Stingray Group Inc.

Good morning, ladies and gentlemen, and welcome to the Stingray Group Incorporated first quarter 2024 results call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 9th, 2023. I would now like to turn the conference over to Mathieu Polacan.

Good morning. Bon matin à tous. Thank you for joining us for Stingrays Conference Call for its first quarter results, ended June 30, 2023. Today, Eric Boyko, President and CEO, as well as co-founder, and GP Trin, CFO, will be presenting Stingrays Financial and Operational Highlights. Our press release reporting Stingray's first quarter results for fiscal 2024 was issued yesterday after the market closed. Our press release MD&A and financial statements for the quarter are available on our investor website at stingray.com and also on CEDR. I will now give you the customary caution that today's discussion of the corporation's performance and its future prospect may include forward-looking statements. The corporation's future operation and performance are subject to risk and uncertainties and actual results may differ materially. These risk and uncertainties include but are not limited to the risk factors identified in Stingray's annual information form dated June 6, 2023, which is available on CEDR. The corporation specifically disclaims any intention or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Accordingly, you're advised not to place undue reliance on such forward-looking statements. Also, please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Please refer to Stingrays MD&A for complete definition and reconciliation of such measures to IFRS. Financial measures. Finally, let me remind you that all amounts on this call are expressed in Canadian dollars unless otherwise indicated. With that, let me turn the call over to Eric.

Okay, merci, Mathieu. Good morning, everyone, and welcome to our first quarter conference call for fiscal 2024. Stigmas delivered robust are listed at a bid of $28.3 million, representing 35.8% of sales in the first quarter of 2024, thanks to cost-saving initiatives implemented over the past year. Despite a temporary slowdown in revenue growth due to the timing of retail media advertising campaigns, I am pleased to report current revenues for Stingray Advertising in the second quarter are plus 45% year-over-year at this point. We remain on target to achieve our goal of 40% growth in the advertising revenues for 2024. We also recently announced a sales agreement in Mood Media, Vibranomics Advertising Division, a leading technology and retail media solution provider that creates the largest retail media audio network in the US. This groundbreaking collaboration will provide advertisers south of the border with an unmatched national presence, reaching over 800 million monthly shoppers through in-store digital audio advertising across 25,000 brick-and-mortar locations. This broad network will encompass major players in key retail verticals, including grocery, drugs, convenience, and home improvements. Expansions to other verticals will continue in 2024. This announcement comes during a period of significant growth for the retail media advertising in the U.S., with a spending forecast to increase from $31 billion in 2021 to an anticipated $61 billion by 2024, as per the eMarketer Retail Media Ad Spending Forecast Report. In addition, we secured a deal last week with Loblaw Media, the retail media division of Loblaw Companies, to expand Stingray's retail auto advertising network into Loblaw stores across Canada. The Loblaw stores auto network will expand nearly 300 locations, including Loblaw, Zier's, Real Canadian Superstores, and other retail banners. With campaign expected to begin as soon as mid-August. As a result, we expect more than to double our revenues from the Stingray advertising business to $100 million, from $50 million right now in the next 24 months. The goal is to offer a single, large-scale network of premium retailers for advertisers seeking reach to promote their brands. We also anticipate accelerated momentum for our in-car entertainment segment in fiscal 24. driven by the recent partnership with BYD, the world's leading manufacturer of new energy vehicles, to bring our popular Sting recalculating product to its fleet of nearly 300,000 cars at launch in Europe and Latin. As well, Audi cars are being to roll out our manufacturing plants with our embedded karaoke app while we keep expanding our presence at Tesla. In terms of fast channels, They generate solid organic growth in the first quarter as we begin better monetizing our content for connected TVs by contracting third parties to resell unsold inventories by major television manufacturers. Aspen revenues from SVOD business were slightly down, significantly given our sharpening focus on B2B-driven customers, but profitably improved year over year. We expect new country launches in Europe, in Latam, Asia, and Middle East, launching Q2 and Q3, which will have positive impact on our overall sub-base, plus the addition of Zen Life SVOD, which also will be a great new product that we're adding with our friends from Amazon. Altogether, revenues from broadcasting and commercial music business increased 2.3% to $47.2 million in the first quarter of 2024, while radio revenues declined by 0.6%, or we call it pretty much flat, to $31.8 million this year. as we will and we still outperform the industry. Looking ahead, we intend to be laser focused on our four high growth opportunities that I outlined earlier, but we will remain disciplined with our spending due to the uncertain economic environment. Our capital allocation strategy will continue, prioritize debt reduction without sacrificing key growth initiative fiscal in 2024. So again, very happy with our first quarter. a good start of the year. And with this, I will now turn over the call to our friend, Jean-Pierre.

Merci, Eric. Bon matin, tout le monde. Revenues reached 79 million in the first quarter of fiscal 24, up 1.1% from 78.1 million in Q1 2023. The increase was primarily due to the equipment and installation sales related to digital signage and an increase of in-car revenues and to a positive foreign exchange impact, largely offset by a decrease in B2C and in retail media advertising revenues. Revenues in Canada improved 1.2% to $47.3 million in the first quarter of 2024. The growth mainly reflects enhanced equipment installation sales related to digital signage. Revenues in the United States remain stable year-over-year at $19.1 million in Q1 2024, as in-car and fast channel revenues increase and to positive foreign exchange impact, largely offset by a decrease in B2C and in retail media advertising revenues. Finally, revenues in other countries rose 2.1% year-over-year to $12.6 million in the most recent quarter. The increase can primarily be attributed to a positive foreign exchange impact, offset in part by lower audio channel and subscription revenues. Looking at our performance by business segment, broadcasting and commercial music revenues grew 2.3 percent to $47.2 million in the first quarter of 2024. The growth was primarily due to equipment and installation sales related to digital signage, in-car and fast-channel revenues increased and to a positive point of exchange impact, largely upset by a decrease in B2C and in retail media advertising revenues. Radio revenues, meanwhile, declined 0.6% of flat year-over-year to $31.8 million in Q1 2024. The slight decrease can be attributed to reduction in national advertising revenues, but as Eric mentioned, our radio business outperformed the industry. In terms of profitability, consolidated adjusted BDA improved 8.4% to $28.3 million in the first quarter of 2024, from 26.1 million in Q1 2023. Adjusted EBITDA margin reached 35.8% in Q1 2024 compared to 33.4% in the same period in 2023. The growth in adjusted EBITDA was mainly due to higher revenues year-over-year, while the increase in adjusted EBITDA margin can be distributed to lower operating costs in the broadcasting and commercial music segment following cost-saving initiatives implemented in fiscal 2023. By business segment, broadcasting and commercial music adjusted EBITDA increased 19% to $20 million in the first quarter of 2024. The year-over-year increase was mainly due to cost-saving initiatives implemented during the past year and an improved gross margin on higher revenues. Adjusted EBDA for our radio segment declined 6.8% year-over-year to $9.9 million in the first quarter of 2024. The decrease can be attributed to a slight drop in revenues, increased music rights fees, and higher marketing expenses. In terms of corporate adjusted EBDA, which represent head office operating expenses, the share-based compensation, as well as performance and deferred shared unit expenses, amounted to a negative $1.6 million in the first quarter of 2024. Stingray reported a net income of $14.1 million, or $0.20 per diluted share, in the first quarter of 2024, compared to $9.4 million, or $0.13 per diluted share, in Q1 2023. The increase was mainly due to a one-time settlement gain from a trademark dispute and higher gain on the fair value of derivative financial instruments. These factors were partially offset by higher interest expense. Adjusted net income total 11.9 million or 17 cents per diluted share in Q1 2024 compared to 13.2 million or 19 cents per diluted share in the same period in 2023. The decrease can mainly be attributed to a higher interest expense partially offset by better operating results. Turning to liquidity and capital resources, The cash flow generated from operating active fees totaled $24.3 million in the first quarter of 2024 compared to $16.3 million in Q1 2023 with a one-time settlement gain from a trademark dispute and better operating results accounting for a year-over-year improvement. Adjusted free cash flow amounted to $18.5 million in Q1 2024 compared to $15.7 million in December 2023. The increase was mainly related to better operating results and lower tax pay, partially offset by higher interest expense. From a balance sheet standpoint, we had a cash-in-cash equivalent of $11.7 million at the end of the first quarter, subordinate debt of $25.6 million, and the credit facilities of $374.1 million, of which approximately $53.7 million was available. Total net debt at the quarter ends to that $388 million, or 3.28 times the total adjusted EBITDA. Net debt increase, secondly, from $371.1 million in Q4 2023, mainly due to an earn-out paid on the in-store audio network acquisition and a higher interest expense. This ends my presentation for today. I will now turn the call back to Eric.

Okay. Thank you, JP, for your report. And I guess we're ready for questions from our friends.

And thank you. Ladies and gentlemen, we will now begin our question and answer session. Should you have a question, please press star, then 1 on your touchtone phone. You will hear a tone acknowledging your request. Should you wish to withdraw from the queue, please press star, then 2. And if you're using a speakerphone, please lift the handset first before pressing any keys. We have our first question from Matthew Lee with Canaccord. Please go ahead.

Hey, morning, guys. I wanted to first ask a question on the radio side. It feels like the cost inflation in this segment was somewhat uncontrollable. Are there ways for you to cut OPEX there to protect the margins if revenue kind of remains flattish for the year?

Yeah, the OPEX year increasing, part of it is because of the NAFTA agreement. So our resound fees for all radio stations stations have increased for us like 1.2 million. That was part of the new agreement with NAFTA that was negotiated. So there's a $300,000 a month coming from that. We did do more marketing this quarter than last year, about $400,000. But besides that, our costs remain the same. And yet our sales are in order to risk a recession. But in our case, with the fact that some of our competitors are shutting down stations or putting less focus on radio or some of our competitors also might be thinking of divesting, it's giving us a great opportunity to win market share with the local sales force. And I must say, we're really gaining momentum on the local side while some of our peers are decreasing their investment in the local teams. So we remain positive. Radio, again, Q2, very stable. But again, part of the OPEX was marketing, and the other one is really it's going to be there forever. It's resound. But the good news, we also got a saving potentially for C11 for part one. So that might offset the resound costs of we don't need to pay CRTC fees. So that's the good news.

So are you expecting to see revenue growth on the radio side by 2021?

Yeah, right now we're expecting, you know, we're happy. We're right now in Q2 at this point. We're positive, slightly positive. But for sure, when we looked at numbers of our peers on both TV and radio, we're very happy with our results. So very stable business, very happy for the moment. But radio, and again, for us, our big win is when our cars, the national market is coming back slowly, but we're not seeing the car business we used to have, which was 30 million pre-pandemic, and last year was 10 million. So the 20 million we're missing, it's all the car business. So we need more cars inventory, and hopefully when you hear more car ads on the radio, then we're happy.

Sounds good. And then maybe just one on Mood Media. You know, my understanding was that you guys had a pretty nice technological advantage against Mood. So maybe you can just kind of delve into what each partner is bringing to that relationship.

It's really, you know, roughly we have our inventory at a certain CPM. You know, what we want to be is 500 million. They also have 500 million of inventory with their retailers, and we only sell a million. So how do we go from 5% selling of our inventory and at least getting to 20%, which would be 200 million? So the goal was really to say how can working together, so we're doubling our retailers, we're really having a national footprint, and both sales force can sell in each other's territory, so we're doubling our sales force. But that's why we feel very confident that we'll be able to double our sales in the next 24 months. And we expect results as early as in the next month. Both our sales force are selling. We're selling on Kroger, and they're selling on Albertson and CVS. And I think you'll see quickly that a lot of retailers will be joining this network. We call it a network. I think it's important. We don't sell a retailer. We sell a network. And I think this deal is very creative. And I must say thank you to our mood partners for... for taking and working together on this project. But it really makes us the number one player in the world by far in terms of number of retailers. And I think you'll see a lot of new retailers being signed and added and will become an incumbent in this space. So very excited about that deal. And we will have some numbers this year. We're just tough to monetize, but there will be some financial impact that we'll be happy to tell the analysts in the next quarter.

All right. Sounds great. I'll pass the line.

Thank you, Matthew.

And thank you. We have our next question from Adam Schein with National Bank Financial.

Thanks a lot. Good morning, Eric. Just first question on what happened exactly in retail media this quarter. Was it a function of the broader advertising market creating some pullback in

some campaigns by clients or was it more you guys or and or you guys sort of slowing things down in anticipation of doing the mood media deal no no it was video it was one campaign by a farmer of two million dollars that was in q1 last year and so the campaign this year was pushed to June July August in q2 so it's a two million dollar campaign so you do the numbers we would have been up 20, 30% in Q1, and Q2 now we're looking, we're already plus 45. We'll probably finish at plus 60, plus 70. So when you average it out over the first six months, we're going to be at the plus 30, plus 40 range. It's really just the timing of one campaign. So overall for the year, our pacing is we're still pacing at plus 30, 35 in the U.S., which is our goal. In Canada, our pacing is at 100%. So we're still in a good position for increasing that unit by 40%. to $55 million. So, again, it's really a timing issue with one campaign. But the more we grow and the bigger we get, the less we'll have this beta risk of one campaign making a difference.

Right. Having said that, some of these metrics that you just gave, the 30-35 U.S., 100% Canada, you also suggested those were the growth metrics prior to the mood media deal. So can you just, you know, I understand the doubling of the Salesforce, the doubling of the footprint, the enhancement of the critical mass, but you know, maybe I'll push you a little bit, you know, are you really going to see an acceleration of growth or do we, should we think about it in terms of that accelerating factor, more of a post 2024 as this thing gains a bit more momentum and adds more verticals?

No, that's a good question. So we, we had a call last Friday and with those same questions, What should we budget on both sides for sales that we expect? So for now, the deal's been done. We haven't created an internal budget. But by the next quarter, we'll have a lot of visibility. We expect impact this year. What amount, difficult to know. But for sure, it's only going to be positive on increasing our sales. It's only positive news of having more territory, more salespeople, and a national territory. It's just on both sides, we haven't given ourselves a budget yet of what that impact will be this year, but we expect it to be material, not significant, but again, early stage, but only upside. Is it gonna be an extra five million, 10 million, 20 million? We don't know, but anywhere from five to 20 extra sales this year that we expect with this partnership, and then next year, sky's the limit in terms of us working well and also evangelizing the market. Our biggest issue is evangelizing the market.

Okay, and just one other question. You touched on the better economics coming out of the SVOD business, notwithstanding the fact that there was a bit of a dip on SVOD subscribers. When we think about this, at one point you had talked, and I know you've updated it since, but at one point it was going to be potentially a hundred million rev business on the back of million subscribers you know you're eventually going to get perhaps to a billion subscribers but would you characterize this as potentially sort of a 50 to 60 million dollar revenue business or could actually scale beyond that I think for sure we'll hit a million subs just with the launch of the new countries with Amazon we're launching in about 20 new countries I mentioned on the call plus we're launching also new products with zen life which is an SVOD product with all of our customers and

So we're adding new products. We're also adding our products with Trivia. So with the addition of these products, it just makes the B2B so much stronger. But again, the B2C is declining. So there is a bit of pivot between B2C and B2B. But our clients are very stable, and we're adding new clients. So again, a million subscribers. We hopefully wanted it this year. We'll see. Maybe it's going to take maybe 18 months. But it's also always growing. And it is going to be a $60 million business. going to $80 million because our RPU is $5 instead of $15. When you're B2B, you're $5 RPU. When you're B2C, you're at $15. Okay, great.

All right, thanks for that.

Thank you, Adam.

And thank you. We have our next question from Scott Fletcher with CIBC.

Good morning. I wanted to follow up on the moon media. I'm curious if there are any impacts on the cost side, or are there any Is there any spending you have to do, whether it's on the Salesforce side or integration of technology? Should we expect any impact margins at all?

It's one of the rare deals that we said to the board. It's only win, win, win. Win, we have more retailers. Win, we have more salespeople. We're working together. We're marketing a product together. We're just leveraging each other's strength. No cost impact and more efficient and And we expect results, or goals, we expect results as early as this month. So it's not something that we want to see in Q4. We expect results in August, September, and hopefully we can report some numbers to you by November. But we expect a new cell on what we call a cross-border cell or cross-territory cell any week now. So very excited. And like I said to Adam, anywhere from 5 to 20 million of cells this year, tough to see. But... But I think it's going to be a great partnership and also for the market and for the retailers and the advertisers. It gives them a good sense that they're teaming up with the right partners.

Okay, thanks. And then I might just drill a little further on some of the growth expectations. So last quarter you were talking to 40% growth expectations in advertising. You're still targeting that. But should we expect that mood media deal to add on top of that 40% or is it sort of now still 40% with mood media?

Yeah, I would still keep that at 40% for now and let's wait for next quarter. Let's wait for the proof is in the pudding. Let's wait to see how the synergies, the positive synergies of this partnership comes in and the speed. For me, we're very confident that we're going to be doubling sales over the next 24 months. It's just how quickly is the speed going to happen. So I think we'll have more visibility by the next quarter. Because now we've only been two weeks in the partnership. So we're like newlyweds.

We're still in the honeymoon. Fair enough. It's early days. And maybe I'll just ask one on the in-car side. Last quarter, you talked to the run rate being around $8 million on the karaoke in-car business. Any color on how much the BYD deal adds to that?

Yeah. So BYD starts by around $50,000 a month in October. But they're expected to do 4 million cars a year. So 4 million cars a year, we're looking, that's about roughly, you know, round numbers. Just that by itself is another 8 to 10 million a year in business from BYD. The big thing for them is they have their plant in Ontario, as you know. They're very strong in Europe, Latam. But right now, the big question is when will they launch in the U.S.? And I think that one is more geopolitical than business. So they're getting ready for the U.S., So again, biggest partner in BYD is Warren Buffett. The company was last worth like $130 billion. Not well known in North America by us Canadians, but we visited them and we're going to visit them in China in September. It's an incredible company in terms of production and size and what they do. So very happy to be their international partner and With VID, we're launching karaoke, but we're also launching Calm Radio. So we're going to have our Calm Radio stations in every car. And we're launching many more products. So it's not only karaoke. We're really becoming the in-car music entertainment. See us as the XM series for EV cars, but around the world. So that's how Stingray is being positioned. But OEMs? BYD, the deal we have right now, it's going to be over 15 years. So they're looking from 2022 to 2037. So I'm going to be almost 70 years old by the time this deal is over. So I think I might be – I'll still be working, but I might be less productive. All right. Well, it does sound like a good opportunity. I'll leave it there. Yeah, and we'll get more visibility with time on all the car dealerships. They're all starting with EVs, so everything is new, even for Audi. Audi are rolling out their cars. So one thing that I'll ask the analysts is maybe we could do a research of how many cars, how many EV cars over the next 10 years, and then we could start doing a modeling. So maybe one of you analysts can take a project if you have some extra time in the summer.

Thank you.

Thank you so much. And thank you. Our next question is from Jerome Dupriot with Desjardins.

Good morning, Simone. Thanks for taking my questions. Just on these numbers you just provided on the BYD deal, you spoke about going from $50,000 a month to potentially another $8 million to $10 million a year. what would that revenue be contingent on? Is that the current expectation that this could be the growth for next year?

It's more, you know, it's how, you know, the difference between us and car manufacturers, we at Stingware used to think about, you know, six to 12 months. They think six to 12 years. So it's a different mindset. You know, the audience ramping up to be ready for 2026. So for us, 2026 is like, you know, But once you're in the cars, you're in the cars for the whole length of the agreement. Once you're embedded, you're embedded forever in that car. So that's what we're doing. So we know where we're going to be in every car. We know where our position is. We just don't know how fast that Audi and BYD. We know Tesla. Tesla right now is ramping up by 100,000 cars a month. So that's easy to model. Every month we get 100,000 new cars. We get our fees per car. So our revenues increases by, you know, about 15,000 a month. I'm keeping numbers round here. That's easy to model. With the new players, we'll have to see how their production output goes and how quickly they deliver those EV cars. There's no doubt that the car business, when I'm talking about vectors, SVOD wants to be a $100 million business. Retail media will be a $100 million business for sure. The fast channel also, we're growing around the world and all the TV manufacturers, that's also another business for $100 million. And the cars will also be a $100 million business. The question is, is it going to be in two, three, or four years? And we'll have more visibility. But all these vectors are high gross margin of 90% plus, very little capex because it's all you deliver once and it's the same content. And it's going to be increasing for the next, you know, what we can tell you is that the EV market will increase for the next 10 to 20 years. So you're going to have a rising lake in this space. And if you're involved, everybody will make money. So it's the opposite of cable industry. A good question is I feel that the cars will be replaced the cable industry. And you'll get your entertainment from your car in the future more than you get it from your cable set at home.

Great. And I think it's fair to say you previously assumed those kind of deals with the car OEMs would take years to materialize. But we've seen a few deals lately, frankly. So are stocks accelerating in general or was this deal specific to BYD?

Yeah, so BYD, we're launching with 300,000 cars in October. So we're launching with 50,000 a month. And now it's all based on their production. How many cars are they going to produce? And all of our deals, by the way, is excluding China. We don't provide music or karaoke in China for licensing purposes. We don't understand the licensing rights there, and we don't want to get involved. So it's a car manufacturer's car delivered outside of China. So we'll have to see their production of BYD. And, you know, we've seen some of their cars in Canada. We've seen their cars when we go to Europe. We see their cars in Latam. So how quickly are they going to – I think they're delivering an electric car in – for 22,000 US, so pretty nice looking car. So are people going to be jumping on those cars? I'm not a car guy, but it's going to be interesting to see those sales over the next few quarters.

Great. And one last from me. You're out with, I think it's a new guidance for advertising revenue doubling in the next two years. What needs to happen in operational terms for you to meet this guidance, maybe in terms of CPM for retail media or other factors?

Really, our number one goal is to get more salespeople, to have more people on the street. I know it's good old-fashioned sales. We need to be able to evangelize the market, evangelize the agencies, both across Canada and the U.S., And also we're looking to go international. So we're looking at Australia and other countries. We're starting to get international deals. But our focus is on Canada and the US. And that's it. So our big investment will be to add 5, 10, 15 new headcounts in sales that will produce results. So it's purely a sales execution. There's no technology. We don't need more footprint. We will get more footprint. It's really about executing and selling and evangelizing. And the other part, we're realizing once we convince a product or an agency about one of our campaigns, the repeat business is 90% to 95%. So once you get a customer on board, they stay with you forever. So it's really great, really excited. In Canada last year, we had 10 campaigns at the same time. This year, we have 53 campaigns launched, a lot of small campaigns. We already have five times more campaigns than we did last year. With that, you need more salespeople. Again, that's both on our side and Mood. We'll both need to expand our sales team. Merci beaucoup. Merci à toi.

We have our next question from Drew Reynolds with RBC.

Yeah, thanks very much. Good morning. Just two follow-ups for me on back to the connected car. Yeah, Eric, I think a bunch of us on this call used to cover the old Canadian Sirius XM, and it was a fascinating kind of ramp up on that model. I just want to know kind of how you generate revenue and what phase or stage you do that with these contracts. And then the second question, just back to the doubling of revenues in Stingray advertising. Just given an evolving revenue mix with that kind of growth, are you still looking at 40% margin for the broadcasting commercial music segment?

Thank you. Yeah, so for the car business, it's the good old cable industry. So it's a goal cost per subscriber or cost per car. So it's a CPF model. Depending on the deals, we'll give them a free period Just like when you rent a building, you'll give them three free months. So that's armitage. But most of the deals should be accretive right away. So example, BYD starting in October. It really depends on the rollout of the cars. Some car manufacturers will start with a basic of a million cars. Some of them start at zero. So when you start at zero, it takes time to ramp up. And that model will only expand as they build more cars. I think it's the, and we enjoy that CPS business, like we enjoy the cable side. So we'll get more visibility on production of cars. And regarding the margin, yeah, our margin, we still expect our margin to be, like you saw this quarter, this quarter our broadcast margin was 42.3%, up from 36% last year. Two reasons, our cost initiative, yes, but the main reason is when we focus on big customers, Our margin is much higher, bigger customers, easier. Amazon, we're in 30 countries going to 60, but we get one check per month. The accountant only has to deposit one check. It's not even a check. It's a wire transfer. It's one delivery for the world. So imagine being able to deliver in 60 countries by one delivery. So when you're B2B, your gross margin is much higher, your gross profit, which gives us EBITDA margin. And right now we're at 42%, so very comfortable to be above 40% in broadcast for now and to be increasing in the future once we do those big deals. To deliver to one Tesla, or to deliver right now to 2 million Teslas, 3 million Teslas, is the same feed. It's one feed going to Tesla. So there's no extra cost. So it's like the good old cable days where, you know, if you have a, it's really broadcasting. That's great. Thank you.

Thank you, Drew.

Thank you. As a reminder, if you have a question, please press star 1. We have a question from Tim Casey with BMO.

Good morning. A couple for me. Just back to the electric vehicle model. Is your revenue from the customer Is that a flat fee through the length of the deal, or does that accelerate or go down after you're through a preview period? I'm just curious if effectively your ARPU from your customer base is flat or whether it'll go up. And second, on the radio business, you talked about you're gaining market share. Are you talking about major markets there or are you talking about smaller markets? And maybe if you could just comment on the overall health of the business. Is the smaller market radio business performing better than large market, given lack of competition from other media and things like that? Thanks.

Yeah, that's a good question. So really for the car business, it's like the cable industry, the CPS. So we get paid per car, not per usage. So if Tesla produces 100,000 new cars, then we get times a fee. Again, we've got to be careful with telling our fees, but it's really a CPS model, just like in the cable days where you charge 10, 15, 20 cents per subscriber, independent if they use it or not. So it does increase over time. We looked into flat fees, but we haven't done any flat fees for now. Most of the car manufacturers prefer paying per car as they expand their business model. So does that answer the question for the car?

So is your agreement that every car that comes off the line has your products in, or is that a customer option?

No, no, every car that comes off the line is embedded with the karaoke and it becomes a subscriber of ours, except in certain markets like China and maybe Korea with certain suppliers. But for the Western world, we get a piece of every car. Thank you. Okay, and for the radio, every month we get a report that we compare each other to all the other radio stations. We call it the tram report. So everybody gives their numbers to an accounting firm. You don't know who's gaining or winning. But for sure, we're beating the market again. This year we're up 8% compared to our peers. That's how we know we're getting market share. Good question. I think we're winning a bit. There's local sales people in every radio. Local sales is about 50% of your sales or more. I think we have an advantage with, as you know, some of our peers are decreasing their radio presence. Some other companies are even looking to divest. That creates uncertainty on their side. It gives us a chance to hire new people, be stronger, and be more present with customers. So we do feel that we have an edge right now in the market, both on the larger station and smaller stations. But still, radio is tough. I won't, you know, radio is a tough business. You know, we don't expect much growth until the car dealership. I remember when I met you, Tim, at the Surfeited Hotel, and you told me about how the radio was good for the car business because you could sell your cars on the weekend. On a Wednesday, you can make a call and do your ads on Thursday. So we need those cars back in the dealership, and hopefully that will be coming back in the next – and hopefully those will be EV cars. So we'll make money selling the cars and doing ads, and then we'll make money doing karaoke and music in the cars.

And just any comment on large market versus small market radio performance in general?

Yeah, I think it's very similar. I could get back to you on maybe a follow-up call on that, but I'll have to go deeper because we have all the reports. But I would say at first glance, it's both markets. Our tram report is strong in both markets.

Thank you.

Okay. Thank you, Tim.

And thank you. We have no further questions in queue. Speakers, please proceed with your closing remarks.

Yeah, and thank you again for the analysts for being up early this morning. Thank you all of you for being there. Thank you for the team at Stingray. Again, another great quarter, and thank you for everybody that are shareholders and have confidence in Stingray, and hopefully we can continue growth and good margins. So have a great day, everyone. Merci beaucoup.

And thank you, ladies and gentlemen. This concludes your conference. Please disconnect your lines.