Post by
Daudau11 on Aug 08, 2023 10:19pm
RBC - Q1/24 Results Slightly Below Expectations
Our view Q1/24 results were slightly below our expectations due to the timing of advertising campaigns and continued choppiness in national radio advertising. We view the results as neutral for the shares at current levels.
First impression • Q1/24 results slightly below our expectations. Revenues and adjusted EBITDA were $79.0M (+1.1% YoY) and $28.3MM (+8.4%), respectively, versus our estimates of $81.7MM and $29.0MM (consensus is $81.7MM and $28.3MM). The modest negative revenue variance mainly reflected weaker radio revenue growth (-0.6% versus our estimate of +4.0%) and the timing of advertising campaigns. Adjusted EBITDA margins were 35.8% versus our 35.5% estimate and 33.4% in Q1/23. Adjusted EPS was $0.17 versus our estimate of $0.22 (consensus is $0.21).
Please see Exhibit 1 for a detailed summary of Q1/24 results versus our expectations.
• A temporary advertising lull within Broadcast and Commercial Music. Q1/24 Broadcast and Commercial Music revenues and adjusted EBITDA were $47.2MM (+2.3% YoY) and $20.0MM (+19.0%), respectively, versus our estimates of $48.4MM and $19.1MM. Organic revenue growth for broadcast and recurring commercial music was -2.0% versus +3.3% on the same basis in Q4/23. Adjusted EBITDA margins were 42.3% (+595bps YoY), ahead of our 39.5% estimate boosted by cost efficiencies. While the modest revenue shortfall is attributed to a temporary slowdown in the timing of retail media advertising campaigns, management indicated a renewed uptick in growth at Stingray Advertising in Q2/24 with the company remaining on target to deliver +40% YoY growth in advertising revenues in F2024. Furthermore, management expects a doubling of Stingray Advertising revenues to $100MM within the next 12-36 months bolstered by recent announcements that include sales agreements with Mood Media's Vibenomics advertising division (25,000+ locations in the U.S.) and Loblaw Media (~300 locations in Canada). Other notables: (i) advertising revenues were $8.2MM in Q1/24 versus $8.6MM in Q1/23; and (ii) streaming subscribers declined to 795k in Q1/24 from 816k in Q4/23 with revenues up +2.1% YoY.
• National advertising choppiness impacts radio. Q1/24 Radio revenues and adjusted EBITDA were $31.8MM (-0.6% YoY) and $9.9MM (-6.8%), respectively, versus our estimates of $33.3MM and $11.2MM. Adjusted EBITDA margins were 31.1%, below our 33.7% estimate. Management attributed the choppy performance in the quarter to national advertising (local and digital advertising up +3% and +2%, respectively), increased right fees and higher marketing expenses.
• Other notables. (i) 7.7k shares were repurchased in Q1/24 for $0.04MM; and (ii) net debt/proforma adjusted EBITDA was 3.28x as at Q1/24 versus 3.19x as at Q4/23.
• Issues in focus for the 10:00 a.m. ET conference call (#888-886-7786). (i) updated commentary on the advertising outlook (radio, retail media, FAST channels) and pacing for Q2/24; (ii) the extent to which management will remain largely inactive on further tuck-in M&A while focusing on debt repayment; and (iii) more granularity on the financial impacts of recent contract announcements.