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spk10: Good morning, ladies and gentlemen, and welcome to the Stingray Group Inc. Q1 2025 Results Call Conference Call. At this time, all lines are in Elisen-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 0 for the operator. This call is being recorded on Wednesday, August 7, 2024. I would now like to turn the conference over to Matthew Tolstein. Please go ahead.
spk02: Thank you. Bonjour. Good morning, everyone, and thank you for joining us for Stingray's conference call for its first quarter results, ended June 30, 2024. Today, Eric Voico, president, CEO, and co-founder, as well as Jean-Pierre Trin, CFO, will be presenting Stingray's operational and financial highlights. Our press release reporting Stingray's first quarter results for fiscal 2025 was issued yesterday after the market closed. Our press release, MDNA, and financial statements for the quarter are available on our investor website at stingray.com, as well as Cedar Plus. I will now provide you with 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 risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's annual information form, dated June
spk00: 4,
spk02: 2024, which is available on Cedar Plus. 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, or advise not to place under-reliance on such forward-looking statements. Also, please be reminded that some financial measures discussed over the course of this conference call are non-IFRS. Refer to Stingray's MDNA 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.
spk04: Merci, Mathieu. Good morning, everyone, and welcome to our first quarter results conference call. Stingray opened fiscal 25 with a robust sales contributions from retail media and fast channel, as advertising revenues nearly doubled year over year. Retail media revenues grew more than 55% quarter of 25, and fast channels when you sort into the triple-digit range to deliver unprecedented growth in advertising revenues. As a result, we have achieved a remarkable organic growth of .1% year over year in broadcast and recurring commercial music revenues. On the fast channel front, it would Stingray reach a run rate of 55 million listening hours per quarter for leveraging strong relationship with partners like Samsung, LG, and Vizio to capture market share. We have recently signed agreement with Roku channels to introduce TikTok radio, Koelo concerts, and two exclusive Stingray music audio channels to the American and Canadian audiences. As a result, we are highly confident about doubling fast channel revenues this year. From a management perspective, it's highly stimulating to see our business firing in all cylinders. For example, our Incor Audio Entertainment Union, which has a longer sales and revenue recognition cycles than advertising, generated double-digit revenue growth in the first quarter. Stingray karaoke has been deployed in approximately two-thirds of the 300 targeted cars at BYD, while the pipeline for other manufacturers remain replete with opportunities. Altogether, revenues from broadcasting and commercial music business increased .5% to 56.9 million in the first quarter, while radio revenues improved .3% to 32 million as we continue to outperform the industry with expanding revenue streams from digital solutions. Following the quarter end, we accord Dakota Collection, a leading streaming platform that showcases iconic moments in music history through storytelling. Dakota Collection, which is available on prime video channels in US and UK, aligns strategically with our plan to enhance our portfolio of music streaming service and solidify our leadership in concert streaming on the Amazon platform. The collection joins Stingray's other popular streaming service such as Quello, Concerts, Stingray, Karaoke, Stingray Classica, and Stingray Jazz. Looking ahead for the rest of this COO25, we will remain focused on generating outside organic growth, while keeping an eye on complementary second acquisitions. As always, our capital allocation strategy will continue to prioritize debt reduction with a target leverage ratio between two and 2.5 times by the end of the fiscal year, without sacrificing investment in high growth areas where we have sustained differentiation. Finally, I would like to say a few words about Stingray's first sustainability report that was released earlier today. This sustainability report reflects our dedication to transparency and responsibility, represents the stepping steps towards a promising future for Stingray. I am highly optimistic about the Transmallant Impact Initiative. We will have overall in our business because it's created a positive feedback loop within the organization. Adding this report to our annual rotation will make us more knowledgeable about ESG matters and therefore better equipped to enact meaningful change. Stingray's sustainability framework has been structured around three main pillars, social prosperity, responsible business, and environmental engagement. For more information, I encourage you to view our sustainability report, and that word is tough to say in English, sustainability report on Stingray's website. I will now turn the call over to Jean-Pierre for financial overview.
spk03: Merci Eric, good morning everyone. Revenues reach 89.1 million in the first quarter of fiscal 25, up 12.8%, from 79 million in Q124. The year over year growth was mainly driven by an increase in fast channel and retail media advertising revenues. Revenues in Canada improved .7% to 49 million in the first quarter of 25. The growth can mainly be attributed to higher equipment and installation sales related to digital signage. Revenues in the United States drew .5% to 28 million in the Q1 of 25, and strange of the greater fast channel and retail media advertising revenues. Finally, revenues in the other countries decreased .2% year over year to 12.1 million in the most recent quarter. The decline was mainly due to reduced subscription and audio channel revenues, partially offset by increased equipment and installation sales related to digital signage. Looking at our pep amounts by business segment, broadcasting and commercial music revenues grew between .5% to 56.9 million in the first quarter of 25. The year over year growth was primarily due to an increase in fast channel and retail media advertising revenues. Radio revenues meanwhile improved .2% year over year to 32.2 million in the first quarter of 25. In terms of profitability, consolidated adjusted BDA rose .9% to 31.1 million in the first quarter of 25 from 28.3 million in Q1 of 24. Adjusted BDA margin reached .9% in Q1 of 25 compared to .8% in the same period. The increase in adjusted BDA year over year can be attributed to higher revenues while adjusted BDA margin declined due to the revenue mix and a lower margins for retail media advertising. By business segment, broadcasting and commercial music adjusted BDA increased 15% to 23 million in the first quarter of 25. The growth was mainly due to higher revenues, partially offset by greater operating costs. For its part, adjusted BDA for our radio segment remained stable year over year to 9.9 million in the first quarter of 25. In term of corporate adjusted BDA, it amounted to a negative 1.8 million in the quarter due to higher compensation compared to the corresponding period. Stingray reported a net income of 7.3 million or 11 cents per share in the first quarter of 25 compared to 14.1 million or 20 cents per share in Q1 of 24. The decrease was mainly caused by an unrealized loss in the current period on the fair value of derivative financial instruments and to a one-time settlement gain from a trademark dispute last year. These items were partially offset by improved operating results in the first quarter of 25. Adjusted net income totaled 13.9 million of 20 cents per share in Q1 25 compared to 11.9 million or 17 cents per share in the same period of 24. The increase was mainly due to higher operating results partially offset by income tax recovery related to the one-time settlement gain on the trademark dispute last year. Turning to the liquidity and capital resources, cash flow generated from operating activities totaled 10.8 million in the first quarter of 25 compared to 24.3 million in Q1 24. The decrease was mainly due to higher negative change in non-cash operating items, greater income taxes paid and to a -on-one time settlement gain from a trademark dispute in a comparable period. These items were partially offset by improved operating results in the first quarter of 25. Adjusted free cash flow generated in the first quarter of 25 totaled 15.5 million compared to 18.5 million in the same period of 24. The decline was mainly related to the higher income taxes paid partially offset by improved operating results. From a balance sheet standpoint, Stingray added cash and cash equivalent of 9.2 million at the end of the first quarter of subordinate debt of 25.6 million and the credit facilities of 345.9 million of which approximately 46.9 million was available. Total net debt at the quarter end stood at 362.3 million or 2.77 times the total adjusted BDA. Finally, we repurchased and canceled 307 hundred thousand shares for a total of 2.3 million in the first quarter under our normal course of issue. This ends my presentation for today. I will now turn the call back to Eric.
spk04: Okay, great. Thank you, GP. So with this, I guess we're ready for the questions. So I know we have a good list of partners and a good list of questions.
spk10: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speaker phone, please leave the handset before pressing any keys. One moment please for your first question. Your first question comes from Adam Shine of National Bank Financial. Please go ahead.
spk06: Morning, Eric. So the fast channel ramp looks to be a function of, you're adding additional services with relationships and I think it's largely platform expansion as well. When we flip over to retail media, can you elaborate a little bit further as to what's driving growth? Are you getting better utilization of the available inventory and perhaps, even getting some improvement to pricing?
spk04: Yeah, retail media is just about, again, evangelizing the market. This year we spent about 20% growth in retail media, but it's really about 90% of our customers return or 95%, so that's even higher than that. But it's really about evangelizing the market about this new platform. So it's a lot of hard work. We're doing well. It's not about inventory, it's not about pricing. It's about having more new customers.
spk06: And when you look at, you're obviously delivering some evolving improvement to top line growth, mix is a factor in terms of the margin drop, but are you looking to take additional costs or you're happy to focus on the top line to ultimately drive EBITDA?
spk04: Quickly, you gotta do the, when we do retail media, as you know, we have a rest share with our partners. So your gross profit, if you have a rest share of 50-50, then your gross profit starts at 40%. When you do fast channels or other products, we usually are in the close to 90% gross profit. So big difference on the product mix. So if you do more retail media, then you lose on your EBITDA margin. We feel very comfortable to be between 40 and 42 and finishing the year closer to 42%.
spk06: Okay, very helpful. And just lastly, you said on the last call that you thought radio was gonna be growing two to 4%, let alone even more. We got sub .5% this quarter, which is still significantly better than what your peers are delivering, but are you looking to see an improvement over the course of the rest of the year from the Q1 result, or
spk04: there's
spk06: other tempering developments?
spk04: Yes, so for us, the big thing for us on the radio side is having the radio team sell ads in retail media. So we'll do a package of radio plus retail media. So that for us is a new vector. We started a year strong. July was very strong, but we're seeing a bit of weakness in August, September. So I think for Q2, it's gonna be more difficult, but hopefully by Q3 and Q4, we're adding some new retailers in Canada that should be announced soon. And those new retailers will really give us a national platform so we can leverage our radio force, which is very strong, as you know, in the Maritimes and in Alberta. So hopefully with these new retailers, we're gonna be more of a national platform. Right now with our current, we're much more focused on Quebec, Ontario. So I think it's gonna be tougher Q2, but then confident for Q3 and Q4 to remain positive.
spk06: Thank you for that, appreciate it. Thank
spk04: you. Thanks, Adam.
spk10: Your next question comes from Aravinda Galapatich of Kanakur Genuity. Please go ahead.
spk09: Good morning. Thanks for taking my questions. Congrats on the quarter. With respect to retail media, Eric, I don't know if you can elaborate a little bit about what proportion of the growth is coming from repeating ad customers perhaps coming back with larger campaign sizes and how much of it is coming from new customers. Any help would be appreciated on that front. And then secondly, perhaps to JP, given growing expectation that the rate, industry rates would ease towards the back end of the year, can you just remind us of sort of the fixed floating mix within your credit facilities? Thank you.
spk04: Okay, good question on retail. So 95% of our customers repeat, but most of our growth is coming and we have to work hard from new customers. So we still need to evangelize the market on retail media. People are used to radio, people are used to out of home, people are used to TV, but it's the first time they have access to really doing media in stores. So the 20% growth that we're expecting is from new customers. While 95% of our customers keep on recurring. So I think it's a very good question. JP, for the credit line and the credit mix,
spk03: it's easy, you know, the board asked us to be a fix for 50%. So the sub debt is fixed and we did swap for the balance. So 50% will be available for a rate reduction in the coming months, coming quarters.
spk09: Thank you, I'll pass
spk03: the
spk09: mic.
spk10: Your next question comes from Drew MacReynolds of RBC. Please go ahead.
spk07: Yeah, thanks very much. Good morning. Two for me, first on the advertising side, clearly, Erica, a strong start to the year and I think you were targeting roughly kind of 40% advertising growth for fiscal 2025. Over a little cautious just on the laws of big numbers and in reaching that for the fiscal year, but obviously a strong start to Q1. So just wondering if you could update us on that outlook and related to that, just any kind of macro headwinds you're seeing, whether the slowdown in radio is macro driven or something else. And then second, just on retail media, in terms of the evangelizing the channel, presumably it is getting kind of easier in terms of the pitch in bringing new customers on versus where you would have been a year or two years ago, only from the perspective of clearly this channel becoming more known as an effective platform to advertise on. But we'd love to kind of hear your thoughts on those discussions, thank you.
spk04: Yeah, so I agree with you, Drew. 99% is not sustainable growth for advertising. So again, we expect to double the fast channels. We talked about that in our discussion this morning. And we expect retail media to grow by about 20%. So that should give us a mix of again, 40% for this year. Again, with the fast channels really becoming more and more material. So I'm very happy about that. And for radio, again, for us, our push is to have the radio sales team sell more digital products. I think we're doing very well compared to our peers. The market is down five to 10%, we're plus 1.5. We expect this quarter, which will be more difficult, we'll know we're closer to zero. But we expect to be positive on the radio side with the radio team selling more retail media. And we have this unique selling proposition that no one else has, so we're very happy. And like I mentioned to Adam, we're adding a partner in the next couple of weeks that will really help us to be more national in Canada. And for retail media, no, I agree with you. We would expect that it would be easier to evangelize, but it is hard work. The good news is what we're building is the retail media network in stores is gonna be very hard to duplicate. A lot of stickiness. You need the boxes, you need the deals, you need the retailers. We need also, one of the things that we need is we need the retailers to accept all the ads. So a lot of times we'll bring some ads and the retailer will say, no, I don't want this ad. So we gotta evangelize both the market and the retailers about the fact that having audio ads in stores is good. So it is a lot of hard work, but the good news is it's gonna be a long-term business.
spk05: That's
spk07: great, thank you very much.
spk04: Thank you, Drew.
spk10: Your next question comes from Jerome DeBri of Deidre. Please go ahead.
spk08: Hey, Bonjour, Tomanda. Thanks for taking my questions. The first one is on fast. Kind of worded differently from Adam, but
spk00: it
spk08: seems that some of the new opportunities might be starting to contribute. So I'm wondering, what are we seeing in the quarter right now in terms of the ramp-up of the new platforms? Is it still the business from Samsung that we're actually seeing in the numbers, or are we already starting to see the results from the new platforms?
spk04: A very good question, Jerome. So now we're really seeing good growth and we're launching new products with Samsung. We're seeing good growth with LG. We're seeing a lot of good growth also with Vizio. We have a lot of new products that are being launched on Vizio. We're launching a lot of new ambient channels, more music channels. We announced our deal with Roku. Very happy to be with Roku. We're expanding with Pluto. So we're really every fast platform in the world, based on our relationship and our products, we're talking to and launching our products. So we see again, we see again, to be able to double ourselves this year and maybe with some new platforms, even better than that. So it's an exciting model. As you know, also every cable company in the world, from Comcast to Bell Rogers to Verizon in Europe, are also launching fast channels. So we'll be leveraging all these different platforms. And for us, the beauty is because of our technology, it comes from the same system. We're highly efficient. All the channels are made internally, distributed internally. So we can effectively launch 50 new channels in a week with 10 new customers. So we've become very good at it. And we're able also to customize the channel for some of our customers. So now we see a lot of growth for the years to come, Joao.
spk08: That's great, thanks. And then on the margins dynamic, obviously at a very strong quarter in retail media, it's gonna probably go back to a bit more normalized growth next quarter. Given the revenue mix in the next quarter, should we be anticipating maybe a better trend in terms of the margin growth year on year next quarter? Yeah, so
spk04: really, as you know, retail media, half the money goes to, or depending on the deals, goes to our partners. So right away, your gross profit is, you're starting at 40% at best compared to the other products where we make above 80%. So this quarter was such a high and unusual, strong quarter in retail media that it brought down our margin 42 to 40, but we should be back at 42%. 42% is what we're aiming for as a EBITDA margin.
spk08: Great, and then maybe one last for me. You've been launching a lot of new products, new different platforms over the last two years. I'm wondering what is the tech team working on these days? Sorry, the what? IT. Oh, no, no. You have the technology
spk04: team. Yeah, so for right now, right now we're probably talking to 10 to 20 car manufacturers, and we're launching application for cars. We're probably doing about, I'd say, 10 to 12 new applications that we're working on for the cars. And I think in the next six months before the holidays, before the end of the calendar year, we'll be announcing a lot of new car partnership once these applications are launched. Every car company in the world is interested in karaoke. You'd be surprised. And they also all wanna do now mics. So Tesla's doing mics, B1D wants to do mics. So you'll have it when you buy a car, you're gonna get a mic and you're gonna sing karaoke in your car. I know a lot of parents hearing this call will be disappointed, but I think it'll be a very sticky product. And also every car manufacturer is looking for a Stingray music. They would love to have their own, GM, Ford, Toyota, Ford radio, GM radio, Toyota radio, and for them to be able to make money from audio in the car instead of just never made money from that retail product. So a lot of demand for, and also for calm radio. So it's gonna be interesting, Jerome, in the next six months to see how many of these applications are launched. And for sure that's where even we have to double the team because we have so much demand from the car business. But like we said before, the car business is a long time. These deals takes, they'll take it on four to 12 years because you started with zero cars or very little cars. And a bit like BYD, you build every year, but it adds on.
spk08: That's great, Eric.
spk04: Merci,
spk08: Jerome.
spk10: Your next question comes from Matt Fletcher of CIBC. Please go ahead.
spk05: Hi, good morning. It's been over a year now since you announced the partnership with Mood Media in the retail media business. Can you sort of reflect on how that's gone, whether it's added to the growth as expected, just sort of own overall summary of how the year's been since the partnership was announced? Yeah,
spk04: it's been a good partnership because both of us, again, both of us are working hard to evangelize the market. So better to be two than just to be one. So that's good news. We've been able to, again, to continue and keep all of our retailers on both sides. So happy about that. The cross-selling has been good. We have about eight million of cross-selling that we're doing on each other's platform. So it's been a good partnership and also brings a lot of stability to the market.
spk05: Okay, thanks. That's good to hear. And then just on the equipment and labor line, I think it was more than I had been expecting. Is this a run rate number in the Q1, or how should we think about the rest of the year, if you could add any color there?
spk04: Yeah, that should be about the run rate. We expect to do about 24 million this year. So we did six million in Q1. Again, we have a lot of new deals. Equipment and labor is growing well, and we're doing a lot more video. So a lot of demand for video. In the future, you could expect us to do, one of the things that we're doing more and more with retailers is we call it, you know, you enter the store and if you hear an ad, the same ad will go on the video at the same time. So you take control of the store. So it's gonna be interesting how we, how the stores and the retailers develop their internal advertising in their location. So the answer is yeah, comfortable with the six million quarter. Okay, thank you. Thanks, Scott.
spk10: Your last question comes from Tim Casey of BMO. Please go ahead.
spk01: Yeah, thanks, a couple for me. Eric, could you talk a little bit about the categories that you have attracted and maybe some that are proving tougher on the retail media? It would seem that pharma is a natural there, but maybe just a big picture discussion on categories and winners and losers there. And then just quickly on CODA, you mentioned that it's, I think you said it's in the UK and the US now, is the goal there to drive that across Prime internationally? Like what was presenting the previous owners from doing that, is it a rights issue or is it something that you can do that they couldn't? Just maybe a little bit about how you expect to grow CODA and if you can, what sort of thresholds do you need to kick in the nine million or an out or eight and a half, whatever it is, thanks.
spk04: Thanks, Tim. So quickly, for sure pharma is a huge customer in the US and because they really, the pharma, they do ads in half the pharmacies, they don't do ads in the other half and they can see with the vaccines right away. They get the result daily, so they can see the instant reaction. So that for the pharma, for them it's been a no brainer. The recurring with them is 100% and as long as there's vaccine and there's shingrith and all these other different types of solution, it's strong. For us, it's all the PNG, it's all the Procter and Gamble type of customers that we're growing. We hired a lot of people, that's the number one focus is how do we drive those consumers. And the third part, which is getting interesting is the retailers are accepting non-endemic. So we're getting a lot of car companies promoting in stores and the retailers are getting more used to, okay, there's nothing wrong with having a Volkswagen ad in a Metro or in a Loblaws. So with the non-endemic, that market for us is unlimited. So that's interesting for us and the same for the US. So that's for your first question. For Koda, Tim, a very small tuck-in. We paid it twice a bid, we expected a bid of 600,000 US. So very small tuck-in, very happy. For the US, US and UK will expand Koda. But it's really, there was two companies that did concerts, Espad, so for us merging with them was very complimentary. And yeah, the actual owners, their cost structure was just too high for that size of company. So that's why we're nowhere for us. It's the integration is zero. IT-wise, it's already what we do. And there's no overhead, no cost. So it's all the gross profit becomes EBITDA. Thank you. Thanks, Tim.
spk10: There are no further questions at this time. That concludes our question and answer session. I'd like to turn the conference back to Eric Boyko for closing remarks.
spk04: Okay, so on behalf of the entire Stingray team, thank you for joining us on this conference call today. Thank you for the analysts for all the work and time you spent with us. We look forward speaking to you again on the release of our second quarter results. Thank you, Tim.
spk10: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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