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spk00: Excuse me, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be place and hold. © transcript Emily Beynon Thank you. Thank you. © transcript Emily Beynon Thank you. Thank you. Excuse me, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on hold. Thank you. Thank you.
spk03: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
spk04: total debt at the end of the quarter stood at $369.1 million, or 3.16 pro forma adjusted EBDA. We believe our balance sheet provides the flexibility to continue to execute our strategy of becoming a fast-growing digital intensive provider of audio and video music brands. Finally, during the fourth quarter, we purchased 80,000 shares under a normal course of intra-bid program. For the whole fiscal year, we bought back 2.1 million shares for a cash consideration of 15 million under the current and previous NCIBs. The current program allows us to repurchase 3.2 million shares until September 26, 2022. This ends my presentation. I will turn back the call to Eric.
spk05: Yeah, and it seems that we might have an issue with the call, VP, so it seems that maybe only the analysts are on the call, so let's see. I'll let you go with the operator.
spk02: Operator, are you there?
spk01: Hi, I am here. Are we ready for the Q&A session?
spk02: Operator, we seem to have all participants that are muted for the call. We want to verify if the analysts were able to hear the call.
spk01: Okay, let me double-check that for you. They should have been able to hear all of the conversation. One moment. Hello, they're just in listen-only mode at the moment, so as soon as we are ready to start the Q&A, they'll be able to speak as well as hear.
spk02: Let's see. Let's start the Q&A and see.
spk01: Okay, perfect. Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your phone. You will hear a three-tone prompt acknowledging your request and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press the star followed by the number two. One moment for your first question. Your first question comes from Your first question comes from Matthew Lee, Concord. Please go ahead.
spk09: Hey, morning, guys. Yeah, I was able to hear the call just fine, so that's not a problem. I think the one question that we have is regarding, you know, margins for the next year. Can you help us understand what you're expecting in terms of an EBITDA margin and maybe, you know, cash flow margin, you know, for next year?
spk05: Very good question. In this quarter, there was... 4 million of extra OPEX, 2 million is an investment, 2 million was a bit non-recurring, capitalization of R&D and different stuff. So I expect our EBITDA margin to be between 33% and 35%. So we should be back to normal. The same EBITDA margin we had for the year, we had 35%, and we expect to stay in the same region.
spk09: That's great. And then maybe you can kind of talk about the opportunity you're seeing in out-of-home advertising, and kind of the revenue you're expecting that to contribute this year?
spk05: Yeah, so roughly the inventory right now we have in Canada is about 60 million of inventory that we can sell, and that's at four minutes an hour. So very excited, lots of potential. Our inventory in the U.S. is closer to 100 million Canadian, so we have a lot of inventory left. to sell in the US. So our number one mandate is to sell that inventory. Like in the radio business, if you don't sell it, you lose it. So it's ramping up. And I think this year, you know, this quarter, as you saw, our advertising this quarter was close to 7.6 million. That's what we did. So it gives you a good, I think, you know, with the ramp up, stingray advertising should be close to 35 to 40 million. based on our current numbers.
spk09: Great. And maybe digging down, you know, what type of margin does that advertising revenue come with?
spk05: For sure, the gross profit on that one is smaller because of the accounting. The revenues are taking gross, but we share a large percentage with our partners, and then we pay commission. So you should expect a gross profit closer to the 40% to 45% range instead of 80%. when we work on net. So it's just because of the revenue share with our partners.
spk09: Great. That's it for me. Thanks.
spk01: Thanks, Matt. Thank you. Thank you. Our next question comes from Adam Schein, National Bank Financial.
spk08: Thanks a lot. Good morning. Hi. Just a follow-up or two on the last couple of questions. I thought the margin range was being targeted to sort of 35% to maybe 40%. So now we're talking... I think, Eric, 33%, 35% total net consolidated?
spk05: Yeah, because if you take the retail media, which has a gross profit of 45% instead of 80%, and this year we expect to do close to $30 million to $40 million in that new product line, it affects your EBITDA margin. So it's not that it's not profitable. It's just that we have the revenue share that we give to Metro and Walmart and CVS.
spk08: Okay, so if we think about, you know, F2022, as Mathieu alluded to in the opening remarks, as a transitionary year and certainly, you know, a catch-up year in the context of COVID and easy comps, you know, this year is about evolving recovery. Can you speak at all to, you know, the opportunity here in terms of the top line when we think about $35 million, $40 million of advertising revenue, when we think about some ongoing traction of late? in the traditional radio business. I see the prospect of let's call it double-digit revenue growth to say the least. So looking around the level maybe of $325 million and then I guess to that we need to then think about 33%, 35% type margin. Is that a reasonable way to look at fiscal 2023? I think so.
spk05: I think you're in the right range. For Q1, because these results are late and we're in June, Q1, we should have a very similar quarter in terms of growth that we had in Q4. So again, double digit. Q1 is looking good. Difficult to promise if something's going to happen in October, November, December. But so far, at the start of the year, the organic growth is double digit, and the radio is also pacing well with the same type of growth. For us, if we have it at our range, for sure we're coming back. There's a lot of OPEC that we're one of, so I think we're confident about those numbers also. But again, depending on, there's no big surprise coming in the fall.
spk08: Right. Just in terms of semantics, you're still having a reporting segment called Broadcasting and Commercial Music. But when we think about the nature of how Stingray Business specifically is evolving, Maybe you could just elaborate on what exactly the overall umbrella product is that's being pushed to the Stingray business clients because we've got Stingray business as we originally know it in terms of the in-store music and the digital signage. To that you add the chatter in terms of the AI insights and then of course this new construct being the Stingray advertising, right, which sort of replaces the Stingray retail media advertising network. So is there an overall umbrella for all of these products go to market, or is Stingray business the default catch-all?
spk05: Yeah, I think, you know, for us, it's the same customer. So, example, Metro. Metro buys signage. Metro buys music. We do advertising in Metro. And we also do chatter and AI in Metro. So that's the way we segment our business. It's one contact. So all of this, all of these products, we put it under Stingray Business. And for sure, Stingray Business as a whole, because you're adding a lot of the retail media, you know, we'll have a very large growth like we saw last quarter. So it's going to be a very big year for Stingray Business.
spk08: I think you've been spending quite a bit of time talking about the nature, obviously, of the in-store advertising network and obviously the retail media traction in Canada. Can you speak at all to anything going on in regards to stingray business in other parts of the world where you have operations like Mexico, Australia?
spk05: For us, Australia, it's a nice business to get global deals because most of our, like we just got an expresso deal, We got Tesla, so it helps us with global deals, but it's a small unit. Mexico also helps us with global deals, but it's a small unit. Our number one focus for Stingray business is U.S., U.S., U.S., so that's where growth will be coming, not only for the music, but also with the Stingray advertising. We're looking to get more customers. We have 16,000 locations in the U.S. that we can sell advertising. And so good news is we're moving forward with a partner that will give us measurement like we did in Canada. So we are working whether that should be coming in the next few weeks or next month. So excited about that. And we'll be able to start monetizing the network in the U.S. like we do in Canada with agencies at a much higher CPM. The CPM we're getting in Canada is close for audio, is close to $20. So great CPM in Canada. And because of the measurement, So if we could do the same CPM in the U.S., that will be our big win.
spk08: Okay. Thanks a lot.
spk05: Thanks, Adam.
spk01: Your next question comes from Drew McReynolds, RBC. Please go ahead.
spk10: Yeah. Excuse me. Thanks very much. Good morning. A couple of follow-ups just from Adam's questions or earlier questions. Just on the radio recovery issue, You flagged automotive, which obviously continues to be weak, but are there any other categories out there that you would kind of consider just not fully recovered? Just trying to unpack what is left here to come into the picture, assuming there's a continued return to normal. And then second question on just the SBOD and OTT subscriptions. Another uptick sequentially here off the seasonally strong quarter. Just some granularity on how you're tracking with those subscriptions on. And are you on the path to a million like you've previously indicated that was a target? And then I'll have one more after that.
spk05: Thanks. Okay. So for the radio, again, Q1, April, May, June. Again, strong growth, double-digit growth. So very happy with that. how we're recovering. Stingray radio, very strong with local cells. The only negative part, again, is we're not getting the same visibility with national cells. We're not getting the same orders and events that we used to have. So the business is more last minute. So I'm very happy for Q1 and Q2. The car business is still not back. I agree with you. One of our board members, as you know, is Rob Steele, who has many car dealerships. And we were talking yesterday at the board that we still see an offer problem. There's still low inventories being given to car dealerships. So we don't see that coming back for the six to 12 next month. On the good side is the radio team has started to sell in the Walmarts and Metro. So we're getting some local sales in our Stingray business network. And there's always new products. As you know, in Ontario, Ontario opened up the lottery rules for gaming. As you can see on the radio, you're hearing a lot more gaming ads. I think we're able to adapt. Slowly but surely, because of the cost savings, our EBITDA will be close to what it was pre-pandemic, even if sales are lower. It is quarter by quarter. I wish I could give you more visibility for the next 12 months. We're still on pace to hit the or a million subscribers. I think the big role is coming from Amazon. Amazon's a great partner. We launched in Australia, we'll be launching in India, Sweden, Germany. So the more countries they launch, the better it is for us. And we also have some new partners in Mexico and also our friends at Google and YouTube are also looking to launch an SVOD service. So a lot of big partners are getting into that game. And by de facto, Stingray, Classica, Jazz, Karaoke, and Quello is being picked as always in the top lineup when they launch their products. So very happy to be partners with these global players. And the main advantage we have, and the same reason we did a deal with Tesla, or we just did a deal with LG, the reason LG chose us as their music partner is because Tesla, LG, Amazon, Google, they want partners with global rights. And that's one of the advantages of Stingray. Because of our presence in all the cable industry, we're able to have global rights for all our products, which makes us unique. And not many companies in our space have global rights. So that's a big advantage.
spk10: Got it. Got it. Thank you. And then one final one, just back to the margin trajectory. So it sounds like there's a little bit of non-recurring, obviously a little bit of mix, but coming with a higher revenue growth profile. In terms of the incremental investment that you talked to in fiscal 2022 that you were putting into the business, will we see incremental investment of any kind of materiality in fiscal 2023 as you kind of look at your strategic initiatives or is the step up of investment somewhat behind you? Just trying to size that one up.
spk05: No, just right now we're investing, let's say, $2 million a quarter for the U.S. business and retail media or Stinger advertising for those products. That's $8 million a year. But, you know, retail media in Canada in Q4 had zero sales. So now this quarter we're getting our sales, and we have a good pipeline for this year. But that's what I mean. So the investment will stay the same, but now we're going to have sales with it. So I think officially April, May, June is when we officially started selling ads A lot of new customers, very exciting, and huge growth. And the beauty about that, all that growth is organic. So we'll be able to monetize our investments starting in Q1. Got it, got it.
spk10: Okay, thank you very much.
spk05: So the answer is no incremental investment in 2023. Yeah, got it.
spk10: Thanks, Eric.
spk05: Thanks, Drew. Sorry for the voice.
spk10: Yeah, all good.
spk01: Your next question comes from Tim Casey, BMO. Please go ahead.
spk07: Thanks. Good morning. I want to go back to the margin discussion here. I mean, how did we go from 35 to 40 to 33 to 35? I don't understand that. Yeah, mix is an issue, but is there an erosion in margin in all the other markets? let's call it non-radio businesses, the radio margin is fairly transparent. But what's going on at BNC there? Because this is not an immaterial change in your direction here. And I'm just confused as to what has happened here.
spk05: Yeah, Tim, I agree with you. One of the big part with radio is, as you know, January, February, March is our lowest quarter of the year because it's the lowest in sales and the fixed costs are the same. So the radio, you know, went from a 40%, 42% EBITDA margin in November, December, down to 29, just based on sales. So there is a bit of seasonality when you look at Q4, so we've got to be careful there. It's always our weakest quarter because of the impact on radio.
spk07: Yeah, but Eric, I'm not talking about the quarter. I'm talking about the full year.
spk05: Yeah.
spk07: You're directing us to 33 to 35. That's a long way from 35 to 40. And I don't understand how, what's happened here.
spk05: Again, the impact of retail media this year is significant. And I'm happy to do a bridge with you after the call just to, with Stingray Media, you got a gross profit of 40 to 45. So, you know, it's not going to give you 40% of the margin. So there is a big impact coming this year with that transition because of the gross or net. So, yeah. But I'm happy to do the bridge analysis with you, Tim, after.
spk07: Sure. Okay. A couple more then. In terms of the direction you're giving us in terms of investment, I mean, are you putting M&A sort of on the back burner or setting it aside for right now when focusing on operations? Are you still looking to M&A as a strategic growth lever?
spk05: No, for this year, you know, we discussed at the board, M&A is more on the back burner. ICEN was a strong acquisition of over 60 million Canadian, and we have a lot of inventory to sell. So for us, our number one focus is to sell the inventory in Canada, the 60 million, and to sell the 100 million in inventory that we have available right now in the U.S. without any new customers, I mean, without any new suppliers. So a lot of emphasis to hire people, meet more agencies and to show the advantage of retail media. And I think for us to deliver strong organic sales because all this is brand new organic. So unless there's something very, very focused or niche that would complement this, I think we're more in a, you know, how do you say it, transitioning our deal with retail media and focusing on that.
spk07: Right. Okay. And then last one, what are you hearing from your regulatory contacts in terms of the radio file and ownership review? I mean, it seems like the industry is having trouble getting the CRTC's attention. Do you see this as a review that's going to happen in 2023, or what are your thoughts on timing and outcome there?
spk05: No, with the CRTC, everything seems to be delayed. You saw it with the Roger Shaw deal. A lot of hearings are being delayed. So my expectation is the more we work with them, my expectations get lower. So hopefully it was supposed to be in the spring. They were saying it would be in April, May. Now it could be the fall. Again, and it's not only me. When we speak to all our other partners, Bell and Rogers and Chorus, I think we all seem to be disappointed in the timing of these reviews. So for now, I'd say it's on hold.
spk07: If and when it comes, how are you thinking about how Stingray will approach the opportunity?
spk05: You know, we're speaking to all the other partners. And everybody's in a whole pattern right now because nobody knows what's going to happen and the timing. So I think we'll have to reevaluate when we get at least a guidance on when the decision's coming. So nobody is, you know, hopefully everybody is confident that we'll go from two radio stations to four. But again, you never know with the government and the CRTC. So difficult to plan something that is not based on what management can do.
spk07: Righto. Okay. That's it for me. Thank you.
spk01: Thanks, Tim. Your next question comes from Scotch Fletcher, CIBC. Please go ahead.
spk06: Good morning. Thanks for taking the call. I wanted to ask you a couple questions on the ISIN acquisition now that you've had it in the fold for a quarter. So the first thing I wanted to ask is, it looks like, you know, the revenue contribution was a little more than we might have expected given the LTM performance when you said, you're talking around 18 and a half million when you bought it. Have expectations changed around organic growth now that you've had it in the business for a quarter?
spk05: Yeah, we've been at, I said the U.S. network has been highly, I said very well, we did almost 5.6 million U.S. last quarter. So I don't want, depending on the exchange rate, we did 6.5 to 7 million Canadian. I'm just giving you overall numbers. a very strong quarter. And we expect the same results to come in Q1, Q2. So I think we're in a good track. And again, we're only selling 15% to 20% of our inventory. So we still have 80% more to sell. But those sales will need to come with more advertisers, more salespeople. But I must say, the U.S. network is... It's a large network of 16,000 stores, so very happy with it.
spk06: Okay, thanks. And then maybe on the margin side, I saw one of their main competitors raised some VC money. I'm just wondering if you think that that's going to be an even further pressure on the margins there, just given the competitive environment. Obviously, they're looking to hire, and they're looking to increase sales as well. So curious what the margin thoughts are there.
spk05: Yeah, and the reason why the margin – You could debate. If we took the revenues on a net basis, then the gross profit would be 90%, because our only cost that we have is the sales fee, which is roughly 10%. But if you take it on a gross basis, and depending on what revenue share you do with different partners, then that's what I mean when your gross profit goes down to 45%. So there's no really... I think the margins will... remain strong again. The fact that our competitor, Vibranomics, raised money is good news for us. There's more and more attention going for audio ads in stores. It's a new market and very happy to be like Pepsi and Coca-Cola or Burger King and McDonald's. I think there's a big market coming and excited how we can show that space. which is, again, most of the retail media is done online, when you think about it, and they do video. Not much audio happening in the U.S. and Canada.
spk06: Okay, thanks. I'll ask, yeah, sorry again.
spk05: Good, good.
spk06: Okay, I'll just ask one more question. Just on the synergies you were expecting with the deal, I mean, is that 16 million number still the target, still sort of what you think you can get out of it?
spk05: Are you talking just to make sure it came in the U.S.?
spk06: Oh, sorry. I'm talking about the ICEM deal again. You mentioned that you saw $16 million of cost synergies total.
spk05: But do you think the 16 is EBITDA or what's the synergy?
spk06: I think that's what you said last time, but just wondering if basically maybe zooming out, is the synergy target sort of still in place? Do you think that you could still... you know, realize what you thought you did when you bought the business.
spk05: Our biggest synergies with ISAM is first to get a measurement. In Canada, we have Cone, and we're working to get a measurement in the U.S. Second is to get the bosses connected, and third is to work with our partner, iStack, to start selling ads from agencies at a much higher CPM. So that's coming forward. And in terms of whatever... With synergies, the EBITDA that was $1,000,000, we are on track to what was given to the market.
spk06: Okay. Thank you.
spk05: I'm not sure if it's $16 million EBITDA or what the number is, but I'm happy to take that $16 offline.
spk06: Okay. Thanks.
spk05: Thank you.
spk01: There are no further questions at this time. I will now turn it back to Mr. Matthew Peliquin. Please go ahead.
spk02: Okay, well, this concludes our call for today. We understand that we did have technical issues. We'll validate that the webcast has been properly recorded for anyone else who wishes to listen to the call. With that, I thank you very much and talk to you later. Thank you.
spk01: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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