Stingray Group Inc.

Good morning, ladies and gentlemen, and welcome to the Stingray Group Q1 2027 results conference call. At this time, note that all participant lines are in the 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. Also note that this call is being recorded on Monday, August 10, 2026. And I would like to turn the conference over to Mathieu Peloquin. Please go ahead.

Good morning, everyone. Thank you for joining us for Stingrays Conference Call for the first quarter of fiscal 2027, ended June 30, 2026. Today, Eric Boyko, President, CEO, and co-founder, as well as Marie-Helene Fournier, Interim CFO, will be presenting Stingrays operational and financial highlights. Our press release reporting Stingrays first quarter results was issued today before the market opened. Our press release, MD&A, and financial statements for the quarter are available on our investor website at stingray.com and on Setter Plus. Today, the corporation also filed its 2026 annual report, including audited annual consolidated financial statements and MD&A for the year ended March 31, 2026. The 2026 annual report is available on Cedar Flex and on the investor relations section of Stingray's website. I will now provide you with the customary caution that today's discussion of the corporation's performance and its future prospects may include forward-looking statements. The corporation's future operation and performance are subject to risk and uncertainty, 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 August 7, 2026, which is also available on CEDAR+. Decorporation 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 advised that some of the financial measures discussed over the course of this conference call are non-IFRS. Refer to Stingrays MD&A for a 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. Good morning, Mathieu. Good morning, everyone. Welcome to our first quarter results conference call for fiscal 2027. Second open fiscal 2027 was left off in 2026 only on a margin scale. Driven by robust revenue contribution from tuning acquisition and fast channel segment, we generated overall growth of 65.2% and Organic Growth of 27.5 year-over-year in the first quarter. The integration of TuneIn has been seamless, creating a failover effect on our entire advertising business with revenue synergies reaching a run rate of $45 million nine months post-transaction. On the fast channel side, Stingray's premium ad network continued to outperform with revenue rising nearly 70% in the first quarter, driven by our reselling of TV manufacturers and many more. Our unique ability to sell ads, both on-platform and off-platform, places Signory in a strong competitive position as we have demonstrated to our partners that we can help them enhance monetization of their flash channels. Looking ahead, we remain confident that our tuned-in and flash channel business will contribute to another year of double-digit organic Thank you for joining us today. We are excited about the opportunity to bring programmatic advertising capabilities to our in store business. We are actively working to enable a market solution for a new audience based multiplier model. where one ad reaches a broader audience than one-on-one basis. We see this evolution in the business model as a key catalyst for steering, and we expect to make progress on this front during the current fiscal year. Finally, our in-car entertainment segment continues to gain traction. Building on the earlier Nissan partnership announcement last February, we continue to deploy new features to our cars, in karaoke, and audio services, and to increase our footprint with existing car manufacturers. We remain optimistic, including new partnerships in the coming months. Altogether, broadcast and commercial music or streaming division revenues more than doubled to $126 million in the first quarter of 2027, mainly due to higher advertising revenues from the tune-in acquisition and greater cash channel sales. Later revenues which were adversely affected by reduced betting and government ads year-over-year in Q1, declined 6.5% to 32 million in the first quarter, but has shown great signs of recovery early in the second quarter. We expect radio sales to improve in the second quarter and we're pacing to be above 5%. Before handing the call over to Marie-Helene for her financial review of the quarter, I would like to say a few words about our capital allocation and our leverage ratio. Some of us will notice that our net debt EBITDA to pro forma adjusted EBITDA increased to 2.5 times in Q1, 2027, but this is largely due because we make a strategic decision to re-purchase 1 million shares from Naqad De Defoe for $15.5 million, the acquisition of Radioline and Westport. and because of customer timing difference in collection of advertising revenues. The share buyback will likely push our target of bringing our leverage ratio under 2.0 by the end of fiscal 2027 instead of the year end calendar of 2026. Nevertheless, we believe it is directly in line with our commitment to actively manage senior race capital assets and maximize value for our shareholders. In closing, Our balance sheet remains healthy, providing us with the flexibility to invest in organic growth and pursue strategic acquisitions. With this, I will now call over to Marie-Helene for her financial review.

Merci, Eric. Good morning, everyone. Bonjour tout le monde. Before reviewing our first quarter results, I am pleased to share that this morning, Singering filed its 2026 Annual Report. The audited results are consistent with the preliminary figures previously reported, except for a $13.8 million reclassification related to the gross net presentation of advertising revenues, mainly arising from the tuning acquisition. This reclassification had no impact on adjusted EBITDA net income or cash flow, but resulted in a favorable improvement to our adjusted EBITDA margin from 30.8% to 34.3%. No other material changes or restatements were made to the previously disclosed figures. We are glad to have this chapter behind us and to move forward. Turning now to our first quarter 2027 results. Revenues reached $158 million in the first quarter of fiscal 2027, up 65.2% from $95.6 million in June 2026. The year-over-year growth was mainly driven by higher advertising revenues from the recent trillion acquisition, along with greater fast-channel sales. Revenues in Canada will decrease 1.7% to $48.7 million in Q1 2027. The year-over-year decline can be attributed to lower radio revenues. Revenues in the U.S. grew 180% to $98.4 million in Q127, primarily due to higher advertising revenues from the twin acquisition, improved fast channel sales, as well as increased equipment and installation sales related to digital finance and the acquisition of cleaning machines. Revenues in other countries remain stable at $10.9 million in the most recent quarter, with greater fast channel sales largely upset by a decline in subscription revenue. Looking at our performance by business segment, broadcasting and commercial music revenues increased 105.2% to $126 million in the first quarter of 2027. The growth mainly reflects higher advertising revenues from the union acquisition, greater fast channel sales, as well as increased equipment and installation sales related to digital signage. For that part, video revenues decreased 6.5% to $32 million in June 2027. largely due to lower local and national airtime revenues and partially upset by increased digital sales. In terms of profitability, Consolidated adjusted EBITDA increased 49.3% to $50.3 million in the first quarter of 2027. Adjusted EBITDA margin reached 31.8% in Q1 compared to 35.2% in the same period last year. The increase in adjusted EBITDA can be attributed to the tune-in acquisition. The decline in adjusted EBITDA margin was largely due to lower gross margin on sales related to tune-in and singing machines, combined with shifts in product mix. By this segment, broadcasting and commercial music adjusted EBITDA grew 75.7% to 42.9 million in Q1, primarily driven by the tune-in acquisition. I just said a bit about how our regular business led by 15% year-over-year to $9.4 million in the first quarter of 2017. The decrease was mainly due to lower revenues, along with changes in sales, not impacting growth margins. In terms of corporate, I just said a bit about it. It amounted to a negative $2.1 million in the first quarter, compared to a negative $1.8 million in the same period of last year. They reported net income of 6.6 million or 10 cents per diluted share in the first quarter of 2027 compared to 16.8 million or 24 cents per diluted share in Q1 2026. The year-over-year decline was primarily due to higher acquisition costs, increased amortization of intangible assets, and unrealized loss on the fair value of derivative financial instruments in the most recent quarter compared to a gain in the prior year quarter. These factors were partially affected by improved operating results. Adjusted net income totaled $27.9 million or $0.40 per diluted share in Q1 2027, compared to $21.3 million or $0.31 per diluted share in the same period in 2026. The increase was due to higher operating results, partially affected by unfavorable variations in foreign exchange and fair value of derivative financial instruments, as well as greater interest expense. Turning to liquidity and capital resources, cash flow from operating activities amounted to $4.8 million in Q1 2027. Compared to $19 million last year, the decline was mainly due to higher negative change in non-cash operating items related to the timing of accounts receivable collection and advertising and greater acquisition costs. These factors were partially offset by improved operating results. adjusted for cash flow total $32.5 million in the first quarter of 27 compared to $18.8 million in the same period of last year. The improvement can be attributed to enhanced operating results and partially upset by higher interest paid. For balance sheet standpoint, Stingray had cash on cash equivalents of $21.9 million at the end of the first quarter and previous facilities of $569.5 million. Net debt at the end of the first quarter of 2027 total 547.6 million compared to 524.1 million in Q4 2026. As a result, our leverage ratio increased to 2.53 times in Q1 2027. The increase in MedDev primarily reflects the repurchase of 1.1 million shares during the quarter for 17.1 million, the settlement of long-term incentive compensation earned by our team in fiscal 2026, The radio line and Westport acquisitions and the timing difference in the collection of advertising revenue. This ends my presentation. I will now turn the call over to Amy.

Okay. This concludes our prepared remarks. At this point, Marie-Helene and I will be pleased to answer your question. Thank you.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-down phone. You will then hear a prompt that your hand has been raised. and should you wish to decline from the polling process, please press star followed by two. And if you're using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from Stephanie Price at CIBC. Please go ahead.

Hi there. It's Sam Schmidt on for Stephanie Price. I wanted to ask around the Q4 revenue restatement. How should we think about the revenue growth rate at TuneIn going forward and the gross versus net accounting. And does this impact the tune-in revenue synergies target?

No. This revenue recognition is with the new rules and the new accounting rules and the fact that we're doing these programmatic sales, which are instant sales, are very complex. So there was only impact for last year. We don't see any impact for this year. No impact for tune-in revenues. It's really a reclass. It's a reclass that for us of $13 million on revenues of close to $500 million. So no impact on that.

Okay, that's helpful. Thank you. And then could we also get an update on the one-rate cost synergies with TuneIn? I believe last quarter they were tracking at around $12 million. And are you still comfortable with the adjusted EBITDA synergy target that you've discussed in the past? And then I'll pass the line. Thank you.

Yeah, right now, in terms of cost synergies, they're pretty much the same than last quarter. We haven't moved it. But for us, the most important number is deposit synergies. The fact that we hit $45 million this quarter and we see that number growing month by month, you know, we're easily going to beat our target that we set ourselves for March 27th. So we sold the market at $20 to $40 million U.S. Right now, we're sitting close to $35 U.S., will easily beat the $40 million over the next few quarters because the synergies are growing on a daily basis on the positive synergy side.

That's helpful. Thank you. Next question will be from Adam Schein at National Bank. Please go ahead.

Thanks a lot. Good morning. So maybe just building on Stephanie's first question, just to be very clear, Eric, we are not to extrapolate 13.8 million times four in the context of reducing F27 current consensus estimates, let's say, right? Those still hold?

Okay. Yes, please. Absolutely. Like I said, it was really reclassification of – it's all about gross and net, and it's all about pragmatic sales and how the contract's written, so it's a lot of detail. and now, as you know, we have the auditors of the auditors. So you have the CPAT that audits the accounting firms. So accounting is getting complex.

The second point of clarification is just on the margin. I don't think you mentioned a specific margin number, but you have talked previously, I think, even going back to the prior call of trying to get to around 35% for F27. Is that still the target?

Yeah, our target is still to go there. The three things right now that affected us in this quarter, our gross margin on what we call the backfill. Our gross profit is low. We're working. Sales increasing fast. We're adjusting every day. And that we're getting better and getting better margin on the backfill. But the backfill is now huge. We are doing, Adam, 200,000 a day USD. So our run rate is $100 million today. that we are selling on Vizio, LG, and Samsung's platform. Last year, we didn't even do 20 million. So that's where we're getting a lot of our growth. But the margin on that product, because we're selling growth and the rev share is growing now, and we're getting better at it every day. The second thing that affected this quarter is singing machine. Singing machine, we don't ship in Q1. So we have negative EBITDA, and then we'll have a positive EBITDA in Q2. That makes a big switch. So for sure the stinging machine, because we sell to retailers, it affects our margin for this quarter.

Okay, so that's helpful. You know, I think going back to the prior quarter, you talked about, you know, try to infuse some of the tune-in programmatic advertising capabilities across the platform. You were starting, of course, with initial traction around FASP. and then ultimately, I think over the next six to 12 months, you're looking to do stuff within retail media and even the traditional radio business. So is that still tracking on plan? Anything you could share on those coming initiatives?

The first is that we're still the only one in the world to do. So we're the only company in the world that's doing audio ads on a CTV. So instead of having a video ad, you get a still image and you get an audio ad. and that really opens up the inventory that we can sell. And now we had one platform that agreed to it. And right now in Q2, we already have our top three platforms agreeing to do audio ads. So that's a really unique, because we're the only one selling that product. So there's no competition. We're not bidding anybody else like we are in the video space. So very happy about that. Also, what's exciting is we hit in June, we hit our programmatic sales tune in and stay together. We hit a high of $550,000 a day. So you do a run rate of that, that's $260 million a year. So we're really doing well. And the last part of the next few months is exciting. So we have new platforms coming on board that we can do backfill. The platforms that have agreed to do audio ads, very exciting for us. And the third thing that's most exciting, we're learning this with the advertising market, but the football season is starting, college football, mid-August. Then the NFL is starting, and with the football season and the sports season, everybody in our space, everybody that works in programmatic sales, we expect to have August, September, October, and hit the record in November with the U.S. Thanksgiving. So we see the next two quarters very strong because we finished Q1 so strong in June. It gives you a good momentum for the next six months. I mean, for us to achieve 27% organic sales is pretty incredible. And we're confident with the margin also will be improving. So we are very, very good momentum for Q2 and Q3 right now.

Thanks, Eric. I'll queue up again. Appreciate it. Thank you, Adam.

Question will be from David McFadgen at ATB Cormark. Please go ahead.

Oh, hi. Yeah, a couple of questions. So first of all, just a clarification on that 27.5% organic growth, is that a pro forma number or is that what you did last year and then you add in the student revenue?

No, no, it's really adding revenue last year plus student's revenue and then your organic growth is on top of that.

Okay, so it seems like it's a pro forma number. Yes. And then, so you talked about selling inventory from some, or for some OEM partners. Can you tell us which OEM partners you were representing in the quarter?

Yes, so for us, we've always said this. We are partners with about maybe 25 OEM platforms on the TV side here. So our top three, the top three that we work with in the U.S., and it's public information, the top three in the U.S. is Vizio. It's LG and it's Samsung. So our goal for us is to do more backfill with them, sell more audio ads, and be better partners. So we're very excited. Most of our programmatic sales still come from the U.S. right now. Europe is starting, Latin America is starting, Canada is doing well, but most of it is from the USA.

Okay. And when you look at the backfill or the... Is the revenue growing because you're just representing more inventory, or are you just getting better sell-through rate, or is it both?

It's really all of the above. You know, Vizio right now is selling a million new TVs a month. So they'll be adding 12 million TVs. So for sure, the TV manufacturers are selling new models, and the TV only lasts four years, so it's much different than selling cars. and then after that we're getting much better at selling more ads which at the end makes our partners more money so we become a big customer of them because we generate a lot of revenues and then after that these partners because we're doing well are giving us more inventory and most importantly they're giving us guaranteed inventory. So it's really a virtual circle of positives and that's why the The premium ad network, you know, we were doing 25,000 a day in Q4, and then after that we grew from 25,000 a day to 200,000 a day. So you can see the growth. So we don't know right now. We can't predict where is that going to stop, but now the momentum is very strong in Q2 and in Q3, and we'll be happy in November to update you of how we're doing on those sales on our CTD partners.

Okay, and then lastly. Maybe you could give us a read on just the fast advertising market because, you know, you talk to some other players in the fast business and they say, you know, the market's kind of tough. But, you know, clearly you're performing the market. So maybe you could just give us an update on just the general market for fast advertising.

Like I said, in our case, because we're having access to more inventory and also because we're the only ones selling the audio ads, the audio ads have been a great success. and so we're taking really the synergies. TwoNave is probably the best audio ad seller in terms of programmatic and now we're telling our customers you can also have an ad on a TV, on a connected TV. So I think that in our case, as we mentioned, the channel this quarter grew by 70%. So this quarter we didn't do plus 20, we did 70% more. So we're really in a strong momentum with the fast jumps. So right now we are on the opposite side because we're getting so much more access.

Okay, thank you.

Thank you, David.

Ladies and gentlemen, a reminder to please press star 1 should you have any questions. Thank you. Next, we will hear from Drew McReynolds at RBC. Please go ahead.

Thanks very much. Good morning. First on the revenue recognition, Eric and Marie-Helene, I absolutely understand the complexity of these contracts and accounting. Just wondering, from quarter to quarter, is the way you recognize revenue evolving Thank you very much. Thank you.

Well aligned with yours, and we're very, very, right now, comfortable, and even for FY2028. So right now, based on the numbers we're getting, if you do the trends, we'll be in an incredible position. On that, a lot of it has to do with contracts, Drew, that were written in 2015, 2018. You read the contract, if it net, if it grows. So right now what we're doing is just re-establishing all our contracts to make sure every contract is clear, all the new contracts with all of our customers are clear. So it's more on that side. So no impact on your revenue guidance or targets for 2027. Okay.

Yeah, no, that's helpful, Eric. Thank you. Second, on the audience-based multiplier model within retail media, can you just flesh that out for us, just how it works and, yeah.

So eventually retail media, and we're not the only ones. All of our peers, Moon Media, other companies in Australia, other companies in Europe, other radio stations, a lot of radio stations want to be able to sell programmatic ads because the market is, the trend is going that way. So I would say that, you know, we are working hard with a lot of our suppliers and with TuneIn to put that in place. We estimate we have anywhere from three to four hundred million of inventory on the retail media side. and now, good news, it's all retailers. Maybe two years ago, they weren't too warm to non-endemic, meaning selling ads that they did not have in the stores. But I think now they're realizing that they're retailers, they're media, they're really media. So now they're letting us sell audio, cars about, ads about cars, ads about, you know, other retailers, like example, Subway is doing ads in Dalai Lama. So now they're accepting to have like a real medium. So that's why we're excited. And I think the multiplier in the next two quarters, we should have a solution for that. And that will open up a lot of doors because we'll be able to open up that market to the programmatic ad people and sell that to the agencies. And I think that will be really a catalyst for that unit.

Yeah, I understand that. And the last one on the M&A environment, can you just remind us, Eric, what that environment in Taekwondo looks like from your perspective and just more broadly where your focus would be on the M&A environment?

Yeah, and very good. So still a lot of companies that are looking to sell and a lot of transactions. So I say right now our first step is You know, we joke in the team, oh, we got an elephant. No, we got a mammoth. We have a lot more synergies, positive synergies to get with TuneIn. Every week, every morning, we do a 9 a.m. synergy call on positive cells. So we have a lot of good, I think we have a lot of food and muffins on the table that we can eat right now before looking at more targets. So we have a lot more, that's it. So we're excited about continuing and having a great Q2, Q3, Q3. and really bring you exciting new synergies with the tune-in acquisition.

All right. That's great. Thank you.

All right, Drew.

This question will be from Jerome Dubreuil at Desjardins. Please go ahead.

Thanks for taking my question. The first one is on the margins. You said you're very comfortable with consensus on all you've done in revenue, but there's a bit of a shift in the profile and margins that we're seeing. I mean, it's very good to see absolutely the growth, but if you can maybe help us on the margin profile you're expecting going forward to go with your double-digit organic growth expectations. Thanks.

Yeah, so again, this quarter, we're getting better. Our sales on backfill went from 50,000 a day in April to and now we're doing $200,000 a day. But you know, don't forget we buy the inventory from Vizio or LG and we resell it. So if we buy at five and resell at eight, then our margin is at 28%. So our goal is really, you know, we have to be, we're getting better and better every day to increase that gross profit margin and sales are expanding quickly. So we're adjusting. and so that's one thing that we're improving on a daily basis and that's why every quarter we're gonna see the gross margin on EBITDA margin growing. I think Q2, Q3. Also big impact this quarter where we had negative EBITDA with Stingy Machine and now Stingy Machine will be shipping in Q2, Q3 and that's also a big impact and what we'll be able to do, I think we'll be able to share with the analysts the impact of Stingy Machine and the gross margin on the backfill but we're getting back towards 25% very quickly in the next few quarters.

That's great. Thanks. The second one I had is on the retail media. You're pointing it out in the press release this morning. You're saying that the ads reach a broader audience rather than a one-to-one basis. If you can maybe explain what that means exactly and if you can provide a timeline on the on meeting those objectives. Thank you.

Yeah. So the issue we have, the issue we have with retail media, with audio, the issue the radio team has, the radio team, you know, we would love to sell programmatic ads, so all radio stations around the world, and in the same situation that X10 Series is, all of the ads, the programmatic ads market right now is seen as a one-to-one. So you sell one audio ad or one video ad, and you expect one person in front of the TV. So the market understands that. Now what we're establishing is a new product, I would say, when you're a retail store, there's not one person listening to an ad, there's a really 50. And I think we're getting very close with a lot of our advertising partners to be able to accept that multiplier and be able to sell the product that way. And we're also working closely with the same multiplier for the radio division. So I think it's very encouraging. It would be a catalyst to increase our sales.

Just to clarify on this, does that mean when you sell an ad in a grocery store, the contract or the pricing works as if there were only one person in the store?

No. If not, the model doesn't work. The model doesn't work. The model only works if you get a multiplier in the store. If not, we do have... So that's why we don't do programmatic sales. Right now we don't do programmatic sales. And don't forget that, Jerome, we were the first company to do an audio ad on CTV. So that just shows you how quickly we've been able to be technology-wise to be able to do that transfer. And most important is to tell our partners, our CTV partners, that we have audio demand. and with the first one seeing the results, we could share with the other partners and I can confirm that all three partners, LG, Samsung and Vizio will be taking audio ads and that's going to be a great growth also for the next few quarters and few years.

Awesome. Merci beaucoup.

Merci Jean.

At this time, Mr. Boyko, we have no other questions registered. Please proceed.

All right. On behalf of the entire Stigler team, thank you for joining us on this conference call. We look forward to speaking with you again following the release for second quarter results in fiscal 27. And again, I always appreciate all the analysts to make themselves available and be there for us. So thank you for your hard work, and thank you for all your reports. And we love reading them. And I'll see you tomorrow. Bonne journée.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.