Stingray Reports Fourth Quarter 2021 Results

Fourth Quarter Highlights

• Revenues decreased 11.8% to $60.3 million from $68.4 million, primarily due to the impact of the COVID-19 pandemic on Radio revenues
• Organic growth of 4.3% in Broadcast and Recurring Commercial Music revenues⁽¹⁾ excluding the impact of foreign exchange and strong organic growth of 13.3% in the United States
• Adjusted EBITDA⁽²⁾ decreased 16.2% to $23.6 million from $28.2 million. However, Adjusted EBITDA⁽²⁾ margin remained stable
• Cash flow from operating activities increased 74.3% to $24.5 million ($0.34 per share) compared to $14.1 million ($0.19 per share)
• Adjusted free cash flow⁽³⁾ decreased 23.2% to $13.8 million ($0.19 per share) compared to $18.0 million ($0.24 per share)
• Net debt to Pro Forma Adjusted EBITDA⁽⁴⁾ ratio of 2.81x
• 967,415 shares repurchased and cancelled for a total of $6.8 million, and
• 525,000 streaming subscribers, increased appreciably by 25.3% over last year

Full Year Highlights

• Revenues decreased 18.7% to $249.5 million from $306.7 million, primarily due to the impact of the COVID-19 pandemic on Radio revenues
• Organic growth of 3.5% in Broadcast and Recurring Commercial Music revenues⁽¹⁾ excluding the impact of foreign exchange and strong organic growth of 11.6% in the United States
• Operating expenses materially decreased by 25.2% to $142.5 million from $190.4 million
• Adjusted EBITDA⁽²⁾ decreased 3.2% to $114.3 million from $118.1 million. However, Adjusted EBITDA⁽²⁾ margin improved from 38.5% to 45.8%
• Cash flow from operating activities increased 18.3% to $104.2 million ($1.42 per share) compared to $88.1 million ($1.16 per share) mainly due to the negative change in non-cash operating items
• Adjusted free cash flow⁽³⁾ decreased 5.1% to $74.4 million ($1.01 per share) compared to $78.4 million ($1.03 per share), and
• 1,530,180 shares repurchased and cancelled for a total of $10.2 million

MONTREAL, June 02, 2021 (GLOBE NEWSWIRE) — Stingray Group Inc. (TSX: RAY.A; RAY.B) (the “Corporation”; “Stingray”), a leading distributor of audio and video music brands in the world, today announced its financial results for the fourth quarter and fiscal year ended March 31, 2021.

Financial Highlights (in thousands of dollars, except per share data)	Three months ended March 31					Twelve months ended March 31
	2021	2020		%		2021	2020	%
Revenues	60,316	68,398		(11.8	)	249,468	306,721	(18.7	)
Adjusted EBITDA(2)	23,638	28,217		(16.2	)	114,268	118,086	(3.2	)
Net income	12,077	(8,486	)	–		45,104	13,970	222.9
Per share – diluted ($)	0.17	(0.11	)	–		0.61	0.18	238.9
Adjusted Net income(5)	11,981	10,095		18.7		62,855	55,908	12.4
Per share – diluted ($)(5)	0.16	0.13		23.1		0.86	0.74	16.2
Cash flow from operating activities	24,514	14,062		74.3		104,246	88,145	18.3
Adjusted free cash flow(3)	13,808	17,974		(23.2	)	74,359	78,350	(5.1	)

(1)	Recurring Commercial Music revenues include subscriptions and usage in addition to fixed fees charged to our customers on a monthly, quarterly and annual basis for continuous music services and excludes credits to clients related to the COVID-19 pandemic. Non-recurring revenues mainly include advertising, support, installation, equipment, one-time fees and discontinued operations.
(2)	Adjusted EBITDA is a non-IFRS measure and is defined as net income before net finance expense (income), change in fair value of investments, income taxes, depreciation and write-off of property and equipment, depreciation of right-of-use assets, amortization of intangible assets, share-based compensation, performance and deferred share unit expense, and acquisition, legal, restructuring and other expenses.
(3)	Adjusted free cash flow is a non-IFRS measure and is defined as cash flow from operating activities less capital expenditures, interests paid and repayment of lease liabilities, plus acquisition, legal, restructuring and other expenses, and adjusted for unrealized gain or loss on foreign exchange and for the net change in non-cash working capital items.
(4)	Pro Forma Adjusted EBITDA is calculated as the Corporation’s last twelve months Adjusted EBITDA, plus synergies and pro forma Adjusted EBITDA for the months prior to the acquisitions which are not already reflected in the results
(5)	Adjusted Net income is a non-IFRS measure and is defined as net income before change in fair value of investments, mark-to-market losses (gains) on derivative instruments, amortization of intangible assets, share-based compensation, performance and deferred share unit expense, and acquisition, legal, restructuring and other expenses, net of related income taxes.

Reporting on Fiscal 2021 performance, Stingray’s President, co-founder and CEO Eric Boyko was very pleased, stating: “We had a very solid year considering the context of the past months. We delivered results which surpassed our expectations, reduced our net debt by close to $35 million, maintained $22 million in dividend payments and repurchased $10 million in shares. We also invested in the Stingray Business in the U.S., laying the foundation for future growth, and continued to build on solid traction in SVOD and FAST channels.

“Fourth quarter Adjusted EBITDA decreased to $23.6 million reflecting mainly higher accrued liabilities tied to the business’s better overall performance in Fiscal 2021. Adjusted EBITDA for the year declined by only 3.2% to $114.3 million and benefited from our comprehensive cost-cutting measures, many of which will be carried forward post-pandemic. By acting swiftly and aggressively last year, we were able to quickly build up ample financial flexibility, which enabled us to continue delivering on our key capital allocation priorities.

“Attesting to the year’s accomplishments in terms of our operational cost structure, despite lower revenues, both segments — Broadcasting and Commercial Music and Radio — generated considerable Adjusted EBITDA margin improvements from the previous year. In the fourth quarter, Broadcasting and Commercial Music revenues decreased by 5.5% to $36.3 million due to the pandemic, lower equipment and installation sales, and the unfavourable impact of foreign exchange, partially offset by the rise in advertising revenues. Adjusted EBITDA decreased by 14.1% to $16.3 million primarily due to adjustments to certain accrued liabilities, partially offset by reduced operating costs.

“For the quarter, Radio revenues decreased by 19.9% to $24.0 million and continued to progressively recover on a comparable basis. Adjusted EBITDA decreased 9.8% to $8.7 million primarily due to the impact of the pandemic and adjustments to accrued liabilities, partially offset by the CEWS and other subsidies as well as reduced operating costs.

“We concluded the year with more than half a million streaming subscribers. We expect solid incremental organic gains in fiscal 2022 and remain on track to reach one million subscribers. Buoyed by strong traction in FAST channels, over the past year, advertising revenues for the year almost tripled from a small base. With recent access to the U.S. market, Stingray Business is set to become a key growth vector with a potential customer base of game-changing proportions.

“We move into 2022 with leaner and more agile operations, significant growth opportunities, a solid financial position and fully prepared to take advantage of the expected recovery in Radio. Adopting a more offensive stance, our capital allocation strategy will shift towards acquisitions and the repurchasing of shares,” concluded Mr. Boyko.

Fourth Quarter Results
Revenues in the fourth quarter decreased $8.1 million or 11.8% to $60.3 million, from $68.4 million a year ago. The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues, as well as a decrease in equipment and installation sales related to digital signage and the negative impact of foreign exchange, partially offset by the increase in advertising revenues in the Broadcast and Commercial Music segment.

For the fourth quarter, revenues in Canada decreased $7.9 million or 18.2% to $35.6 million, from $43.5 million a year ago. The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage. Revenues in the United States increased $0.7 million or 6.9% to $10.9 million, from $10.2 million a year ago. The increase was primarily due to organic growth in advertising revenues in the Broadcast and Commercial Music segment and in streaming subscriptions, partially offset by the negative impact of foreign exchange. Revenues in Other countries decreased $0.9 million or 6.0% to $13.8 million, from $14.7 million a year ago. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues.

Broadcasting and Commercial Music revenues in the fourth quarter decreased $2.2 million or 5.5% to $36.3 million, from $38.5 million a year ago. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, as well as a decrease in equipment and installation sales related to digital signage and the negative impact of foreign exchange, partially offset by the increase in advertising revenues.

For the fourth quarter, Radio revenues decreased $5.9 million or 19.9% to $24.0 million from $29.9 million a year ago. This decrease was primarily due to the impact of the COVID-19 pandemic on revenues.

Adjusted EBITDA for the fourth quarter decreased $4.6 million or 16.2% to $23.6 million from $28.2 million a year ago. Adjusted EBITDA margin was 39.2% compared to 41.3% a year ago. Due to a better performance than initially anticipated, certain accrued liabilities recorded in the first nine months to reflect uncertainty created by the COVID-19 pandemic were adjusted upward in the fourth quarter. This, combined with the reversal of certain accrued liabilities in the fourth quarter of 2020, had a negative impact on year-over-year Adjusted EBITDA. The decrease in Adjusted EBITDA is also due to the impact of the COVID-19 pandemic on revenues, partially offset by reduced operating costs and by the CEWS and other subsidies.

For the fourth quarter, the Corporation reported a Net income of $12.1 million ($0.17 per share) compared to a Net loss of $8.5 million ($(0.11) per share) a year ago. The variance was mainly related to a mark-to-market gain on derivative instruments and a foreign exchange gain, partially offset by higher legal expenses, higher income taxes and lower operating results. Adjusted Net income was $12.0 million ($0.16 per share), compared to $10.1 million ($0.13 per share) a year earlier. The increase was mainly related to a foreign exchange gain, partially offset by lower operating results and higher income taxes.

Cash flow generated from operating activities amounted to $24.5 million for the fourth quarter of 2021 compared to $14.1 million a year ago. The increase was mainly due to the positive change in non-cash operating items and to the foreign exchange gain, partially offset by lower operating results. Adjusted free cash flow generated in the fourth quarter of 2021 amounted to $13.8 million compared to $18.0 million a year ago. The decrease was mainly related to lower operating results and higher interest paid, partially offset by lower income taxes paid.

As of March 31, 2021, the Corporation had cash and cash equivalents of $9.0 million, a subordinated debt of $31.7 million and credit facilities of $416.3 million, of which approximately $110.8 million was available.

Year-End Results
Revenues for Fiscal 2021 decreased $57.2 million or 18.7% to $249.5 million, from $306.7 million for Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage, partially offset by the increase in advertising revenues in the Broadcast and Commercial Music segment, the acquisition of Marketing Sensorial México (MSM) and Chatter Research Inc. and the organic growth in streaming subscriptions.

Adjusted EBITDA for Fiscal 2021 decreased $3.8 million or 3.2% to $114.3 million from $118.1 million for Fiscal 2020. Adjusted EBITDA margin was 45.8% compared to 38.5% for Fiscal 2020. The decrease in Adjusted EBITDA was primarily due to the impact of the COVID-19 pandemic on revenues, to the reversal of certain accrued liabilities in the fourth quarter of 2020 and to the adjustments of certain accrued liabilities in the fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted EBITDA, partially offset by the CEWS and other subsidies, by reduced operating costs and by a settlement with SOCAN.

Net income for Fiscal 2021 was $45.1 million ($0.61 per share) compared to $14.0 million ($0.18 per share) for Fiscal 2020. The increase was mainly related to a mark-to-market gain on derivative instruments, to lower legal expenses and to a foreign exchange gain, partially offset by higher income taxes, by a negative change in fair value of investments following the sale of securities held in AppDirect Inc., by higher performance and deferred share unit expense and by lower operating results. Adjusted Net income for Fiscal 2021 was $62.9 million ($0.86 per share), compared to $55.9 million ($0.74 per share) for Fiscal 2020. The increase was mainly related to a foreign exchange gain, partially offset by lower operating results and higher income taxes.

Declaration of Dividend
On March 24, 2021, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting share and multiple voting share. The dividend will be payable on or around June 15, 2021, to shareholders on record as of May 31, 2021.

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 and subsequent events
During Fiscal 2021, global economies and financial markets were impacted by the coronavirus (“COVID-19”) outbreak as it quickly spread around the world and on March 11, 2020, the World Health Organization declared it a global pandemic. Government authorities around the world have taken actions to slowdown the spread of COVID-19, including measures such as the closure of non-essential businesses and social distancing. The tangible impact on the Corporation started in the Radio segment towards the end of the fourth quarter of 2020, as many non-essential local businesses were forced to temporarily close leading to a decrease in advertising and related revenues. In the early days of the crisis, the decision was made by the Corporation’s management to implement significant cost saving measures, which, combined with the Canadian Emergency Wage Subsidy (CEWS), helped to maintain a solid financial position. The Corporation’s Radio segment, and Broadcast and Commercial Music segment, but to a lesser extent, have been impacted during the first half of 2021. In the second half of 2021, although still impacted, the Corporation noticed progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social distancing. Management expects the situation to continue improving as local businesses resume their normal operations. The extent to which COVID-19 continues to impact the Corporation’s business will depend on future developments, which are uncertain and cannot be predicted at this time. The Corporation’s focus will be to continue to closely monitor its cash position and control its operating expenses while capitalizing on its growth opportunities.

On May 5, 2021, the Corporation announced the launch of free, ad-supported TV channels and premium SVOD services with thirteen major OTT providers: Alteox (Luxembourg), Amazon Prime Video Channels (Italy, Spain and Netherlands), ChannelBox (United Kingdom), Maskatel (Canada), Pluto TV (Latin America and United States), Pzaz (Global), Rakuten TV (Europe), Redbox (United States), Rostelecom (Russia), Ruutu (Finland), Samsung TV Plus (Brazil, Mexico, Netherlands and Sweden) Totalplay (Mexico) and Zeasn (Austria and Germany). These distribution agreements grow Stingray’s audience over new platforms in new territories and add millions of potential viewers.

On April 28, 2021, the Corporation announced that free, ad-supported channels Qello Concerts by Stingray and Stingray Karaoke have become available on Samsung TV Plus Mobile in Germany and the UK. Mobile and tablet users will access both channels on Samsung’s free ad-supported video service through the TV Plus App and the Samsung Free page. The distribution agreements grow Stingray’s potential reach by millions of users. The service is set to launch in June 2021 in Austria and Switzerland.

On March 1, 2021, the Corporation announced it signed an agreement to provide custom music, media, and consumer insights solutions for Orangetheory Fitness, one of the world’s fastest-growing brands, operating 1,400 studios worldwide, in Canada, 50 American states and 25 countries around the globe.

On February 26, 2021, the Corporation announced that Ms. Karinne Bouchard has been appointed to the Board of Directors, effective immediately. Ms. Bouchard has also joined the Corporation’s Audit Committee. The Corporation also announced that Mr. John Steele has resigned from the board.

On February 5, 2021, the Corporation launched its Classic Hits brand Rewind in three Maritime markets. In addition to rebranding the popular Classic Hits station Up! 93.1 (CIHI) in Fredericton as Rewind 93.1, the format and brand appears in Miramichi as Rewind 95.9 (CHHI, previously 95.9 Sun FM) and in Nova Scotia’s Annapolis Valley as Rewind 89.3 (CIJK, previously 89.3 K-Rock).

Conference Call
The Corporation will hold a conference call to discuss these results on Thursday, June 3, 2021, at 10:00 AM (ET). Interested parties can join the call by dialing 647-788-4922 (Toronto) or 1-877-223-4471 (toll free). A rebroadcast of the conference call will be available until midnight, July 3, 2021, by dialing (800) 585-8367 or (416) 621-4642 and entering passcode 6594453.

About Stingray
Montreal-based Stingray (TSX: RAY.A; RAY.B) is a leading global music, media, and technology company with over 1,000 employees worldwide. Stingray is a premium provider of curated direct-to-consumer and B2B services, including audio television channels, over 100 radio stations, SVOD content, 4K UHD television channels, FAST channels, karaoke products, digital signage, in-store music, and music apps, which have been downloaded over 160 million times. Stingray reaches 400 million subscribers (or users) in 160 countries.

Forward-Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian securities law. Such forward-looking information includes, but is not limited to, 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 Annual Information Form for the year ended March 31, 2021, 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 shows stable results from its operation which allows users of the financial statements to better assess the trend in the profitability of the business. The Corporation believes that Adjusted free cash flow and Adjusted free cash flow per share are important measures 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 and Net debt to Pro Forma Adjusted EBITDA are important to analyse the company’s debt repayment capacity on an annualized basis, taking into consideration the annualized adjusted EBITDA of acquisitions made during the last twelve months. Each of these non-IFRS financial measures is not an earnings or cash flow measure recognized by International Financial Reporting Standards (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

	3 months					12 months
(in thousands of Canadian dollars)	March 31, 2021 Q4 2021		March 31, 2020 Q4 2020			March 31, 2021 Fiscal 2021		March 31, 2020 Fiscal 2020
Net income (loss)	12,077		(8,486	)		45,104		13,970
Net finance expense (income)	(7,284	)	33,463			(1,199	)	42,822
Change in fair value of investments	–		(1,914	)		3,787		(6,550	)
Income taxes	4,047		(4,165	)		15,960		1,692
Depreciation and write-off of property and equipment	3,082		2,790			11,653		11,477
Depreciation of right-of-use assets	1,436		1,426			5,660		5,618
Amortization of intangible assets	5,303		5,659			21,379		23,207
Share-based compensation	235		258			851		1,001
Performance and deferred share unit expense	2,028		(1,507	)		6,436		745
Acquisition, legal, restructuring and other expenses	2,714		693			4,637		24,104
Adjusted EBITDA	23,638		28,217			114,268		118,086
Net finance expense (income), excluding mark-to-market losses (gains) on derivative financial instruments	(3,214	)	(10,976	)		(12,619	)	(27,122	)
Income taxes	(4,047	)	4,165			(15,960	)	(1,692	)
Depreciation of property and equipment and write-off	(3,082	)	(2,790	)		(11,653	)	(11,477	)
Depreciation of right-of-use assets	(1,436	)	(1,426	)		(5,660	)	(5,618	)
Income taxes related to change in fair value of investments, share-based compensation, performance and deferred share unit expense, amortization of intangible assets, mark-to-market losses (gains) on derivative financial instruments and acquisition, legal, restructuring and other expenses	122		(7,095	)		(5,521	)	(16,269	)
Adjusted Net income	11,981		10,095			62,855		55,908

Adjusted free cash flow reconciliation to Cash flow from operating activities

	3 months					12 months
(in thousands of Canadian dollars)	March 31, 2021 Q4 2021		March 31, 2020 Q4 2020			March 31, 2021 Fiscal 2021		March 31, 2020 Fiscal 2020
Cash flow from operating activities	24,514		14,062			104,246		88,145
Add / Less :
Acquisition of property and equipment	(1,929	)	(2,153	)		(5,690	)	(6,704	)
Acquisition of intangible assets other than internally developed intangible assets	(194	)	(463	)		(1,313	)	(1,769	)
Addition to internally developed intangible assets	(1,367	)	(1,534	)		(6,428	)	(5,902	)
Interest paid	(5,142	)	(3,819	)		(18,053	)	(17,442	)
Repayment of lease liabilities	(1,099	)	(1,180	)		(5,011	)	(4,873	)
Net change in non-cash operating working capital items	(344	)	7,262			10,632		(2,169	)
Unrealized loss (gain) on foreign exchange	(3,345	)	5,106			(8,661	)	4,961
Acquisition, legal, restructuring and other expenses	2,714		693			4,637		24,104
Adjusted free cash flow	13,808		17,974			74,359		78,351

Pro Forma Adjusted EBITDA reconciliation

(in thousands of Canadian dollars)	March 31, 2021		March 31, 2020
LTM Adjusted EBITDA	114,268		118,086
Synergies and Adjusted EBITDA for the months prior to the business acquisitions which are not already reflected in the results	190		2,037
COVID-19 mandated store closures required anticipated rollouts and deployments to be deferred	1,825		–
Pro Forma Adjusted EBITDA	116,283		120,123
Net debt to Pro Forma Adjusted EBITDA	2.81		3.01

Note to readers: Annual 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 Péloquin
Senior Vice-President, Marketing and Communications
Stingray
(514) 664-1244, ext. 2362
[email protected]