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

Stingray Digital Group Inc.

November 12, 2015 07:00 ET

Stingray Reports Second Quarter 2016 Results

Continued Momentum in International Revenues - 50% Growth

MONTREAL, QUEBEC--(Marketwired - Nov. 12, 2015) -

Highlights

  • Revenues increased 24.0% to $21.3 million
  • Recurring revenues of $18.8 million or 88% of total revenues, an increase of 20.3%
  • Net income increased 326.5 % to $9.2 million or $0.18 per share (diluted) compared to last year
  • Adjusted EBITDA increased 13.2% to $7.6 million
  • Adjusted Net income up 29.1% to $6.2 million or $0.12 per share (diluted) compared to last year
  • Adjusted free cash flow of $6.4 million, an increase of 30.1%
  • Obtained five-year renewal of its Broadcasting License by the CRTC
  • Strategic relationship with Multi Channels Asia PTE Ltd., a Singapore-based media company
  • Declaration of a dividend of $0.03 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 second quarter ended September 30, 2015.

Financial Highlights
(in thousands of dollars, except per share data)
Three months ended September 30, Six months ended September 30,
2015 2014 % 2015 2014 %
Revenues 21,302 17,179 24.0 41,197 32,812 25.6
Recurring revenues 18,785 15,618 20.3 36,028 29,992 20.1
Adjusted EBITDA(1) 7,625 6,734 13.2 14,776 12,558 17.7
Net income 9,242 2,167 326.5 7,465 3,185 134.4
Per share - diluted ($) 0.18 0.06 200.0 0.24 0.24 -
Adjusted Net income(2) 6,198 4,607 34.5 10,981 8,198 33.9
Per share - diluted ($) 0.12 0.13 (7.7 ) 0.24 0.24 -
Cash flow from operating activities 935 467 100.2 5,044 3,205 57.4
Adjusted free cash flow(3) 6,407 4,704 36.2 11,667 7,983 46.1
(1) Adjusted EBITDA is a non-IFRS measure and is defined as net income before net finance expenses, change in fair value of investment, income taxes, depreciation, amortization and write-off, share-based compensation, 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 with our second quarter results, which reached record levels on several fronts," said Eric Boyko, President, CEO and co-founder of Stingray. "International revenues represented 39% of total revenues, an increase of 50% over last year. Adjusted free cash flow, a solid indicator of the strength of our business model, increased to $6.4 million or by 36%".

"During the quarter, we acquired and successfully completed the integration of European television channels Brava NL BV, Brava HDTV BV and Djazz TV BV. We also completed the small but strategic acquisition of Cultuur7, a Flemish television channel operator dedicated to cultural content. In addition, we signed several new customers in Canada and in international markets as we continue to effectively leverage our internationally established B2B platform of quality music products and services. Finally, our recently announced relationship with MCA should help us support the continued growth internationally for years to come."

"A recent survey indicates that 40% of Canadian adults listened to Stingray Music channels in the last month and that 8% of our listeners use our mobile app. Following combined marketing initiatives related to our rebranding to Stingray Music, brand awareness increased from 30% in December 2014 to 48% in September 2015. We are pleased by our growing brand recognition and by the penetration rate of our mobile app, both of which enhance our strategic position with our clients.

"We are actively working on our acquisition pipeline and benefit from a solid financial position to continue to execute our business model," concluded Mr. Boyko.

Second Quarter Results

The Corporation generated revenues of $21.3 million in the second quarter of 2016, an increase of 24.0% compared with revenues of $17.2 million a year ago. The increase was primarily due to acquisitions combined with solid growth of 50% in international markets. Revenues were also positively impacted by the favorable exchange rate with the US dollar.

Recurring revenues of $18.8 million in the second quarter of 2016 remained relatively stable in percentage of total revenues at 88%, and increased 20.3% over the same period last year. International revenues posted solid growth and represented 38.5% of total revenues, up from 31.8% last year.

Music Broadcasting saw an increase of 19.5% in revenues to $15.6 million, mainly due to the acquisitions of Brava and Telefonica On the Spot and the signing of new customer contracts. Commercial Music revenues increased 38.2% to $5.7 million, mainly as a result of the acquisition of Les Réseaux Urbains Viva Inc. and the signing of new customer contracts, as well as non-recurring revenues from installation and equipment sales. In September 2015, Stingray Business began offering its commercial music services in Mexico via Basha, a local leader in the field of in-store media. This collaboration will allow the Corporation to expand in the fast growing Mexican market.

Adjusted EBITDA for the second quarter of 2016 was $7.6 million or 35.8% of revenues, compared to $6.7 million or 39.2% of revenues a year earlier. The increase in Adjusted EBITDA of 13.2% was primarily due to the acquisitions of Brava and Telefonica On the Spot, growth in international markets and the favorable impact of changes in the allocation of music copyright royalties and related rights.

For the second quarter, the Corporation reported a net income of $9.2 million, or $0.18 per share (diluted), compared to $2.2 million, or $0.06 per share (diluted) for the same period in 2014. The increase was mainly attributable to the change in the fair value of an investment (see below for information), the increase in operating results and lower financing costs related to the debt repayment with the IPO, partially offset by higher income taxes.

Adjusted net income increased 34.5% to $6.2 million, or $0.12 per share (diluted), compared to $4.6 million, or $0.13 per share (diluted) a year ago. The increase was due to the successful integration of acquisitions, signing of new international contracts, additional sales from installation and equipment and lower finance expenses related with the debt repayment with the IPO.

Cash flow from operating activities was $0.9 million in the second quarter of 2016, versus $0.5 million a year earlier. Adjusted free cash flow for the three-month period ending September 30, 2015 increased 36.2% to $6.4 million, compared to $4.7 million for the same period a year ago.

As of September 30, 2015, the Corporation had cash and cash equivalents of $1.5 million and a revolving credit facility of $100.0 million, of which approximately $80.8 million was unused, allowing it to pursue strategic acquisitions and achieve its growth objectives.

Six Months Results

Revenues for the first six months of Fiscal 2016 increased 25.6% to $41.2 million compared to $32.8 million a year ago. The increase in revenues was primarily due to the acquisitions combined with significant growth in international markets and the launch of new products.

Adjusted EBITDA increased 17.7% to $14.8 million for the first six months of Fiscal 2016 from $12.6 million in Fiscal 2015. The increase was due to the acquisitions in Fiscal 2015 and 2016, growth in international markets, additional non-recurring revenues related to installation and equipment sales and the favorable impact of changes in the allocation of music copyright royalties and related rights.

As a result, Adjusted net income increased 33.9% to $11.0 million, or $0.24 per share (diluted), compared to $8.2 million, or $0.24 per share (diluted) a year ago.

Declaration of Dividend

On November 11, 2015, the Corporation declared a dividend of $0.03 per subordinate voting share, variable subordinate voting share and multiple voting share that will be payable on or around December 15, 2015 to holders of subordinate voting shares, variable subordinate voting shares and multiple voting shares on record as of November 30, 2015.

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

During the quarter, the Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision renewing until August 31, 2020 the broadcasting licence of the Corporation's national pay audio service, Stingray Music.

On September 21, 2015, an additional investment of $0.3 million was made in AppDirect Inc. ("AppDirect"), a company that offers a cloud service marketplace and management platform that enables companies to distribute web-based services. As of September 30, 2015, the Corporation's 1.76% interest in AppDirect had an estimated fair value of $16.1 million.

On November 11, 2015, Stingray announced that it has entered into a strategic relationship with Multi Channels Asia ("MCA"), a Singapore-based media company, which owns, represents and distributes a number of thematic Pay-TV networks serving Asia and the Pacific. Under the terms of the agreement, Stingray will provide MCA with growth capital over a multi-year term and in exchange obtain an expanded foothold in the Asian region.

Conference Call

The Corporation will hold a conference call to discuss these results on Thursday, November 12, 2015 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: 62223620. This tape recording will be available until December 9, 2015.

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 135 million Pay-TV subscribers (or households) in 127 countries. Geared towards individuals and businesses alike, Stingray's products include the following leading digital music and video services: Stingray Music, Stingray Concerts, Stingray Brava, Stingray Djazz, Stingray Music Videos, Stingray Lite TV, Stingray Ambiance and Stingray Karaoke. 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 over 235 employees across the world, including in Toronto, Miami, London, Amsterdam and Tel Aviv. 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. 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, Adjusted EBITDA margin, Adjusted Net income, Adjusted Net income per share, Adjusted free cash flow are important measures in evaluating our performance. 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

Three-month periods ended Six-month periods ended
(in thousands of Canadian dollars) Sept. 30, 2015
Q2 2016
Sept. 30, 2014
Q2 2015
Sept. 30, 2015
YTD 2016
Sept. 30, 2014
YTD 2015
Net income 9,242 2,167 7,465 3,185
Net finance expenses (1,310 ) 1,202 (444 ) 2,434
Change in fair value of investment (7,549 ) (450 ) (7,812 ) (900 )
Income taxes 2,117 (348 ) 783 (482 )
Depreciation of property and equipment and write-off 488 541 943 942
Amortization of intangibles 3,592 3,288 6,815 5,618
Stock-based compensation 371 80 592 312
Restricted share unit and deferred share unit 242 - 417 -
IPO expenses and CRTC tangible benefits 305 - 5,800 -
Acquisition, restructuring and other various costs 127 254 217 1,449
Adjusted EBITDA 7,625 6,734 14,776 12,558
Net finance expenses 1,310 (1,202 ) 444 (2,434 )
Income taxes (2,117 ) 348 (783 ) 482
Depreciation of property and equipment and write-off (488 ) (541 ) (943 ) (942 )
Income taxes related to change in fair value of investment, share-based compensation, amortization of intangible assets, IPO expenses and CRTC tangible benefits and acquisition, restructuring and other various costs (132 ) (732 ) (2,513 ) (1,466 )
Adjusted Net income 6,198 4,607 10,981 8,198

Adjusted free cash flow reconciliation to Cash flow from operating activities

Three-month periods ended Six-month periods ended
(in thousands of Canadian dollars) Sept. 30, 2015
Q2 2016
Sept. 30, 2014
Q2 2015
Sept. 30, 2015
YTD 2016
Sept. 30, 2014
YTD 2015
Cash flow from operating activities 935 467 5,044 3,205
Add / Less :
Capital expenditures (682 ) (457 ) (1,612 ) (955 )
Net change in non-cash operating working capital items 5,756 4,563 2,277 4,829
Acquisition, restructuring and other various costs(1) 93 131 158 904
IPO expenses and CRTC tangible benefits(1) 305 - 5,800 -
Adjusted free cash flow 6,407 4,704 11,667 7,983

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