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Stingray Reports First Quarter 2018 Results

U.S. markets achieving 65.1% sales growth compared to last year

/EINPresswire.com/ -- MONTREAL, QUEBEC--(Marketwired - Aug 2, 2017) - (TSX:RAY.A)(TSX:RAY.B)

First Quarter Highlights

  • Revenues increased 18.9% to $29.2 million
  • Recurring revenues of $25.0 million or 85.7% of total revenues, an increase of 16.9%
  • Adjusted EBITDA(1) up 16.3% to $9.2 million
  • Net income decreased to $0.3 million or $0.01 per share (diluted) compared to $2.0 million or $0.04 per share (diluted) last year
  • Adjusted Net income(2) up 9.5% to $5.7 million or $0.11 per share (diluted) compared to last year
  • Cash flow from operating activities decreased to $(0.6) million compared to last year
  • Adjusted free cash flow(3) of $7.2 million, an increase of 21.8%
  • Increased quarterly dividend by 11.1% to $0.05 per share

Stingray Digital Group Inc. (TSX:RAY.A)(TSX:RAY.B) (the "Corporation"; "Stingray"), a leading business-to-business multi-platform music and in-store media solutions provider, today announced its financial results for the first quarter ended June 30, 2017.

Financial Highlights Quarters ended June 30,
(in thousands of dollars, except per share data) 2017 2016 %
Revenues 29,178 24,547 18.9
Recurring revenues 25,010 21,401 16.9
Adjusted EBITDA(1) 9,169 7,881 16.3
Net income 280 2,044 (86.3 )
Per share - diluted ($) 0.01 0.04 (0.75 )
Adjusted Net income(2) 5,703 5,207 9.5
Per share - diluted ($) 0.11 0.10 10.0
Cash flow from operating activities (589 ) 2,722 (121.6 )
Adjusted free cash flow(3) 7,240 5,943 21.8
(1) Adjusted EBITDA is a non-IFRS measure and is defined as net income before net finance expenses, change in fair value of investments, income taxes, depreciation, amortization and write-off, share-based compensation, restricted and deferred share unit expenses, initial public offering ("IPO") expenses and CRTC tangible benefits and acquisition, restructuring and other various costs.
(2) Adjusted Net income is a non-IFRS measure and is defined as net income before amortization of intangible assets, share-based compensation, change in fair value of investment, IPO expenses and CRTC tangible benefits, acquisition, restructuring and other various costs, net of related income taxes.
(3) Adjusted free cash flow is a non-IFRS measure and is defined as cash flow from operating activities less capital expenditures for property and equipment and separately acquired intangible assets, net change in non-cash working capital items, IPO expenses and CRTC tangible benefits and acquisition, restructuring and other various costs, net of related income taxes.

"We are pleased to report solid first quarter results with revenue growth of 18.9% supported by 29.5% and 65.1% growth in the International and U.S. markets, respectively. Growth continues to be fuelled by a combination of acquisitions and organic growth of 6%. Adjusted EBITDA increased by 16.3%, to $9.2 million," said Eric Boyko, President, CEO, and Co-Founder of Stingray.

"We are entering our third year as a public company and we are proud of what we have achieved. We have pursued a multi-faceted diversification strategy to strengthen our position as a multi-platform music provider and expand our global reach. For the first time this quarter, revenues from outside of Canada represented more than 50%. We are particularly pleased with our presence south of the border which now accounts for 15% of total revenues and is growing at an accelerated pace with clients such as Comcast.

"The success of our multi-platform music, capacity to leverage and curate our content and our efforts to expand brand awareness cannot be better exemplified than by the Stingray Music mobile app. Recently, we achieved an important milestone with two million downloads, representing a two-fold increase over about a year. Over the past twelve months, the app registered 3.3 million monthly visitors and the level of engagement with listeners is exceptional, reaching 9.2 hours a week, well above the industry average. Our global efforts to expand the reach of the app continues with a recent launch in Singapore.

"On the strength of the first quarter, we continue to look forward to a solid year. As we rapidly expand our business, the revenue mix is somewhat changing our margin profile. Clearly, the emphasis remains on generating high margins and significant free cash flow," concluded Mr. Boyko.

First Quarter Results

Revenues increased 18.9% to $29.2 million in the first quarter of 2018, compared with revenues of $24.6 million a year ago. The increase was primarily due to the acquisitions of Yokee Music and Classica, combined with growth from Music Broadcasting with B2C Karaoke apps and subscription video on demand services in the United States, as well as additional equipment sales primarily related to digital signage in Commercial Music.

Recurring revenues were up 16.9% to $25.0 million in the first quarter of 2018 over the same period last year and decreased slightly to 85.7% of total revenues for the quarter, compared to 87.2% of total revenues last year. Starting this quarter, revenue by geography has been segmented in three regions (from two initially): Canada (49.8% of total revenues), United States (15.5% of total revenues) and Other Countries (34.7% of total revenues). For the quarter, Canadian revenue increased 3.2% to $14.5 million, United States revenue increased 65.1% to $4.5 million, whereas revenues in Other Countries increased by 29.5% to $10.1 million.

Music Broadcasting revenues increased 22.0% to $21.8 million, mainly due to the acquisitions of Classica, Much Channels, and Festival 4K in Fiscal 2017, as well as Yokee Music and C Music in May 2017, and organic growth in the United States market, primarily related to B2C Karaoke apps and subscription video on demand services. Commercial Music revenues rose 10.4% to $7.4 million, mainly as a result of organic growth in sales of equipment and installation primarily related to digital signage.

Adjusted EBITDA for the first quarter of 2018 increased to $9.2 million or 31.4% of revenues, compared to $7.9 million or 32.1% of revenues a year earlier. The 16.3% increase in Adjusted EBITDA was primarily due to the acquisitions realized in Fiscal 2017 and Q1 2018 partially offset by higher operating expenses related to international expansion.

For the first quarter, the Corporation reported a net income of $0.3 million, or $0.01 per share (diluted), compared to $2.0 million, or $0.04 per share (diluted) for the same period last year. The decrease was mainly attributable to higher legal fees, higher amortization expense of intangible assets as well as negative change in fair value of investment and contingent considerations, partially offset by higher operating results and a gain on foreign exchange.

Adjusted Net income increased 9.5% to $5.7 million, or $0.11 per share (diluted), compared to $5.2 million, or $0.10 per share (diluted) a year ago. The increase was primarily due to higher Adjusted EBITDA, partially offset by higher income net tax expenses.

Cash flow from operating activities amounted to $(0.6) million in the first quarter of 2018, versus $2.7 million a year earlier. Adjusted free cash flow increased to $7.2 million, from $5.9 million for the same period a year ago.

As of June 30, 2017, the Corporation had cash and cash equivalents of $3.2 million and a revolving credit facility of $100.0 million, of which approximately $41.9 million was unused, allowing it to pursue strategic acquisitions and achieve its growth objectives.

Declaration of Dividend

On August 1, 2017, the Corporation increased the quarterly dividend by 11.1 % to $0.05 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend will be payable on or around September 15, 2017, to holders of subordinate voting shares, variable subordinate voting shares and multiple voting shares on record as of August 31, 2017.

The Corporation's dividend policy is at the discretion of the Board of Directors and may vary depending upon, among other things, our available cash flow, results of operations, financial condition, business growth opportunities and other factors that the Board of Directors may deem relevant.

The dividends paid are designated as "eligible" dividends for the purposes of the Income Tax Act (Canada) and any corresponding provisions of provincial and territorial tax legislation.

Additional Business Highlights

On May 9, 2017, the Corporation announced that it had acquired Israel-based Yokee Music Ltd., provider of three social music apps regularly ranked in the music category's top 10 in 100 countries: Yokee Karaoke, Yokee Guitar, and Yokee Piano. Together, the apps have reached over 80 million downloads in four years and count 4 million monthly users, with over 50% year-over-year growth.

On May 26, 2017, the Corporation announced that it had acquired the music video television channel called C Music Entertainment Ltd, a London-based multi-award-winning satellite and cable television channel dedicated to classical, crossover and cinematic music videos.

On June 8, 2017, the Corporation announced the launch of Stingray Classica, Stingray DJazz and Stingray Karaoke available now on Amazon Channels. Amazon Prime members in the United States can now subscribe to each channel for $6.99 per month after the 7-day free trial to access unlimited channel streaming.

On June 16, 2017, the Corporation announced the launch of Stingray Music on Singapore's Singtel, marking the service's debut in the Asia-Pacific region.

On June 23, 2017, the Corporation announced the launch of an all-4K music television channel. The only 4K television channel made in Canada will launch in July 2017 and will be offered to all pay TV providers across the country.

On July 31, 2017, the Corporation announced that it has acquired a leading Australian provider of in-store media solutions, SBA Music PTY Ltd.

On July 31, 2017, the Corporation announced that it has concluded the acquisition of Satellite Music Australia PTY Ltd, a subsidiary of Macquarie Media Operations PTY Ltd and an Australian provider of in-store media solutions servicing more than 2,200 locations.

Annual Shareholders' Meeting

The Corporation will hold its annual general shareholders' meeting on Wednesday, August 2, 2017, at 11:00 AM (ET) at its Montreal headquarters located at 730 Wellington Street, in Montreal, Quebec.

Conference Call

The Corporation will hold a conference call to discuss these results on Wednesday, August 2, 2017, at 9:00 AM (ET). Interested parties can join the call by dialing 647-788-4922 (Toronto) or 1-877-223-4471 (toll free). If you are unable to call at this time, you may access a tape recording of the conference call by dialing 416-621-4642 (Toronto) or 1-800-585-8367 (toll free) followed by access code: 13901082. This tape recording will be available until September 2, 2017.

About Stingray

Stingray (TSX:RAY.A)(TSX:RAY.B) is a leading business-to-business multi-platform music and in-store media solutions provider operating on a global scale, reaching an estimated 400 million pay TV subscribers (or households) in 156 countries. Geared towards individuals and businesses alike, Stingray's products include the following leading digital music and video services: Stingray Music, Stingray Concerts, Stingray iConcerts, Stingray Brava, Stingray DJAZZ, Stingray Music Videos, Stingray Lite TV, Stingray Ambiance, Stingray Karaoke, Stingray Loud, Stingray Vibe, Stingray Juicebox, Stingray Retro, Festival 4K, and Classica. Stingray also offers various business solutions, including music and digital display-based solutions, through its Stingray Business division. Stingray is headquartered in Montreal and currently has close to 350 employees worldwide, including in the United States, the United Kingdom, the Netherlands, France, Israel, Australia, South Korea, and Singapore. Stingray was recognized in 2013 and 2014 as a finalist in the Top 50 of Deloitte's Technology Fast 50™ list, and figures amongst PROFIT magazine's fastest-growing Canadian companies. In 2016, Stingray was awarded best IR for an IPO at the IR Magazine Awards - Canada. For more information, please visit www.stingray.com

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Such forward-looking information includes information with respect to Stingray's goals, beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking information is identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", and "continue", or the negative of these terms and similar terminology, including references to assumptions. Please note, however, that not all forward-looking information contains these terms and phrases. Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Stingray's control. These risks and uncertainties could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's prospectus dated May 26, 2015, which is available on SEDAR at www.sedar.com. Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that Stingray anticipates will be realized or, even if substantially realized, that they will have the expected consequences or effects on Stingray's business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained herein is provided as of the date hereof, and Stingray does not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Non-IFRS Measures

The Corporation believes that Adjusted EBITDA and Adjusted EBITDA margin are important measures when analyzing its operating profitability without being influenced by financing decisions, non-cash items and income taxes strategies. Comparison with peers is also easier as companies rarely have the same capital and financing structure. The Corporation believes that Adjusted net income and Adjusted net income per share are important measures as it demonstrates its core bottom-line profitability. The Corporation believes that Adjusted free cash flow is an important measure when assessing the amount of cash generated after accounting for capital expenditures and non-core charges. It demonstrates cash available to make business acquisitions, pay dividend and reduce debt. The Corporation believes that Net debt including and excluding contingent considerations and balance payable on business acquisitions and Net debt to Adjusted EBITDA are important measures when analyzing the significance of debt on the Corporation's statement of financial position. Each of these non-IFRS financial measures is not an earnings or cash flow measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS.

Our method of calculating such financial measures may differ from the methods used by other issuers and, accordingly, our definition of these non-IFRS financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-IFRS financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.

Adjusted EBITDA and Adjusted Net income reconciliation to Net income

(in thousands of Canadian dollars) Three-month
period ended
June 30, 2017
Q1 2018
Three-month
period ended
June 30, 2016
Q1 2017
Net income 280 2,044
Net finance expense 537 648
Change in fair value of investments 434 91
Income taxes (recovery) 464 412
Depreciation of property and equipment and write-off 621 574
Amortization of intangibles 4,541 3,187
Stock-based compensation 194 290
Restricted, performance and deferred share unit 313 326
Acquisition, legal fees, restructuring and other various costs 1,785 309
Adjusted EBITDA 9,169 7,881
Net finance expense (537 ) (648 )
Income taxes (464 ) (412 )
Depreciation of property and equipment and write-off (621 ) (574 )
Income taxes related to change in fair value of investments, share-based compensation, restricted, performance and deferred share unit expenses, amortization of intangible assets and acquisition, legal fees, restructuring and other various costs (1,844 ) (1,040 )
Adjusted Net income 5,703 5,207

Adjusted free cash flow reconciliation to Cash flow from operating activities

(in thousands of Canadian dollars) Three-month
period ended
June 30, 2017
Q1 2018
Three-month
period ended
June 30, 2016
Q1 2017
Cash flow from operating activities (589 ) 2,722
Add / Less :
Capital expenditures (1,211 ) (632 )
Net change in non-cash operating working capital items 7,255 3,544
Acquisition, legal fees, restructuring and other various costs 1,785 309
Adjusted free cash flow 7,240 5,943

Note to readers: Condensed interim consolidated financial statements and Management's Discussion & Analysis of Operating Results and Financial Position are available on the Corporation's website at www.stingray.com and on SEDAR at www.sedar.com.

Mathieu Peloquin
Senior Vice-President, Marketing and Communications
Stingray
(514) 664-1244, ext. 2362
mpeloquin@stingray.com

Distribution channels: IT Industry, Music Industry, Technology