ANNUAL REPORT 2017 Year Ended March 31, 2017 Stingray Digital Group Inc. table of content 03 Word from the CEO 06 Management’s Discussion and Analysis 08 Company Profile 10 Business Strategy 18 Competitive Strength 20 Key Business Risks 22 Executive Team and Board of Directors 49 Consolidated Financial Statements A Year in Acquisitions word from In an industry where consolidation is the watchword, and the CEO where growth and scale define success, acquiring premium quality music content is one of Stingray’s primary development strategies and key differentiators. In June 2016, we closed the acquisition of Festival 4K, one of Dear shareholders, clients, partners and colleagues, the first television channels to broadcast entirely in native 4K UHD. Since rebranded since as Stingray Festival 4K, the Fiscal 2017 caps our first decade on a high note! While there channel complements Stingray’s existing 4K offering, Stingray is no proven recipe or how-to guide to success, I have learned Ambiance 4K, putting us resolutely at the forefront of the 4K in Stingray’s first ten years that creativity, meticulous analysis revolution. That same month, we announced the acquisition of market demands, technological innovation, and bold of four (4) specialty music video channels from Bell Media: exploration of new ideas should always be part of the equation. MuchLoud, MuchRetro, MuchVibe and Juicebox. These channels have already garnered interest from pay TV providers wishing This year, we’ve once again met our key objectives through to reconnect with diverse demographics. a combination of strategic acquisitions, technological development, expanded distribution agreements, diversified In October, we grew our classical music offering with the client base, exciting marketing initiatives, and, of course, expert acquisition of hundreds of exclusive concerts and documentaries music content curation. from Berlin-based EuroArts, an internationally renowned producer and distributor of classical music film productions. I am proud to share another solid performance in Fiscal 2017. This agreement will benefit our services for years to come and Stingray’s dedicated team outdid itself, breaking the $100 exponentially grow our linear and On Demand offering. million revenue mark. Revenue increased by 12.8%, reaching $101.5 million (compared to $89.9 million in Fiscal 2016.) We New and Expanded Distribution Agreements achieved a strong operating performance with an Adjusted If there is one thing I am particularly proud of, it is the long- EBITDA(1) of $33.9 million and net income of $10.7 million ($0.21 term relationships we have built with our clients in 156 countries per share). Furthermore, we achieved cash flow from operating servicing over 400 million households and 74,000 commercial activities of $22.8 million and an adjusted free cash flow(1) of locations. This year alone, we renewed and/or expanded $26.5 million. We continued to raise our dividends and returned agreements with eight (8) European pay-TV providers: Vodafone over $8.2 million to you, our shareholders. Portugal, Orange Polska, Vodafone España, UPC Hungary, T-Mobile Netherlands, United Group Balkans, Sat-Trakt Doo and In the past twelve months, we’ve grown our offering by an PT Telecom Hungary. These strategic deals represent a significant astounding nine (9) brands: Stingray Brava, Stingray DJAZZ, growth of Stingray’s current European distribution, increasing our Stingray Classica, Stingray Festival 4K, Stingray iConcerts, potential reach by more than one million subscribers. We have Stingray Juicebox, Stingray Vibe, Stingray Loud, and Stingray also signed a renewed and expanded distribution agreement Retro. We have proven, beyond a doubt, our ability to integrate with Shaw, a key player in the Canadian market. and bring to market new acquisitions quickly and efficiently; creating a more valuable Stingray for our internal and external As our global reach grows alongside demand for curated, “lean stakeholders. back” music products, we look to the Asia-Pacific region as a major growth market. Only five (5) months after the opening With an enviable portfolio of 16 distinct yet complementary of a Stingray office in Singapore, we concluded distribution services, Stingray is uniquely positioned to respond to demand agreements with StarHub and Singtel for a range of services that from entertainment content providers and commercial clients includes Stingray Music, Stingray iConcerts, Stingray Brava, wishing to implement impactful music and customer experience Stingray DJAZZ, and Stingray Karaoke. strategies. In July, we signed a multi-year contract renewal with the National I can say with confidence that the stage is set for continued Cable Television Cooperative (NCTC). In October, KlowdTV - an growth and diversification in the years to come. online subscription platform for streaming television - chose to include Stingray Music’s audio channels in its basic subscription package. In July, we signed a multi-year contract renewal with the National Cable Television Cooperative (NCTC). In October, KlowdTV - an online subscription platform for streaming television - chose to include Stingray Music’s audio channels in its basic subscription package. We also renewed and expanded a distribution agreement with Comcast, bringing thousands of new music selections to Xfinity On Demand platforms. Annual Report 2017 | Stingray Digital Group Inc. | 3 Our commercial division, Stingray Business, also reached major milestones this year. We rolled out in-store music and digital signage services in thousands of locations across Canada. Amongst the $101.5 M commercial clients signed or renewed this year: Couche-Tard, La 12.8% from 2016 Source, Opa!, CDMV, Chapters Indigo, New Look Eyewear, and Telus. Revenues Our ability to adapt to an evolving technological landscape and adjust our product offering to state-of-the-art distribution platforms are key to Stingray’s continued success. In the coming years, we expect to sign distribution agreements with prominent OTT providers, mobile operators, and commercial clients. $10.7 M Marketing Initiatives In order to fully benefit from the cross-selling and cross-promotional Or $0.21 per share opportunities offered by each new acquisition, services are rapidly Net income reintroduced under the Stingray brand. Through inspiring product design and effective, multi-platform marketing strategies, we aspire to the highest levels of B2B and B2C brand awareness that will make Stingray ubiquitous in the market. This year, our team completed, in record time, the rebranding of Stingray Brava, Stingray DJAZZ, Stingray Juicebox, Stingray Loud, Stingray Vibe, Stingray Retro and $33.9 M Stingray Festival 4K. We also introduced the refreshed look and feel 9.2% from 2016 of our flagship brand, Stingray Music. 33.4% margin 1 Adjusted EBITDA 1 Giving Back With success comes a responsibility to give back to our community. Of all our achievements, the one that truly marks this year for me is our first campaign benefiting Centraide of Greater Montreal, a network of 350 agencies that help individuals and families break social isolation and build caring communities. Through a series $22.8 M of initiatives supportedby the entire Stingray family, we raised 20.0% from 2016 $100,000, far exceeding our initial objective. Cash flow from operating activities Thank you I wish to take this opportunity to thank our 350 talented employees around the world for their passion, support, and drive to excellence. Without each and every one of you, we would not reach the ambitious goals we set for ourselves. I also wish to acknowledge the unwavering support and vision of Stingray’s board and executive team. $26.5 M 8.7% from 2016 Thank you! Adjusted free cash flow 1 As I look to the year ahead, I am confident that together we will continue to realize our mission with ambition, a sense of purpose, and 1 Refer to “Forward looking statements” and “Supplemental information on Non-IFRS measures” on page 24 and for unrivaled innovation. reconciliations to the most directly comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures” on page 29. Eric Boyko President, Co-founder and CEO Annual Report 2017 | Stingray Digital Group Inc. | 4 ‘‘Our ability to adapt to an evolving technological landscape and adjust our product offering to state-of-the-art distribution platforms are key to Stingray’s continued success.’’ Annual Report 2017 | Stingray Digital Group Inc. | 5 management’s discussion and analysis The following is the annual report and Management’s Discussion and Analysis (“MD&A”) of the results of operations and financial position of Stingray Digital Group Inc. (“Stingray” or “the Corporation”), and should be read in conjunction with the Corporation’s consolidated audited financial statements and accompanying notes for the years ended March 31, 2017 and 2016. This MD&A reflects information available to the Corporation as at June 7, 2017. Additional information relating to the Corporation is also available on SEDAR at www.sedar.com Annual Report 2017 | Stingray Digital Group Inc. | 6 Annual Report 2017 | Stingray Digital Group Inc. | 7 company profile Stingray Digital Group Inc. is the world-leading provider of multiplatform music services and digital experiences for pay TV operators, commercial establishments, OTT providers, mobile operators, and more. Clients in 156 countries trust our comprehensive product portfolio and content curation expertise to develop and implement powerful music