Good morning, ladies and gentlemen, and welcome to the Stingray Group Inc. Q2 2025 results conference call. At this time, note that 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. Also note that this call is being recorded on November 6, 2024, and I would like to turn the conference over to Mathieu Péloquin. Please go ahead.
Mathieu, thank you very much. Good morning, everyone, and thank you for joining us for Stingray's conference call for its second quarter ended September 30, 2024. Today, Eric Boyko, President, CEO, and Co-founder, as well as Jean-Pierre Trahan, Chief Financial Officer, will be presenting Stingray's operational and financial highlights. Our press release reporting Stingray's second quarter results for fiscal 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 and on 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 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 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. Please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Refer to Stingray's 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.
Bonjour Mathieu, merci Mathieu. Good morning, everyone, and welcome to our second quarter results conference call. We are pleased to report that the revenues for our broadcasting and commercial music business increased 22.2% to CAD 60.9 million in the second quarter of 2025, while the EBITDA for that segment increased 25% to CAD 25 million. Aside from those positive data points, we achieved organic growth, excluding radio, of 15.6% in the second quarter, making four consecutive reporting periods in a row in which Stingray has generated robust double-digit revenue increase year over year. This string of strong organic results, in turn, has brought an enhanced degree of predictability to our profitability, including maintaining a consolidated adjusted EBITDA margin of over 40% in the broadcast and commercial segment. The annual EBITDA run rate basis for that division now stands at CAD 100 million.
Stingray's FAST channels and retail media segments continue to drive growth in the second quarter of fiscal 2025, raising advertising revenues by 66% year over year. Our pilot project with Vizio on the FAST channel side, combined with increased penetration with other TV manufacturers, largely contributed to the significant revenue growth. We also benefit from higher digital equipment installation revenues on new accounts across our North American in-store advertising platform and through our digital signage banking network of locations to boost revenues. On the retail media front, key customer wins at Sobeys, Shoppers Drug Mart, and Metro within our Canadian network should deliver meaningful revenue contributions in the second half of the fiscal year and beyond. Today, our retail ad network truly covers all of Canada, allowing brands to maximize their national reach at point of sale.
Moving on to in-car entertainment business, we recently launched karaoke in Ford Motor Company vehicles, beginning with all-electric F-150 Lightning, Mustangs, Mach-E, while further developments are expected across the Ford and Lincoln fleet. We also secured a similar agreement with NIO for its smart electric vehicle across European countries and expanded our footprint at BYD with an updated version of our karaoke app. In addition, we created our own new revenue stream within the in-car entertainment space through a partnership with Xperi TV by introducing eight new channels on video screens for backseat passengers on the BMW Group vehicle. Key channels within the package include Stingray Naturescape, Holidays cape, ZenLIFE, Qello Concerts, Stingray CMusic, and DJAZZ, as well as the Ultimate Trivia.
This premium offering will be extended to our luxury car manufacturers in upcoming quarters as we position Stingray as the supplier of choice in this market. Consequently, the future looks bright for Stingray as most, if not all, metrics on the management dashboard are pointing upwards. We fully intend to sustain this growth momentum based on an array of highly differentiated music, digital, and advertising solutions that we provide to the global markets. I will now turn the call over to our friend Jean-Pierre for our financial review. Merci.
Merci, Eric. Good morning, everyone. Revenues reached CAD 93.6 million in the second quarter of 2025, up 13.4% from CAD 82.5 million in 2024. The year-over-year growth was mainly due to an increase in FAST channel sales, as well as higher equipment and installation sales related to digital signage. Revenues in Canada rose 1.1% to CAD 48.9 million in the second quarter of 2025. Growth reflects equipment and installation sales related to digital signage, partially offset by a decrease in audio channel revenues. Revenues in the United States grew 52.5% to CAD 32.9 million in Q2 2025 on the strength of higher FAST channel revenues, along with enhanced equipment and installation sales. Finally, revenues in other countries decreased 5.9% year over year to CAD 11.8 million in the most recent quarter. The decline was mainly due to reduced business-to-customer subscriptions and less audio channel revenues.
Looking at our results by business segment, broadcasting and commercial music revenues increased 22.2% to CAD 60.9 million in the second quarter of 2025. The year-over-year growth was primarily driven by higher fast channel revenues and greater equipment and installation sales related to digital signage. Radio revenues, meanwhile, remained stable year over year at CAD 32.7 million in the second quarter 2025, as higher digital advertising sales were offset by slightly lower national airtime revenues. In terms of profitability, consolidated adjusted EBITDA improved 15.2% to CAD 34 million in the second quarter of 2025 from CAD 29.5 million in 2024. Adjusted EBITDA margin reached 36.3% in 2025 compared to 35.8% in 2024. The year-over-year growth in adjusted EBITDA and adjusted EBITDA margin can mainly be attributed to higher revenues. By business segment, broadcasting and commercial music, adjusted EBITDA increased 25.4% to CAD 25 million in the second quarter of 2025.
This growth was largely driven by higher revenues. For its part, Adjusted EBITDA for our radio segment remained flat year over year at CAD 11 million. In terms of corporate Adjusted EBITDA, it amounted to a negative CAD 2 million in the second quarter due to higher compensation paid compared to 2024. Stingray reported a net income of CAD 5.8 million, or CAD 0.08 per share, in the second quarter of 2025, compared to CAD 9.4 million, or CAD 0.14 per share, in 2024. The decrease was mainly caused by an unrealized loss in the fair value of derivative financial instruments and a negative foreign exchange impact, partially offset by higher operating results. Adjusted net income totaled CAD 16.7 million, or CAD 0.24 per share, in 2025, compared to CAD 14.6 million, or CAD 0.21 per share, in 2024.
The increase can be attributed to better operating results and, in the most recent quarter, partially offset by a foreign exchange loss. Turning to liquidity and capital resources, cash flow generated from operating activities totaled CAD 19.2 million in 2025 compared to CAD 19.1 million in 2024. The year-over-year improvement was mainly due to better operating results, largely offset by a foreign exchange loss and higher negative change in non-cash operating items. Adjusted free cash flow amounted to CAD 21.1 million in Q2 2025 compared to CAD 14.6 million in the same period of 2024. The increase was mainly due to higher operating results. From a balance sheet standpoint, Stingray added cash and cash equivalents of CAD 8.6 million at the end of the second quarter, subordinated debt at CAD 25.6 million, and credit facilities of CAD 350.5 million, of which approximately CAD 68 million was available.
Total net debt at the quarter-end stood at CAD 367.5 million, or 2.72 times pro forma adjusted EBITDA. As a result, we remain comfortable with achieving a leverage ratio between 2 and 2.5 times by the end of fiscal 2025. Finally, we repurchased and canceled 333,000 shares for CAD 2.5 million in the second quarter under our normal course issuer bid and 640,000 shares for CAD 4.8 million at the outset of the fiscal year. Given Stingray's current valuation, we believe it's a good use of cash to repurchase our shares to enhance shareholder value. This ends my presentation for today. I will now turn the call back to Eric.
Okay. Merci, JP. Thank you. So yeah, happy also that a lot of the time the analysts would ask us to show growth over multiple quarters. So we were very pleased as management to be able to show to the market four strong double-digit growth in the last four quarters. So this concludes our prepared remarks. I think Jean-Pierre and I will be pleased to answer any questions that you may have.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question at this time, please press star followed by one on your touch-tone phone. You will hear a prompt acknowledging that your hand has been raised. And if you would like to withdraw from the polling process, please press star followed by two. And if using a speakerphone, please lift the handset before pressing any keys. And your first question will be from Adam Shine at National Bank Financial. Please go ahead.
Thanks a lot. Good morning. Eric, can you share a little bit with us in terms of maybe quantifying those new contracts in retail media?
Yeah. So first, one of the big issues we have, and mostly because of the radio team sells ads in stores, and we call it from wheels to aisles. So we'll do a campaign. We'll say, "Put CAD 50,000 in radio and put CAD 50,000 in retail media." The issue we have is our radio team is very much focused on the Maritimes because of our radio and out west. So for us, getting more Canadian-based retailers was important. So Sobeys is a perfect fit. They're from the Maritimes. So Sobeys and also getting, for sure, Shoppers Drug Mart. We're adding both of them as 1,200-1,400 locations across the country. So for the first time, we can say we have a strong Canadian presence, which also gives us access to all national brands.
Is this something? I mean, can you share at all? Is this in the aggregate, potentially CAD 5 million of additional revenues, give or take, or maybe?
Yeah. It's good. We see our growth that we're doing both in retail and FAST. It's just going to give us more push in Canada. For sure, for us, our biggest part of the market is the U.S. But officially now, we can say that we have a national network across Canada. Nobody can say we don't have a national presence. So it was an important milestone for us.
Okay. And then you talk in the press release about maintaining an EBITDA margin of 35%. But obviously, you're tracking above that level so far in H1. And are you really characterizing 35% from the perspective of at least 35%? It's not as though you're pointing to some margin compression in the second half of the year, correct?
Exactly. And again, this quarter, broadcasting commercial did 41, and radio did 30.8. So together, we did 33. So we did 36.3. But broadcasting, we had a lot in commercial. We had a lot of E&L. If the E&L would have been standard, our margin would have been even a point higher. So we would have been at 37%. So we're very comfortable with our EBITDA margins, both in broadcasting, commercial, and overall increasing.
Okay. And just one final one very quickly. Just in the context, we're seeing a lot of movement by the CRTC to try and figure out, A, what Google CAD 100 million windfall can flow into the new system here in Canada. Additionally, there's this local radio news potential relief. Do you get a sense that you're lined up to get something material from some of these efforts?
No. No. We might get a bit of money, but it's not material. Usually, it's one-offs. But for now, we're not seeing anything on our side that makes a big difference. We're happy to see that there's going to be an audio review next year. So audio review, including radio. So that gives us a big win would be to go to four radios per city. But at least that's back in the discussion. So I think the market and the CRTC, the government sees that a lot of people are shutting down the radio stations. They have to be more proactive. Hopefully, the government and the CRTC gets the news.
Yeah. No, I agree with that. Okay. I'll queue up again. Appreciate it. Thanks.
Thanks, Adam.
Next question will be from Aravinda Galappatthige at Canaccord Genuity. Please go ahead.
Good morning. Thanks for taking my questions and congrats on the quarter. I wanted to start in the in-car category. Obviously, you continue to sort of show business development on the karaoke-led offering. But I was wondering, Eric, maybe you can talk a little bit about sort of the broader positioning you hope to achieve in the in-car entertainment segment, particularly on the back of sort of the partnership with TiVo and for BMW. Any thoughts on sort of the longer-term view here and maybe traction in that direction?
No, no. I think that's a key question. So I think the cars are realizing, just like TV manufacturers, that the days of giving away their media center to SiriusXM or to even AM/FM for free, even as a cost center because it costs them money to install, are over. They want to control the media center. They want to be able to sell a premium Wi-Fi package like Tesla does at $20. They want to be able to get advertising revenue, subscription revenue, or even micro payments. So they're looking at any type of way to rake money from their media and not give it away, which is very smart. The good news is I don't think any company in the world is in a better position because right now, most car companies don't do much video on the front. They need audio. So what's audio?
Audio is Stingray Music. Audio is Calm Radio. Audio is karaoke. So we're positioned to be in every car in the world. And I think that we'll see most car manufacturers will have karaoke in their cars, I think, against all parents' wish because the kids will be sitting in the car. And even mics. We're going to see a lot of orders of microphones in a car. So karaoke, music. One of our goals is to provide Stingray Music with ads so we can both share money on the ads subscription-wise. So I think it's exciting times. But the car business, we're talking 2026, 2027, up to for the next 12 years. It's a long cycle. But it's a very interesting discussion, and there'll be a lot of changes.
I think it's going to be interesting times to see what happens to SiriusXM in cars with cars wanting to control their space. And also for us, if we can bring our FAST channel for the back seats, which we did with these cars, is good. The more we get distribution on the FAST channels on different platforms, the more that we can monetize with ads.
Thanks, Eric. And then maybe just quickly switching gears to radio. You continue to be quite stable there, well ahead of the competition or sort of your peers, it seems. Maybe just talk about some of the dynamics there. Is it a case of maybe some of the auto segment coming back? Is it market share gains? Maybe just talk to where you're seeing that where you're deriving that stability.
Yeah. Our radio station, we are outperforming our peers. Our peers are down 10%-15%. We're stable almost. No, we still feel that we can be positive in the 2% range. The three things that we do very well, and with the team, we're investing a lot in the local sales team. We have the best local sales team. In most cities, we outperform our viewership in sales. So let's say we own 40% of the viewership in Halifax, but we'll get 60% of the advertising revenue. So for sure, we're winning. Second thing, we're very strong on a digital front to offer our customers a digital product. And third, like I was mentioning to our friend before, we're having our sales rep sell the audio in our stores in the retail network in Sobeys, in Metro.
So that gives our reps in any city a unique selling proposition that nobody else can offer. So I think that slowly putting that together, radio can become and will become a positive organic sales business.
Thank you. I'll pass the line.
Okay. Thank you, sir.
Next question will be from Scott Fletcher at CIBC. Please go ahead.
Good morning. Really strong growth in the advertising businesses again. Hoping you might be able to provide a little bit of a breakdown between the contribution from FAST and retail media like you have in the past?
Yeah. You know what? That's something that is getting bigger and bigger. And I agree with you. It is a bit confusing. The fast channels, because we get the revenues on a net basis, have a high, high EBITDA margin because you're taking it from net. And by nature, retail media, we share a good percentage with the retailer. So that one is on net and the other one's on gross. So it's something that we're looking to on GP in the future. The numbers were small before to divide, but in the future, we'll have to divide both because one is running at 80% EBITDA margin and the other one's at 40% EBITDA margin. But at this point, we did well in the first half so far this year. I think we're up 80%. Incredible.
We usually tell the market we want to be up 40%. So I don't think the 80% is sustainable for the rest of the year. Last year, we had a very, very strong retail media sales in the States with all the vaccines in Q3. But again, for the year, we're comfortable to keep on growing above 40% for the year. Q3 might be a bit slower because last year was just an incredible quarter. I think we were up 70%. But again, the trends are good. And the fast channels by itself, we can talk more, but the fast channels. It's Samsung reported. They now have 88 million active listeners in the U.S. They're growing by 50%. Now, we're having dinner with Roku, Pluto, LG, Samsung, Vizio. And everybody's saying the likes we're in a business that the like is growing. Everybody is making more money.
What's happening is we're getting the audience from the traditional cable side. And there were 70 billion U.S. events in the U.S. on the good old NBC, ABC, and those channels. And now all of that money is going. It's not new money. It's money that's going to the FAST channels. And if you see on our launches, Stingray is launching with a lot of new partners in many new countries. We're going to monetize better. We're getting better at it. And we're also launching a lot of new products. So you'll see in the next press release. So it means more product, more launches, more platforms. And each of the platforms are doing better. So we see growth in the FAST channel. And I said that to the board for the next 8-16 quarters. So this phenomenon is not going to go away.
All right. Lots of good stuff in there. Is there anything, any update you can share on the run rate of the viewing hours? I think last quarter, you said there were sort of you exited at a 55 million hours.
Yeah. I think we had, again, a very good growth coming about CAD 59-60 million. And we keep those numbers growing with more launches of products, like I said, and better monetization. So year over year, the number is huge. I think we can share with you on a one-on-one or with the investor deck.
Okay. Thank you. Appreciate it.
Thank you, Scott.
Next question will be from Jérôme Dubreuil at Desjardins. Please go ahead.
Hey, bonjour, tout le monde. Thanks for taking my question. Another one on FAST. Good growth there, it seems. I guess the question from a longer-term perspective is how sustainable is this business overall? You just shared numbers on the hours of listenership, which shows good growth. But maybe if you can talk about your ranking versus other content, whether there are emerging players in this market and questions like this. Thank you.
Yeah. It's interesting, Jérôme. Stingray is probably right now the number one broadcaster on all fast platforms. If you take on Samsung, we have over 20 different channels, including the audio channels. And I think we're going to be adding six to eight more channels before the holidays. We're launching more channels on Roku. We're launching more channels on LG. We're launching more channels on Pluto. We'll be launching three more new channels on Vizio before the end of the month. So it's tough. We don't get the information. Don't forget, they're the ones selling. They have the stats. They don't share with us the stats. We created a group of broadcasters to try to share information, but we don't have all the exact data.
But for you, as an analyst, as long as we can keep on adding channels, platform growing, adding new platforms, and adding new products, all that is, there's a direct correlation with number of hours, and then they're able to sell better. Some of our partners, their fail rate is at 95%. So we're always impressed, but some of our partners are doing extremely well and are getting to be very effective at the waterfall. But the issue is we're B2B. The issue with B2B, it's not a B2C product. And for sure, you can imagine Samsung will not share us who their customers are. So there'll be a bit of work there. Does that answer the question, Jérôme? We're a bit foggy.
It does. No, that's helpful. Thanks. Second one for me, we're getting close to the higher end of your leverage range objective. Does this mean you're starting to maybe change the way you think about capital allocation, or we keep going at this point?
No. I think Q3, Q4 very focused. Discussions afoot. We want not only to bring down our debt-to-EBITDA ratio, but we also want to deleverage our balance sheet, so we want the debt ratio, the debt load to come down nominally. And we'll see. We grew so fast this quarter. We have a lot of receivables coming. The FAST channel partners do pay us in 120-180 days. So it's great. We'll get paid, but we got to get into that cycle. Once that cycle comes in, then we'll see that cash flow, so that's why we feel very good in Q3 and Q4. And I think we're going to be well below 2.5, close to 2. Once we get to 2, then we'll sit down on an analyst call when we speak one-on-one and establish what is the best strategy. We are looking at some acquisitions.
The market is becoming more flexible, so I must say before it was the market was a bit highly valued. One of our issues we have, Jérôme, is our stock price increases, but our EBITDA increases faster than our stock price, so our EV, our EBITDA to EV ratio keeps getting lower, so that hopefully one day you guys can work that out, but no, I think we're very confident about our debt and to be close to two times that EBITDA, and from there, we'll adjust.
Yeah. We are noticing the EBITDA growth. Thank you.
Merci, Jérôme.
Once again, ladies and gentlemen, if you have any questions, please press star followed by one on your touch-tone phone. Next is Tim Casey at BMO. Please go ahead.
Thanks, Eric. Could you talk a little bit about in-store audio in the U.S., how that business is going? In the past, you've talked about how you really have to educate the market on that, and you didn't call it out as a growth driver on the advertising line. It seems like it's all FAST, so maybe just some color on what's happening with that business. Thanks.
Please unmute, Mr. Péloquin. Mr. Péloquin, can you please unmute your line? We are unable to hear you at this time. One moment. Please stand by.
Use webcam button.
We can hear you now, sir. Please go ahead.
Okay. Boss? On the hinge. Are you back, Tim? I'm here. Okay. Sorry about that. No, no. I was speaking to you, and nobody touched anything. So maybe it's just amazing results that even the machine is too happy. Okay. Yeah. So Tim, for the U.S. revenue, I agree. We're not seeing the same increase in sales right now because we grew a lot in the last two years. And also, it takes time to evangelize the market. It's really a lot of work to get the P&Gs to get on board. So hopefully, with time, we'll be able to because we do have the network in the U.S. And our inventory in the U.S. is in the hundreds of millions of dollars. So we have a lot of sales that we could increase. And we're also looking at new partners like we're doing in Canada.
I think you're going to see announcing new partners that will help us help sales like audio radio stations in the U.S. with their sales rep selling in retail stores. So you can imagine the two big broadcasters in the U.S. that we're looking to talk to and work with them. Thank you. Okay. Sorry, Tim, about that.
Thank you. And at this time, we have no other questions registered. Please proceed.
All right. Hey, sorry again for the phone line on behalf of the entire Stingray team. Thank you for joining us today on this conference call. We know that the analysts are always busy. We know everybody's busy. Everybody reports in the same two weeks. So we look forward to speaking to you again following the release of our third quarter results in the cold month of February. So merci, tout le monde. Have a nice day.
Thank you. Merci. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Have a good day.