Expect more acquisitions throughout 2021 after Reservoir’s July 28 merger with the Roth CH Acquisition II Co., a special purpose acquisition company that netted Reservoir $142 million and provided an alternative to a traditional — and more costly and time-consuming — IPO on the Nasdaq. Golnar Khosrowshahi, founder and CEO, said the company is in “a strong position to capitalize on the powerful secular tailwinds we’re seeing across the music business and around the globe.”
Reservoir’s acquisitions since forming in 2007 total $569 million – including $112 million in Q2 – that’s up 24.3% compared to the same period last year. Among its purchases have been Chrysalis Records in 2019 and in 2020 the catalog of Bob Crewe, a songwriter for The Four Seasons and “Lady Marmalade” by Labelle, among many other lasting hits.
Reservoir’s share price dropped 6.1% to $7.41 on Tuesday. It has fallen 28.1% from $9.49 on July 29, its first day of trading on the Nasdaq after the merger closed.
Financial metrics (Q2 2021 vs. Q2 2020):
- Revenue: $16.7 million, up 22.5%
- Music publishing revenues; $12.3 million, up 8.1%
- Recorded music revenues: $4.2 million, up 93.8%
- Operating income before depreciation and amortization: $4.4 million, down 7.9%
- Operating income: $282,000, down 78.4%
Items of note from the quarter:
- Reservoir’s $617,000 loan under the Paycheck Protection Plan was forgiven.
- The merger with Roth CH Acquisition II Co gave Reservoir $142 million after closing costs.
- Music publishing performance royalties declined 14.2% year-on-year due to COVID-19 business restrictions and closures that affected retail, restaurants, bars, gyms, live shows, synchronization revenue and physical sales.
- Quarterly revenue was 16% greater than the previously stated forecast.
Key events in Q2 and Q3 2021:
- Reservoir acquired Tommy Boy Music for $100 million on June 2.
- Completed merger with Roth CH Acquisition II Co on July 28.