According to a new earnings report, Hipgnosis Songs Fund (LON: SONG) pulled in $147.23 million in net revenue during its last-completed fiscal year – down almost 13 percent from the prior 12-month stretch.
Hipgnosis Songs Fund (HSF) today published its performance breakdown for the 12 months ending on March 31st, 2023, ahead of a much-anticipated annual meeting and continuation vote in September. Spanning an astonishing 180 or so pages, the voluminous report covers everything from the publicly traded entity’s financials to its diversity commitments and its top sync deals to its plans for future stock-buyback initiatives.
Beginning with the hard numbers behind Hipgnosis’ showing, though, the fund has according to the resource deployed approximately $2.2 billion to acquire 146 catalogs (encompassing 65,413 songs) since arriving on the scene in 2018.
The “fair value” of this IP – at least as determined by ostensibly independent catalog appraiser Citrin Cooperman – grew by four percent to hit $2.8 billion on the year, per the text. Execs attributed the boost in part to “royalty statements received exceeding expectations, especially performance income and streaming income from older vintage catalogues.”
With 39 employees as of March’s end, HSF disclosed $147.23 million in net revenue, representing a 12.54 percent year-over-year (YoY) dip, once again. Meanwhile, a hike in “catalogue bonus provision” payments ($43.76 million, up from less than $1 million during the prior fiscal year) and loan interest ($33.70 million) contributed to a significant YoY spike in operating expenses ($233.86 million) and, in turn, post-tax losses ($89.64 million), the text indicates.
(These bonuses refer particularly to “a financial liability for consideration that may be payable” based upon the terms of catalog acquisitions and the commercial performance of the relevant IP, the resource explains.)
Lastly, regarding core financial data for the fiscal year, EBITDA came in at $117.72 million, according to the document – down about 10.08 percent YoY – and Blackstone-powered Hipgnosis Song Management is said to have pulled in a healthy $12.5 million in advisory fees in its capacity as the fund’s “investment advisor.”
When the market closed today, Hipgnosis stock was worth an even 74 GBX ($0.97) per share – down substantially from the same point in 2022.
HSF’s Stock-Price Woes and Potential Plans for a Partial Catalog Sale
“Nevertheless,” wrote Hipgnosis head Merck Mercuriadis, “the current share price does not reflect the success of our investment strategy and I know all Shareholders share my frustration and disappointment that this is the case. … As a result, we have been working with the Board, following consultation with many of the Company’s largest Shareholders, on a number of options to enhance Shareholder value.”
“The ultimate decision on which options will be progressed, if any,” added Hipgnosis chair Andrew Sutch, “will be taken in consultation with our Shareholders. We look forward to updating you further in due course, and well in advance of the Company’s AGM this September, at which the Company will table its scheduled five-year Continuation Vote.”
Hipgnosis’ Director Compensation
The entity’s non-executive directors “are giving 50 days full-time equivalent per annum to their role,” according to the text, and received a 10 percent pay raise effective April 1st. Consequently, the chair is set to take home £93,500/$122,756 annually, against £89,650/$117,701 for the chairs of the audit/risk management committee as well as the portfolio committee and £82,500/$108,314 for all others, the report states.
HSF’s Share-Buyback Program and Key-Investor Holdings
Hipgnosis “purchased into treasury” a relatively small two million shares, for a cumulative £1.7 million/$2.23 million, during the fiscal year, per the document.
“The Board recognises its modest buyback activities to date showed intent rather than having a material impact on the share price discount,” the text proceeds. “We expect more material share buybacks may play an important part of the Company’s strategy as we move forward.”
Additionally, BlackRock quietly sold off 948,508 shares between March 31st and June 30th, according to the report, for 38,920,378 shares still in its possession as of the latter date.
Hipgnosis’ Sync Income
Sync income, including that attributable to visual-media placements as well as revenue from licensing deals with social services and fitness platforms, is said to have turned in 24.7 percent YoY growth across the prior calendar (not fiscal) year, compared to 14.8 percent for streaming, based upon an enclosed “Pro Forma Annual Revenue” analysis.
A newly commissioned recording of “Wanted Dead or Alive,” performed this time by Empara Mi, brought Hipgnosis “a six-figure synch fee” when it was placed in a trailer for the forthcoming Transformers: Reactivate video game, the report states.
HSF’s Response to a Little-Discussed Lawsuit Against Mercuriadis
Though the matter’s received minimal industry coverage, Mercuriadis and others are reportedly facing a lawsuit levied “by liquidators of Hipgnosis Music Limited,” which is said to have folded in 2018. According to reports from across the pond, the allegations at hand include breach of fiduciary duty.
“The Company has become aware that it, Merck Mercuriadis and Hipgnosis Song Management are named as defendants in a claim form issued in the High Court,” reads the defendants’ comments on the subject. “The details have not been particularised, nor has the claim been served.
“It is assumed that the claim refers to matters before the incorporation of the Company in June 2018, as the claimant is a company which was put into liquidation in February 2018. The Company has taken independent legal advice and will continue to monitor the situation.”