Reservoir Media Q2 FY2027 Earnings: Recorded Music Growth Supports Raised Outlook

Reservoir Media (NASDAQ: RSVR) reported fiscal Q2 2027 revenue of $49.9 million, up 10% from $45.4 million, while diluted EPS rose to $0.07 from $0.03. Adjusted EBITDA increased 14% to $22.1 million as Recorded Music outpaced Music Publishing, and the company raised and narrowed its full-year outlook.

Core Financial Results

Revenue grew 4% organically and 10% on a reported basis including acquisitions, showing that acquired catalogs supplemented underlying growth. Total costs and expenses increased 8%, slower than revenue, allowing operating income to rise 15%.

Net income more than doubled, helped by higher operating income and favorable changes in foreign-exchange and interest-rate swap valuations. Higher interest expense and income tax expense partially offset those benefits.

OIBDA and Adjusted EBITDA are non-GAAP measures. The results cover the three months ended September 30, 2026.

Business and Segment Performance

Recorded Music produced the faster growth in both revenue and OIBDA, while Music Publishing remained the larger segment. Recorded Music also expanded its OIBDA margin, whereas the Publishing margin was unchanged.

Music Publishing growth was led by digital revenue, which increased 10% to $17.6 million, and synchronization revenue, which rose 13% to $5.2 million. Reservoir attributed the digital increase to additional catalog acquisitions and continued streaming growth, while synchronization benefited from license timing. Publishing OIBDA margin remained steady at 37% as higher revenue was partly offset by increased cost of revenue and administrative expenses.

Recorded Music digital revenue increased 33% to $11.5 million, while neighboring-rights revenue rose 40% to $1.5 million. Both benefited from acquired catalogs, with neighboring rights also supported by new affiliations. Synchronization revenue fell 54% to $0.9 million because of license timing, partially offsetting those gains.

Recorded Music OIBDA margin expanded to 54% from 51%, reflecting a lower cost of revenue as a percentage of segment revenue. This margin improvement allowed OIBDA to grow faster than revenue.

Profitability, Cash Flow, and Balance Sheet

Reservoir’s operating margin increased to approximately 24.6% from 23.5%, while its Adjusted EBITDA margin rose to about 44.2% from 42.6%. Cost of revenue and administrative expenses each grew 7%, below the 10% increase in revenue, although depreciation and amortization increased 12%.

The 110% increase in net income was not solely operational. Reservoir recorded a $1.1 million gain on the fair value of swaps, compared with a $0.3 million loss a year earlier, and moved from a foreign-exchange loss to a small gain. Interest expense increased to $7.0 million from $6.7 million, limiting some of the improvement.

For the six months ended September 30, 2026, operating cash flow was $21.6 million, down $3.7 million from the prior-year period. Management attributed the decline primarily to working-capital timing involving royalty payments to creators and accounts payable, partly offset by the timing of royalty advance recoupments.

Reservoir ended the quarter with $24.8 million in cash and $89.2 million available under its revolving credit facility, for total liquidity of $113.9 million. Reported total debt was $458.6 million and net debt was $433.8 million. Compared with March 31, 2026, total liquidity declined from $117.1 million, while net debt increased from $429.8 million.

Fiscal 2027 Guidance

Reservoir raised and narrowed its outlook for the fiscal year ending March 31, 2027. The company did not provide the former ranges in the supplied release, but management said first-half performance gave it confidence to increase both revenue and Adjusted EBITDA guidance.

The outlook implies that management expects catalog growth and cost discipline to continue supporting results through the remainder of the fiscal year.

Management’s View

Founder and CEO Golnar Khosrowshahi emphasized growth across both Publishing and Recorded Music and reiterated Reservoir’s strategy of expanding and diversifying its portfolio through established catalogs and new songwriter relationships. Recent investments included the recorded music catalog of José Feliciano and the publishing catalog of Billy Strayhorn, alongside deals covering future works from several songwriters and producers.

CFO Jim Heindlmeyer linked the higher outlook to first-half growth from Reservoir’s diversified catalog and its approach to investment and cost management.

Recent Insider Transactions

The supplied insider data showed no insider purchases or sales during the preceding six months, with total insider holdings listed at 31.43 million shares. The latest 10 reported transactions were stock awards rather than open-market trades.

Because all 10 entries were grants, they should be distinguished from discretionary purchases or sales in the open market.

Risks Investors Should Watch

• Acquisition-supported growth: Organic revenue increased 4%, compared with 10% reported growth including acquisitions. A meaningful portion of growth therefore depends on acquired catalogs continuing to perform and integrate effectively.
• License-timing volatility: Publishing synchronization revenue rose 13%, while Recorded Music synchronization revenue fell 54%. The contrasting moves show how license timing can create substantial quarterly variation.
• Debt and interest costs: Net debt reached $433.8 million, and quarterly interest expense increased to $7.0 million. These obligations reduce the amount of operating improvement that reaches net income and cash flow.
• Working-capital timing: Six-month operating cash flow declined despite higher earnings, primarily because of the timing of royalty and accounts-payable payments. Continued timing effects could make cash generation uneven between reporting periods.

Conclusion

Reservoir Media’s fiscal second quarter combined double-digit reported revenue growth with faster increases in operating income and Adjusted EBITDA. Recorded Music was the main source of acceleration, supported by digital revenue, neighboring rights, and catalog acquisitions, while Publishing delivered steadier growth. The raised full-year outlook signals confidence in that momentum, but acquisition dependence, leverage, and working-capital-related cash flow variability remain important areas to monitor.