Thank you, sir, and good morning, everyone, and thank you for joining us for Stingray's second quarter conference call for the period ending September 30, 2022. Today, Eric Boyko, President, Chief Executive Officer and Co-Founder; and Jean-Pierre Trahan, Chief Financial Officer, will be presenting Stingray's financial and operational highlights for Q2 of fiscal 2023.

Our press release reporting Stingray's second quarter results for fiscal 2023 was issued yesterday after the market closed. Our press release, MD&A and financial statements for the quarter are available on our investor website at stingray.com and also on SEDAR.

I will now provide you with the customary 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 June 7, 2022, which is available on SEDAR. The 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 reminded that some of the financial measures discussed over the course of this conference call are non-IFRS.

Please 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 our CEO and President, Eric Boyko.

Thank you, Matthew. Sorry for the voice this morning.

Good morning, everyone, and welcome to our second quarter conference call for fiscal 2023. Stingray continues to deliver against its long-term growth strategy in the seasonally soft second quarter with revenues increasing 9.8% to $77.6 million.

In recent months, we have focused on better monetization of our investment in driving operational efficiencies. As a result, we have narrowed our focus on proven high-growth pillars such as retail media, fast channel, in or entertainment and B2B driven subscription on-demand SVOD to accelerate a digital transformation.

On the property side, we generated adjusted EBITDA of $27 million, resulting in a margin of 34.8%. I'm pleased with the progress we have made on the margin front with 140 basis points improvement from the previous quarter.

Based on ongoing revenue momentum and cost control measures, we are confident about sustaining a 35% adjusted EBITDA margin by fiscal year-end. Turning to our business segments.

Broadcast and Commercial Music revenues grew 17% to $44.9 million in the quarter, again, largely based on stage advertising fell by in-store audio networks acquisition. The Stingray advertising business segment secured another big win last week with Calgary joining Stingray's advertising retail network.

In all, we are now over 20,000 locations across North America, including 16,000 in the United States, which are now certified by Geopath, a nonprofit organization that provides industry standard audit metrics for auto home advertising. Stingray also maintained momentum in the fast channel market in the quarter, which stream hours nearly doubling year-over-year to 13.7 million hours.

We reassigned a distribution agreement with LG NPCL for a suite of fast channel design for smart TVs and web OS operating system. Turning to in-car entertainment.

We continue to grow our footprint in the automobiles with Stingray Karaoke. Revenues were up more than 40% in the second quarter.

As indicated in previous quarters, we're engaged in talks with several other car manufacturers to integrate our technology into new models, but the sales cycle is prolonged and must run its course. In terms of SVOD, our subscriber count climbed 24.4% to more than 760,000 at the end of the quarter.

We're nearing our goal of reaching 1 million subscribers, but more importantly, we are focused on gaining higher-margin subscribers through B2B to see partners who have large intel customer base. Moving on to our radio business.

Revenues improved 1.3% to $32.7 million in the second quarter as the segment benefits from a gradual return to normal commercial post-COVID operations. Although radio is not a high-growth business that generates healthy cash flows that support our digital transformation.

In closing, our capital allocation strategy remains unchanged, given persistent inflammatory share pressure and the uncertain market environment, we will focus on debt reduction while digitating the necessary resources to grow our high-margin digital business. We have taken a cautionary approach and have realized $12 million in OpEx savings on a recurring basis that will be coming over the next few quarters.

So we are confident to bring the debt level closer to 3 by the end of the year. With this, I will turn it to you, Jean-Pierre, to do the financial overview.

Thank you.

Thank you, Eric. Good morning, everyone.

Revenues reached $77.6 million in the second quarter of 2023, up 9.8% from $7.7 million in Q2 2022. As I explained, the growth was primarily due to the acquisition of in-store holder network.

Revenues in Canada improved 1.2% to $47.2 million in the second quarter of 2023. This year-over-year increase can be attributed to a growth in radio revenues based on the gradual easing of COV-19 restriction and a return to normal commercial operations.

Revenues in the United States grew 69.2% to $18.4 million in Q2 on the strength of the in-store audio network acquisition. Revenues in other countries decreased 8.7% year-over-year to $12 million in the most recent quarter.

The decline reflects lower audio channel and commercial revenues and a negative foreign exchange impact. Looking at our revenues by business segment, Broadcasting and Commercial Music revenues rose 17% to $44.9 million in the second quarter of 2023.

Again, the increase was primarily driven by the in-store audio network. Radio revenues improved 1.3% year-over-year to $32.7 million in Q2 2023 due to the gradual easing of COVID-19 restriction and return to normal commercial operations.

In terms of profitability, consolidated adjusted EBITDA increased 5.6% to $27 million from $25.6 million in Q2. The increase in adjusted EBITDA was primarily due to the acquisition of in-store network, partially offset by the Canadian wage subsidy program in 2022.

By business segment, Broadcasting and Commercial Music adjusted EBITDA increased 16.6% to $16.9 million, mainly due to the contribution of in storage network. Radio adjusted EBITDA meanwhile decreased 9.6% year-over-year to $11.3 million.

The decline can be attributed to a lower gross margin related to the larger proportion of digital revenues in the SUS program in Q2 2022. In terms of corporate adjusted EBITDA, which represent head office operating expenses, less share-based compensation as well as performance and deferred share unit expenses and amounted to negative $1.2 million in Q2 2023.

Stingray reported a net income of $2.3 million or $0.05 per diluted share in the second quarter of 2023 compared to $12.1 million or $0.17 per diluted share in Q2 2022. The decline is caused mainly by our unrealized change in fair value of contingent consideration of $6 million higher interest expenses and an unrealized loss on [ Vertiv ] instrument.

Adjusted net income totaled $10.8 million or $0.15 per diluted share in Q2 2023, down from $16.3 million or $0.23 per diluted share in the same period of 2022. The decline is caused mainly by unrealized change in fair value of contingent consideration of $6 million and higher interest expenses.

Turning to liquidity and capital resources. Cash flow generated from operating activities amounted to $18.4 million in Q2 2023 compared to $20.4 million in Q2 2022.

The decrease was mainly due to higher income tax paid, higher negative change in noncash operating items and higher restructuring and other costs, partially offset by higher operating results. Adjusted free cash flow totaled $15 million in Q2 2023 compared to $15.4 million in the same period of 2022.

The decrease was mainly due to higher interest paid, partially offset by improved operating results. From a balance sheet standpoint, I think we had cash and cash equivalents of $15.4 million at the end of the second quarter, subordinated debt of $25.5 million and credit facilities of $368.4 million, of which approximately $64.8 million was available.

Total net debt at the quarter end stood at $378.5 million or 3.4x pro forma adjusted EBITDA as expected. Because of tangible benefits payable to the CRTC ability to order that was declared decelerated in the same quarter.

We were given a great spirit by the Canadian government during the pandemic. But in fiscal 2023, we have a total of $13 million in regulated payment due to the prescribed reception in August of this Q2 and the coming November.

Forward, our focus will be on reducing our debt as outlined by B. Finally, we repurchased and canceled 46,000 shares for a total of $300,000 under our normal course of issuer bid program in the second quarter.

This ends my presentation for today. I will now turn the call back to Eric.

Okay. Thank you, JP.

This concludes our prepared remarks. At this point, Jean-Pierre and I will be pleased to answer any questions you may have.

And thank you again for being on the line today, and we appreciate all your support.

Eric, maybe we could start with macro. And obviously, we've seen companies reporting and talking about some softening trends in terms of advertising, but also in regards to consumer behavior.

Can you speak at all about the last few weeks and the line of sight going into the next quarter, how things are trending? Any incremental pressures and then 1 or 2 more.

Yes. So I guess our business is pretty recession robust.

The broadcasting side, there's not much impact. The car business, there's not much impact.

Retail Media is on the opposite side increasing, retailers want to do ads in stores. So we're seeing incredible numbers that we're going to have in October, November, December.

And even radio. Radio because we're much more local than our competitors.

Radio was going to be pacing in Q3, the same that we're facing in Q2. So everything is pretty stable as of now, and we're already half way to the quarter.

And like I mentioned, we did our OpEx savings of $12 million. So we're going to start seeing those savings coming in the October, November, December quarter.

So it's pretty material. We're looking at $3 million in the quarter.

And that's why we also had a lot of severance this quarter, which affected our net income. But I think we're making the right moves.

And I guess, we're -- the trends for us right now are looking good compared to last year and compared to our budget.

So just touching on the margin. I mean, obviously, I think 2, 3 quarters ago, remember you signaled that the margin would be perhaps in the 33%, 35% range for the year.

And then obviously, I think in your disclosures today and in the release yesterday, you're talking more about a sustaining level of about 35%. So part of it is obviously the additional OpEx savings.

Maybe you can elaborate on those as well. And just to be clear, if I can understand, is it a matter of delivering 35% on the year and being confident of continuing that into next year?

Or is it more about sort of exiting the year sort of closing out Q4 at a 35% level to gear up for next year?

Very good point. So I think we can raise our range from 33%, 35% to 35% to 37%.

For sure, the cost savings, you're looking at $3 million in the quarter. out of $80 million of sales.

So you got about -- just that will increase our margin by 4%. And the cost savings, what we did, Adam, was really look at our projects that were profitable 3 years ago and are not profitable now because of all the extra costs of inflammation and salary.

So we're really -- we're being more efficient, more productive without cutting growth. So a lot of our projects were nice to have and now we're realizing that those nice to have projects are not making money.

So I think the focus is good. And I think we started this process of cost saving in June.

And I think we might even beat the $12 million run rate of savings. And also -- and we're focusing on higher-margin products.

So when you focus on higher-margin product, you make more EBITDA. So I think we're adjusting well.

And like we've seen in the market, most companies adjusting.

And just lastly, just on leverage, obviously, you've talked about it in regards to trying to get it down from your reported level towards that 3x. You're slowing the buyback, you're focused on the deleveraging.

Obviously, you're looking at margin to boost EBITDA and free cash flow, but are there any component parts of the business that might have some monetization opportunity in the context of a sale at this point or not necessarily so?

No, no. We maintain we're going to do again close to $70 million of free cash flow this year.

We're doing $1 per share. So we're going to reallocate most of that free cash flow towards debt repayment.

As you saw, we have tangible benefits. So this year, we're paying for almost 3 years of tangible benefits.

So it is paying back debt, but it's not debt with interest -- so I think it's the right focus. And the good news is we have another 3 years of $5 million a year of tangible benefits to the CRTC, and that will be finished forever.

So we're one of the last few companies in Canada that has tangible benefits. We tried to convince the CRC that this tax is not fair, but they kept their position.

So I feel we're confident to be close to 3 by the end of March. And I think our focus is in a year from now to be lower than 2.5%.

And with the strong free cash flow we have with the cost savings and most of our sales are B2B. So they're pretty much guaranteed Amazon and Comcast and all these TCL, fast Samsung they're not going to lose a number of screens and Tesla.

So we're very good -- that will be our primary focus as a management team.

Maybe start with a housekeeping question. Just how much an intangible payments did you say that we are fitting to make in November?

And then how much more was there in 2023 and 2024?

Yes. So in November and which is part of -- we still want to hit closer to 3.

We got about $6 million in November. And then we have for the next 3 years in August, we have 5,5,5.

The good news is on the Stingray digital side. We had tangible benefits when we did the IPO.

So that finished this year. So I leave that -- so now we're paying a potential benefit for the radio with the NCC acquisition.

So we got 15 left.

Got it. And then one more.

You mentioned $70 million in free cash flow just now. That kind of implies a relatively sizable ramp-up in the second half of the year.

Can you maybe help us decide for where that's coming from?

Yes, for sure. Our biggest quarter is Q3.

So you can -- Q3 expect a strong quarter even with the looming recession. So far, we're looking in good shape.

The retail media is very strong, lots of demand. So that also is really surprisingly happy.

And that's also a bit -- I guess, advertisers are looking to transfer from TV, I guess, to more and radio to more in the stores. So that's a good ramp up.

And our cost-saving initiatives are kicking in. So in Q2, you don't see it sorry for my cough in Q2, you don't see it, but you'll see it coming in Q3, Q4 and the rest of next year, the $12 million in cost savings we did or productivity is recurring.

It's on salaries. Now we didn't cut the Christmas party or the holiday party -- so we're going to see it next year.

And I think it just makes a Stingray lean company and more -- and also more productive.

Great. And then just in terms of finding advertisers from the digital auto home services, it looks like advertising revenue sort of flat quarter-over-quarter.

Is that seasonality demand related or just being patient with the partners that you're finding the inventory?

You're absolutely right. It is 100% based on the first quarter.

I mean, so it was -- no, we have a big decrease in retail media in Q2, and you're going to it is seasonal. We're going to see a huge increase in Q3 compared to Q2.

So there is much more seasonality for now. And also, we -- in this business unit, we invested a lot of money.

We hired a lot of new reps. We have close to $100 million of inventory in Canada and $200 million in the U.S.

right now. So the issue is about how do we execute and sell that inventory.

So our focus is really executing on this inventory that we have. That's exclusive.

And we have a certain advantage with this program. But the issue, it's still new.

We have to eventualize it. It's -- and when you go to stores, you're going to hear it more and more in every store you're going you're going to hear the ads.

So the advertisers are getting used to it. So that's our feeling.

Sort of a follow-up on your last answer there. Can you get an update on the ramp-up of the sales team in the U.S.?

I know that you had sort of been looking to target sales reps to target agencies. And then sort of a further question on the progress on rolling out sort of the measurement capabilities in the U.S.

Is that still sort of about the same talk to that time? Yes.

So in terms of our cost savings of $12 million, would be more. We're investing close to $1.5 million in a new team.

So we have 4 new partners in the U.S. that just joined our team.

We have one more in Canada. In terms of boxes out of the 4,000 ISAN boxes we needed to transfer, I think we are almost at 2,500.

And the other boxes, we'll be able to use our technology on these boxes. So we're ready to go in the U.S.

of being a measured platform. So I think it's going to be -- it's going to take 3 to 6 months for this team to come in.

But even in the meantime, there's a lot of demand that we're getting from the actual team. So I must say retail media went from almost 0 last year, and we're going to hit close to $40 million this year.

So it's material as the progress. And I think retail media has the potential in terms of inventory we have to surpass radio in the next few years.

Okay. And then maybe sort of in the Canadian business, obviously, things seem like they're going well on the retail media side, are you seeing any lift to the CPMs as people shift out as advertisers shift maybe like you said, away from whether it be TV or some of the other channels?

Yes. So our CPM in retail media is -- in Canada, we're almost hitting close to $20 CPM.

In the U.S., we're improving the CPM with the measurement. But for sure, that's where there's a lot of scalability.

You go from a CPM from 3 to 12 with the same number of ads you could tip yourselves. So that is our primary focus.

And just to say, we are by far the biggest retail media network in terms of audio in the world. So we're well positioned, and it's a new market.

And we also have -- like I say, we already have the network because we have over 80,000 boxes installed in the U.S. and Canada.

So it's almost likely for a mini cable company.

Yes. A couple for me.

Eric, can you just give us a little more color on what you're seeing in the quarter, as you've mentioned several times, the December quarter is a fairly seasonally significant one for you. What -- how would you describe overall the ad growth?

I know you're quite excited about retail, but maybe just talk about some of the other platforms, particularly radio. And then when you look out to next year, -- how are you thinking about radio, in particular?

It's -- we're sort of normalized the financials, I guess, if you will, you're through the headcount cutting Qs are gone. How are you thinking about that business?

And what sort of margin sort of contributions are you expecting in the context of what is now consolidated 35% to 37%.

Thank you, Tim. And for this quarter, again, we see radio very stable like in Q2.

So a small increase in sales compared to last year. Again, we keep our costs low.

So we see pretty much the same trend that we saw in Q2. Retail Media is going to be a huge quarter for us because it's -- we're getting a lot of buys right now in October, November, December.

So that has a huge impact, and we have the cost savings coming in. Radio for now, we're national is soft, but we have a very strong local sales team that's -- and I think that's the difference between us and Corus and Rogers and Bell.

I think our sales team is really overachieving compared to our competitors. So that's working well.

And with the cost savings we have, we feel confident to maintain an EBITDA margin of higher than 35% because the cost saving represents anywhere from 4% to 6% of EBITDA, and those are there to stay. So I think we're well positioned.

For sure, there's a big, big recession, we have to see for the radio. Radio last year, did 135, 130 off my head and about $42 million, $44 million EBITDA -- so we're still having a margin of 35% EBITDA even as the sales are lower than our peak of $155.

I missed the first part of the call, so I apologize for any Repeat here. Just on the modeling side, clarification on the tangible benefits.

So you have the payment going out in November, $6 million and then another payment in aggregate, $15 million in August. Did I get that right?

No, also $6 million in November, and then it's going to be $5 million of August next year. And so August 23, 24, 25.

Potential benefits are in our books. It was booked as a debt when we did the deal.

It just that we -- I thought we would be able to delete more, but the CRTC doesn't want us to delay it more. So we're regulating so we got to follow the regulator.

Yes. Yes.

Understood. And again, just for kind of modeling with respect to free cash flow here, cash taxes and CapEx, just remind us cash tax rate we should be assuming and then where CapEx comes in, just given all the kind of efficiency focus you're putting in?

That's a good point. So for sure, with interest rates to interests are higher, but I guess we're able to deduct 33%.

So that's the advantage of interest. So that will lower taxes.

And for sure, with the -- with our cost synergies of $12 million, you let you're talking about close to 100 people. No, it's less computers, less phones, less chairs, solar CapEx is going to be much tighter, but I'll have to get back to you with the exact number.

JP and I will get back to you for what would we see, but you can expect our CapEx and our income tax to be lower, offset by higher interest rate.

Yes. Yes.

Got it. And last one for me on the streaming subscribers and I apologize if this is a repeat.

Just can you just give an update on where you are with respect to kind of the mix of those subs and the churn you're seeing and obviously, we're entering now a seasonally strong period.

Yes. For us, on the SVOD side, for sure, there's a big focus and the big progress on the B2B to C side.

So Amazon and Comcast and Cox. And the good news is there's more platform being launched.

So we're now working right now with our friends at YouTube and Google have a SBA platform that we're going to be launching with. Amazon is expecting to launch in 12 to 40 more countries.

And then so and the new product. So we're also launching with all of our clients with Calm Radio, we launched the SVOD Calm Life.

So that is a brand-new product in the music sector for wellness and meditation. So we're able to leverage our big partners to really use their network and their expansion.

And those customers on the B2B side, there's technically no churn because there is a churn, but they give us the churn. But Amazon and Comcast and Cox and all these partners continue to grow month-over-month, a bit slower these days compared to last year, but they always grow.

So I think it's going to be -- I think it's a sustainable platform for Stingray for the years to come. And I think we'll be hitting our 1 million subscribers, hopefully, in the next 12 to 18 months, but the growth is well positioned and excited with the new partners and launching ESMA platform.

So it's going to be -- for us, it's a very -- and beauty, it's one check. We get one check from Amazon.

We got one check of Comcast, we get one check to Claro from easy. So it's a great business model for us to scale.

-- and have 80% to 90% EBITDA margin.

Okay. Thank you again for the analysts and all the companies that are covering us.

We appreciate your time, and I know you guys are busy, and so and as everybody on the call. So thank you for being confident in Stingray.