Stingray Group Inc. (RAY) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and welcome to the Annual and Special Meeting of Shareholders of Stingray Group Inc. [Foreign Language] My name is Mark Pathy, I'm the Chairman of the Board of the Corporation, and I will preside at the meeting as Chairman. The meeting will consist of 2 parts. The first, which I will conduct will be the legal part. After this, there will be a presentation by Eric Boyko, the President and Chief Executive Officer of Stingray Group; and Marie-Helene Fournier, the Interim Chief Financial Officer of the Corporation. Before we start the legal portion of the meeting, I would like to present the other current Board members in addition to Eric Boyko and myself. Those are Claudine Blondin; Karinne Bouchard; The Honorable Jean Charest; Mélanie Dunn; Ian Lurie, Gary Rich; Robert Steele and Pascal Tremblay. Subject to the corporation's articles being amended in order to increase the maximum number of directors some 10 to 15 following the adoption of the special resolution to that effect by the shareholders at today's meeting. The size of the Board of Directors will be set to 11 directors, and we are very excited to introduce Greg Coleman as a new nominee to Stingray's Board of Directors. Stingray's management team consists of Eric Boyko, Mario Dubois, Lloyd Feldman, Marie-Helene Fournier, Valérie Héroux, Steve Jones, Ratha Khuong, Mathieu Péloquin, David Purdy and Jean-Pierre Trahan. Now let's begin with the legal portion of the meeting. As this meeting is held virtually via live webcast, it is helpful to set out a few rules for the orderly conduct of the meeting. Registered shareholders and duly appointed proxy holders wishing to participate and vote today on the various motions should have received prior to the meeting their respective control number in order to access it. Questions in respect of a motion can be submitted in writing using the instant messaging service of the virtual interface. Questions will generally appear shortly after they are submitted but will only be addressed during the question period at the end of the meeting, provided that questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting. For the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each motion after the presentation of all motions in this legal portion of the meeting. When you are asked to vote, you will be able to access the electronic ballot from the voting icon at the top of your screen on the virtual interface. You will only have a certain amount of time to do so when the polls are open. To expedite the formal part of the meeting, I will move and second all motions. I now ask that the Annual and Special Meeting of Shareholders of Stingray Group Inc. come to order. I hereby appoint Lloyd Feldman, Corporate Secretary of the Corporation, to act as Secretary of the meeting. For the purposes of this meeting, I hereby appoint Francine Beauséjour and Jenny [ Kongham ] of TSX Trust Company as scrutineers to compute the votes of any polls taken at this meeting and to report thereon to the Chairman. The purposes of today's meeting are set out in the management information circular dated August 17, 2026. The notice calling this meeting and the form of proxy were mailed to shareholders on or around August 24, 2026, along with the audited consolidated financial statements of the corporation for the fiscal period ended March 31, 2026, and related MD&A to the shareholders of the corporation who requested such documents. Unless there's any objection, I will dispense with the reading of the notice of meeting. Copies of the management information circular and other meeting materials are available under the corporation's profile on the SEDAR+ website as well as on the corporation's website. Our transfer agent, TSX Trust Company, has attested to the proper mailing of the notice of this meeting, and there has been filed with me prior to this meeting, proof of service of such mailing, and I direct that a copy of such proof of service be annexed to the minutes of this meeting. I've been advised that there are at least 2 individuals present, each of whom is a shareholder or a proxy holder representing a shareholder and who hold or represent by proxy together more than 88.1% of the total number of votes attached to the outstanding voting shares of the corporation, and therefore, a quorum of shareholders of the corporation is present, and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report, and I direct that their formal report be annexed to the minutes of this meeting. The first item on the agenda is to receive the consolidated financial statements of the corporation for the fiscal year ended March 31, 2026, together with the auditor's report thereon. Copies of such documents have been mailed to the shareholders who requested such financial statements, and it is not proposed to read them to the meeting. I direct that a copy of the consolidated financial statements of Stingray Group Inc. for the fiscal year ended March 31, 2026, together with the auditor's report thereon as both appear in the annual report of the corporation be annexed to the minutes of this meeting. The second item on the agenda of today's meeting is the adoption of a special resolution to amend the articles of the corporation to increase the maximum number of directors from 10 to 15. The text of the resolution to be adopted is set out on Page 6 of the management information circular prepared in connection with today's meeting. The French version of the resolution is on Page 6 of the French circular. Unless there is any objection, I will dispense with the reading of the resolution. Okay. I move and second that the special resolution reproduced on Page 6 of the management information circular to amend the articles of the corporation to increase the maximum number of directors from 10 to 15 be approved. Unless there are any questions, I will move to the next item of business. The meeting will now proceed with the election of the directors of the corporation. The 11 directors to be elected by the shareholders of the corporation shall hold office until the close of business of the first Annual Meeting of Shareholders of the corporation following election or until their successors are elected or appointed. Claudine Blondin, Karinne Bouchard, Eric Boyko, Jean Charest, Greg Coleman, Melanie Dunn, Ian Lurie, Gary Rich, Robert Steele, Pascal Tremblay and myself, Mark Pathy, have been nominated as directors for the ensuing year or until their successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Since there are no other nominations, I move and second a motion to elect the directors named above. Unless there are any questions, I'll move to the next item of business. Okay. Moving along. The fourth item of business for the meeting is the appointment of PricewaterhouseCoopers LLP as auditors of Stingray Group for the ensuing year at such remuneration as may be fixed by the Board of Directors of Stingray Group. I move and second that PricewaterhouseCoopers LLP be appointed as auditor of Stingray Group until the close of the next annual meeting and that the directors be authorized to fix the remuneration. Unless there are any questions, I will move to the next item of business. Okay. The next item on the agenda is the adoption of an ordinary resolution approving all unallocated options under the corporation's stock option plan as is required every 3 years by the rules of the TSX. The text of the resolution to be adopted is set out on Page 59 of the management information circular prepared in connection with today's meeting. The French version of the resolution is on Page 61 of the French circular. Unless there is any objection, I will dispense with the reading of the resolution. I hereby move and second that the ordinary resolution reproduced on Page 59 of the management information circular and approving all unallocated options under the corporation's stock option plan be approved. Unless there are any questions, I will move to the next item of business. All right then. The sixth and final item of business for the meeting is the adoption of an ordinary resolution approving all unallocated performance share units under the corporation's performance share unit plan as is also required every 3 years by the rules of the TSX. The text of the resolution to be adopted is set out on Page 60 of the management information circular prepared in connection with today's meeting. The French version of the resolution is on Page 62 of the French circular. Unless there's any objection, I'll dispense with the reading of the resolution. I hereby move and second that the ordinary resolution ReViaproduced on Page 60 of the management information circular and approving all unallocated performance share units under the corporation's PSU plan be approved. Unless there are any questions, we will now proceed with voting. As we mentioned, voting today will be conducted by electronic ballot. I will now take a moment to ask that the balloting be opened to registered shareholders and duly appointed proxy holders. The polls are now open. And at this point, all registered shareholders and duly appointed proxy holders who have properly logged in with their control number and who wish to vote will be able to see on the screen all motions being brought forth at this meeting. Please register your votes by accessing the voting page and selecting the for or against button next to the name of each proposed director and next to each of the resolutions with respect to the amendment of the corporation's articles and the unallocated stock options and performance share units, respectively, and selecting for or withhold button next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the corporation's auditor. Each of the matters submitted to a vote at today's meeting with the exception of the special resolution to amend the articles of the corporation require the approval of a majority of the votes cast at the meeting. The special resolution to amend the articles of the corporation to increase the maximum number of directors from 10 to 15 requires the approval of at least 2/3 of the votes cast at the meeting. We will provide registered shareholders and duly appointed proxy holders approximately 1 more minute to complete the electronic ballots. Once the electronic balloting closes, the voting page will disappear, and your votes will automatically be submitted. Start the 1-minute pause now. [Voting]

Okay. And the 1 minute is up. I hope everyone had the opportunity to register their votes. I've been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor for each of the resolutions. The special resolution to amend the articles of the corporation to increase the maximum number of directors from 10 to 15 has been duly adopted. Each of the 11 nominees have been duly elected as directors of the corporation to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed, and the appointment of PricewaterhouseCoopers LLP as the auditor of the corporation has been duly approved, and the Board of Directors have been authorized to fix the remuneration. Each of the ordinary resolutions approving the unallocated stock options under the corporation's stock option plan and the unallocated performance share units under the corporation's PSU plan have also been duly adopted. I direct that was the results -- that the results of the polls will be included with the minutes of this meeting, and the results of the voting for the election of directors will be announced in a news release in accordance with the policies of the TSX and filed on SEDAR+. The formal items of business as set out in the notice of meeting have now been dealt with. I now move and second that the meeting now terminate. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. And now it is my pleasure to turn the meeting over to Eric Boyko, the President and Chief Executive Officer of the Corporation; and to Marie-Helene Fournier, Interim Chief Financial Officer for their portion of the meeting. After this, there will be a question period. Please hold off on your questions until after the presentation. Thank you.

Thank you, Mark. Good morning, and welcome. Thank you for joining us today. 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 operations 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 August 7, 2026, 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 are 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 the Stingray MD&A for a 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. Fiscal 2026 was a year of strong execution and meaningful progress. Building on that momentum, we released our first quarter fiscal 2027 results last month, reporting a solid start to the new year that further demonstrates the strength of our diversified business model and our ability to execute on our strategic priorities. I will walk you through both periods, beginning with the first quarter of fiscal 2027. Revenues for the first quarter of fiscal 2027 reached $158 million compared with $95.6 million in the first quarter of last year and an increase of 65.2%. Adjusted EBITDA was $50.3 million, up 49.3% from $33.7 million. Adjusted net income reached $27.9 million or $0.40 per share compared with $21.3 million or $0.31 per share in the prior year quarter, an increase of 31.1%. Net income was $6.6 million or $0.10 per share compared with $16.8 million or $0.24 per share in the prior year quarter. Cash flow from operating activities was $4.8 million compared with $19 million in the last year, while adjusted free cash flow was $32.5 million compared with $18.8 million. I will now present the key financial highlights for fiscal 2026. We delivered strong growth on both the top and bottom lines. Total revenues reached $457.8 million, up 18.3% from $386.9 million in fiscal 2025. Adjusted EBITDA increased to $160.2 million, up 12.6% from $142.2 million. Adjusted net income reached $90.3 million or $1.33 per share compared with $72.7 million or $1.05 per share in fiscal 2025, an increase of 24.3%. Our operational performance also translated into strong cash generation. Cash flow from operating activities was $116.6 million, up 11%, while adjusted free cash flow reached $102.1 million, up 22.1% from $83.6 million. The year-over-year variance in net income and cash flow from operations reflects timing differences in working capital and certain nonrecurring items and is not indicative of any change in the underlying strength of our business. Adjusted metrics, which we believe are more reflective of our core performance tell a consistently positive story. The story of our revenue performance over the last several years is one of successful and deliberate transformation. From fiscal 2022 to fiscal 2026, total revenues grew from $282.6 million to $457.8 million, and strategic growth revenues now represent 67% of total revenues, up from just 42%, 4 years ago. That shift is not accidental. It reflects a clear and consistent strategy. The most compelling illustration of this transformation is the extraordinary growth of our advertising revenues within the Broadcast and Commercial division from $12 million in fiscal 2022 to $136.9 million in fiscal 2026, an increase of more than elevenfold in just 4 years. What was once a modest revenue line has become one of the most powerful growth engine in our business. At the same time, our Consumers and Business division has grown from $159.1 million to $325.4 million, driven by our streaming platform, FAST channels and the contribution of TuneIn. Meanwhile, radio revenues have remained stable, a testament to the resilience of that business as we continue to evolve our overall revenue mix. The takeaway is clear. Stingray is a more diversified and dynamic company today with a revenue profile driven by high-growth, high-margin initiatives that position us well for sustainable and long-term growth. We have successfully expanded our business while consistently improving our profitability and cash flow and fiscal 2026 is the clearest proof yet of that commitment. Our adjusted EBITDA reached $160.2 million, up 13% versus fiscal 2025 and has grown every single year over the 5-year period. This is not growth at any cost. It is high-quality disciplined growth that has consistently protected our margin structure. What is equally compelling is how this growth has been funded. Our business continues to be a powerful generator of cash. Adjusted free cash flow grew 22% to reach $102.1 million in fiscal 2026, crossing the $100 million mark for the first time in Stingray's history. The self-funding capacity is a core strength of our business model. It provides the fuel for our strategic investments without compromising our financial health or our ability to return capital to shareholders. That is not a coincidence. It is a result of rigorous financial discipline and a resilient business model that is built to perform through different market conditions. This disciplined approach has built a strong financial foundation that positions us well for the next chapter of Stingray's [indiscernible]. Our strong financial performance gives us the means to pursue a clear balance and disciplined capital allocation strategy, one that consistently improve our balance sheet, rewards our shareholder and fuels our future growth. On the balance sheet, our net leverage target remains 2 to 2.25x adjusted EBITDA. Q1 leverage of 2.53 is slightly above that range, reflecting the recent acquisition activity that has accelerated our core platform. We are fully committed to returning to a leverage of approximately 2x by the end of fiscal 2027, and our robust free cash flow generation give us every confidence in our ability to deliver that commitment. Returning capital to shareholders is a commitment we take seriously. We currently pay a quarterly dividend of $0.085 per share, and we renewed our normal post issuer bid this month. Since inception, our buyback program, we have repurchased 11.4 million shares for a total of $89.3 million, including 1.1 million shares for $17.1 million in the first quarter of fiscal 2027 alone. These are not symbolic gestures. They are a direct expression of our confidence in Stingray intrinsic value. On the M&A front, we have now completed over 50 acquisitions totaling more than $1 billion track record that demonstrates both our ambition and our discipline. We will continue to pursue transactions that strengthen our platforms, expand our reach and create compelling long-term value. That concludes my financial review. I will now turn the presentation over to Eric.

Well, thanks Marie. So team, so looking at the numbers that Marie just gave us, incredible numbers for the last 5 years. So we're very happy. If you look at a 1-year return, our stock price is up 64%. 3-year return, our stock price is up 250%. So incredible results that we had on the [ jump on ] stock and we feel we had a great year. And the good news is we feel it's going to be an even better year. So we're very excited. If you look at the guidance that we have on our stock, most of our -- I think the guidance or the estimates from analysts were $21, $21.50. And this year, they expect us to do around $650 million of sales. They expect us to do around $230 million of EBITDA and to redo -- to do $2.50 of shares of free cash flow. So we're very confident. And I think our #1 goal as a management team this year is to execute on the plan and really to focus on the integration of TuneIn. So a lot of people ask me says TuneIn. So sometimes you say, well, we're busy because we killed an elephant. A lot of our colleagues and investors says, no, you kill them my move. So we're very excited with the TuneIn integration, acquisition and what we can do together. So if you look at our first strategy, which is the 3 pillars, so distribution. Our goal is always -- goal to have more distribution. So we are distributed on TVs, connected TVs. We're just distributed on smart speakers. We're in cars. We're also in retail media. So we say Stingray is the #1 connected media company to devices. So not many companies can have all these different connections. Monetization. That was a big key with TuneIn. We are really able to monetize, and we see the growth in advertising sales over the last 3 years. And this year, we expect that $400 million of our $650 million will be advertising. And finally, content. It's good to be able to monetize, but we own most of our content, TuneIn also. So we're lucky that we have inventory that we can monetize. And that's a big difference between us and other companies. If you look at the TuneIn acquisition, so very excited, TuneIn added 75 million unique users. So by combining and TuneIn is the #1 audio sales platform in the world. If you exclude Spotify, the Spotify sells their own inventory. So we're very lucky having the TuneIn monetization network or the ad stack plus Stingray is a 1 plus 1 equals 5. And we see it -- we told the market and also where we have access to 100,000 radio stations across the world, plus CNN, plus a lot of the other assets they have. So it is a unique product and a perfect fit for Stingray and TuneIn. And we already agreed last quarter that we reached $45 million of annual savings, positive sales, and our goal was between $20 million to $40 million. So we already beat that objective. But if we go to the FAST channels. FAST channels continue to grow. Our listenership is up 35%. So we're very happy. But most important, our sales in Q1 were up 70%. So we're able, with the TuneIn acquisition to not only grow their viewership but to be able to monetize at an accelerated rate and we confirm that we see this growth going forward and are very excited for the months of September, October, November, December, and this is the big time of the year. So excited to report to you our Q2 numbers in November. And in terms of platform, we are really -- we have a great partnership with LG, great partnership with Vizio, great partnership with Samsung. I think we are their #1 partner, if you ask them, so we're very, very proud for the Montreal company to be such a strong distributor. But then also, we also have Pluto, [ Joy TV, Well ], Fire, Amazon, Hisense, Roku. So we're really distributed on all the platforms worldwide. And we're probably the broadcaster that has the most channels per platform. So we're even beating Discovery, Time Warner because of our different types of channels that we offer. And also, we got lucky because we did it in the U.S., we didn't have many channels in the U.S. When we started the FAST channels, we were able to launch as quickly because we were not cannibalizing our market. So going back to our biggest project, and our biggest builder, what which we call the premium ad inventory or internally, we call the backfill, but I'll use the word premium ad inventory. It's really us what we're doing with our partners is putting Stingray content and with our partners, Vizio, Samsung, LG, helping them to monetize their channels of -- so what gives us is really a huge amount of supply. And then on the other side, we have the demand coming in from all of our partners, and we just saw the $45 million with our friends from the TuneIn. And so we're able to -- with Magnite, Nexxen and [ Magi ] and many suppliers able to bring inventory there. And that's, for example, we went from doing 0 or, let's say, 10,000 a day and we're now reached a point that we're doing 200,000 a day. So that is a new business of $100 million and growing. So very excited by that. Then Stingray advertising. So this is -- again, we have a 33,000 locations that we can do ads. So we do audio ads. We're the largest footprint -- easy large footprint in the world about doing this audio ads, 1 billion monthly shopping visits, huge numbers. We have over $400 million of inventory. Now our execution is we're only selling about 10% to 15% of that inventory. So we have to be able to grow the demand side. And our big winner is to get programmatic sales like we do with TuneIn into the Stingray advertising model. Finally, cars. We love the car business. I think we are going to be in every car in the world. Karaoke is already -- and over 20 manufacturers with 20 OEMs. So Karaoke. I'm sad for all the families, but Karaoke will be part of every car. And we're even looking to add mics. So you'll have microphones with singing machine in every car. So for those who have young kids, good luck. But I must say also now we're bringing music. So we want to be the music supplier who wants Stingray music and you'll see a lot of deals will be announced in the next few months but we're well positioned. Our key asset with our music strategy is where we want to distribute and share the revenues of music with the OEMs, and I think we're well positioned. And we're one of the only companies in the world that has global music rights for non-on-demand music. So I think we're well positioned. The only thing with the car business, it's a long game. It's a long sales process, and you sell 1 car, you sell 2 cars. So I see this as a 5- to 15-year project, but this will give us a guarantee for the next 15 years, I'm 55, I'm 56, I'll be 71. So good news for the shareholders also. And finally, same -- so build on long-term value creation. So same thing, use our balance sheet. As you know, we've done a great use our balance sheet that we did with this deal to buying companies. So we're able to do this with our credit facility at less than 5%. So we're able -- and we have a lot of flexibility. Second thing, commitment to shareholder return, but we're very disciplined. We will review our dividend policy again on the second quarter. But our goal is to make sure we give a strong shareholder return. And our goal is to be below 2x EBITDA with the current market condition. As an entrepreneur, I used to be at 2.5%. But now maybe I'm getting older, but I feel that being below 2 is safer and very committed to long-term growth. So when we went public, Stingray was doing $70 million of sales and $27 million of EBITDA in 2015. And this year, we're going to be close to $700 million of sales and $230 million EBITDA. So if you look at the growth that we've achieved, it's incredible. But one of our main goals, I think it's important is that we really want to be able to hit $1 billion in sales. I think once we hit $1 billion in sales, then we're going to be a real Canadian success, real Quebec and Canadian success. So with this in mind, Mr. Chairman, I think we had a great year. We're very happy. Thank you for the team members at Stingray. Thank you for the Board. Thank you for the analysts, and most important for our shareholders, thank you for your confidence in Stingray and we expect to give you same returns and even better for the future.

Okay. Well, thank you very much, Eric, and Marie-Helene for very interesting presentations, and congratulations on a great year and to the team for the great job that they've done. As we start the question period, I ask that anyone who would like to ask a question do so these in writing by using the instant messaging feature of the virtual interface. We will answer as many questions as time permits. When asking your question, please state your name, the entity you represent, if any, and confirm whether you are a shareholder, a duly appointed proxy holder or a guest. Please limit your questions to topics relating to today's subject matter and keep your questions short and to the point. We will now give attendees a moment to type in their questions. For each question we answer, we will summarize the question and read out loud the name of the person who asked such question. And if applicable, the entity such person represents. We'd like to remind you that questions which were already answered or that are redundant or repetitive may not be published or answered. Okay. Well, I guess the team did such a good job of covering all the material today that there are no questions outstanding. And so this concludes the question period and also concludes this year's Annual and Special Meeting of Stingray Group shareholders. On behalf of the corporation's Board of Directors and executive team, I wish to thank Stingray employees and stakeholders for their hard work and dedication. Thank you very much.