Stingray Group Inc. (RAYA) Earnings Call Transcript
August 10, 2026
Earnings Call Speaker Segments
Good morning and welcome to Stringray Q1 2027 results conference. [Operator Instructions]I like to turn the over to Mathieu Peloguin.
Good morning, everyone. Thank you for us for Stingray's Conference Call for the first quarter of fiscal 2027 ended June 30, 2026. Today, Eric Boyko, President, CEO and Co-Founder; as well as Marie-Helene will be presenting Stringray's operational and financial highlights. Our press release reporting Stingray's first quarter results was issued today before the market opened a press release, MD&A and financial statements for the quarter are available on our investor website at stingray.com and on set. Today, the corporation also filed its 2026 annual report, including the audited annual consolidated financial statements and MD&A for the year ended March 30, 2026. The 2026 Annual Report is available on Sedar+ and Investor Relations section of Stingray's website. I will now provide you with the customer caution that today's discussion of the corporation's performance and its future prospects may include forward-looking statements. The corporation's future operation and performance are subject to risks and uncertainties, and actual results may differ materially. These risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's annual information form dated August 7, 2026, which is also available on SEDAR+. Key Corporation specifically disclaims any intention or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Accordingly, you're advised not to place undue reliance on such forward-looking statements. Also, please be advised that some of the financial measures discussed over the course of this conference call are non-IFRS. Refer to Stingray's MD&A for a complete definition and reconciliation of such measures to IFRS financial measures. Finally, let me remind you that all amounts on this call are expressed in Canadian dollars unless otherwise indicated. With that, let me turn the call over to Eric.
Good morning, Mathieu. Good morning, everyone. Welcome to our First Quarter Results Conference Call for fiscal 2027. I tear open fiscal 2027 where it left off in 2026, only on a larger cap, driven by robust revenue contribution from Tumi acquisition and Fast-channel segment we generated overall growth of 65.2% and organic growth of 27.5% year-over-year in the first quarter. . The intuition of tuning has been seamless, screening is pailover effect on our entire advertising business with revenue synergies reaching a run rate of $45 million, 9 months post transaction. On the fast channel side, Stingray's premium ad network continued to outperform with revenue rising nearly 70% in the first quarter, driven by our reselling of TV manufacturers, unsold inventory including audio ads for some of our major OEM partners. Our unique ability to sell ad both on platform and off-platform places Stringray in a strong competitive position as we have demonstrated to our partners that we can help them enhance monetization of their fast channels. Looking ahead, we remain confident that our tuning and fast channel business will contribute to another year of double-digit organic revenue growth in 2027. That said, the margin on these strategic assets are modestly lower than our corporate average, which is why we are maintaining our optimistic outlook for the adjusted EBITDA margin for fiscal '25. In terms of retail media, we are excited about the opportunity to bring programmatic advertising capabilities to our in-store business. We are actively working to enable our market solution for a new audience-based multiplier model where 1 ad reaches a broader audience than one-on-one basis. We see this evolution in our business model as a key catalyst for Stingray and we expect to make progress on this front during the current fiscal year. Finally, our in-car entertainment segment continued to gain traction building on the earlier Etan partnership announcement last Friday, last February, we continued to deploy new features to our cars in Karaoke and audio services and to increase our footprint with existing current manufacturers. We remain optimistic, including new partnership in the coming months. Altogether, Broadcast and Commercial Music or streaming division revenues more than doubled $126 million in the first quarter of 2027 mainly due to higher advertising revenues from the Tunein acquisition and greater fast channel sales. Radio revenues which were adversely affected by reduced bedding and government adds year-over-year in Q1 declined 6.5% to $32 million in the first quarter, but has shown great signs of recovery early in the second quarter. We expect radio sales to improve in the second quarter, and we're pacing and to be above 5%. Before handing the call over to Marie-Helene for her financial review of the quarter, I would like to say a few words about our capital allocation and our leverage ratio. Some analysis will notice that our net debt EBITDA to pro forma adjusted EBITDA increased to 2.5x in Q1 2027. But this is largely due because we make a strategic decision to repurchase 1 million shares from Nacala depot for $15.5 million, the acquisition of Radio Line and Westport and because of customer timing difference in collection of advertising revenues. The share buyback will likely push our target of bringing our leverage ratio under 2.0 by the end of fiscal 2027 instead of the year-end calendar of 2026. Nevertheless, we believe it is directly aligned with our commitment to actively manage to capital assets and maximize value for our shareholders. In closing, our balance sheet remains healthy, providing us with the flexibility to invest in organic growth and pursue strategic acquisitions. With this, I will now call the call over to Marie-Helene for our financial review.
Thanks, Eric. Good morning, everyone. Before reviewing our first quarter results, I am pleased to share that this morning, Stingray filed its 2026 annual report. The audited results are consistent with the preliminary figures previously reported, except for $13.8 million in reclassification related to the growth representation of advertising revenues mainly arising from the union acquisition. This reclassification had no impact on adjusted EBITDA, net income or cash flow but resulted in a favorable improvement to our adjusted EBITDA margin from 30.8% to 34.3%. No other material changes or restatements were made to the previously disclosed figures. We are glad to add this chapter behind us and to move forward. Turning now to our first quarter 2027 results. Revenues reached $158 million in the first quarter of fiscal 2027, up 65.2% from $95.6 million in Q1 2026. The year-over-year growth was mainly driven by higher advertising revenues from the recent union acquisition, along with greater fast channel sales. revenues in Canada decreased 1.7% to $48.7 million in the first quarter 2027. The year-over-year decline can be attributed to lower radio revenue. Revenues in the U.S. grew 180% to $98.4 million in Q1 '27, primarily due to higher advertising revenues from the Tunein acquisition improved fast channel sales as well as increased equipment and sells to sales related to digital signage and the acquisition of Stringray Energy. Revenues in other countries remained stable at $10.9 million in the most recent quarter with greater fast channel sales, largely offset by a decline in subscription revenue. Looking at our performance by business segment, Broadcasting and Commercial Music revenue increased 15.2% to $126 million in the first quarter of 2027. The growth mainly reflects higher advertising revenues from the union acquisition, greater fast channel sales as well as increased equipment and installation sales related to digital signage. For their part, renew revenues decreased 6.5% to $32 million in Q1 2027, largely due to local -- to lower local and national airtime revenues and partially offset by increased digital sales. In terms of profitability, consolidated adjusted EBITDA improved 49.3% to $50.3 million in the first quarter of 2027. Adjusted EBITDA margin reached 31.8% in Q1 compared to 35.2% in the same period last year. The increase in adjusted EBITDA can be attributed to the Tunein acquisition. The decline in adjusted EBITDA margin was largely due to lower gross margin on sales related to Tunein and Singing Machine combined with shifts in product mix. By business segment, Broadcasting and Commercial Music adjusted EBITDA grew 75.7% to $42.9 million in Q1, primarily driven by the Tunein acquisition. Adjusted EBITDA for our radio business dropped by 15% year-over-year to $9.4 million in the first quarter of 2027. The decrease was mainly due to lower revenues, along with changes in sales mix impacting gross margins. In terms of corporate adjusted EBITDA, it amounted to a negative $2.1 million in the first quarter compared to a negative $1.8 million in the same period of last year. The reported net income of $6.6 million or $0.10 per diluted share in the first quarter of 2027 compared to $16.8 million or $0.24 per diluted share in Q1 2026. The year-over-year decline was primarily due to higher acquisition costs, increased amortization of intangible assets an unrealized loss on the fair value of derivative financial instruments in the most recent quarter compared to a gain in the prior year quarter. These factors were partially offset by improved operating results. Adjusted net income totaled $27.9 million or $0.40 per diluted are in Q1 2027 compared to $21.3 million or $0.31 per diluted share in the same period in 2027. The increase was due to higher operating results, partially offset by unfavorable variations in foreign exchange and fair value of derivative financial instruments as well as greater interest expense. Turning to liquidity and capital resources. Cash flow from operating activities amounted to $4.8 million in Q1 2027 compared to $19 million last year. The decline was mainly due to higher negative change in noncash operating items related to the timing of accounts receivable collection in advertising and weather acquisition costs. These factors were partially offset by improved operating results. Adjusted free cash flow totaled $32.5 million in the first quarter of '27 compared to $18.8 million in the same period of last year. The improvement can be attributed to enhanced operating results and partially offset by higher interest paid. For a balance sheet standpoint, then had cash and cash equivalents of $21.1 million at the end of the first quarter and credit facilities of $569.5 million. Net debt at the end of the first quarter of 2027 totaled $547.6 million compared to $524.1 million in Q4 2026, as a result, our leverage ratio increased to 2.53x in Q1 2027. The increase in net debt primarily reflects the repurchase of 1.1 million shares during the quarter for $17.1 million, the settlement of long-term incentive compensation earned by our team in fiscal 2026, the radio line and Westport acquisitions and a timing difference in the collection of advertising revenue. This ends my presentation. I will now turn the call over to Eric.
Okay. This concludes our prepared remarks. At this point, Marie-Helene will be pleased to answer your question. .
[Operator Instructions] First, we will hear from Stephanie Price at CIBC. .
It's Sam Schmidt on for Stephanie Price. I wanted to ask around the Q4 revenue restatement. How should we think about the revenue growth rate at Tunein going forward and the growth versus net accounting -- and does this impact the China revenue synergies targets? .
No, no, no. This revenue recognition is with the new rules and the new accounting rules and the fact that we're doing these programmatic cells, which are instant cells are very complex. So it was only impact for last year. We don't see any impact for this year, no impact for tuning revenues it's really a reclass. It's a reclass that for us of $13 million on revenues of close to $500 million. So no impact on that. .
Okay. That's helpful. And then could we also get an update on the run rate cost synergies with Tunein. I believe last quarter, they were tracking at around $12 million. And are you still comfortable with the adjusted EBITDA synergy target that you've discussed in the past? And then I'll pass the line. .
Yes. Right now, in terms of cost synergies, they're pretty much the same than last quarter, and we haven't moved it. But for us, the most important number is the positive synergies. The fact that we hit $45 million this quarter, and we see that number growing month by month, we're easily going to beat our target that we set ourselves for March '27. So we told the market USD 20 million to USD 40 million we now we're sitting close to USD 35, but we'll easily beat the $40 million over the next few quarters because the synergies are growing on a daily basis on the positive synergy side.
Next question will be from Adam Shine at National Bank. .
So maybe just building on Stephanie's first question. Just to be very clear, Eric, we are not to extrapolate 13.8 million type 4 in the context of reducing F27 current consensus estimates, let's say, right, those still old?
Yes. Please. Absolutely. Like I said, it was really a reclassification of -- it's all about gross and net and solo programmatic sales and how the contracts written -- so it's a lot of detail. And now as you know, we have the auditors of the auditors. So you have the CPAP that audits are the accounting firms. So accounting is getting complex. .
The second point of clarification is just on the margin. I don't think you mentioned a specific margin number, but you have talked previously, I think even going back to the prior call of trying to get to around 35% for F '27. Is that still the target? .
Yes. Our target is still to go there. The 3 things right now that affected us in this quarter. Our gross margin on what we call the backfill. Our gross profit is low. We're working -- sales increasing fast. We're adjusting every day, and that we're getting better and getting better margin on the back hill. But the backfill is now huge. We are doing Adam USD 200, 000, 100,000 a day. So our run rate is $100 million that we are selling on Vizio, LG and Samsung's platform. Last year, we didn't even do $20 million. So that's where we're getting a lot of our growth -- but the margin on that product because we're selling gross and the rev share is lower in now and we're getting better at it every day. The second thing that affected this quarter is Singing machine. -- machine we don't ship in Q1. So we had negative EBITDA, and then we'll have a positive EBITDA in Q2 that makes a big switch. So for sure, the sinking machine because we sell to retailers it affects our margin for this quarter. .
Okay. That's helpful. I think going back to the prior quarter, you talked about try to infuse some of the Tunein programmatic advertising capabilities across the platform. starting, of course, with initial traction around fast. And then ultimately, I think over the next 6 to 12 months, you're looking to do stuff within Retail Media and even the traditional radio business. So is that still tracking on plan? Anything you can share on those coming initiatives?
Yes. The first initiative that we're still the only 1 in the world to do. So we're the only company in the world that's doing audio ads on a CTV. So instead of having a video ad, you get a still image and you get an audio ad. And that really opens up the inventory that we can sell. And now we had 1 platform that I agreed to it. And right now, in Q2, we already have our top 3 platforms agreeing to do audio ads. So that's a really unique because we're the only 1 selling that product. So there's no competition. We're not bidding anybody else like we are in the video space. So very happy about that. Also, what's exciting is we hit in June, we hit our programmatic cells Tunein and Stringray together. We hit a high of $550,000 a day -- so you do a run rate of that. That's $260 million a year. So we're really doing well. And the last part for the next few months, that is exciting. So we have new platforms coming on board that we can do backfill. The platforms that have agreed to do audio ads, very exciting for us. And the third thing that's most exciting, we're learning this with the advertising market but the football season is starting college football mid-August, then the NFL is starting. And with the football season and the sports season, everybody in our space, everybody have worked in programmatic cells, we expect to have August, September, October and hit the record in November with the U.S. Thanksgiving. So we see the next 2 quarters very strong because we finished Q1 so strong in June. It gives you a good momentum for the next 6 months. I mean, for us to achieve 27% organic sales is pretty incredible. And we're confident with the margin also will be improving. So we are very, very good momentum for Q2 and Q3 right now.
Thanks. Question will be from David McFadgen at ATB Cormark. .
A couple of questions. So first of all, just a clarification. On that 27.5% organic growth, is that a pro forma number? Or is that what you did last year and then you add in the tune of revenue? .
No, no. It's really adding our revenue last year plus Ten's revenue, and then the organic growth is on top of that. .
Okay. It seems like it's a pro forma number. And then -- so you talked about selling inventory from some -- or for some OEM partners. Can you tell us which are partners you were representing in the quarter? .
Yes. So for us, we've always said that we are partners with about maybe 25 OEM platforms on the TV side here. So -- but our top 3 -- the top 3 that we work with in the U.S. and is public information, the top 3 in the U.S. is Visio, it's LG, and it's Samsung. So our goal for us is to do more backfill with them, sell more audio ads. -- and be better partners. So we're very excited. Most of our programmatic cells still come from the U.S. right now. Europe is starting Latin America starting. Canada is doing well, but most of it is from the U.S.A. .
Okay. And when you look at the backfill or the the premium ad network. Is the revenue growing because you're just representing more inventory? Or are you just getting better sell-through rate? Or is it both?
It's really -- it's all of the above. Visual right now and visual right now is selling million new TVs a month. So they'll be adding 12 million TVs. So for sure, the TV manufacturers are selling new models and TV only last 4 years. So it's a much difference in selling cars. And then after that, we're getting much better at selling more ads which, at the end, makes our partners more money. So we become a big customer of them because we generate a lot of revenues. And then after that, these partners because we're doing well are giving us more inventory and most importantly, they're giving us guaranteed inventory. So it's really a virtual circle of positive. And that's why the premium ad network we were doing 25,000 a day in Q4, and the then after we grew from 25,000 a day to 200,000 a day. So you can see the growth. So we don't know, but now we can't predict where is that going to stop. But now the momentum is very strong in Q2 and in Q3, and we'll be happy in November to update you on how we're doing on those calls on our CTP partners.
Okay. And then lastly -- maybe you could give us a read on just the fast advertising market because you talked to some other players in the SaaS business and they say the market is kind of tough. But clearly, you're performing the market. So maybe you could just give us an update on just the general market for fab advertising. .
Like I said, in our case, because we're having access to more inventory and also because we're the only ones selling the audio ads. The other ads has been a great success. So we're taking really the synergies. Tunein is probably the best audio ad seller in terms of programmatic. And now we're telling our customers, you can also add on a TV on a connected TV. So I think that in our case, as we mentioned, the fast channel this quarter grew by 70%. So this quarter, we didn't do plus 20. We did 70% more. So we're really in a strong momentum with the fast channels. So we're -- right now, we are on the opposite side because we're getting so much more access. .
[Operator Instructions] Next, we will hear from Drew McReynolds at RBC. .
First on the revenue recognition, Eric and Marie-Helene, absolutely. I understand the complexity of these contracts and accounting. Just wondering from quarter-to-quarter, are like is the way you recognize revenue evolving that significantly? Or is it more steady state and what we see is just kind of the relative buckets of revenues and how that mix evolves. Just trying to better understand what's moving here and what is kind of predictable from our perspective? .
And very easy. So for -- in terms of the consensus revenue that you have for the market, we are very comfortable for the revenue and EBITDA for this year. Our budget and our forecast is well aligned with yours, and we are very, very right now comfortable and even for FY 2028. So right now, based on the numbers we're getting, if you do the trend we'll be in an incredible position. On that, a lot of it had to do with on contracts, Drew, that were written in 2015, 2018, you read the contract. Is it net asset grows. So right now, what we're doing is just establishing all our contracts to make sure every contract is clear. All the new contracts with all of our customers are clear. So it's more on that side. So no impact on your revenue guidance or target for 2027 .
Okay. Yes. No, that's helpful, Eric. Second, on the Adient-based multiplier model within Retail Media. Can you just flesh that out for us? Just how it works in. Yes.
So our inventory in retail media, and we're not the only ones. I can know all of our peers, Wound media, other companies in Australia, other companies in Europe, other radio stations, a lot of radio stations want to be able to sell programmatic ads because the market is -- the trend is going that way. . So I would say that we are working hard with a lot of our suppliers and with Tunein to put that in place. We estimate we have anywhere from $300 million to $400 million of inventory on the retail media side. And now good news is all retailers, maybe 2 years ago, they weren't 21 to nonendemic, meaning selling us that they did not have in the stores. But I think now they're realizing that they're retailer, their media, they're really media. So now they're letting us sell audio cars about ads about cars. Ads about other retailers, like example, Subway is doing ads in Dollarama. So now they're accepting to have, like, like a real media. So that's where we're excited. And I think the multiplier in the next 2 quarters, we should we should have a solution for that, and that will open up a lot of doors because we'll be able to open up that market to the programmatic ads people and sell that to the agencies. And I think for us, that will be really a catalyst for that unit.
Yes. Understood. So that. And last 1 on the M&A environment, can you just remind us there what that environment pipeline looks like from your perspective? And just more broadly, where your focus would be on .
And still a lot of companies that are looking to sell and a lot of transactions. So I say -- but right now, our first step is we join the team. We got an elephant. We got a mammoth. We have a lot more synergies, positives and synergies to get with tuning every week, every morning, 9:00 a.m. synergy call on positive cells. So we had a lot of good I'd say we have a lot of food and muffins on the table that we can eat right now before looking at more targets. So we have a lot more of that fit. So we're excited about continuing and having a great Q2, Q3 and really bring you exciting new synergies with the Tunein acquisition.
The question will be from Jerome Dubreuil at Desjardins.
First 1 is on the margins. you said you're very comfortable with consensus on EBITDA and revenue, but there's a bit of a shift in the profile in margins that we're seeing. I mean it's very good to see the absolute EBITDA growth. But if you can maybe help us on the margin profile you're expecting going forward? -- to go with your double-digit organic growth expectation? .
Yes. So again, this quarter, there's the -- we're getting better ourselves on backfill went from $50,000 a day in April, and now we're doing 200,000 a day. But don't forget, we buy the inventory from Visio or LG, and we resell it. So if we buy at 5 and we sell at then our margin is -- so all this really -- we have to be -- we're getting better and better every day to increase that gross profit margin and sales are expanding quickly. So we're adjusting -- so that's 1 thing that we're improving on a daily basis, and that's why every quarter, we're going to see the gross margin but our EBITDA margin growing, I think Q2, Q3, also big impact this quarter where we had negative EBITDA with Singing Machine. And now Singing Machine will be shipping in Q2, Q3, and that's also a big impact. And what we'll be able to do, I think we'll be able to share with the analysts the impact of Singing Machine and the gross margin on the backfill. -- but we're getting back towards 35% in the next -- very quickly in the next few quarters.
That's great. Second 1 I had is on the retail media, you're pointing it out in the press release this morning. You're saying that the ads reach a broader audience rather than a one-to-one basis. If you can maybe explain what that means exactly? And if you can provide a timeline on meeting those objectives. .
So the issue we have the issue we have with Retail Media, where audio the issue rate the radio team has, radio team know we would love to sell programmatic ads. So all radio stations around the world and in the same situation at X-Series is all of the ads, the programmatic ads market now, you've seen as a one-to-one. So you sell one audio ad or on video ad and you expect 1 person in front of the TV. So it's that -- the market understands that. Now what we're establishing is a new product, I would say, when you're a retail store, there's not 1 person listening to or at, there are really 50. And I think we're getting very close with a lot of our advertising partners to be able to accept that multiplier and be able to sell the product that way. And we're also working closely with the same multiple for the radio division. So I think it's very encouraging, and that will really -- it will be a catalyst to increase ourselves.
Yes. Then just to clarify on this, does that mean when you sell an ad in a grocery store, the contract or the pricing worse as if there were only 1 person in the store? .
No. If not, the model doesn't work. The model doesn't work as the model only works if you get it multiply in the store. Yes. So that's why we don't do programmatic cells. Right now, we don't do programmatic cells. And all to get Joe, we were the first company to do an audio ad on CTV. So that just shows you how quickly we've been able to be technology-wise to be able to do that transfer. And most important is to tell our partners -- our CTV partners that we have audio demand. And with them -- with the first 1 seeing the results, we could share with the other partners, and I can confirm that all 3 partners, LG, Samsung and Vizio will be taking audio ads, and that's going to be a great growth for us for the next few quarters and few years. .
At this time, Mr. Boyko, we have no other questions registered. Please proceed. .
All right. On behalf of the entire Stingray team, thank you for joining us on this conference call. We look forward to speaking with you again following the release of our second quarter results and fiscal '27. And again, I always appreciate all the analysts to make themselves available and be there for us. So thank you for your hard work, and thank you for all your reports, and we love reading them.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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