiscal 2023 compared to 48% for Fiscal 2022.
Fiscal 2021 ​ Fiscal Fiscal ​ ​ ​ ​ 2022 2021 $ Change % Change Writer royalties and other publishing costs ​ $ 35,475 ​ $ 28,991 ​ $ 6,484 22 % Artist royalties and other recorded music costs ​ 8,711 ​ 3,863 ​ 4,848 125 % Total cost of revenue ​ $ 44,186 ​ $ 32,854 ​ $ 11,332 34 % ​ Cost of revenues increased by $11,332 thousand, or 34%, during Fiscal 2022 compared Fiscal 2021.
Fiscal 2022 ​ 2023 2022 $ Change % Change Writer royalties and other publishing costs ​ $ 38,532 ​ $ 35,475 ​ $ 3,057 9 % Artist royalties and other recorded music costs ​ ​ 9,454 ​ 8,711 ​ 743 9 % Total cost of revenue ​ $ 47,986 ​ $ 44,186 ​ $ 3,800 9 % ​ Cost of revenues increased by $3,800 thousand, or 9%, during Fiscal 2023 compared Fiscal 2022.
Acquisitions and Business Combinations In conjunction with each acquisition transaction, Reservoir assesses whether the transaction should follow accounting guidance applicable to an asset acquisition or a business combination.
To the extent that a portion of an outstanding advance is no longer deemed recoverable, that amount will be expensed in the period the determination is made. 50 Table of Contents Acquisitions and Business Combinations In conjunction with each acquisition transaction, Reservoir assesses whether the transaction should follow accounting guidance applicable to an asset acquisition or a business combination.
These sources of liquidity are needed to fund our debt service requirements, working capital requirements, strategic acquisitions and investments, capital expenditures and other investing and financing activities we may elect to make in the future. During the Fiscal 2021, we borrowed $617 thousand (the “ PPP Loan ”) under the Paycheck Protection Program (the “ PPP ”).
These sources of liquidity are needed to fund our debt service requirements, working capital requirements, strategic acquisitions and investments, capital expenditures and other investing and financing activities we may elect to make in the future. We believe that our primary sources of liquidity will be sufficient to support our existing operations over the next twelve months.
These increases reflect increases at Chrysalis Records and the acquisition of Tommy Boy and improved operating leverage on the Recorded Music platform as a result of growth. 49 Table of Contents Reconciliation of Net Income to EBITDA and Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
These increases reflect increases at Chrysalis Records and the acquisition of Tommy Boy, improved operating leverage on the Recorded Music platform as a result of growth and a decrease in physical revenue, which carries a higher cost of revenue than other revenue types, partially offset by increased administration expenses associated with being a public company for a full year. 44 Table of Contents Reconciliation of Net Income to EBITDA and Adjusted EBITDA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ Fiscal Fiscal vs.
This increase in Music Publishing revenue was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which led to increases 44 Table of Contents in synchronization revenue, mechanical revenue and digital revenue. Additionally, other revenues increased, driven primarily by the launch of a rights management subsidiary in the Middle East.
This increase in Music Publishing revenue was mainly driven by acquisitions of catalogs and revenue from the existing catalog, which led to increases in digital revenue, synchronization revenue, mechanical revenue and performance revenue. These increases were partially offset by a decrease in other revenue, reflecting the nonrecurrence of revenues recognized in the prior year from Dubai Expo.
Fiscal 2021 ​ ​ Fiscal Fiscal ​ ​ ​ ​ ​ 2022 2021 $ Change % Change ​ Revenues ​ $ 107,840 ​ $ 80,246 ​ $ 27,595 34 % Costs and expenses: ​ ​ ​ ​ Cost of revenue ​ 44,186 ​ 32,854 ​ 11,331 34 % Amortization and depreciation ​ 19,022 ​ 14,077 ​ 4,945 35 % Administration expenses ​ 25,279 ​ 14,986 ​ 10,293 69 % Total costs and expenses ​ 88,487 ​ 61,918 ​ 26,569 43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 19,353 ​ 18,328 ​ 1,025 6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (10,871) ​ (8,972) ​ (1,899) 21 % Gain (loss) on foreign exchange ​ 331 ​ (911) ​ 1,241 (136) % Gain on fair value of swaps ​ 8,558 ​ 2,988 ​ 5,570 186 % Interest and other income ​ 11 ​ 13 ​ (3) (21) % Income before income taxes ​ 17,382 ​ 11,446 ​ 5,935 52 % Income tax expense ​ 4,253 ​ 2,147 ​ 2,107 98 % Net income ​ 13,128 ​ 9,300 ​ 3,829 41 % Net income attributable to noncontrolling interests ​ (52) ​ (47) ​ (5) 11 % Net income attributable to Reservoir Media, Inc. ​ $ 13,077 ​ $ 9,253 ​ $ 3,824 41 % ​ 43 Table of Contents Revenues Our revenues were composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
Fiscal 2022 ​ ​ 2023 2022 $ Change % Change ​ Revenues ​ $ 122,287 ​ $ 107,840 ​ $ 14,446 13 % Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ Cost of revenue ​ 47,986 ​ 44,186 ​ 3,800 9 % Amortization and depreciation ​ 22,075 ​ 19,022 ​ 3,053 16 % Administration expenses ​ 31,168 ​ 25,279 ​ 5,889 23 % Total costs and expenses ​ 101,229 ​ 88,487 ​ 12,742 14 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 21,058 ​ 19,353 ​ 1,705 9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (14,756) ​ (10,871) ​ (3,885) 36 % Loss on early extinguishment of debt ​ (914) ​ — ​ (914) NM ​ Gain on foreign exchange ​ 269 ​ 331 ​ (61) (19) % Gain on fair value of swaps ​ 2,765 ​ 8,558 ​ (5,793) (68) % Other income (expense), net ​ (17) ​ 11 ​ (28) NM ​ Income before income taxes ​ 8,405 ​ 17,382 ​ (8,977) (52) % Income tax expense ​ 5,625 ​ 4,253 ​ 1,372 32 % Net income ​ 2,780 ​ 13,128 ​ (10,349) (79) % Net income attributable to noncontrolling interests ​ ​ (240) ​ ​ (52) ​ ​ (189) NM ​ Net income attributable to Reservoir Media, Inc. ​ $ 2,539 ​ $ 13,077 ​ $ (10,537) ​ (81) % ​ NM - Not meaningful 38 Table of Contents Revenues Our revenues were composed of the following amounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ ​ Fiscal Fiscal vs.
Music Publishing administration expenses increased by $7,041 thousand, or 70%, during Fiscal 2022 compared to Fiscal 2021. Expressed as a percentage of revenues, Music Publishing administration expenses increased to 22% for Fiscal 2022 from 15% for Fiscal 2021, driven primarily by new administration expenses associated with being a public company and increased costs related to acquisitions.
Expressed as a percentage of revenues, Music Publishing administration expenses increased to 24% for Fiscal 2023 from 22% for Fiscal 2022, driven primarily by increased administration expenses associated with being a public company for a full year and an increase in share-based compensation expense.
Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly. 54 Table of Contents (4) The Company routinely enters into asset acquisition agreements and less often share purchase agreements, which can have deferred minimum funding commitments and other related obligations, which are reflected in the table above.
Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly.
See Note 3, “ Business Combination and PIPE Investment ” to the accompanying consolidated financial statements for additional information with respect to the Business Combination and related transactions. COVID-19 Pandemic In January 2020, a new strain of coronavirus, COVID-19, was identified in Wuhan, China. In March 2020, the World Health Organization declared a global pandemic.
See Note 3, “ Business Combination and PIPE Investment ” to the accompanying consolidated financial statements for additional information with respect to the Business Combination and related transactions. COVID-19 Pandemic The COVID-19 pandemic that emerged in 2020 has disrupted physical and manufacturing supply chains and required the closures of physical retailers.
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.
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. 47 Table of Contents 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.
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. 55 Table of Contents In many instances, Reservoir commits to pay our recording artists and songwriters royalties in advance of future sales.
Calculations are based on revenue earned or user/usage measures or a combination of these. 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.
Cost of revenues as a percentage of revenues was 41% for Fiscal 2022 and Fiscal 2021, reflecting a small margin decrease for Music Publishing, as described below, which was offset by an increase in the relative weight of Recorded Music as a percentage of total revenue and an increase in Other revenue.
Cost of revenues as a percentage of revenues decreased to 39% for Fiscal 2023 compared to 41% for Fiscal 2022, reflecting a small margin increase for Recorded Music, as discussed below, and an increase in Other revenue. Writer royalties and other publishing costs for the Music Publishing segment increased by $3,057 thousand, or 9%, during Fiscal 2023 compared Fiscal 2022.
Investing Activities Cash used in investing activities was $196,823 thousand for Fiscal 2022 compared to $118,614 thousand for Fiscal 2021. The increase in cash used in investing activities was primarily due to increased acquisitions of music catalogs, including Tommy Boy. Financing Activities Cash provided by financing activities was $196,534 thousand for Fiscal 2022 compared to $47,220 thousand for Fiscal 2021.
Investing Activities Cash used in investing activities was $72,231 thousand for Fiscal 2023 compared to $196,823 thousand for Fiscal 2022. The decrease in cash used in investing activities was primarily due to decreased acquisitions of music catalogs compared to Fiscal 2022, which included the acquisition of Tommy Boy on June 2, 2021 for approximately $100 million.
Music Publishing revenues represented 71% and 82% of total revenues for Fiscal 2022 and Fiscal 2021, respectively. Recorded Music revenues represented 27% and 16% of total revenues for Fiscal 2022 and Fiscal 2021, respectively. U.S. and international revenues represented 53% and 47%, respectively of total revenues for Fiscal 2022.
Music Publishing revenues represented 69% and 71% of total revenues for Fiscal 2023 and Fiscal 2022, respectively. Recorded Music revenues represented 28% and 27% of total revenues for Fiscal 2023 and Fiscal 2022, respectively. Other revenue represented 3% and 1% of total revenues for Fiscal 2023 and Fiscal 2022, respectively.
Reservoir accounts for these advances under the related guidance in FASB ASC Topic 928, Entertainment — Music (“ ASC 928 ”). 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.
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.
Expressed as a percentage of revenue, OIBDA Margin decreased to 36% for Fiscal 2022 from 40% for Fiscal 2021, primarily because of increased overhead associated with being a public company and increased costs related to acquisitions. Music Publishing OIBDA decreased $2,528 thousand, or 9%, during Fiscal 2022 compared to Fiscal 2021.
Expressed as a percentage of revenue, OIBDA Margin decreased to 35% for Fiscal 2023 from 36% for Fiscal 2022, primarily because of increased administration expenses associated with being a public company for a full year, an increase in share-based compensation expense and increased costs related to acquisitions, partially offset by revenue growth.
Expressed as a percentage of revenue, Music Publishing OIBDA Margin decreased to 32% in Fiscal 2022 from 41% in Fiscal 2021. The decreases in Music Publishing OIBDA and OIBDA Margin reflect increases in administration expenses associated with being a public company and writers’ royalties and other publishing costs as a percentage of revenue, partially offset by revenue growth.
The decreases in Music Publishing OIBDA and OIBDA Margin reflect increased administration expenses associated with being a public company for a full year, partially offset by revenue growth. Recorded Music OIBDA increased by $3,411 thousand, or 25% during Fiscal 2023 compared to Fiscal 2022.
Fiscal 2021 ​ Fiscal Fiscal ​ ​ ​ ​ ​ 2022 ​ 2021 ​ $ Change ​ % Change Operating income ​ $ 8,386 ​ $ 2,787 ​ $ 5,599 201 % Amortization and depreciation expenses ​ 5,155 ​ 2,222 ​ 2,933 132 % OIBDA ​ $ 13,541 ​ $ 5,009 ​ $ 8,532 170 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OIBDA Margin ​ 46 % 38 % ​ ​ OIBDA Consolidated OIBDA increased by $5,970 thousand, or 18%, during Fiscal 2022 compared to Fiscal 2021, driven by a 170% increase in Recorded Music OIBDA, partially offset by a 9% decrease in Music Publishing OIBDA.
Fiscal 2022 ​ ​ 2023 ​ 2022 ​ $ Change % Change Operating income ​ $ 11,489 ​ $ 8,386 ​ $ 3,103 37 % Amortization and depreciation expenses ​ 5,463 ​ 5,155 ​ 308 6 % OIBDA ​ $ 16,952 ​ $ 13,541 ​ $ 3,411 25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OIBDA Margin ​ 49 % 46 % ​ ​ OIBDA Consolidated OIBDA increased by $4,758 thousand, or 12%, during Fiscal 2023 compared to Fiscal 2022, driven by a 25% increase in Recorded Music OIBDA.
Fiscal 2021 ​ Fiscal Fiscal ​ ​ ​ ​ ​ 2022 ​ 2021 ​ $ Change ​ % Change Operating income ​ $ 10,731 ​ $ 15,279 ​ $ (4,548) (30) % Amortization and depreciation expenses ​ 13,769 ​ 11,749 ​ 2,020 17 % OIBDA ​ $ 24,500 ​ $ 27,028 ​ $ (2,528) (9) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OIBDA Margin ​ 32 % 41 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded Music ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ vs.
Fiscal 2022 ​ ​ 2023 ​ 2022 ​ $ Change % Change Operating income ​ $ 8,692 ​ $ 10,731 ​ $ (2,039) (19) % Amortization and depreciation expenses ​ 16,521 ​ 13,769 ​ 2,752 20 % OIBDA ​ $ 25,213 ​ $ 24,500 ​ $ 713 3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OIBDA Margin ​ 30 % 32 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded Music ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ Fiscal Fiscal vs.
The most significant acquisitions of size during Fiscal 2022 and Fiscal 2021 were as follows: 42 Table of Contents ● On June 2, 2021, we acquired, through a membership interest purchase agreement, Tommy Boy Music, LLC (“ Tommy Boy ”), a 40-year-old record label, which included a diverse catalog of primarily recorded music rights and some music publishing rights (the “ Tommy Boy Acquisition ”). ● On April 13, 2020, we acquired, through an asset purchase agreement, all of the music assets of three entities doing business as Shapiro, Bernstein & Co., a century old U.S. music publishing company, which included a diverse catalog of primarily music publishing rights and some ancillary rights.
On June 2, 2021, we acquired, through a membership interest purchase agreement, Tommy Boy Music, LLC (“ Tommy Boy ”), a 40-year-old record label, which included a diverse catalog of primarily recorded music rights and some music publishing rights. 37 Table of Contents Use of Non-GAAP Financial Measures We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“ U.S.
We used a portion of the proceeds from the Business Combination and PIPE Investment to repay $80,600 thousand of debt (amounts to related parties) associated with the Tommy Boy acquisition and $55,000 thousand of debt under the Senior Credit Facility.
We used a portion of the proceeds from the Business Combination and PIPE Investment to repay $80,600 thousand of debt (amounts to related parties) associated with the Tommy Boy acquisition and $55,000 thousand of debt under the Senior Credit Facility. 45 Table of Contents Cash Flows The following table summarizes our historical cash flows (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ ​ ​ ​ 2023 2022 $ Change Cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities ​ $ 31,204 ​ $ 12,479 ​ $ 18,725 Investing activities ​ $ (72,231) ​ $ (196,823) ​ $ 124,592 Financing activities ​ $ 38,462 ​ $ 196,534 ​ $ (158,072) ​ Operating Activities Cash provided by operating activities was $31,204 thousand for Fiscal 2023 compared to $12,479 thousand for Fiscal 2022.
Advances vary in both amount and expected life based on the underlying recording artist or songwriter. To the extent that a portion of an outstanding advance is no longer deemed recoverable, that amount will be expensed in the period the determination is made.
Advances vary in both amount and expected life based on the underlying recording artist or songwriter.
However, we believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.
However, we believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements.
These obligations have been presented based on the principal amounts due as of March 31, 2022. Amounts do not include any unamortized deferred financing costs. (2) Operating lease obligations primarily relate to the minimum lease rental obligations for our real estate in various locations around the world.
These obligations have been presented based on the principal amounts due as of March 31, 2023. Amounts do not include any unamortized deferred financing costs. (2) The Company routinely enters into long-term commitments with songwriters and recording artists for the future delivery of music.
Fiscal 2021 ​ Fiscal Fiscal ​ ​ ​ ​ 2022 2021 $ Change % Change Music Publishing administration expenses ​ $ 17,096 ​ $ 10,055 ​ $ 7,041 70 % Recorded Music administration expenses ​ 7,259 ​ 4,207 ​ 3,052 73 % Other administration expenses ​ 924 ​ 724 ​ 200 28 % Total administration expenses ​ $ 25,279 ​ $ 14,986 ​ $ 10,293 69 % ​ Total administration expenses increased by $10,293 thousand, or 69%, during Fiscal 2022 compared to Fiscal 2021, reflecting increases in both the Music Publishing and Recorded Music segments.
Fiscal 2022 ​ 2023 2022 $ Change % Change Music Publishing administration expenses ​ $ 20,088 ​ $ 17,096 ​ $ 2,992 18 % Recorded Music administration expenses ​ 8,419 ​ 7,259 ​ 1,160 16 % Other administration expenses ​ 2,661 ​ 924 ​ 1,737 188 % Total administration expenses ​ $ 31,168 ​ $ 25,279 ​ $ 5,889 23 % ​ Total administration expenses increased by $5,889 thousand, or 23%, during Fiscal 2023 compared to Fiscal 2022, reflecting increases in both the Music Publishing and Recorded Music segments, as well as an increase in Other administration expenses.

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