Thank you very much, [ Bomatin ]. Good morning, everyone, and thank you for joining us for Stingray's Third Quarter Conference Call for the period ending December 31, 2022.

Today, Eric Boyko, President, CEO and Co-Founder; as well as Jean-Pierre Trahan, CFO, will be presenting the Stingray financial and operational highlights. Our press release reporting Stingray's third quarter results for fiscal 2023 was issued yesterday after the market closed.

Our press release, MD&A and financial statement for the quarter are available on our investor website at stingray.com as well as 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 Eric.

Okay. Thank you, Mathieu.

Good morning, everyone, and welcome to our third quarter conference call for fiscal 2023. Stingray raised its performance in the third quarter by delivering record adjusted EBITDA of $34.5 million on unprecedented revenues of $89.2 million.

The adjusted EBITDA for the Broadcasting and Commercial Music division was up by 54.8%. We achieved these milestones mainly due to the success of our Stingray Advertising offering fueled by the InStore Audio Network acquisition.

We are also seeing the benefits of our renewed focus on our key growth initiatives and also our streamline operations. Indeed, in the last 6 months, we have realigned our resources to high-growth areas like Stingray Advertising, which remain mostly immune to an economic downturn based on its large consumer base of grocery stores and pharmacy chains, while trimming down other segments to improve profitability.

The end result is that our restructuring efforts, partially offset by strategic investments, have generated a cost saving of approximately $12 million on an annual basis. And I guess we will see these numbers really coming more in Q4.

Turning to our reporting segments. Broadcasting and Commercial Music revenue grew 35% to $54.2 million in the third quarter of ‘23 primarily driven by InStore Audio Network’s acquisition, revenue increase of our key growth initiative and a positive foreign exchange on the U.S.

dollar. Key achievement in this segment in the quarter includes [ hiring sales ] resources to further grow our U.S.

retail media business; launching free ad-supported TV channel with Amazon Freevee and Samsung TV Plus to increase our presence in the FAST channel space. Releasing the Stingray Karaoke app with 100,000 licensed songs on Samsung Smart TVs to elevate our brand exposure worldwide; and finally, introducing our wellness-driven CalmLIFE streaming service on Comcast and Cox to expand market share in the subscription-based video-on-demand business.

In terms of SVOD, our subscriber count rose 16.4% to more than 805,000 subscribers with B2C revenues increasing by 20%. Total SVOD revenues also increased year-over-year on a net revenue basis as we opted to reduce unprofitable investment in [ B2B ] app to focus on better margins and lower operating expense with B2B partners with large installed customer base.

Moving on to Radio. Revenues improved by 0.4% to $35.1 million in the third quarter on higher digital sales.

Although this represents a modest growth, we remain pleased with the overall performance and the cash flow generating business as the automated industry gradually resolve its supplies chain issues, we anticipate that once again becoming one of our top revenue generating category for our Radio business. Looking ahead to the fourth quarter, we are optimistic about our multiple growth opportunities despite an uncertain economic environment.

Accordingly, we will focus on debt reduction while maintaining investments in key strategic areas. Strong customer traction at the recent Consumer Electronics Show, CES, in Las Vegas has reinforced our confidence that we have pivoted in the right direction where a market-driven focus on retail media, FAST channels, in-car entertainment and B2B-driven subscription video on demand.

I will now turn the call to Jean-Pierre for a financial review. And thank you, Jean-Pierre, for a good quarter.

Thank you, Eric. Good morning, everyone.

Revenues reached a record high of $89.2 million in the third quarter of 2023, up 18.9% from $75 million in the Q3 2022. As Eric mentioned, the growth was primarily due to the InStore Audio Network acquisition and a positive foreign exchange impact.

In fact, revenues in the United States grew 111% to $26.6 million in Q3 2023. Finally, revenues in other countries remained stable year-over-year at $13.2 million.

Looking at our performance by business segment. Broadcasting and Commercial Music revenues rose 35.1% to $54.2 million in the third quarter of 2023.

Again, the increase was primarily driven by InStore Audio Network and a positive foreign exchange impact. Radio revenues improved 0.4% year-over-year to $35.1 million in Q3 2023 due to the higher digital revenues.

In terms of profitability, consolidated adjusted EBITDA reached a peak of $34.5 million and an adjusted EBITDA margin of 38.6% in the third quarter of 2023 compared to $28.5 million or 38% adjusted EBITDA margin or 35.8% excluding the subsidies in Q2 2022. The increase in adjusted EBITDA was primarily due to the acquisition of InStore Audio Network and OpEx efficiencies partially offset by the Canada Emergency Wage Subsidy in Q3 2022.

It should be -- recall that our third quarter is seasonally strong reporting periods, so we’re reiterating our adjusted EBITDA target of 35% for fiscal 2023. By business segment, Broadcasting and Commercial Music adjusted EBITDA increased 54.8% to $22.6 million in the third quarter of 2023 mainly due to the contribution for -- from InStore Audio Network and OpEx efficiencies.

Radio adjusted EBITDA meanwhile was relatively flat year-over-year, excluding the Canadian government subsidy, but decreased 11.5% year-over-year to $13.3 million in the third quarter of 2023, if we account for this incentive. In terms of Corporate adjusted EBITDA, we represent -- which represent head office operating expenses less share-based compensation as well as performance and deferred share unit expenses, it amounted to negative $1.4 million in Q3 2023.

Stingray reported a net income of $12.9 million or $0.19 per diluted share in the third quarter of 2023 compared to $12.5 million or $0.18 per diluted share in Q3 2022. Adjusted net income totaled $16.5 million or $0.24 per diluted share in Q3 2023 compared to $17 million or $0.24 per diluted share in the same period of 2022.

Turning to liquidity and capital resources. Cash flow generated from operating activities amounted to $24.6 million in Q3 2023 compared to $24.8 million in Q2 (sic) [ Q3 ] 2022.

The decrease can be attributed to a negative change in noncash operating items and higher restructuring and other costs partially offset by improved operating results. Adjusted free cash flow totaled $18.1 million in Q3 2023 compared to $14.7 million in the same period in 2022.

The increase was mainly due to improved operating results partially offset by higher interest paid. From a balance sheet standpoint, Stingray had cash and cash equivalent of $12.3 million at the end of the third quarter, sub debt of $25.5 million and credit facilities of $366 million, of which approximately $65 million was available.

Total net debt at the quarter end stood at $379 million or 3.34x pro forma adjusted EBITDA. It should be noted that we paid an additional $6 million intangible benefit during the third quarter and $13.6 million in this fiscal year so far.

Finally, we repurchased 341,000 shares for a total of $1.6 million under a normal course issuer bid program in the third quarter. Going forward, our #1 capital allocation priority lowering our debt level.

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

Okay. Again, 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 fourth quarter results. Have a great day, everyone, and again, thank you for the whole team.

Now I think we're ready for the questions, I think, Mrs. operator.

Congrats on third quarter. My first question is in regards to the regulatory change in radio.

Now allowing networks doing upwards of 4 stations per geography. Does that it any opportunities for you to build that business?

It just seems like adding assets in Ontario will make a lot of sense given the potential synergies.

Yes. The ruling is a bit more difficult than that.

They're really giving us one more radio per city, the opportunity. I must say everybody is talking.

There'll be a lot of trading in 2023. So it's always good when there's a trading market.

Everybody was waiting for the radio review to decide what to do. So it's going to be very interesting.

So I'd say 2023, not -- I'm not talking for us, but I'm talking for the whole market on radio will be very active. And -- but right now, everybody is analyzing their strategy.

And when we told the Board yesterday is we're trying to figure out the different opportunities or not of this buying or selling certain regions. So it's -- right now, we're still in the analyzing point.

So we said the same thing to the Board yesterday. We are just analyzing and seeing what also the big players are going to be doing.

Okay. Great.

And then maybe swapping to the music broadcasting side. Your digital out-of-home assets seem to be performing very, very well.

You've always done a very good job of building inventory. But can you maybe talk about the demand you're seeing from advertisers for digital out-of-home?

I mean how quickly do you see that inventory kind of reaching a oxo position?

As you saw advertising not only with the retail media, but the advertising also on our FAST channels, we went from $1.4 million last year to $14 million, for sure, adding the retail network was a big plus. But I think we're really seeing the trends there.

I think for us, the pharmaceutical and the big brands are coming in, we're still in the invoicing the market. So we're the biggest audio retailer in the world right now, but also being #1 and the first one, you also have to explain the advantage and the studies.

So I don't know we're excited. Now this year, the sales on the retail media are up 50%.

I think we'll see a good growth also for next year, but it's a strong year for retail media and also the FAST channels are growing well. But just not to benefit all of our key projects of growth, the car business, the FAST, the SVOD, all the stuff that we've been focusing on for the last few years, we're finally seeing the result because last year, we were running -- the broadcast and commercial was running at $4 million quarter of EBITDA.

And now we've hit 22%. And I think we're very comfortable as a management team to say that the broadcast Commercial division, I have to get a point that we're comfortable with $20 million of EBITDA per quarter.

So we reached that milestone. So I think it's exciting for Stingray.

We're looking at broadcasting and commercial to be around $80 million a year business right now at a run rate basis. Was that clear mention…

So the growth you just stated in terms of retail media, year 1 with ISAN was obviously success in terms of elevating the growth profile. Can you elaborate maybe just a little bit further in terms of some of the strategy going into year 2, if it changes at all in terms of pursuing additional mandates and opportunities in the U.S.

to the extent that you can highlight a range of growth potential for ISAN in '23 calendar would be great. And maybe just remind us in terms of how you're pacing in terms of the Canadian retail media business.

Absolutely. So I guess retail media growth last year was 50%.

In Canada, it's unlimited because we had 0 the year before. So it's a Google one ever return.

So -- but I think this year, again, we're seeing it's going to be high double-digit and more than the 20% because it's a really growing division on both together. So if you look at our investment, we were able to do that 12 million cost while investing $3 million in retail media.

We've hired a total of close to 4 new person in the team in the U.S., 5 in Canada. We've added 9 new headcounts just focused on selling the inventory.

Right now, we're only selling roughly 10% to 20% of the available inventory. And we think on TV and radio, I don't think there's another bed in the world that when they become to maturity, doesn't sell 100% of their inventory.

So I think we've got a lot of work to do there. And -- but also, I want to say the SVOD, the FAST channels, we've known a lot of the -- we launched on Google, SVOD, which is very exciting.

So we have a lot -- all of the -- finally, all of the growth strategy is coming in place.

Do you want to just elaborate a little bit on SVOD -- because obviously, you did say in the release that it's more of a flattish revenue context, but there is some nuance in regards to how some Lake County works in terms of B2B versus the prior B2C context.

Correct. No, that's a good question.

And I had the same question with the Board at this. So when you do it quickly, when you do a B2C product under accounting rules, let's say you saw at $10, you generate -- you put $10 of revenue and then you put your commission that you have to pay Apple and all that and you generate net revenues fine.

When we work with a B2B player, they sell it at 10, but we record only 5. So the more that our product mix is going to B2B -- we see a believe that gross revenues are flat, but if you look at on a net revenue basis, they're up.

So I know it's a bit complex for the -- but maybe I can explain that more on one-on-one but our net revenues are up compared to last year.

I just want to ask on the margin levels for the B&C business. I guess you sort of touched on it there, but given that sort of we're seeing -- what sounds like a seasonally strong quarter with that sort of nearly 42% margins.

Is that -- for the full year in '24, is it sort of -- are you thinking north of 35 into sort of like maybe high 30s. Is that reasonable for '24?

Yes. Absolutely, for sure.

The big advantage that we're seeing in broadcast and commercial, and I like the B$C or whatever you call it there, that we're thinking about the name because the name is becoming complicated. But for broadcast and commercial, we're going to see higher margins because of the cost savings.

The cost savings are -- when you do cost savings of $12 million in the unit, it really improves our EBITDA margin. So I think back to you on what it's going to be higher than radio.

So I have to get back with a range of where we sit for the next few quarters for next year. but again, I can reaffirm that management now feels comfortable with a $20 million EBITDA per quarter on the broadcast and commercial.

So we hit that run rate. It's not like we got lucky on quarter and we're going to go down by half next quarter.

Okay. And then I wanted to ask on the contribution of SaaS revenue.

I know you guys don't disclose the exact amount, but is there -- could you sort of provide a ballpark whether that's relative to the total or relative even to the SVOD numbers, how much FAST is contributing sort of…

Yes, FAST get a bit of a disappointment in terms of rollout. It's been longer and more -- longer and more difficult than we first imagined.

So this year, we're going to about $4 million. So it's very immaterial.

If you think that we're going to be doing 320, 350, once we're back, it's less than 1%. So right now, in our models in your models, SaaS, it's not something that I think will affect the pricing or the EBITDA materially.

We're making money. It's growing.

It's a nice marketing project to add to all of our consumers. -- to help us get more retail media stores.

But right now, financially, it's not material.

Two for me. First, in terms of the savings you've achieved this quarter, first of all, congratulations since that.

I want to check what were we seeing in the quarter. We're seeing this pro forma EBITDA adjustment of $5 million in the numbers.

I wonder how this $5 million compares to the $12 million in annualized savings we're seeing. Does that mean we're only seeing 40% of the savings in the quarter.

Yes. If you look in Q2, we have very little savings because most of our -- we started the project of looking at cost alignment in May and June.

The good news is, I think -- and I think a lot of our investors and our Board says we were really one of the first companies to start looking the focus on projects and cost allocation. So we're really going to start seeing some savings next quarter.

Next quarter, you're really going to be able to see the $3 million in the quarter because we finalized our projects at the end of November. So in terms of that, I'll have to get back to exactly because tech-speak right now, we have $12 million coming forward because we just achieved our projects.

So -- but let me get back to you on that specific question, Jerome.

And another one, I don't know if this one would be more for JP, but I wonder like we've seen a positive FX impact in the quarter. I wonder what portion of the costs related to the U.S.

business are actually in U.S. dollars.

Just to trying to figure out what's the margin impact from the FX.

Jerome, most of our revenue comes from the U.S. more and more.

But the cost is limited. It's commission and rights, but it's not that big...

Are we expecting our free cash flow from the U.S. right now to be around $35 million.

That's the free cash flow after COGS, after cost, so that's the net inflow of free cash flow in the U.S. And that -- ourselves keep on growing, it's going to be closer to 45% 50 next year.

But the impact this quarter was only on EBITDA was $1 million. was $1 million in EBITDA for this quarter, which is good, but I thought it was going to be more important.

But we're happy. $1 million EBITDA more will take it.

And for sure, Stingray right now, we do have a hedging policy that the Board has voted on. So we are hedging 75% of our cash flow for this year and 50% of next year because as the U.S.

-- our U.S. sales have become material, where this year will achieve $80 million of U.S.

sales. And next year, based on growth, we should be closer to $100 million.

So for sure, we have to be -- and we have very little U.S. OpEx.

We have a lot of COGS, we because we pay our cost of goods sold in U.S. dollars.

But in terms of employees living in the U.S.

It's Montreal, it's Canada.

In the U.S., you probably only have less than 6 to 8 employees -- so we're really Canadian-based cost. And also generally, we don't even have a real office in the U.S.

We have presence, but we don't have it in -- we don't have an office in New York or in Miami. So it's a very -- our team is all over the country.

Great. Last one regarding retail media.

I know you had a lot of -- well, a significant amount of hires there to try to sell the inventory and what have you. I wonder what portion of this new sales force was already ready to hit the ground running during the quarter?

Are we seeing already a lift from those recent hires? Or we should be expecting a more material impact from these hires in the coming quarters?

Most of this started in November or mid-November. Good news.

We really have one of our already have one person that's already sold a campaign between one we know to $6 million this year. So it goes fast.

So very exciting for the next. And the impact of adjusting the investment here that I'm looking for roughly in OpEx that we invested this quarter was $1 million, and it's roughly the same in Q4.

It goes from $944,000 to $1.93 million per quarter of investments. Is that clear enough or?

That's pretty clear.

So pretty flat.

A few for me, Eric, on the B&C advertising, I mean, as reported in the quarter, it went from a little less than $2 million to about $14 million. Is that all ISAN?

Or is there any other buckets of advertising and..

No, that's it. It's ISAN, what you know.

The name is -- we call it retail media now. But ISAN plus what we do in Canada because we're selling -- so it’s U.S., retail media.

Canada, retail media, FAST channels. So the FAST channels are growing by 8% to 7%.

And the big difference...

Yes, you just told us immaterial.

No, no, I got mixed up. I thought that the question before was FAST.

Okay. No, no, the FAST.

No, no, sorry, I thought he was talking about Chatter. So I got mixed up.

Sorry about that. The question [indiscernible] before.

No, Scott. So the FAST channels are growing by 87%.

It's really -- we'll have to get back to you. I can disclose this more one-on-one with you guys, the analysts, what the numbers are.

And this is based on a net basis. So if we sell with a partner 100,000 a month, and we get 50,000, we only report the 50,000 again.

So the FAST channel also reported on net. And that also is going to increase our EBITDA margin and our overall margin because we record our net.

So I'll get back to you, Tim. Sorry, thank you for that question.

I got mixed up.

Okay. So let's go back.

The $2 million to $14 million as reported, that's not just ISAN, there was a meaningful component of FAST channels.

Let me get back to you to what that number is.

Okay. You talked about the continued shift from direct-to-consumer to B2B, and you mentioned there's some accounting issues.

But I mean -- so have you stopped all DTC marketing and operations? Have you turned all those taps off?

Or are you still tinkering to some degree?

No, no. We're really focusing on the products that work well.

We're able to measure return on investment. Some product on B2C, we're not working as well.

So we diminish our user acquisition. We've also stopped investing in certain products because every app is very expensive, an app that does $20,000 a month and another one that does $200,000 a month is the same cost.

So we focus on focusing on the bigger apps and cutting the smaller apps. But by cutting smaller apps, there is less of a focus on B2C.

And for sure, with the B2B growing so fast, the B2C by nature is becoming less and less material in our business model.

Okay. Perfect.

Two more. One, the $20 million a quarter run rate, is the cost savings already in that number when you say you're comfortable with that $20 million quarter that...

Yes.

Okay. That includes...

It's starting in Q4. All of the cost savings are going to be included.

The only offset would be that if sales are growing so strong in retail media, we need more salespeople, then for sure, we'll reallocate our investment towards units that we need -- and also if we get a lot of car business deals and we'll hire more R&D people to service all our customers. But it would be -- we would hire people because they're generating a higher return on investment and a quick return on investment.

Okay. Perfect.

And last one. Can you remind us where your targets are now on leverage and when you expect to get there?

Absolutely. So our goal is to go down to 2.5.

And as you know, with analysts, by increasing EBITDA, you've got a 3:1 advantage there. So we continue to see our EBITDA growing.

Last year, Q4 was not a very good quarter at $21 million. We're very confident this year that, again, that we should have a good quarter.

So we will again improve our LTM, improve our EBITDA margin. And our focus absolutely right now is to decrease that.

So I think that we'll get back what our goal is to be down to 2.5, and it's our first priority as a management team and also reaffirmed by the Board yesterday. So our #1 goal is to bring back our debt EBITDA to 2.5.

It's [ Sylvia ] sitting in for Drew. Just 3 quick questions today, if I may.

First one, what is the contribution of digital advertising to radio revenue?

Sorry, what was the question again?

Yes. What is the contribution of digital advertising to radio revenue?

To radio, digital, it's -- I must say the mix is getting more important. We're probably about, I would say, 12% of our sales are coming from digital sales and radio.

So it's -- I think we're doing very well. It's increasing.

But I think it's a nice add that we're doing to the traditional side. And also, the good news also that we don't see in the results is the radio team is selling on the retail media in Canada.

But those numbers come on the broadcasting and commercial team. So we officially have all of our over 100 salespeople in Canada that sell radio also selling the radio in the stores.

So we're really seeing our first synergy. We're starting it slow, but we're able -- I think Stingray and the radio side has a very strong local sales team.

And I would even say, I think we have the -- look at our margins compared to our peers, our EBITDA margin, I think we're the most efficient management and sales team in the country to sell audio ads and Stingray as a specialist is selling audio ads.

And then the second one is the higher ISAN or retail media contribution in this quarter due to seasonality? And if so, should this be recurring in Q3 '24?

And what should we assume for what is likely a seasonally lower Q4 '23?

Yes. There is seasonality and, for sure, to October, November, December were very strong.

It was a very strong quarter. But again, it's not as seasonal as radio.

But because this quarter was so strong, I don't think we can expect to be having those numbers for the rest of the year right away. So -- and it's really because we got some huge orders that came in.

So hopefully, things are looking good. And like I said, we did 50% organic growth last year in retail media.

And this year, we expect a high organic growth no higher than the 20% because we're really launching new retailers, and we're becoming more and more efficient.

Great. And then the last question is just on the audio channel.

To what extent is the pressure due to cord-cutting accelerating? And how do the headwinds compare between Canada, the U.S.

and international?

Yes. So the audio channel business for us.

So we'll do 350 million, I’m keeping a round number here, just we'll do 350 million Stingray. The audio channels represent less than 30 million.

So it's less than 10% of our sales now. So really does the pivot.

So it's 10% of our sales. And because we're growing the other side of the business so much, so it's less and less material.

For sure, we're much stronger in Canada. But the business in Canada is very stable because we're very -- we're protected by the regulator, and we're protected because all of our partners are vertically integrated, and we're one of the few independents.

And even with the Shaw-Rogers deal, if you look at the conditions, they're protecting even more the independents. So I think that we're very well positioned in Canada to maintain our revenues and even in the rest of the world because they're small numbers.

But in Canada, we're very well protected by our position with the CRTC and the regulator.

Yes. Again, thank you very much.

I appreciate all the analysts. You guys are really supportive of giving us a lot of good guidance and highlights, and we're lucky we're a small company to have so many of the firms and the banks and you guys personally involved.

So we really appreciate your time and energy, and you guys are great partners. [Foreign Language] See you guys.

Bye, everybody.