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 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 7, 2024. I would now like to turn the conference over to Mathieu Péloquin . Please go ahead.
Thank you. [Foreign language] 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 Boyko, President, CEO, and Co-Founder, as well as Jean-Pierre Trahan, CFO, will be presenting Stingray's operational and financial highlights. Our press release reporting Stingray's first quarter results for fiscal 2025, 2025, 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, as well as SEDAR+. 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 risks 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 4, 2024, which is available on SEDAR+. 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 are advised not to place undue 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 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.
[Foreign language], Mathieu. Good morning, everyone, and welcome to our first quarter results conference call. Stingray opened fiscal 2025 with a robust sales contributions from Retail Media and FAST channel as advertising revenues nearly double year-over-year. Retail Media revenues grew more than 55%, quarter of 2025, and FAST Channels revenues soared into the triple-digit range to deliver unprecedented growth in advertising revenues. As a result, we have achieved a remarkable organic growth of 17.1% year-over-year in broadcast and recovering commercial music revenues. On the FAST Channels front, it would significantly reach a run rate of 55 million listening hours per quarter. We're leveraging strong relationships with partners like Samsung, LG, and VIZIO to capture market share.
We have recently signed an agreement with Roku Channel to introduce TikTok Radio, Qello Concerts, and two exclusive Stingray music audio channels to the American and Canadian audiences. As a result, we are highly confident about doubling FAST channels revenues this year. From a management's perspective, it is highly stimulating to see our business firing on all cylinders. For example, our in-car audio entertainment unit, 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 20.5% to CAD 56.9 million in the first quarter, while radio revenues improved 1.3% to CAD 32 million as we continue to outperform the industry with expanding revenue streams from digital solutions. Following the quarter end, we acquired The Coda Collection, a leading streaming platform that showcases iconic moments in music history through storytelling. The Coda Collection, which is available on Prime Video Channels in U.S. and U.K., 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 services such as Qello Concerts, Stingray Karaoke, Stingray Classica, and Stingray Jazz.
Looking ahead for the rest of fiscal 2025, we will remain focused on generating outsized 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 2-2.5x 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, which reflects our dedication to transparency and responsibility, represents steps towards a promising future for Stingray. I am highly optimistic about the transformative impact initiative we will have overall on our business, because it has created a positive feedback loop within the organization.
Adding the support to our annual rotation will make us more knowledgeable about ESG matters, and therefore better equipped to enact meaning, meaningful change. Stingray 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 our financial overview.
Merci, Eric. Good morning, everyone. Revenues reached CAD 89.1 million in the first quarter of fiscal 2025, up 12.8% from CAD 79 million in Q1 2024. The year-over-year growth was mainly driven by an increase in fast channel and retail media advertising revenues. Revenues in Canada improved 2.7% to CAD 49 million in the first quarter of 2025. The growth can mainly be attributed to higher equipment and installation sales related to digital signage. Revenues in the United States grew 46.5% to CAD 28 million in the Q1 of 2025, and the strength of the greater fast channel and retail media advertising revenues. Finally, revenues in the other countries decreased 4.2% year-over-year to CAD 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 performance by business segment, broadcasting and commercial music revenues grew 20.5% to CAD 56.9 million in the first quarter of 2025. The year-over-year growth was primarily due to an increase in FAST channel and retail media advertising revenues. Radio revenues, meanwhile, improved 1.2% year-over-year to CAD 32.2 million in the first quarter of 2025. In terms of profitability, consolidated adjusted EBITDA rose 9.9% to CAD 31.1 million in the first quarter of 2025, from CAD 28.3 million in Q1 of 2024. Adjusted EBITDA margin reached 34.9% in Q1 2025, compared to 35.8% in the same period.
The increase in adjusted EBITDA year-over-year can be attributed to higher revenues, while adjusted EBITDA margin declined due to the revenue mix and a lower margins for retail media advertising. By business segment, broadcasting and commercial music adjusted EBITDA increased 15% to CAD 23 million in the first quarter of 2025. The growth was mainly due to higher revenues, partially offset by greater operating costs. For its part, adjusted EBITDA for our radio segment remained stable year-over-year to CAD 9.9 million in the first quarter of 2025. In terms of corporate, adjusted EBITDA amounted to CAD -1.8 million in the quarter due to higher compensation compared to the corresponding period. Stingray reported a net income of CAD 7.2 million or CAD 0.11 per share in the first quarter of 2025, compared to CAD 14.1 million or CAD 0.20 per share in Q1 2024.
The decrease was mainly caused by an unrealized loss in the current period on the fair value of derivative financial instrument, 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 2025. Adjusted net income totaled CAD 13.9 million or CAD 0.20 per share in Q1 2025, compared to CAD 11.9 million or CAD 0.17 per share in the same period of 2024. 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 CAD 10.8 million in the first quarter of 2025, compared to CAD 24.3 million in Q1 2024.
The decrease was mainly due to a higher negative change in non-cash operating items, greater income taxes paid, and to a 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 2025. Adjusted free cash flow generated in the first quarter of 2025 totaled CAD 15.5 million, compared to CAD 18.5 million in the same period of 2024, in 2024. 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 equivalents of CAD 9.2 million at the end of the first quarter of subordinated debt of CAD 25.6 million, and the credit facilities of CAD 345.9 million, of which approximately CAD 46.9 million was available.
Total net debt at the quarter end stood at CAD 362.3 million or 2.77 times pro forma adjusted EBITDA. Finally, we repurchased and canceled 307,000 shares for a total of CAD 2.2 million in the first quarter under our Normal Course Issuer Bid. This ends my presentation for today. I will now turn the call back to Eric.
... Okay, great! Thank you, JP. 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.
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 speakerphone, 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.
Morning, Eric. So, the FAST channel ramp looks to be a function of, you know, you're adding additional services with relationships and, I think you're—you know, 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, you know, even getting some improvement to pricing?
Yeah, retail media is just about, again, evangelizing the market. This year, we expect about 20% growth in retail media, but it's really about, 90% of our customers return, or 95%, so that's, you know, even higher than that. But it's really about evangelizing the market about this new platform. So, it's a lot of, 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.
When you look at, you know, you're obviously delivering some evolving improvement to top line growth, mix, 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?
It's so quickly, you gotta do you know, when we do retail media, as you know, we have a rev share with our partners. So your gross profit, you know, if you have a rev 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 the 42%.
Okay, very helpful. And then, just lastly, you know, you said on the last call that you thought radio was going to be growing 2%-4%, let alone even more. You know, we got, you know, sub 1.5% this quarter, which is still significantly better than what your peers are delivering. But are, are you, are you looking to see an improvement over the course of the rest of the year from the Q1 results, or-
Yeah, good.
There's other tempering developments?
Yes. So for us, the big thing for us on the radio side is having the radio team sell ads in retail media. So, you know, we'll do a package of radio plus retail media. So that for us is a new vector. We started the 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 got tougher, tougher Q2, but they're confident for Q3 and Q4 to remain positive.
Thank you for that. Appreciate it. Thank you.
Thanks, Adam.
Your next question comes from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.
Good morning. Thanks for taking my question. Congrats on the quarter. With respect to retail media, Eric, I don't know if you can sort of elaborate a little bit about, you know, what proportion of the growth is coming from repeating, you know, ad customers, you know, perhaps coming back with larger, larger campaign sizes, and how much of it is coming from, sort of new customers? Any help would be, you know, be appreciated on that front. And then secondly, perhaps for JP, you know, given, you know, growing expectation that interest 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.
Okay, yeah, 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, keep on recurring. So, I think it's a very good question. JP, for the credit line and the credit mix?
It's easy, you know, the board asked us to be fixed for 50%, so the sub-debt is fixed, and
... we did swap for the balance. So, so 50% will be available for a rate reduction in the coming months, coming quarters.
Thank you. I'll pass the line.
Your next question comes from Drew McReynolds of RBC. Please go ahead.
Yeah, thanks very much. Good morning. Two for me. First, on the advertising side, clearly, Eric, a strong start to the year, and, you know, I think you were targeting roughly kind of 40% advertising growth for fiscal 2025. We're a little cautious just on the laws of big numbers 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, in bringing new customers on versus, you know, where you would have been a year or two years ago. Only from the perspective of, you know, clearly this, this channel becoming, you know, more known as, as an effective, platform to advertise on. But, but we'd love to kind of hear your thoughts on those discussions. Thank you.
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, no, 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 5%-10%, we're + 1.5%.
We expect this quarter, which will be more difficult, we'll know 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, next couple of weeks that will really help us 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, you know. 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 time we'll bring some ads, and the retailer will say, "No, I don't want this ad." So we got to 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, it's gonna be a long-term business.
That's great. Thank you very much.
Thank you, Drew.
Your next question comes from Jérôme Dubreuil of Desjardins. Please go ahead.
Good morning, everyone. Thanks for taking my questions. The first one is on FAST. Kind of word it differently from Adam, but it 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?
A very good question, Jérôme. So now we're really seeing good growth, and we're launching new products with Samsung, and 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 our sales this year, and with, maybe with some new platforms, even better than that. So it's, it's an exciting model.
As you know, also, every cable company in the world, from Comcast to Bell, Rogers to Verizon, to in Europe, are also launching FAST channels. So, 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, Jérôme.
That's great. Thanks. And then on the margins, dynamic, now, obviously, you had a very strong quarter in Retail Media. It's gonna probably go back to a bit more normalized growth next quarter. Given the, the revenue mix in, in the next quarter, should we be anticipating, maybe a better, better trend in terms of the margin growth, year-on-year, next quarter?
... Yeah, so really, you know, we, as you know, retail media, we, 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%-40%, but we should be back at 42%. 42% is what we're aiming for as a EBITDA margin.
Great. And then maybe one last for me. You've been launching a lot of, a lot of new products and 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.
You have a technology team.
Yeah. So for right now, we're 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, you know, 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 is doing mics. BYD 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 it's. I think it'll be a very sticky product. And also, every car manufacturer is looking for Stingray music. They would love to have their own, you know, GM, Ford, Toyota, you know, 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 car radio. So it's gonna be interesting, Jérôme, in the next six months to see how many of these applications are launched. And for sure, that's where even we had 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, you know, 4-12 years because you started with zero cars or very little cars. And a bit like BYD, you build every year, but it adds on.
That's great, Eric. [Foreign language]
[Foreign language], Jerome.
Your next question comes from Scott Fletcher of CIBC. Please go ahead.
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, you know, added to the growth as expected? Just sort of an overall summary of how the year's been since the partnership was announced.
Yeah, it's been a good partnership because both of us, you know, again, we're both of us are working hard to evangelize the market, so better to be two than just to be one. So that's the 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 CAD 8 million of cross-selling that we're doing on each other's platform. So it's been a good partnership, and also, it also brings a lot of stability to the market.
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 for in the Q1, or how should we think about the rest of the year? If you could add any color there.
Yeah, yeah. Well, that should be about the run rate. You know, we expect to do about CAD 24 million this year, so, and we did CAD 6 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 the stores and the retailers develop their internal advertising in their location.
The answer is yeah, comfortable with the CAD 6 million quarter.
Okay, thank you.
Thanks, Scott.
Your last question comes from Tim Casey of BMO. Please go ahead.
Yeah, thanks. A couple from 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 U.K. and the U.S. now. Is the goal there to drive that across Prime internationally? Like, what was preventing 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, you know, what sort of, sort of thresholds do you need to kick in the CAD 9 million earn-out or CAD 8.5 million, whatever it is? Thanks.
Thanks. Tim, so quickly, you know, a good for sure, pharma is a huge customer in the U.S. 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, that's where the pharma, it's a for them, it's been a no-brainer. The recurring with them is 100%. And as long as there's vaccine and there's Shingrix and all these other different types of solution, it's strong. For us, it's all the P&G, it's all the Procter & Gamble type of customers that we're growing.
We hired a lot of people, that's our number one focus, is how do we drive those consumers? And the third part, which is getting interesting, is the retailers are accepting non-endemics. So we're, we're getting a lot of car companies promoting in stores. And the retailers are getting more used to, "Okay, let's, you know, there's nothing wrong with having a Volkswagen ad, you know, in a Metro or in a Loblaws." So there, with the non-endemic, that, that market for us is unlimited. So, that, that's, that's interesting for us, and the same for the U.S.. So that's for your, your first question. For Coda, Coda, Tim, a very small tuck in, we paid it twice, twice EBITDA. We expect an EBITDA $600,000. So very small tuck in, very happy.
For the U.S. and U.K., we'll expand Coda. But it's really there was two companies that did concerts as well. So for us, merging with them was very complementary. And yeah, the actual owners, their cost structure was just too high for that size of company. So that's why we're, you know, where 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.
Thanks, Tim.
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.
Okay. 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 to speaking to you again on the release of our second quarter results. [Foreign language]
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.