NEWS RELEASE Stingray Reports Second Quarter 2017 Results
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NEWS RELEASE Stingray Reports Second Quarter 2017 Results Sequential Improvement in Adjusted EBITDA margin to 33.5% 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 $0.04 per share Montreal, November 10, 2016 – Stingray Digital Group Inc. (TSX: RAY.A; RAY.B) (the “Corporation”; “Stingray”), a leading business-to-business multi-platform music and in-store media solutions provider, today announced its financial results for the second quarter ended September 30, 2016. Financial Highlights Three months ended Six months ended (in thousands of dollars, except per share data) September 30 September 30 2016 2015 % 2016 2015 % Revenues 24,527 21,302 15.1 49,074 41,197 19.1 Recurring revenues 21,584 18,785 14.9 42,985 36,028 19.3 Adjusted EBITDA(1) 8,220 7,625 7.8 16,101 14,776 9.0 Net income 1,405 9,242 (84.8) 3,449 7,465 (53.8) Per share – diluted ($) 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. 1 “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 2 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.