Stingray Digital Group Inc.
TSX : RAY.A
TSX : RAY.B

Stingray Digital Group Inc.

June 08, 2017 07:00 ET

Stingray Reports Record Full Year Fiscal 2017 and Fourth Quarter 2017 Results

Revenues surpass $100 million

MONTREAL, QUEBEC--(Marketwired - June 8, 2017) - (TSX:RAY.A)(TSX:RAY.B)

Full Year Highlights

  • Revenues increased 12.8% to a record $101.5 million
  • Recurring revenues of $87.6 million or 86.3% of total revenues, an increase of 12.9%
  • Adjusted EBITDA(1) increased 9.2% to an all-time high of $33.9 million
  • Cash flow from operating activities increased 20.0% to $22.8 million
  • Adjusted free cash flow(3) of $26.5 million, an increase of 8.7%
  • Net income of $10.7 million or $0.21 per share (diluted) compared to $13.9 million or $0.29 per share (diluted) last year
  • Adjusted Net income(2) of $27.3 million or $0.53 per share (diluted) compared to $24.3 million or $0.50 per share (diluted) last year
  • Annual dividend of $0.18 per share

Fourth Quarter Highlights

  • Revenues increased 3.3% to $26.5 million
  • Recurring revenues of $22.7 million or 85.6% of total revenues, an increase of 3.8%
  • Adjusted EBITDA(1) increased 10.1% to $9.0 million
  • Cash flow from operating activities increased 40.4% to $10.8 million
  • Adjusted free cash flow(3) of $8.0 million, an increase of 24.6%
  • Net income of $4.6 million or $0.09 per share (diluted) compared to $3.2 million or $0.06 per share (diluted) last year
  • Adjusted Net income(2) of $10.5 million or $0.20 per share (diluted) compared to $7.1 million or $0.14 per share (diluted) last year

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 fourth quarter and fiscal year ended March 31, 2017.

Financial Highlights
(in thousands of dollars, except per share data)
Three months ended
March 31
Fiscal year ended
March 31
2017 2016 % 2017 2016 %
Revenues 26,502 25,658 3.3 101,501 89,944 12.8
Recurring revenues 22,683 21,860 3.8 87,612 77,587 12.9
Adjusted EBITDA(1) 9,046 8,219 10.1 33,864 31,004 9.2
Net income 4,608 3,247 41.9 10,717 13,881 (22.8 )
Per share - diluted ($) 0.09 0.06 50.0 0.21 0.29 (27.6 )
Adjusted Net income(2) 10,534 7,135 47.6 27,310 24,309 12.3
Per share - diluted ($) 0.20 0.14 42.9 0.53 0.50 6.0
Cash flow from operating activities 10,826 7,709 40.4 22,766 18,968 20.0
Adjusted free cash flow(3) 7,991 6,415 24.6 26,511 24,384 8.7
(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. See Non-IFRS Measures below.
(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. See Non-IFRS Measures below.
(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. See Non-IFRS Measures below.

"During Fiscal 2017, we continued to significantly strengthen our multi-channel music platform on a global scale, underlined by the fact that international revenue is rapidly approaching the 50% level. We are very pleased to have surpassed the symbolic mark of $100 million in revenues this year, which, more importantly, provides critical scale to our business model, and enhances our capacity to compete and consolidate our industry," said Eric Boyko, President, CEO, and Cofounder of Stingray.

"For the year, Adjusted EBITDA reached $33.9 million, up 9.2% over last year, and the Company continued to generate significant free cash flow. In addition to sustaining a sizeable acquisition program, we have returned money to our shareholders through dividends that increased 28.6% in Fiscal 2017. Since Stingray's IPO in June 2015, the Company has raised the dividend three times.

"Recently, we announced the acquisition of Yokee Music, an Israel-based provider of three social music apps regularly ranked in the music category's top 10 in 100 countries. This is our largest B2C acquisition to date and we are extremely excited by the potential growth that these apps present within our complementary platform. Furthermore, this acquisition will meaningfully expand our reach in the B2C mobile app market.

"We look forward to the opportunities ahead considering the scope of the market's potential. As we continue to build our global multi-channel music platform, we will further enhance shareholder value by leveraging existing products and services, acting as an industry consolidator, and expanding geographically," concluded Mr. Boyko.

Fourth Quarter Results

The Corporation generated revenues of $26.5 million in the fourth quarter of Fiscal 2017, an increase of 3.3% compared with revenues of $25.7 million a year ago. The increase was primarily due to the acquisitions of Classica and Bell's Music Video Channels ("Much Channels") combined with international growth related to new products and organic growth for digital signage in Canada.

Recurring revenues were up 3.8% to $22.7 million over the same period last year and increased at 85.6% of total revenues for the quarter, compared to 85.0% last year.

Music broadcasting revenues increased 1.5% to $19.7 million, mainly due to the acquisitions of Classica and Much Channels, and organic growth from online and downloaded music products. Commercial music revenues rose 9.0% to $6.8 million, mainly as a result of organic growth from digital signage activities in Canada.

Adjusted EBITDA increased to $9.0 million or 34.1% of revenues, compared to $8.2 million or 32.0% of revenues a year earlier. The 10.1% increase in Adjusted EBITDA was primarily due to the acquisitions realized in Fiscal 2016 and 2017 from which synergies were realized, as well as to organic growth in international markets.

For the fourth quarter, the Corporation reported a net income of $4.6 million, or $0.09 per share (diluted), compared to $3.2 million, or $0.06 per share (diluted) for the same period last year. The increase was mainly attributable to higher income taxes recovery related to the recognition of prior unrecognized tax losses, lower loss on fair value of investments, partially offset by higher legal fees and amortization of intangibles.

Adjusted Net income increased 47.6% to $10.5 million, or $0.20 per share (diluted), from $7.1 million, or $0.14 per share (diluted) for the same period a year ago. The increase was primarily due to higher income tax recovery and higher Adjusted EBITDA related to acquisitions combined with organic growth in commercial music.

Cash flow generated from operating activities increased 40.4% to $10.8 million for Q4 2017 from $7.7 million for Q4 2016. The increase was mainly due to higher operating results, and lower net change in non-cash operating items mainly related to timing for payment of accounts payables, partially offset by higher interest paid. Adjusted free cash flow increased to $8.0 million, compared to $6.4 million for the same period a year ago. The increase was primarily related to higher operating results, lower financing costs and lower capital expenditures.

As of March 31, 2017, the Corporation had cash and cash equivalents of $5.9 million and a revolving credit facility of $100.0 million, of which approximately $59 million was unused, allowing it to pursue strategic acquisitions and achieve its growth objectives.

Year-end Results

Revenues for Fiscal 2017 increased 12.8% to $101.5 million compared to $89.9 million a year ago. The increase in revenues was primarily due to the acquisitions combined with growth in international markets and commercial music in Canada.

Adjusted EBITDA increased 9.2% to $33.9 million, from $31.0 million in Fiscal 2016. Adjusted EBITDA margin was 33.4% compared to 34.5% in Fiscal 2016. The increase in Adjusted EBITDA was primarily due to the acquisitions of DMD, iConcerts and Classica, and to organic growth in international markets and in commercial music in Canada. The decrease in EBITDA margin was mainly related to salaries costs to support revenue growth in international markets and the required ramp-up period to realize synergies from acquisitions.

For Fiscal 2017, net income decreased to $10.7 million, or $0.21 per share (diluted), from $13.9 million, or $0.29 per share (diluted) in Fiscal 2016. Adjusted Net Income increased to $27.3 million, or $0.53 per share (diluted), from $24.3 million, or $0.50 per share (diluted) in Fiscal 2016.

Declaration of Dividend

On April 28, 2017, the Corporation declared a dividend of $0.045 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend will be payable on or around June 15, 2017, to holders of subordinate voting shares, variable subordinate voting shares and multiple voting shares on record as of May 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 February 7, 2017, the Corporation confirmed product launches with Vodafone Portugal, Orange Polska, Vodafone España, UPC Hungary, T-Mobile Netherlands, United Group Balkans, Sat-Trakt Doo, and PT Telecom Hungary. These strategic deals represent a significant growth in Stingray's current European distribution; increasing its potential reach by more than a million subscribers.

On March 3, 2017, the Corporation announced the acquisition of Nature Vision TV ("Nature Vision"), a 24/7 channel available online and on television. Nature Vision TV complements Stingray's existing Slow TV programming, Stingray Ambiance 4K, available as a linear television channel and Video On Demand to Pay-TV providers worldwide.

On April 14, 2017, the Corporation announced it has extended its exclusive distribution agreement with leading Australian pay TV provider, Foxtel for an additional five years and three months. In addition to the selection of audio music channels currently available on television, Foxtel residential subscribers will soon have access to the Stingray Music mobile app and web player.

On May 9, 2017, the Corporation announced that it has 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, for a total consideration of US$12.5 million (CA$16.8 million). 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 signed an agreement to acquire and operate a classical and cinematic music video television channel called C Music Entertainment Ltd., for a total consideration of GBP3.6 million (CA$6.2 million).

Conference Call

The Corporation will hold a conference call to discuss these results on Thursday, June 8, 2017, at 10:00 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: 13844047. This tape recording will be available until midnight, July 8, 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, NatureVision TV, Yokee Music, 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.

The following tables show the reconciliation of Net income to Adjusted EBITDA:

Quarters ended March 31 Years ended March 31
(in thousands of Canadian dollars) 2017
Q4 2017
2016
Q4 2016
2017
Fiscal 2017
2016
Fiscal 2016
Net income 4,608 3,247 10,717 13,881
Net finance (income) expenses 1,006 836 2,036 (418 )
Change in fair value of investments 334 1,113 (408 ) (7,345 )
Income taxes (5,201 ) (1,428 ) (3,596 ) 275
Depreciation of property and equipment and write-off 724 594 2,418 2,146
Amortization of intangibles 3,895 2,624 14,750 12,882
Stock-based compensation(1) 372 390 1,332 1,351
Restricted and deferred share unit expenses 688 319 2,008 963
IPO expenses and CRTC tangible benefits - 21 - 5,821
Acquisition, legal, restructuring and other various costs 2,620 503 4,607 1,448
Adjusted EBITDA 9,046 8,219 33,864 31,004
Net finance (income) expenses (1,006 ) (836 ) (2,036 ) 418
Income taxes 5,201 1,428 3,596 (275 )
Depreciation of property and equipment and write-off (724 ) (594 ) (2,418 ) (2,146 )
Income taxes related to change in fair value of investment, share-based compensation, restricted and deferred share unit expenses, amortization of intangible assets, IPO expenses and CRTC tangible benefits and acquisition, legal, restructuring and other various costs (1,983 ) (1,082 ) (5,696 ) (4,692 )
Adjusted Net income 10,534 7,135 27,310 24,309
Note (1) Stock-based compensation includes related employee benefits

The following table shows the reconciliation of Cash flow from operating activities to Adjusted free cash flow:

Quarters ended March 31 Years ended March 31
(in thousands of Canadian dollars) 2017
Q4 2017
2016
Q4 2016
2017
Q4 2017
2016
Q4 2016
Cash flow from operating activities 10,826 7,709 22,766 18,968
Add / Less :
Capital expenditures (522 ) (1,100 ) (3,233 ) (3,429 )
Net change in non-cash operating working capital items (4,933 ) (718 ) (2,371 ) 1,576
Acquisition, legal, restructuring and other various costs 2,620 503 4,607 1,448
IPO expenses and CRTC tangible benefits - 21 - 5,821
Adjusted free cash flow 7,991 6,415 26,511 24,384

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.

Contact Information

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