Good morning, ladies and gentlemen, and welcome to the Stingray Group Incorporated first quarter 2024 results call. At this time, 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. This call is being recorded on Wednesday, August 9th, 2023. I would now like to turn the conference over to Mathieu Péloquin.
Good morning. [Foreign language] . Thank you for joining us for Stingray's conference call for its first quarter results ended June 30, 2023. Today, Eric Boyko, President and CEO, as well as Co-founder, and JP Pierre, CFO, will be presenting Stingray's financial and operational highlights. Our press release reporting Stingray's first quarter results for fiscal 2024 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 also on SEDAR. I will now give you 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 6, 2023, 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're advised not to place undue reliance on such forward-looking statements. Also, please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Please 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.
Okay, merci, Mathieu. Welcome to our first quarter conference call for fiscal 2024. Stingray delivered robust Adjusted EBITDA of CAD 28.3 million, representing 35.8% of sales in the first quarter of 2024, thanks to cost-saving initiatives implemented over the past year. Despite a temporary slowdown in revenue growth due to timing of retail media advertising campaigns, I am pleased to report current revenues for Stingray Advertising in the second quarter are +45% year-over-year at this point. We remain on target to achieve our goal of 40% growth in the advertising revenues for 2024. We also recently announced a sales agreement with Mood Media, Vibenomics advertising division, a leading technology and retail media solution provider that creates the largest retail media audio network in the U.S.
This groundbreaking collaboration will provide advertisers south of the border with an unmatched national presence, reaching over 800 million monthly shoppers through in-store digital audio advertising across 25,000 brick-and-mortar locations. This broad network will encompass major players in key retail verticals, including grocery, drug, convenience, and home improvement. Expansions to other verticals will continue in 2024. This announcement comes during a period of significant growth for the retail media advertising in the U.S., with a spending forecast to increase from $31 billion in 2021 to an anticipated $61 billion by 2024, as per the eMarketer Retail Media Ad Spending Forecast report. We secured a deal last week with Loblaw Media, the retail media division of Loblaw Companies, to expand Stingray's retail audio advertising network into Loblaw stores across Canada.
The Loblaw store audio network will expand nearly 300 locations, including Loblaws, Zehrs, Real Canadian Superstores, and other retail banners, with campaign expected to begin as soon as mid-August. As a result, we expect more than to double our revenues from the Stingray Advertising to CAD 100 million, from CAD 50 million right now in the next 24 months. The goal is to offer a single large-scale network of premier retailers for advertisers seeking reach to promote their brands. We also anticipate accelerated momentum for our in-car entertainment segment in fiscal 2024, driven by the recent partnership with BYD, the world's leading manufacturer of new energy vehicles, to bring our popular Stingray Karaoke to its fleet of nearly 300,000 cars at launch in Europe and Latam.
As well, Audi cars are being to roll out our manufacturing plants with our embedded karaoke app, while we keep expanding our presence at Tesla. In terms of FAST channels, they generate solid organic growth in the first quarter as we begin better monetizing our content for connected TVs by contracting third parties to resell unsold inventories by major television manufacturers. As planned, revenues from SVOD business were slightly down, simply given our sharpening focus on B2B-driven customers, but profitability improved year-over-year. We expect new country launches, well, in Europe, in Latam, Asia, and Middle East, launch in Q2 and Q3, which will have positive impact on our overall sub base, plus the addition of Zen Life SVOD, which also will be in great new product that we're adding with our friends from Amazon.
Altogether, revenues from Broadcasting and Commercial Music increased 2.3% to CAD 47.2 million in the first quarter of 2024, while Radio revenues declined by 0.6%, or we call it pretty much flat, to CAD 31.8 million, as we will, and we still outperform the industry. Looking ahead, we intend to be laser-focused on our four high-growth opportunities that I outlined earlier, but we will remain disciplined with our spending due to the uncertain economic environment. Our capital allocation strategy will continue, prioritize debt reduction without sacrificing key growth initiatives fiscal 2024. Again, very happy with our first quarter, a good start of the year. With this, I will now turn over the call to our friend, Jean-Pierre.
[Foreign language], Eric [Foreign language] to non revenues reached $79 million in the first quarter of fiscal 2024, up 1.1% from $78.1 million in Q1 2023. The increase was primarily due to the equipment and installation sales related to digital signage and an increase of in-car revenues, and to a positive foreign exchange impact, largely offset by a decrease in B2C and in retail media advertising revenues. Revenues in Canada improved 1.2% to $47.3 million in the first quarter of 2024. The growth mainly reflect enhanced equipment installation sales related to digital signage.
Revenues in the United States remained stable year over year, at CAD 19.1 million in Q1 2024, as in-car and FAST channel revenues increased, and to positive foreign exchange impact, largely offset by a decrease in B2C and in retail media advertising revenues. Finally, revenues in other countries rose 2.1% year over year to CAD 12.6 million in the most recent quarter. The increase can primarily be attributed to a positive foreign exchange impact, offset in part by lower audio channel and subscription revenues. Looking at our performance in by business segment, Broadcasting and Commercial Music revenues grew 2.3% to CAD 47.2 million in the first quarter of 2024.
The growth was primarily due to equipment and installation sales related to digital finance, in-car and FAST channel revenues increase, and to a positive foreign exchange impact, largely offset by a decrease in B2C and in retail media advertising revenues. Radio revenues meanwhile, declined 0.6% or flat year over year to CAD 31.8 million in Q1 2024. The slight decrease can be attributed to reduction in national advertising revenues, but as Eric mentioned, our radio business outperformed the industry. In term of profitability, consolidated Adjusted EBITDA improved 8.4% to CAD 28.3 million in the first quarter of 2024, from CAD 26.1 million in Q1 2023. Adjusted EBITDA margin reached 35.8% in Q1 2024, compared to 33.4% in the same period in 2023.
The growth in Adjusted EBITDA was mainly due to higher revenues year-over-year, while the increase in Adjusted EBITDA margin can be attributed to lower operating costs in the Broadcasting and Commercial Music, following cost-saving initiatives implemented in fiscal 2023. By business segment, Broadcasting and Commercial Music Adjusted EBITDA increased 19% to CAD 20 million in the first quarter of 2024. The year-over-year increase was mainly due to cost-saving initiatives implemented during the past year and an improved growth margin on higher revenues. Adjusted EBITDA for our Radio segment declined 6.8% year-over-year to CAD 9.9 million in the first quarter of 2024. The decrease can be attributed to a slight drop in revenues, increased music right fees, and higher marketing expenses.
In term of corporate Adjusted EBITDA, which represent head office operating expenses, the share-based compensation, as well as performance and deferred shared unit expenses, it amounted to a negative CAD 1.6 million in the first quarter of 2024. Stingray reported a net income of CAD 14.1 million, or CAD 0.20 per diluted share in the first quarter of 2024, compared to CAD 9.4 million or CAD 0.13 diluted share in Q1 2023. The increase was mainly due to a one-time settlement gain from a trademark dispute and higher gain on the fair value of derivative financial instruments. These factors were partially offset by higher interest expense. Adjusted net income totaled CAD 11.9 million or CAD 0.17 per diluted share in Q1 2024, compared to CAD 13.2 million or CAD 0.19 per diluted share in the same period in 2023.
The decrease can mainly be attributed to a higher interest expense, partially offset by better operating results. Turning to liquidity and capital resources. I'm sorry. Cash flow generated from operating activities totaled CAD 24.3 million in the first quarter of fiscal 2024, compared to CAD 16.3 million in Q1 2023, with a one-time settlement gain from a trademark dispute and better operating results, accounting for a year-over-year improvement. Adjusted free cash flow amounted to CAD 18.5 million in Q1 2024, compared to CAD 15.7 million in the same period, 2023. The increase was mainly related to better operating results and lower tax paid, partially offset by higher interest expense.
From a balance sheet standpoint, I think we had a cash and cash equivalent of CAD 11.7 million at the end of the first quarter, subordinated debt of CAD 25.6 million, and the credit facilities of CAD 374.1 million, of which approximately CAD 53.7 million was available. Total net debt at the quarter end stood at CAD 388 million, or 3.28 times pro forma Adjusted EBITDA. Net debt increased from CAD 371.1 million in Q4 2023, mainly due to an earn-out paid on the in-store audio network acquisition and a higher interest expense. This ends my presentation for today. I will now turn the call back to Emile.
Okay, thank you, JP, for your report. I guess we're ready for questions from our friends.
Thank you. Ladies and gentlemen, we will now begin our question-and-answer session. Should you have a question, please press star then one on your touch-tone phone. You will hear a tone acknowledging your request. Should you wish to withdraw from the queue, please press star then two, and if you're using a speakerphone, please lift the handset first before pressing any keys. We have our first question from Matthew Lee with Canaccord. Please go ahead.
Hey, morning, guys. I wanted to first ask a question on the radio side. It feels like the cost inflation in this segment was somewhat uncontrollable. Are there ways for you to cut OpEx there to protect the margins if revenue kind of remains flattish for the year?
Yeah, the OpEx here increasing is part of it is because of the NAFTA agreement. So our resound fees for all radio stations have increased for us, like, CAD 1.2 million that was part of the new agreement with NAFTA that was negotiated. There's a CAD 300,000 a month coming from that. We did do more marketing this quarter than last year, about CAD 400,000. Besides that, our costs remained the same.
Yeah, our sales are in order to risk a recession, but in our case, with the fact that some of our competitors are shutting down station or putting less focus on radio, or some of our competitors also might be thinking of divesting, it's giving us a great opportunity to win market share with the local sales force. I must say we're really gaining momentum on the local side, while some of our peers are decreasing their investment in the local teams. We remain positive. Radio, again, in Q2, very stable. Again, part of the OpEx was marketing, and the other one is really is gonna be there forever. It's, it's resound.
The good news, we also got a saving, potentially for C-11 for Part one, for Part one, so that might offset the resound costs of. We don't need to pay CRTC fees, so that's the good news.
Are you expecting to see revenue growth on the Radio side by 2024?
Yeah, right now we're expecting, you know, we're happy. We're right now in Q2, at this point, we're positive, slightly positive. For sure, when we looked at numbers of our peers on both TV and radio, we're very happy with our results. Very stable business, very happy for the moment. Radio, and again, for us, our big win is when our cars the national market is coming back slowly, but we're not seeing the car business we used to have, which was CAD 30 million pre-pandemic, and last year was CAD 10 million. The CAD 20 million we're missing, it's all the car business. We need more cars inventory, and hopefully, when you hear more car ads on the radio, then we're happy.
Sounds good. Maybe just one on Mood Media. You know, my understanding was that, you know, you guys had a very nice technological advantage against Mood. Maybe you can just kind of dive into what each partner is bringing to that relationship.
It's, it's really, you know, roughly, we have our inventory at a certain CPM, you know, at what we wanna be is $500 million. They also have $500 million of inventory with their retailers, and we only sell million. How do we go from 5% selling of our inventory and at least getting to 20%, which will be $200 million? The goal was really to say, how can working together, so we're doubling our retailers, we're, we're really having a national footprint, and both sales force can sell in each other's territory, so we're doubling our sales force. That's why we feel very confident that we'll be able to double our sales in the next 24 months, and we expect results as early as in the next month. Both our sales force are selling.
We're selling on Kroger, they're selling on Albertsons and CVS. I think you'll see quickly that a lot of retailers will be joining this network. We call it a network, as I think it's important. We don't sell a retailer, we sell a network, and I think that this deal is very creative. I must say thank you to, to our Mood partners for, for taking and working together on this project. It really makes us the number one player in the world, by far, in terms of number of retailers. I think you'll see a lot of new retailers being signed and added, and we'll become an incumbent in this, in this space. Very excited about that deal. We will have some numbers this year.
We just tough to monetize, but there will be some financial impact that we'll be happy to tell you, tell the analysts in the next quarter.
All right. Sounds great. I'll pass the line.
Thank you, Matthew.
Thank you. We have our next question from Adam Shine with National Bank Financial.
Thanks a lot. Good morning, Eric. Just, first question on what happened exactly in retail media this quarter. Was it a function of the broader advertising market, creating, you know, some pullback in some campaigns by clients, or was it more you guys, or, and/or you guys, sort of slowing things down in anticipation of doing the Mood Media deal?
No, no, it was one campaign by a pharma of $2 million that was in Q1 last year, and so the campaign this year was pushed to June, July, August in Q2. It's, it's a $2 million campaign. You do the numbers, we would have been up 20%-30% in Q1 and Q2. Now we're looking already +45%. We'll probably finish at +60%, +70%. So when you average it out over the first 6 months, we're gonna be at the +30%, +40% range. It's really just a timing of one campaign. Overall, for the year, our pacing is we're still pacing at +30-35% in the US, which is our goal.
In Canada, our pacing is at 100%, so we're still in a good position for increasing that unit by 40% to $55 million. Again, it's really a timing issue with one campaign, but the more we grow and the bigger we get, the less, the less we'll have this beta risk of one, one campaign making a difference.
Right. Having said that, you know, some of these metrics that you just gave, the 30%, 35% US, 100% Canada, you know, you also suggest that those were the growth metrics prior to the Mood Media deal. You know, I understand the doubling of the sales force, the doubling of the footprint, the enhancement of the critical mass, but, you know, maybe I'll push you a little bit. You know, are, are you really gonna see an acceleration of growth, or should we think about it in terms of that accelerating factor, more of a post-2024, as this thing gains a bit more momentum, it adds more verticals?
No, that's a good question. We, we had a call last Friday, and that was same question: What should we budget on both sides for sales that we expect? So for now, the deal's been done. We haven't created an internal budget. By the next quarter, we'll, we'll have a lot of visibility. We expect impact this, this year. What amount? Difficult to know, but for sure, it's only gonna be positive on increasing our sales. It's only positive news of having more territory, more salespeople, and a national territory. It's just on both sides, we haven't given ourself a budget yet of what that impact will be this year, but we expect it to be material, not significant, but again, early stage, but only upside. Is it gonna be an extra CAD 5 million, CAD 10 million, CAD 20 million?
We don't know. Anywhere from 5 to 20 extra sales this year that we expect with this partnership, and then next year, it's, you know, sky's the limit in terms of us working well and also evangelizing the market. Our biggest issue is evangelizing the market.
Okay, just 1 other question. You, you touched on the better economics coming out of the SVOD business, you know, notwithstanding the fact that there was a bit of a dip on SVOD subscribers. When we think about this, this, you know, at one point, you know, you had talked, and I know you've, you've updated it since, but at one point it was gonna be, you know, potentially a $100 million rev business on the back of a one million subscribers. You know, you're eventually gonna get perhaps to a one billion subscribers, but would, would you characterize this as potentially sort of a $50 million-$60 million revenue business, or could it actually scale beyond that?
Yeah, I think for sure we'll hit 1 million subs just with the launch of the new countries. With Amazon, we're launching in about 20 new countries, I mentioned on the call, plus we're launching also new products with ZenLIFE, which is an SVOD product with all of our customers. We're adding new products. We're also adding our products with Trivia. With the addition of these products, it just makes the B2B so much stronger. Again, the B2C is declining, so there is a bit of pivot between B2C and B2B. Our clients are very stable, and we're adding new clients. Again, one million subscribers, we hopefully wanted this year. We'll see. Maybe it's gonna take maybe 18 months, but it's also always growing, and it is gonna be a CAD 60 million business, going to CAD 80 million.
Okay.
because our ARPU is CAD 5 instead of CAD 15. When you're B2B, you're CAD 5 ARPU. When you're B2C, you're at CAD 15.
Okay, great. All right. Thanks for that.
Thank you, Adam.
Thank you. We have our next question from Scott Fletcher with CIBC.
Good morning. I wanted to follow up on the Mood Media. I'm curious if there are any impacts on the cost side, or is there any spending you have to do, whether it's on the sales, sales force side or integration of technology? Should we expect any impact to margins at all?
Really, Scott, it's one of the rare deals that we said to the board, it's only, win, win, win. Win, we have more retailers, win, we have more salespeople. We're using or, you know, we're, we're working together, we're marketing a product together, so we're just leveraging each other's strength. It, no cost impact and more efficient. We expect results. Our goal is we expect results as early as this month, so it's not something that we want to see in Q4. We expect results in August, September, and hopefully, we can report some numbers to you by November. We, we expect a new sale on what we call a cross-border sale or cross-territory sale, any week now.
Very excited, and like I said to Adam, anywhere from CAD 5 million-CAD 20 million of sales this year, tough to see. I think it's gonna be, it's a great partnership and also for the market and for the retailers and the advertisers, it gives them a good sense that they're teaming up with the right partners.
Okay, thanks. Then I might just drill a little further on some of the growth expectations. Last quarter, you were talking to 40% growth expectations in advertising. You're still targeting that. Should we expect that Mood Media deal to add on top of that 40%, or is it sort of now still 40% with Mood Media?
Yeah, I would still keep it at 40% for now. Let's wait for next quarter. Let's wait, where the proof is in the pudding. Let's wait to see how the synergies, the positive synergies of this partnership comes in and the speed. For me, we're very confident that we're gonna be doubling sales over the next 24 months. It's just how quickly is the speed gonna happen? I think, you know, we'll, we'll have more visibility by the next quarter. Because now we're only been 2 weeks in the partnership, so we're like newlyweds. We're still in the honeymoon.
Fair enough. It's, it's early days. Maybe I'll just ask one on the, on the in car side. Last quarter, you talked to the run rate being around CAD eight million on the karaoke in-car business. Does any, any color on how much the BYD deal adds to that?
Yeah. BYD starts by about CAD 50,000 a month in October, but they're expected to do four million cars a year, so four million cars a year, it's we're looking, that's about roughly, you know, round numbers. Just that by itself is another CAD 8 million-CAD 10 million a year in business from BYD. The big thing for them is they have their plant in Ontario, as you know. They're very strong in Europe, Latam, and Right now, the big question is: When will they launch in the U.S.? I think that one is more geopolitical than business. They're getting ready for the U.S. Again, biggest partner in BYD is Warren Buffett. The company was last worth, like, CAD 130 billion.
Not well known in North America by us Canadians, but it's, you know, we visited them, and we're gonna visit them in China in September. It's an incredible company in terms of production and size and what they do. Very happy to be their international partner. With BYD, we're launching karaoke, but we're also launching Calm Radio. We're gonna have our Calm Radio stations in every car, and we're launching many more products. It's not only karaoke. We're really becoming the in-car, the in-car music entertainment. See us as the XM Sirius for EV cars, but around the world. That's how Stingray is being positioned. But OEMs, BYD, the deal we have right now it's gonna be over 15 years. They're looking from 2022 to 2037.
I'm gonna be, I'm gonna be almost 70 years old, so by the time this deal is over. I think I, I might be, I'll still be working, but I might be less productive.
All right. Well, it does sound like a good opportunity. I'll, I'll, I'll leave it there.
Yeah, we'll get more visibility with time on all, on all the car dealership. They're all starting with EVs, so the everything, everything is new, even for Audi. Audi are rolling out their cars, one thing that, you know, I'll ask the analysts is maybe we could do a research of how many cars, how many EV cars over the next 10 years, and then we could start doing a modeling. Maybe one of you analysts can, can take a project if you have some extra time in the summer. Thank you.
Thank you. Our next question is from Jérome Dubreuil with Desjardins.
[Foreign lanaguage] . Thanks for, for taking my questions. Just on these numbers you just provided on the BYD deal, you, you spoke about going from CAD 50,000 a month to potentially another CAD 8 million-CAD 10 million a year. What, what would that revenue be contingent on? Is, is that the current expectation that this could be the growth for, for next year?
It's more, you know, it's how. You know, the difference between us and car manufacturers, we at Stingray are used to think about, you know, 6 to 12 months. They think 6 to 12 years. It's a different mindset. You know, Audi is ramping up to be ready for 2026. For us, 2026 is like, you know. Once you're in the cars, you're in the cars for the whole length of the agreement. Once you're embedded, you're embedded forever in that car. That's what we're doing. We know we're gonna be in every car. We know where our position is. We just don't know how fast that Audi and BYD. We know Tesla. Tesla right now, is ramping up by 100,000 cars a month.
That's easy to model. Every month, we get 100,000 new cars, we get our fees per car, so our revenues increases by, you know, about, you know, CAD 15,000 a month. I'm keeping numbers round here. That's easy to model. With the new players, we'll have to see how their production output goes and how quickly they, they, they deliver those EV cars. There's no doubt that the car business, when I'm talking about vectors, you know, SVOD, we want it to be a CAD 100 million business. Retail media will be a CAD 100 million business, for sure. You know, the FAST channel also, we're growing very around the world and all the TV manufacturers, that's also another business for CAD 100 million, and the cars will also be a CAD 100 million business.
The question is, is it gonna be in two, three or four years? We'll have more visibility. All these vectors are high gross margin of 90% plus, very little CapEx, because it's all you deliver once, and it's the same content. And it's, and it's gonna be increasing for the next. You know, what we can tell you is that the EV market will increase for the next 10-20 years. You're gonna have a rising lake in this space, and if you're involved, everybody will make money. It's the opposite of cable industry. Would even, a good question is I feel that the cars will be replaced the cable industry, and you'll get your entertainment from your car in the future, more than you get it from your cable set at home.
Okay, great. I, I think it's fair to say you previously assumed those kind of deals with, with, with the car OEMs would take years to materialize, but we've seen a few deals lately, frankly. Are thoughts accelerating in general, or was this deal specific to BYD?
Yeah, so BYD, as we're launching with 300,000 cars in October, so we're launching with 50,000 a month, and now it's all based on their production. How many cars are they gonna produce? All of our deals, by the way, is excluding China. We don't provide music or karaoke in China for licensing purposes. We don't understand the licensing rights there, and we don't wanna get involved. So it's, it's a car manufacturer's car delivered outside of China, so we'll have to see their production of BYD. You know, we've seen some of their cars in Canada, we've seen their cars when we go to Europe, we see their cars in LATAM. How quickly are they gonna I think they're delivering a electric car in, for $22,000 US. Pretty nice-looking car.
Are people gonna be jumping on those cars? I, I'm not a car guy, but it's gonna be interesting to see those sales over the next few quarters.
Great. One last from me. year out with, I think it's a new guidance for advertising revenue doubling in the next two years. What needs to happen in operational terms for you to meet this guidance, maybe in terms of CPM for retail media or other factors?
Well, really, our number one goal is to get more salespeople, to have more people on, on the street. I know it's good old-fashioned sales. We need to be able to evangelize the market and evangelize the agencies, both across Canada and the U.S., also we're looking to go international, so we're looking at Australia and other countries. We're starting to get international deals, our focus is on Canada and U.S., and, and that's it. Our, our, our big investment will be to add five, 10, 15 new headcounts in sales, that will produce results. It's, it's purely a sales execution. There's no technology, there's no w e don't need more footprint. We will get more footprint. It's really about executing and selling and evangelizing.
The other part, we're realizing, once we convince a product or an agency about one of our campaign, the repeat business is 90%-95%. Once you get a customer on board, they stay with you forever. It's really great, really excited. In Canada last year, we had 10 campaigns at the same time. This year, we have 53 campaigns launched. A lot of small campaigns. We already have five times more campaigns than we did last year. That will be, with that, you need more salespeople. Again, and that's both on our side and Mood. We'll both need to expand our sales team.
Yeah. Super cool.
We have our next question from Drew Reynolds with RBC.
Yeah, thanks very much. Good morning. Just two follow-ups for me on back to the connected car. Yeah, Eric, I, I think a bunch of us on this call used to cover the old Canadian SiriusXM, and it was a fascinating kind of ramp-up on that model. Just I just wanna know kind of how you generate revenue and at what phase or stage you do that with these contracts. Then the second question, just back to the doubling of revenues in Stingray Advertising. Just given an evolving revenue mix with that kind of growth, are you still looking at 40% margin for the Broadcasting and Commercial Music? Thank you.
Yeah. For the car, for the car business, it's the good old cable industry. It's a goal, cost per subscriber or cost per car, so it's a CPS model. Depending on the deals, we'll give them a free period, just like, you know, just like, you know, when you rent a building, you'll give them three free months. That's amortized, but most of the deals should be accretive right away. Example, BYD is starting in October. It really depends on the rollout of the cars. Some car manufacturers will start with a basic of one million cars, some of them start at 0. When you start at 0, it takes time to ramp up. That model will only expand as they build more cars.
I think it's the. We enjoy that, CPS business, like we enjoy the cable side. It's. We'll get more visibility on production of cars. Regarding the margin, yeah, our margin, we still expect our margin to be, like you saw this quarter, this quarter, our broadcast margin was 42.3%, up from 36% last year. Two reasons, our cost initiative, yes, but the, the main reason is, when we focus on big customers, our margin is much higher, bigger customers, easier. Amazon, we're in 30 countries, going to 60, but we get one check per month, because only the accountant only has to deposit one check. It's not even a check, it's a wire transfer. It's one delivery for the world.
Imagine being able to deliver in 60 countries by one delivery. When you're B2B, your gross margin is much higher, your gross profit, which gives us an EBITDA margin, and right now we're at 42%, very comfortable to be above 40% in Broadcasting and Commercial Music for now and to be increasing in the future once we do those big deals. To deliver to one Tesla or to deliver right now to two million Teslas or three million Teslas is the same feed. It's one feed going to Tesla. There's no extra cost. It's like the good old cable days, where, you know, it's really broadcasting.
That's great. Thank you.
Thank you, Drew.
Thank you. As a reminder, if you have a question, please press star one. We have a question from Tim Casey with BMO.
Hi, good morning. A couple from me. Just back to the electric vehicle model. Is your revenue from the customer, is that a flat fee through the length of the deal, or does that accelerate or go down, you know, after you're through, through a free preview, a preview period? I'm just curious if, you know, your, effectively, your ARPU from your customer base is flat, or whether it'll go up. Secondly, on the radio business, you talked about you're gaining market share. Are you talking about major markets there, or are you talking about smaller markets? Maybe if you could just comment on the overall health of the business. Is the smaller market radio business performing better than large market, you know, given lack of competition from other media and things like that?
Thanks.
Yeah, it's a good question. Really, for the car business, it's like the cable industry, it's a CPS. We get paid per car, not per usage. If Tesla produces 100,000 new cars, then we get times a fee. Well, again, we gotta be careful with, because telling our fees, but it's really a CPS model, just like in the cable days, where you charge 10, 15, 20 cents per subscriber, independent if they use it or not. It does increase over time. We haven't we looked into flat fees, but we haven't done any flat fees for now. Most of the car manufacturers prefer paying per car as they expand their business model. Does that answer the question for the car?
Is your agreement that every car that comes off the line, has your products in, or is that a customer option?
Yes.
Or.
No, no, every car that comes off the line is embedded with the karaoke, and it becomes a subscriber of ours, except in certain markets like China and maybe Korea, with certain suppliers, so. For the Western world, we get a piece of every car.
Thank you.
Okay, for the radio, now, with radio, you know, every month, we get a report that, you know, we compare to each other, to all the other radio station. We call it the TRAM Report. Everybody gives their numbers to an accounting firm. You don't know who's gaining or winning, but for sure, we're beating the market again. This year, we're up 8% compared us to our peers. We are, that's how we know we're gaining market share. Good question. I think, you know, we're winning a bit t here's local salespeople in every radio. Local, local sales is about 50% of your sales or more. I, I think we have an advantage with, as you know, some of our peers are decreasing their radio presence.
Some other, some other companies are even looking to divest, so that creates uncertainty on their side. It gives us a chance to hire new people, be stronger, and be more present with customers. We do feel that we have an edge right now in the market, both on the larger station and smaller stations. Still, radio is tough. I won't, you know, radio is a tough business. You know, we don't expect much growth until the car, the car dealership. I remember when I met you, Tim, at the Sofitel Hotel, and you told me about how the radio was good for the car business because you could sell your cars on the weekend. On a Wednesday, you could make a call and do your ads on Thursday.
We need those cars back in the dealership, hopefully, that will be coming back in the next Hopefully, those will be EV cars. We'll make money selling the cars and doing ads, and then we'll make money doing karaoke and music in the cars.
Just a ny, any comment on large market versus small market radio performance in general?
Yeah, I, I, I think it's very similar. I, I, I could get back to you on, maybe a follow-up call on that, but, to go deeper, because we have all the reports. I would say at first glance, it's both markets our TRAM report is strong in both markets.
Thank you.
Okay. Thank you, Tim.
Thank you. We have no further questions in queue. Speakers, please proceed with your closing remarks.
Thank you again for the analysts for being up early this morning. Thank you to all of you for being there. Thank you for the team at Stingray. And again, another great quarter, and thank you for everybody that are shareholders and have confidence in Stingray, and hopefully, we can continue growth and good margins. Have a great day, everyone. Merci beaucoup.
Thank you, ladies and gentlemen. This concludes your conference. Please disconnect your line.