Ladies and gentlemen, thank you for standing by, and welcome to Stingray Group's First Quarter twenty twenty six Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. I will now turn the call over to Matthew Peloquin. Please go ahead.
Thank you. Good morning, Bonnathri and Atos. Thank you for joining us for Stengeri's conference call for the 2026 ended 06/30/2025. Today, Eric Voigtko, President, Chief Executive Officer and Co Founder and Maggie Renz Flumier, Interim Chief Financial Officer, will be presenting Stingray's operational and financial highlights. Our press release reporting Stingray's first quarter results was issued yesterday after the market closed.
Our press release and D and A and financial statements for the quarter are available on our investor website at stingray.com and on Sutter plus 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 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 06/10/2025, which is available on SEDAR 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, 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 Singway's MD and A for a complete definition and reconciliation of such measures to IFRS financial measures. Finally, let me remind you that all lines on this call are expressed in Canadian dollars unless otherwise indicated.
With that, let me turn the call over to Good morning, everyone, and welcome to our first quarter conference call of fiscal twenty twenty six. Stingray opened the fiscal year on a strong note with organic sales of 12.5% in broadcast and recurring commercial music. Revenues growing double digit for the first time for the fourth time in the last five quarters, mainly driven by continued strength in fast channel revenues.
Our new premium advertising network is already delivering strong results. Launched just last quarter, launched in April, to monetize unsold fast channels ad inventory, we have already sold over 20% of the available hours, which is giving us about 1,500,000.0 a month or 18,000,000 a year. We feel that we can reach 60% field rate, so we could triple that momentum in the next quarters coming along. We expect this momentum to accelerate as we onboard strategic DSPs partners in The U. S.
And internationally. We also recently launched six new fast channels on Watch3 plus visuals free streaming service. This expansion significantly increases Stingray's offering on the platform, providing video customers with a wider array of curated musical experiences. Looking forward to our strategy to grow the fast channel business is straightforward and focused on three areas. First, we will deepen our partnership with established leaders like Vimeo, Samsung, LG by selling our channel portfolio on their platform and also get more backfill rights to sell the on stone inventory.
Second, we will secure a new distribution deal. We'll achieve this by leveraging our greatest competitive advantage, our world leading music lover to attract new TV manufacturers and other partners, like we did last week or two weeks ago by launching six channels on Roku, which we're very happy. And third, we will maximize the value of our ad inventory by using the premium advertising network to accelerate monetization across the entire fast ecosystem, which means that we will increase our fill rate of 20% and try to bring it closer to 60%. So very excited on those three initiatives. On the Retail Media side, we delivered a solid performance in the first quarter, in line with our expectation and our budget by continuing to diversify and deepen our advertiser base.
As a reminder, retail media sales has increased 53% last year in the quarter due to large pharmaceutical orders in the same period last year. In the '26, we will generate 40% revenue growth for our Singer advertising business, which combines fast channels and retail media revenues. We are targeting the same amount for Q2. And depending on the backfill rates and fill, we have a lot of potential there. So for us to see, but again, it's a new business that started in April.
Turning to another part of our business, we introduced music and MVN channels to Samsung's visual experience transformation platform last month, which is called the VTX platform. It's a glass based content management solution that enables suppliers like Stingray to create and distribute content remotely through B2B screens, including digital menus, kiosks and signage. Cengage is the first company to offer a dedicated music application on this platform. This new revenue stream will be recognized under our subscription revenues. Finally, we experienced some project delays related to the installation of initial signage during the first quarter that has been pushed revenue finishing into the current quarter.
Our budget is to make $7,500,000 a quarter. This quarter, did $4,500,000 but in Q2, we expect to do 10,500,000.0 So we'll be on our budget of $15,000,000 for the first two quarters. So just a question of timing, and that's the issue with the equipment and labor. We are increasingly securing large long term contracts with institutional players like banks, for example, the timing of installation can be effective. This these timing promises our interest from achieving robust financial results in the '6.
We delivered consolidated adjusted EBITDA of $33,700,000 or 35.2% of sales on revenues of $95,600,000 I also want to recognize the outstanding performance of our radio division. The team delivered an exceptional quarter that we haven't seen in many years. Once again, outperforming the market. They grew revenues by 6.2% and expanded adjusted EBITDA by an impressive 11%. For sure, this was helped by the elections in Canada in April, assets of Singing Machine Company, which was our first karaoke partner in 02/2007, with a primary goal to bolster our in car karaoke offering.
By accompanying the renowned hardware and our extensive karaoke library and global distribution network, we will enhance the at home and in car karaoke experience from millions of fans. We see tremendous potential in developing new microphone technology, especially for expanding in car entertainment market, creating exciting new opportunities for growth. From a financial standpoint, this acquisition immediately enhances our revenue base. We expect to generate 20,000,000 in annual revenues with a target EBITDA margin of 10%. Given the timing of the acquisition, its premium contribution for the current fiscal year will approximately $15,000,000 The thing we management is very, very aggressive and that when we think that in the next five years, every car will have karaoke and to the detriment of a parent, there will be mics in the cars and your kids will be singing while you're driving.
So good luck. In closing, Jean Charre, former Premier of Quebec and Deputy Prime Minister of Canada has been nominated to Stingray's board of directors. During our annual general meeting, we will we will that we will have today, mister mister Charret will stand for election. Should he be elected, mister Charret's wife council will be invaluable for to Stingray's base on his disciplined career and public service. His extensive experience in public policy and international business and his deep understanding of the game landscape is important.
It also sits on a number of Boards of Directors, including the Board of Publicis Group and the largest communication company in the world. Finally, Francois Gerard, Co Founder of Stringway and Director since 02/2007, has provided the Board that he will not stand for reelection on the upcoming annual meeting. We are grateful for Mr. Cairua's cooperation spirit and strategic insight, which has helped position Stairway for success in the evolving media and technology industry. We wish him all the best in the future.
Now I will turn you to Marie Lynn for a financial overview of our first quarter. Marie?
Thank you, Alex. Good morning, everyone. Revenues reached 95,600,000.0 in the '26, up 7.4% from 89,100,000.0 in Q1 twenty five. The year over year growth was largely due to an increase in fast channel, partially offset by lower retail media advertising revenue. On the digital signage front, we saw a slight shift in project timing with a few installations moving from the first quarter into the second.
This is purely a timing variance, and we expect to recognize the associated revenue in Q2. Revenues in Canada rose 1.1% to 49,500,000.0 in the '26. The growth can be attributed to an increase in revenue driven by higher airtime sales and digital sales, partially offset by a shift in timing of certain digital signage projects that reduced E and L and solution sales. Revenues in The United States grew 25.8% year over year to 35,200,000.0 in Q1 twenty six, reflecting greater past channel sales, but partially conquered by less retail media advertising revenue. Revenues in other countries decreased 9.5% to $10,900,000 in the most recent quarter.
The year over year decline was primarily caused by lower in store commercial revenue and reduced other channel sales. Looking at our performance by business segment. Broadcast and commercial music increased 8% to 61,400,000.0 in the '26. The growth was primarily driven by greater fast channel sales, partially offset by lower retail media revenues and timing variances in e and l. For their part, video revenues improved 6.2% to 34,200,000.0 in Q1 twenty six, mainly due to higher airtime sales and digital sales.
It should be noted that we consider this increase extraordinary and are still targeting low single digit revenue growth for the full fiscal year. In terms of profitability, consolidated adjusted EBITDA rose 8.3% to $33,700,000 in the '26. Adjusted EBITDA margin reached 35.2% compared to 34.9% for the same period in 2025. The growth in adjusted EBITDA and adjusted EBITDA margin was mainly driven by higher revenues, partially offset by lower gross margin due to product mix and greater operating expenses related to increased sales. By business segment, Broadcast and Commercial adjusted EBITDA grew 6.5% to 24,400,000 in the 2026.
The year over year increase can be attributed to an improved gross margin on higher revenues, partially conquered by an unfavorable product mix and greater operating expenses. Adjusted EBITDA for our revenue segment rose 11.2% to $11,000,000 in the 2026. Similarly, the year over year increase can be credited to a better growth margin on higher revenues along with disciplined control over operating expenses. In terms of corporate adjusted EBITDA, it remained stable at a negative 1,800,000 in the first quarter. Singular reported net income of $16,800,000 or $0.24 per diluted share in the '6 compared to $7,300,000 or $0.11 in Q1 twenty twenty five.
The increase was mostly driven by an unrealized gain in the '6 compared to an unrealized loss in the '5 on the fair value of derivative financial instruments, along with higher operating results and the foreign exchange gains. These factors were partially offset by the higher performance and the deferred revenue unit expense related to an increase in the corporation share price. Adjusted net income totaled $21,300,000 or $0.31 per diluted share in Q1 'twenty six compared to $13,900,000 or $0.20 in the same period in 2025. The year over year increase was mainly due to higher operating results, a positive foreign exchange impact and an unrealized gain in the '6 compared to an unrealized loss in the '5 on the fair value of derivative financial insurance. Turning to liquidity and tax value process.
Cash flow from operating activities totaled 19,000,000 in q one compared to 10,800,000.0 in q one twenty twenty five. The year over year increase can be attributed to a lower negative change in non cash operating items, higher operating results and the foreign exchange gains. Adjusted free cash flow amounted to $18,800,000 in Q1 'twenty six compared to $15,500,000 last year. The increase was mainly driven by higher operating results and lower interest rates. From a balance sheet standpoint, Sperry had cash on cash equivalent of 11,500,000.0 at the end of the first quarter and a credit facility of $237,400,000 The credit facility consists of a $500,000,000 revolving credit line, of which $160,800,000 was available.
Total net at the end of the '26 stood at twelve months, our leverage ratio improved to 2.24 times at the end of q one from 02/1928 times in the previous quarter and from 2.77 in the same period last year. Based on our current outlook, we are confident in our plan to bring our leverage ratio below two times by the end of this fiscal year. A strong balance sheet is a key priority as it provides the foundation to accelerate our growth both organically and through strategic acquisitions. Finally, we repurchased 242,000 shares during the first quarter under our current NCIB program for a total of 3,100,000.0. We also made dividend payments of $5,100,000 to reward shareholders.
This ends my presentation. I will now turn the call over to Eddy.
Okay. Martin, very good presentation. I think now we're open to the questions from our fantastic analysts. So to you guys.
Thank you, ladies and gentlemen. We will now begin the question and answer Should you have a question, please press the star followed by the one on your touch tone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any case. And your first question is from Jerome DeBrill from Desjardins.
The first one is on the backfill opportunity. Thanks for the disclosure there. And as you said, you can achieve 60% at some point. Does it mean the annual $18,000,000 goes to $54,000,000 or maybe there are pricing considerations there and maybe on the timing to achieve that 60%?
Yes. So that's a very good note. So for us, so we don't it's very you do a budget and you have zero. So we have zero for the backfill in the budget. We started with one with we we never really asked for the rights to sell the on store inventory.
At the end of the day, the big players, Vizio, LG, Samsung, Roku, sell about 40% of the inventory. And the other 60%, we lose it. It's like radio. So we started asking some of our partners that if we could start with some DSPs and partners to sell the backfill. We started that on April 1, and our current run rate is 1,500,000.0 a month or 18,000,000 at 20% fill rate.
So our objective, our number one objective is to triple that fill rate to 60%, which will bring us to a $50,000,000 business. And it's a bit like the sausage, the more the more high grade sausage you sell, the better they are and the more you the more you sell them, it's a bit of that combination. And our goal, and I think we're attracting a lot more supply. So our number one objective is to convince the three other partners or the four other partners that we want to do backfill rates, right, which we are establishing right now and to get more supply. So to be able to increase our fill rate, that will increase our supply.
And I must tell you something, I was telling the board yesterday, the depth of the lake of the TV ad is like Lake Bacay in Russia. It's a very deep lake. At the end of the day, what we're providing and our advertisers is Olive Garden, Gecko Insurance Company, Procter and Gamble, the cars. The same ad you see on ABC, CBC, NBT in The US, they wanna reach households. They wanna reach your home, but they can't because people are watching Netflix and other and other systems.
So we're providing those advertisers via different DSPs access to our unique viewership. So it's really exciting. And I must say this, I don't see how deep the rate is so deep that there's a lot of potential there. So we just started. This quarter, we did an 18,000,000 run rate.
We'll see next quarter, we're improving week by week. We're also we added ad tech people. Don't forget, Stingray advertising, which was zero three years ago. We finished last year at 80,000,000. So it's a huge growth, and we expect this year again to grow by 40% in Q1 and Q2.
But the backfill rate, the supply, and we've been getting supply from other partners that are asking us, can you help me sell on other channels. So very exciting for us, I'm a Sage Home. I've never seen growth in my life of a business segment like this. And this is based on right now we have 1.25 employees working on the back. We have the whole company working on it, but we only added one headcount and a part time consultant.
So we'll be adding more people, adding more technology, getting better at it, and we're aggressively going to New York every week now. And I'm also going to New York tomorrow, meeting different DSPs and demand providers. So a very exciting world, this programmatic system and excited what we can do over the next few quarters. So but I'm to establish our run rate right now, 1,500,000.0 a month.
That's excellent to hear. Eric, second one for me is on capital allocation. I think you and Marielen mentioned that you're targeting to be at two times by the end of fiscal year. At the same time, I'm thinking about the M and A comments you made on the last earnings call talking about potential very large deal. If you can provide maybe an update on this and maybe on the likelihood this happens, are you thinking about it with the target leverage at the end of the year?
Yes. And I would say with our friend, Donald Trump and all the tariffs and the uncertainty, it really put all of the big deals on standby. The dollar is moving. There's a lot of uncertainty. And you can imagine, including us, management, our Board, everybody is more on the conservative side.
Agree, we feel our debt EBITDA will be below two by December and will be well below two by March. So we're the cash is really coming in strong even this quarter. So good news. So now our focus is more like the small tuck ins. So we did a nice tuck in this week, 20,000,000 of revenues, that's still 5% revenue increase, again, very affordable price.
And then we have two more tuck ins. Our tuck ins are concentrated on two segments right now or three segments. The tuck ins are focused on cars, like what the semi machine for the mic. And also you'll see some other acquisition in that segment. And the second one is to expand our retail media network in The U.
S. So very focused on it, very good tuck ins. And right now to be straightforward, we have so much potential with the backfill and to get more supply and on the fast channels that it's right now, our focus is on that. It's not big capital allocation, but management focus for the whole management team at every senior position is based on how can we expand that fill rate from 20 to 60 and to double, triple our supply in the next twelve months. So with this incredible potential of all these ad sales, TV ads. Is that a good answer, Jose?
Thank you.
Thank you. And your next question is from Aravinda Galappatthige from Canaccord Genuity. Your line is now open.
I'll start with a couple of housekeeping questions on the acquisition. Can you just sort of talk to what the full cost is? Then you can I'm not sure if there's any sort of debt that sort of you're assuming with the acquisition. Maybe just clarify that and seasonality of the revenues.
Very good answer. This acquisition was less than $1,000,000 So it was really an asset deal. We're taking over the inventory. We have a few liabilities owed to vendors. Our biggest customer is Walmart, very happy.
Walmart also owns Visio. We're becoming very close to Walmart. They do $20,000,000 of sales, and 19,000,000 of a hardware, 1,000,000 of software. On our side, we generate another 4,000,000 of software sales with Singing Machine. So the deal was not only to get that tumor and and on 20,000,000, they'll do 10% EBITDA margin, so not big margin.
But we're also protecting and securing the 4,000,000 that we do because we provide the software on every karaoke machine. I'll be happy to ship you one because they're really good. They're good machines. But I think, you know, securing the 4,000,000 and most important, we have now four car companies, including BYD, including Tesla, including some some, like, companies like Ford that want to that have ordered mics in cars. And I was making a joke, but I believe that in the next five years, every car will come with karaoke.
And you will have in your console, in the middle, you will have two mics. And we also launched scoring. We have scoring right now with BYD. So people are able to score themselves. So fantastic for us, fantastic for the car manufacturers, and that's too good for the parents in the front.
Thanks, Eric. And then just moving on to Retail Media. I mean, obviously, you've built that business up very nicely over recent years. You're obviously starting to comp against the fiscal quarters. Recognizing sort of the size of the longer term opportunity, how should we think of sort of the path forward from here? Are there any sort of near term limiting factors that sort of comps sort of perhaps suppressing your growth as you look to expand from here on?
Yes. So we tell me that we expect double digit growth. We already have in Q2, we're already reached double digit growth for this quarter. So and we still have two months to go. But at the end of the day, the difference between the fast channels and retail media is the fast channel you're selling a one to one, which the market is very used to.
Retail media is one to many, which is a very different model and different approach. So I think our network is incredible. We will expand our network in The U. S, but it's not as easy to propel growth as we are achieving in the fashion. So expect double digit growth, and we need again to eventualize the market.
Audio in stores is still something that is new and that advertising are slowly understanding and explaining and we're gaining, but it's not the same growth than the Connected TV for sure.
Thanks. And just a follow-up for me on that before I hand off. On the video side of things, have you I know there was sort of a pilot program in Quebec. Are you thinking of expanding that? What's been sort of the feedback from there? Thank you.
Yes.
It's very interesting. So a lot of retailers, we a lot of retailers have their screens. They're asking us to sell on their screens. So in Canada, we're getting very much involved to offering both audio and video. And we have a unique technology that we call it the takeover.
So you go into Metro or you go to Loblaws, and we'll do an audio ad and all the screens will also show the Colgate product. So when we take over the store, it's very effective for advertisers. We're the only company that's able to do the video and audio and match it because we provide audio in Canada to 95% of major retailers. We do have a strong distribution. So I think it's going to be a very good prospect for us.
Video is a huge market. Video is 20x the size of audio. So we're excited to be in that space. And this happened, I've been we've been asked by our retailers. Very good comment there. I appreciate that comment about that potential.
Thank you.
Thank you.
Thank you. And your next question is from Sam Schmidt from CIBC. Your line is now open.
Hi there. You mentioned a new platform that will be recorded in subscription revenues.
Can you comment on magnitude of that? And how should we think about the growth rate in subscriptions going forward? Thank you.
Yeah. This is so Samsung launched a big initiative. They put billions of dollars in it, the VXT platform. So they wanted every commercial TV will come with apps included or content. You will subscribe to that content.
It's it's a new project. So for every Samsung TV sold in the world, we'll have Stingray Music and Stingray Albion. They're only offering and also Loop Heart, which we also bought. So we have three of the four products. It's just starting at Samsung.
Samsung is a big company. So for us, we're happy to be the three out of four partners for that for that. So every commercial TV, every corner store, every restaurant that buys a Samsung TV will have that included and they could add music or add ambience as a SVOD service, but we're just launching and they're also just launching. But I can tell you that they put billions of dollars in this project with the billing and everything. So exciting for us to be, again, chosen by one of our key customers, Samsung, to be their first partner.
That's great. And then one more for me just on SaaS. Can you unpack drivers between increased demand, listening hours or adding new partners and channels as we look over 2026?
Yes. So for us, it's like I tell the Board, it's not a very good the first thing is we need to increase the fill rate. So we need to sell more. So we need to increase our fill rate from 20 to 60. The more we increase our fill rate, the more people will give us supply.
So the goal is to get more supply. The way to get more supply is to get more backfill rights, which we want to do because right now we only have backfill rights on one partner out of five. So we are in the stage of getting the rights for the other four partners. And then after that, it's launching more channel and getting more supply and also start selling some of our peers that we can also be effective at. So we're very excited about that.
So it's increasing sales and getting more supply. Basic of business, but very exciting because we don't need much manpower. It's a very automatic programmatic system that you connect with different DSPs. So you don't need 200 or 300 salespeople. So that's why we're so excited about it.
And your next question is from Jerome DeBrill from Desjardins. Your line is now open.
Hey, sorry, I'm back. Just want a clarification. You're talking about the back sales that went from 18 to 50. This is just for the current platform you're you're in. Right?
For it's just for increasing the the backfill from 20% to 60%. And so so should we understand that that this this could be applicable to to other fast platforms as well?
Absolutely. So we were never really in the advertising space. Same way when we went public in 2015, we were 90% of ourselves were CBS. We were doing zero advertising, and we even voted and remember that we don't want to be an advertising company. So we were happy to be a CBS and based on cable.
So that shows you the strength of the pivot. Now we know now we're doing $80,000,000 of advertising. Radio does $130,000,000 So 50% of our sales is advertising, and that will grow to 80%. So I agree with you, Bill. A, with the current inventory, if we increase the fill rate from 20 to 60, and we just started, like I tell the team, we're three months old.
So we're really babies right now, but we're learning fast. And that will triple from 18 to 50. And then our goal right now is to get more supply. So we're aggressively meeting our suppliers. We're going to go to two days at the U.
S. Open. A lot of our suppliers are based in New York. They like tennis. So we're going to so working very hard to get those right, and we feel that we'll be able to add two or three new partners, not necessarily the same size by the end of the year.
So I think every partner is happy that we are helping them make more money. Also for the backfill, it's not the same margins than we do because in this case, we have to pay them their rev share. So the margin is lower because in this case, we sell and then we give money to Vizio, LG, Samsung or Roku. So not the same EBITDA margin than when they sell it because we get the net. So that we can go more offline and give you some details on that too.
But very good question. So, yes, our goal now is to get more supply and get back to the right for the our other three partners. Merci. Merci.
Thank you. There are no further questions at this time. Please proceed with the closing remarks.
All right. Hey, so thank you very much for being on the Q1 call. Thank you for thank you again for the all same rate management team for all the great work we've done. Another good start of the year. I'm very happy, looking positive, strong pipeline.
And we also want to make a little advertising. We have our AGM today at 11:00. So very excited to present our AGM. I do say I missed the little days of being in person. Maybe next year, I'll convince our Chief Legal Officer.
It's virtual, but happy that you can join our AGM and to present you our results and a bit of our strategy for the years coming forward. I'll now make sense in loan. Excited for fiscal 'twenty six, and have a great day. Thank
you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.