MONTREAL, QUEBEC--(Marketwired - Nov. 10, 2016) -
Second Quarter Highlights
- Revenues increased 15.1% to $24.5 million
- Recurring revenues of $21.6 million or 88% of total revenues, an increase of 14.9%
- Adjusted EBITDA(1) increased 7.8% to $8.2 million
- Cash flow from operating activities increased 287.2% to $3.6 million
- Adjusted free cash flow(3) of $5.2 million, a decrease of 19.0%
- Net income of $1.4 million or $0.03 per share (diluted) compared to $9.2 million or $0.18 per share (diluted) last
year, due to one-time change in fair value of AppDirect recognized last year.
- Adjusted Net income(2) down 12.8% to $5.4 million or $0.10 per share (diluted) compared to last
year
- Quarterly dividend of $0.04 per share
Stingray Digital Group Inc. (TSX:RAY.A)(TSX:RAY.B) (the "Corporation"; "Stingray"), a leading business-to-business
multi-platform music and in-store media solutions provider, today announced its financial results for the second quarter ended
September 30, 2016.
Financial Highlights
(in thousands of dollars, except per share data) |
Three months ended
September 30 |
|
Six months ended
September 30 |
|
| |
2016 |
2015 |
% |
|
2016 |
2015 |
% |
|
| Revenues |
24,527 |
21,302 |
15.1 |
|
49,074 |
41,197 |
19.1 |
|
| Recurring revenues |
21,584 |
18,785 |
14.9 |
|
42,985 |
36,028 |
19.3 |
|
| Adjusted EBITDA(1) |
8,220 |
7,625 |
7.8 |
|
16,101 |
14,776 |
9.0 |
|
| Net income |
1,405 |
9,242 |
(84.8 |
) |
3,449 |
7,465 |
(53.8 |
) |
| |
Per share - diluted ($) |
0.03 |
0.18 |
(83.3 |
) |
0.07 |
0.16 |
(56.3 |
) |
| Adjusted Net income(2) |
5,405 |
6,198 |
(12.8 |
) |
10,612 |
10,981 |
(3.4 |
) |
| |
Per share - diluted ($) |
0.10 |
0.12 |
(16.7 |
) |
0.21 |
0.24 |
(12.5 |
) |
| Cash flow from operating activities |
3,620 |
935 |
287.2 |
|
6,342 |
5,044 |
25.7 |
|
| Adjusted free cash flow(3) |
5,189 |
6,407 |
(19.0 |
) |
11,049 |
11,667 |
(5.3 |
) |
| |
|
| (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. |
"We are pleased with our second quarter results which include a 15.1% increase in revenue and Adjusted EBITDA of $8.2 million.
For the quarter, Adjusted EBITDA margin reached 33.5%, a notable improvement over the 32.1% reported in the first quarter of
Fiscal 2017 and in line with our current scenario for a gradual improvement throughout the year on a sequential basis. As
indicated before, incremental synergies from acquisitions completed in Fiscal 2016 will support the gradual margin improvement,"
said Eric Boyko, President, CEO and co-founder of Stingray.
"The increase in revenues for the second quarter was due primarily to acquisitions, a large contract in the U.S. combined with
growth in Commercial Music in Canada. For the same period, international revenue increased by 27.7% and reached 42.7% of total
revenue. Adjusted EBITDA growth largely reflects the contribution of acquisitions.
"We recently announced the addition of four new music video channels to our long-term distribution agreement with Shaw
Communications. Shaw will now carry Stingray Vibe, Stingray Juicebox, Stingray Loud and Stingray Retro, which were acquired from
Bell in July 2016 and completely rebranded. This is in addition to the prior agreement, which included Stingray Concerts,
Stingray Karaoke, and Stingray Music. Considering the rapid evolution of the Canadian TV industry, our clients are always looking
at different ways to improve their content to keep viewers interested and engaged.
"Our recent agreement with KlowdTV, an up-and-coming and innovative player in the online television streaming industry, can
only further emphasize the multi-platform aspect of our business model and our capacity to participate in the new
state-of-the-art distribution platforms that will shape the future of our industry. Under the terms of the agreement, KlowdTV
subscribers will have continued access to 50 Stingray Music linear audio channels.
"To further expand our growing content library and provide a more comprehensive classical music offering, we recently
announced the acquisition from Berlin-based EuroArts of hundreds of exclusive concerts and documentaries and also an option to
purchase all future content. The classical musical audience is large (estimated at 40 million in the U.S. market alone) and a
very attractive niche market.
"Going forward, we continue to see many opportunities to expand our multimedia content and leverage it via our 400 million Pay
TV subscriber base, and we expect to maintain the pace of our acquisition program for the remainder of the current fiscal year,"
concluded Mr. Boyko.
Second Quarter Results
The Corporation generated revenues of $24.5 million in the second quarter of Fiscal 2017, an increase of 15.1% compared with
revenues of $21.3 million a year ago. The increase was primarily due to the acquisitions of iConcerts and Digital Media
Distribution ("DMD") in Fiscal 2016 combined with growth in Commercial Music in Canada.
Recurring revenues were up 14.9% to $21.6 million over the same period last year and remained at 88% of total revenues for the
quarter. International revenues again posted continue solid growth and represented 42.7% of total revenues, up from 38.5% last
year.
Music Broadcasting revenues increased 15.3% to $18.0 million, mainly due to the acquisitions of iConcerts and DMD, and new
contracts signed in the U.S. Commercial Music revenues rose 14.6% to $6.5 million, mainly as a result of organic growth in music
and digital signage recurring revenues and the acquisition of Nümédia, which generated additional recurring music revenues and
non-recurring revenues related to equipment sales.
Adjusted EBITDA increased to $8.2 million or 33.5% of revenues, compared to $7.6 million or 35.8% of revenues a year earlier.
The 7.8% increase in Adjusted EBITDA was primarily due to the acquisitions realized in Fiscal 2016 and 2017, partially offset by
higher operating expenses related to international expansion. The decrease in EBITDA margin was mainly related to recent
acquisitions from which future synergies are expected in upcoming quarters.
For the second quarter, the Corporation reported a net income of $1.4 million, or $0.03 per share (diluted), compared to $9.2
million, or $0.18 per share (diluted) for the same period last year. The decrease was mainly attributable to the one-time gain on
fair value of AppDirect of $7.5 million and the change in fair value of contingent considerations, both of which occurred in the
second quarter of last year, and increased general and administrative expenses related to legal fees, acquisitions and
settlements.
Adjusted Net income decreased 12.8% to $5.4 million, or $0.10 per share (diluted), compared to $6.2 million, or $0.12 per
share (diluted) a year ago. The decrease was primarily due to the higher change in fair value of contingent considerations and
higher foreign exchange gain recognised in the second quarter of last year.
Cash flow from operating activities increased to $3.6 million versus $0.9 million a year earlier, mainly due to the positive
net change in working cash capital items associated with lower accounts receivables and higher trade payables paid. Adjusted free
cash decreased to $5.2 million, compared to $6.4 million for the same period a year ago. The net change was mainly related to
higher income tax paid and lower foreign exchange gain partially offset by higher Adjusted EBITDA.
As of September 30, 2016, the Corporation had cash and cash equivalents of $2.6 million and a revolving credit facility of
$100.0 million, of which approximately $58.9 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 2017 increased 19.1% to $49.1 million compared to $41.2 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 9.0% to $16.1 million from $14.8 million for the same period last year. The increase was primarily
due to the acquisitions realized in Fiscal 2016 and 2017 partially offset by higher general and administrative expenses.
Adjusted net income for the first six months of Fiscal 2017 decreased 3.4% to $10.6 million, or $0.21 per share (diluted),
compared to $11.0 million, or $0.24 per share (diluted) a year ago.
Declaration of Dividend
On November 9, 2016, the Corporation has declared a dividend of $0.04 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend will be payable on or around December 15, 2016, to holders of subordinate
voting shares, variable subordinate voting shares and multiple voting shares on record as of November 30, 2016.
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 July 14, 2016, the Corporation announced it has signed a multi-year contract renewal with the National Cable Television
Cooperative (NCTC) for its Stingray Music service. Under the terms of the renewal, the NCTC's 800 member companies will have
continued access to 50 Stingray Music linear audio channels.
On October 13, 2016, the Corporation announced that it has extended its long-term distribution agreement with Shaw
Communications Inc. Under the term of this extension, Shaw Cable and Shaw Direct will now carry Stingray's four music video TV
channels (Stingray Vibe, Stingray Juicebox, Stingray Loud, and Stingray Retro) in addition to Stingray Concerts, Stingray
Karaoke, and Stingray Music.
On October 14, 2016, the Corporation announced the acquisition of hundreds of exclusive concerts and documentaries from
Berlin-based EuroArts Music International GmbH (EuroArts), a producer and distributor of classical music film productions, for a
total consideration of EUR 1.1 million (CA$1.6 million). EuroArts will continue to distribute the acquired programs and will
maintain its distribution, acquisition and production businesses.
On October 20, 2016, the Corporation announced that it has signed a distribution agreement for its Stingray Music service with
KlowdTV, an online subscription platform for streaming television. Under the terms of the agreement, KlowdTV subscribers will
have continued access to 50 Stingray Music linear audio channels.
Conference Call
The Corporation will hold a conference call to discuss these results on Thursday, November 10, 2016, 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: 4935097. This tape recording will be available until midnight, December 8, 2016.
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 152 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,
Stingray Karaoke, Festival 4K, and iConcerts. 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
300 employees worldwide, including in the United States, the United Kingdom, the Netherlands, Switzerland, France, Israel,
Australia and South Korea. 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 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:
| |
Three-month periods ended |
|
Six-month periods ended |
|
| (in thousands of Canadian dollars) |
Sept. 30, 2016
Q2 2017 |
|
Sept. 30, 2015
Q2 2016 |
|
Sept. 30, 2016
YTD 2017 |
|
Sept. 30, 2015
YTD 2016 |
|
| Net income |
1,405 |
|
9,242 |
|
3,449 |
|
7,465 |
|
| Net finance expenses |
373 |
|
(1,310 |
) |
1,021 |
|
(444 |
) |
| Change in fair value of investment |
(250 |
) |
(7,549 |
) |
(159 |
) |
(7,812 |
) |
| Income taxes |
487 |
|
2,117 |
|
899 |
|
783 |
|
| Depreciation of property and equipment and write-off |
546 |
|
488 |
|
1,120 |
|
943 |
|
| Amortization of intangibles |
3,982 |
|
3,592 |
|
7,169 |
|
6,815 |
|
| Stock-based compensation(1) |
298 |
|
371 |
|
588 |
|
592 |
|
| Restricted share unit and deferred share unit |
444 |
|
242 |
|
770 |
|
417 |
|
| IPO expenses and CRTC tangible benefits |
- |
|
305 |
|
- |
|
5,800 |
|
| Acquisition, legal fees, restructuring and other various costs |
935 |
|
127 |
|
1,244 |
|
217 |
|
| Adjusted EBITDA |
8,220 |
|
7,625 |
|
16,101 |
|
14,776 |
|
| Net finance expenses |
(373 |
) |
1,310 |
|
(1,021 |
) |
444 |
|
| Income taxes |
(487 |
) |
(2,117 |
) |
(899 |
) |
(783 |
) |
| Depreciation of property and equipment and write-off |
(546 |
) |
(488 |
) |
(1,120 |
) |
(943 |
) |
| 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, legal fees, restructuring and other various
costs |
(1,409 |
) |
(132 |
) |
(2,449 |
) |
(2,513 |
) |
| Adjusted Net income |
5,405 |
|
6,198 |
|
10,612 |
|
10,981 |
|
| 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:
| |
Three-month periods ended |
|
Six-month periods ended |
|
| (in thousands of Canadian dollars) |
Sept. 30, 2016
Q2 2017 |
|
Sept. 30, 2015
Q2 2016 |
|
Sept. 30, 2016
YTD 2017 |
|
Sept. 30, 2015
YTD 2016 |
|
| Cash flow from operating activities |
3,620 |
|
935 |
|
6,342 |
|
5,044 |
|
| Add / Less : |
|
|
|
|
|
|
|
|
| Capital expenditures |
(871 |
) |
(682 |
) |
(1,503 |
) |
(1,612 |
) |
| Net change in non-cash operating working capital items |
1,755 |
|
5,756 |
|
5,299 |
|
2,277 |
|
| Acquisition, restructuring and other various costs |
685 |
|
93 |
|
911 |
|
158 |
|
| IPO expenses and CRTC tangible benefits |
- |
|
305 |
|
- |
|
5,800 |
|
| Adjusted free cash flow |
5,189 |
|
6,407 |
|
11,049 |
|
11,667 |
|
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.