Good morning, everyone, and thank you for joining us for Stingray's financial results conference call for the fourth quarter and fiscal year-ended March 31, 2024. Today Eric Boyko, President, Chief Executive Officer and Co-Founder, as well as Jean-Pierre Trahan, Chief Financial Officer, will be presenting Stingray's operational and financial highlights.

Our press release reporting Stingray's fourth quarter results for fiscal 2024 was issued yesterday after the markets closed. Our press release, MD&A, and financial statements for the quarter are available on our investor website at www.stingray.com and 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 operations and performance are subject to risks and uncertainty, 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 4, 2024, which is now 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 are 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 Boyko.

Merci, Lloyd. Good morning, everyone, and welcome to our fourth quarter conference call for fiscal 2024.

We took giant strides and established Stingray as the leader in Retail Media advertising, FAST channels, and in-car audio entertainment during the past fiscal year, resulting in a robust adjusted EBITDA of CAD 125.9 million on revenues of CAD 345 million. In the process, we expanded our share in these new segments through operational excellence.

Stingray advertising revenues, which include Retail Media advertising and FAST channels, grew by 45.4% year-over-year against our annual growth target of 40%. For its part, in-car audio entertainment surged 60% during the same period.

The trickle-down effect of these high-growth, high-margin business on profitability helped Stingray achieve a consolidated adjusted EBITDA margin of 36.4% in 2024 versus our stated goal of 35%, again beating our KPI. Consequently, we outperformed internal expectations during the past year, with most of our key performance indicators pointing upwards of our objectives.

Looking at our reporting segments. Broadcast and Commercial Music revenues increased 10.7% to CAD 216 million in 2024, primarily, again, driven by higher revenue contribution from Retail Media advertising, FAST channel, along with a positive foreign exchange impact.

Radio revenues improved for the year by 0.5% to CAD 129.4 million in 2024, mainly due to growth in digital and local airtime sales, partially offset by lower national airtime revenues. In terms of our financial position, we reduced our debt level in a high interest rate environment in 2024, closing the fiscal year with a net debt to pro forma adjusted EBITDA of 2.76x.

We plan to further deleverage our balance sheet for a sweet spot closer to 2x to 2.5x in fiscal '25, which will provide us with a flexibility to invest in organic and acquisition-related growth. Looking ahead to fiscal '25, we will continue to evangelize the Retail Media advertising sector while growing our footprint and fill rate.

Following a seasonally soft fourth quarter in which Retail Media still grew by 13% year-over-year, we witnessed a strong growth in Q1 2025. We continue to attract new advertisers and expand into existing accounts in North America.

We also expect substantial revenue contribution from our FAST channel business, now supported by a quarterly run rate of close to 16 million hours in Q1. We are launching with many platforms and are very excited about this segment.

In addition, we are highly optimistic about our in-car audio entertainment segment, with 4 global manufacturers under contract, including the ongoing deployment of Stingray Karaoke and 300,000 BYD cars, combined with a very strong pipeline. In-car audio entertainment presents another key business for Stingray, while keeping in mind that it's a longer sales process and a very long revenue recognition cycle.

Turning to our Radio segment. We should continue to outperform the industry that is expected to remain relatively flat on an annual basis.

In the fourth quarter alone, our Radio business grew by 5% year-over-year, which bodes well for the future. Given these growth opportunities and stable cost base, we will continue to maintain adjusted EBITDA margin objective of above 35% for 2025.

I will now turn the call to our friend, Jean-Pierre, for a financial overview. Merci.

Merci, Eric. Good morning, everyone.

Revenues reached CAD 83.7 million in the fourth quarter of fiscal '24, up 6% from CAD 78.9 million in Q4 '23. The growth was largely due to increase in FAST channel, Retail Media, and Radio revenues, driven by higher digital and national advertising sales.

Revenues in Canada improved 4.4% to CAD 45.6 million in the fourth quarter of '24, again on the strength of increased Radio revenues driven by higher digital and national advertising sales. Revenues in the United States grew 19.4% year-over-year to CAD 26.2 million in Q4 '24, reflecting stronger FAST channel and Retail Media revenues.

Revenues in other countries decreased 10.8% to CAD 11.9 million in the most recent quarter. The year-over-year decline was mainly caused by reduced in-store commercial revenues and less subscription revenues.

Looking at our performance in business segment. Broadcasting and Commercial Music revenues increased 6.7% to CAD 53.4 million in the fourth quarter of '24.

The growth was primarily due to greater FAST channel and Retail Media revenues. Radio revenues, meanwhile, rose 4.7% to CAD 30.2 million in Q4, due to higher digital and national revenues.

In terms of profitability, consolidated adjusted EBITDA improved 10.7% to CAD 29.4 million in the fourth quarter of '24. Adjusted EBITDA margin reached 35.2% in Q4 '24, compared to 33.7% in the same period in '23.

The growth in adjusted EBITDA and adjusted EBITDA margin was mainly due to higher revenues. By business segment, Broadcasting and Commercial Music adjusted EBITDA increased 11.1% to CAD 22.7 million in the fourth quarter of '24.

The year-over-year increase can be attributed to an improved gross margin on higher revenues. Adjusted EBITDA for our Radio segment rose 7% year-over-year to CAD 8.2 million in the fourth quarter of '24.

The year-over-year increase can be credited to a better gross margin on higher revenues. In terms of corporate adjusted EBITDA, it amounted to a negative CAD 1.5 million in Q4, which was flat year-over-year.

Stingray reported a net loss of CAD 46.3 million, or CAD 0.67 per share, in the fourth quarter of '24, compared to a net income of CAD 4.4 million, or CAD 0.06 per share in Q4 '23. The variation was mainly related to a onetime noncash impairment charge of CAD 56.1 million on goodwill for the Radio segment.

Following annual impairment tests using a DCF, an adjustment was necessary for a group of Cash Generating Units within the Radio segment. Adjusted net income reached CAD 15.4 million, or CAD 0.22 per share, in Q4 '24, compared to CAD 14.7 million, or CAD 0.21 per share, in the same period of '23.

The year-over-year increase was mainly due to higher operating results and a gain on the disposal of property and equipment in the Radio segment and a higher gain on foreign exchange. These factors were mostly offset by a decrease in the value of contingent consideration in the comparable period in '23 and by a higher income tax expense.

Turning to liquidity and capital resources. Cash flow generated from operating activities totaled CAD 44.3 million in Q4 '24, compared to CAD 27.6 million in Q4 '23.

The year-over-year improvement was primarily driven by a higher positive change in noncash operating items, as well as a lower legal restructuring and other costs. Adjusted free cash flow amounted to CAD 15.3 million in Q4 '24, compared to CAD 14.9 million in the same period of '23.

The increase was mainly related to improved operating results, mostly offset by higher income tax paid. From a balance sheet standpoint, Stingray had a cash and cash equivalent of CAD 9.6 million at the end of the fourth quarter, subordinate debt of CAD 25.6 million, and credit facilities of CAD 338.7 million, of which approximately CAD 83.4 million was available.

Total net debt at the end of the fourth quarter stood at CAD 354.7 million, down CAD 27 million from the previous quarter, as we significantly increased payment on our credit facilities. Combined with improved adjusted EBITDA over the last 12 months, our net debt to pro forma adjusted EBITDA ratio dropped to 2.76x at the end of the fourth quarter.

As Eric mentioned earlier, we intend to bring our leverage ratio down further in fiscal '25. Finally, we repurchased 557,000 shares in fiscal '24, including 57,000 shares in the fourth quarter for a total of CAD 2.9 million, compared to 786,000 shares for CAD 4.4 million in '23.

To end my presentation, I will now turn the call back to Eric.

Okay. Merci, J.P.

This concludes our prepared remarks. At this point, Jean-Pierre and I are very happy and pleased to answer any questions that you may have and very happy to report a good year-end, and thank you for all the finance team, everybody at Stingray.

With this, we'll start the questions, please.

Congrats on the quarter. Eric, I was wondering, high-level, obviously, seeing good growth in FAST, seeing good growth in Retail Media.

The FAST piece, I think, you've already given some targets in the last quarterly conference call. What's your view now that you've hit your targets that I think you talked about crossing CAD 50 million, you've done that.

What are your longer-term targets for Retail Media? What's achievable when you look at the landscape now?

I know that you're trying out some new product enhancements around video as well. I just wanted to get your thoughts on that, too, to start off.

Yes, I agree. So, I must say that Q1 is very strong, will be well above 50%.

Both FAST channels and Retail Media again started the year on fire. But again, the problem with advertising is it's not as easy to predict the next few quarters.

But the trends of last year, the momentum is still continuing the good news for Q1. And you're right, we're also expanding on video.

So, it's going to be interesting. But it's also the FAST channels, we hit 60 million hours or 20 million hours a month.

So, the FAST channel is an increase of almost 300% compared to last year. And the FAST channels will just keep growing because that market we're launching on many new platforms.

You'll see the announcement. And this whole market, the lake is growing up, and it's good to have wind in your back.

So, we're happy after all these years of being in the cable industry, of having this growth in our back.

I did want to quickly clarify your comments around the margin expectation for fiscal '25. You mentioned 35%.

That obviously represents a slight dilution from the fiscal '24 levels. Are there any cost items that we should be thinking of there that's relevant?

Yes, I think, a very good question. So, this year we did 36.4%.

I think we should stay about the same. We're saying 35% to be a bit conservative.

For us, it's all a question of product mix. Revenues on SVOD and FAST, EBITDA margins are very high.

Gross margins are high on those 2 products because they're on a net basis. But when you go to Retail Media, it's on a gross basis.

When we sell a dollar in Retail Media, we have to share a good portion with our partners. So, it's really the product mix that will affect the EBITDA margin.

Okay, makes sense. And last question.

I noticed the subscription component within the BCM segment continues to hold up really well. Obviously, I know that in-car is in there and a couple of other growth elements are in there, but it seems like your legacy cable component may not be declining as much as maybe people think.

Is that the case? Because that subscription line seems to be holding up really well on a year-over-year basis.

Yes. Surprisingly, we've been able to maintain most of our contracts, even renew contracts at a higher price.

So, that keeps the subscription revenues stable. And don't forget, the pivot that we're still doing is we're really focused on B2B.

And the B2C business, we're not investing as much into it. We realized over time that Stingray is much stronger as a B2B company.

So, we still have the B2C business, which is the Apple apps and all these different things that we're not investing as much in UI. And also, the return on investment post-COVID on the B2C side, I think, you see a lot of different of our partners haven't been as good as expected.

But I agree with you, the CPS model on the cable side is more or less flat to minus 2%, so better than expected.

The first one is on advertising growth. You mentioned starting the year with a very healthy growth of north of 50%.

Are you ready to provide similar guidance to what you did last year with the 40% expectation for advertising growth regarding the full year?

Yes, certainly, once the numbers get bigger, it's tougher to achieve 40%. So, all I can say is we started Q1 very strong.

And again, for the FAST channels, we're hitting 20 million hours a month. So, you're looking at 60 million hours a quarter.

So, that one is going to be maintained. But, again, looking at another positive year, and if the Q1 represents the rest of the year, then we're in good shape.

Yes. Fair enough.

Second question is on Retail Media. I'm wondering about your visibility on that product.

You alluded to that with the advertising comments, but how do you measure the pipeline that you have, and how are you able to gain confidence in the future growth of that segment?

I must say, on Radio, believe it or not, we get a lot of visibility. The pipeline is much more, I guess, traditional.

And on Retail Media, it's a bit more -- but right now, year-over-year, at this date, we're plus 20% compared to last year in our pipeline. But I agree, it's not as easy to predict the Retail Media side.

It's a new segment. On the FAST channel side, that one, we know the number of hours, and it's purely a rule of 3.

So, on the FAST channels, we expect a very strong growth this year, and we expect to double ourselves from last year.

Okay, great. And one last for me.

We're getting closer to your leverage objective with pretty strong deleveraging in the quarter there. How should we be thinking about capital allocation in 2025?

Retail Media, it's a broad category. You're talking about launching video services or other maybe adjacent services in Retail Media.

Are you thinking about potentially thinking about strengthening your current Retail Media offering with M&A, or how should we be thinking about this?

Good question. So, again, based on our model right now, and you can see our deleveraging, we expect to finish the year or year-end close to 2x debt to the debt.

So, in that range. So, we're very positive over the next 4 quarters.

You saw this year, CAD 82 million of free cash flow this year, CAD 1.20 per share. It's pretty incredible that we generated that much cash.

So, no, I think we'll continue deleveraging. Organic sales are strong.

Organic sales will be above 10%. Q1, again, strong organic sales.

So, when you have strong organic sales, you're less focused on M&A, a lot of tuck-ins, and a bit of NCIB. We maintain our NCIB policy.

But right now there's no major deals in the pipeline. Also, not because there's no deals.

The pricing is still high. So for now, there's nothing that we see major.

So, we'll focus on deleveraging our balance sheet and returning money to our shareholders.

I want to ask a few more questions on the advertising side. First, I was wondering if you could give some color on how much of the growth in the advertising, particularly Retail Media, is coming from new partnerships versus expansion with existing partners.

Do you have anything you could share on that?

Yes, it's a mix of 50:50. For sure, Retail Media is still a very new model.

And we're talking to many different partners from Samsung and around the world. Everybody sees a lot of potential in Retail Media, but it's a lot of hard work.

So, it's a mix with 50% of our customers investing more and a lot of individualization, so a lot of new customers, and so our fill rate is still very low. So, we have a lot of inventory to fill.

So, the good news is we don't need to buy more real estate. We have a lot of real estate now.

We've got to build the condos and the house. So, it's all about execution.

So, I think that's good. And I agree, so part of advertising, half of it is Retail Media, the other half is FAST channels.

So, for now, it's a bit of a mixed bag, but we'll see in the future how we disclose both.

Okay. Anything you can share on the exact mix there?

I think that would be helpful.

No, the only problem is that, again, we got to be careful with. We do have competition on the FAST channel side, so, again, we just got to be cognitive that it was small, it's growing.

At one point, it will become big enough that we'll disclose, but for now, it's still smaller.

Okay, fair enough. And then on the advertising rates, as this market grows, I guess, again, both Retail Media and the FAST side, have the ad rates changed?

Are they getting worse? Are they getting better?

Just any color on the rates would be helpful.

Yes. So, on the FAST channel, I must say that the ads are sold by our partners.

So, it's Samsung, it's LG, it's Vizio, it's TCL, it's Pluto, Roku. So, they're the ones selling the ads.

And I must say that this week is the upfront in Toronto. The FAST channel platforms are getting very effective and are really challenging cable channels and specialty channels.

So, I think that will just continue to grow. I think in December, Samsung announced that their advertising growth for last year was up 65%.

So, we're lucky to be with partners that are really in a good space. And we're launching on many more platforms, and our channels, the music channels and the ambiance channels and all of our video channels are performing well on that type of platform.

So, we're getting more and more ads, which is in this market, you would say, surprising, but it's a new vector. So we're not affected by the economy.

That's fair. Last one for me.

On the Retail Media side, you mentioned in the past that pharma had been a big category and vaccines in particular. Are you starting to lap maybe a more difficult comparable year-over-year as the demand for those pharma and vaccines ads...

No, on the contrary, it's incredible. There's a lot of new products.

And also, the pharma, we see them strong in Retail Media, and we see them very strong on the FAST channels. If you listen to your Samsung TV Plus or LG or Vizio, you'll see a lot of pharma ads on the TV also.

So, pharma in the U.S. is the #1 ad for TV and radio.

So, we see that growth going on, and I'm not even going in the [ Ozempic ] type of products and all that. So, there's really a big investment being done by the pharma on many different products, and we don't see that stopping.

So, happy to have them as partners.

Just going back once again to the advertising line, which is so important. Can you just maybe unpack what -- I know it's difficult to predict, but what are the targets you've set internally so we can think about how to model that?

And I just want to clarify, you mentioned Q1 has started strong, but could you unpack a bit the relative growth you're seeing between FAST and the retail audio? Then on Radio, same kind of question.

You had a strong finish to the year. What are you seeing so far in this quarter, and what are you hearing from your sales teams about how the year looks to unfold?

Okay. So, good question.

So, for sure, the FAST channels, the hours are increasing, compared to last year, by 278%. So, for sure the FAST channel, which is a much smaller number, is increasing by threefold right now.

So, incredible growth in hours. And roughly, we monitor revenues per hour.

So, there's a rule of 3 there. The more hours you do, the more revenues we have.

And the FAST channel, the revenues are net, so which is a bit more. On the Retail Media side, we're getting to larger number there.

So, we don't expect to have 3 times the level. So, again, strong double-digit growth on Retail Media, but tougher to predict than the FAST channels.

And I agree, in the future, we'll see how we disclose both FAST and Retail because they're both advertising, but one is on net and 1 is on gross. So, very difficult for the analysts and for you guys to understand the margin.

One has a very, very high margin, the other one has a lower margin because of the sharing with our partners. So, that's something that maybe we can talk more one on one.

On the Radio side. I agree, wow, what a quarter.

Very excited with our quarter. And Q1, also very positive.

And our forecast for the year is good on Radio. We are really gaining a lot of market share on the local side.

With our different competitors in Canada focusing more on video and letting audio go away, we're really becoming the #1 radio player in Canada. We call it the power ratio, but in most of the markets, we are winning and gaining market share.

And we see that going forward this year also. So most people see radio down 2% to 3%.

We see radio up 2% to 4% and maybe even more. So, very happy with that segment, which I know some of the analysts think it's an old segment, but it's great cash flow.

So, Eric, just to confirm, you're looking forward. You're thinking your Radio revenues will be up in 2025?

Yes. Again, strong Q1 and looking very positive for the year.

On the Radio, surprisingly we have a lot more visibility than Retail Media, where the pipeline is when you come in the quarter, you almost have 75% of your sales done on the Radio side. So, again, very strong start of the year.

Radio, because strong locally, strong digital, and the Radio team is also selling Retail Media in the Canadian stores of all of our partners. So, just a strong unit.

Last one. Would you say there's a difference between your larger market and smaller market radio operations, or are you seeing growth across all market sizes?

In Radio, we have what we call a [ churn ] report. So, all the radio people put their numbers with an accounting firm, and we measure the growth of the market and our growth.

And right now, I must say, in most markets we are beating our competition or the average of the market. So across Canada, there's always a few, one maybe Kamloops was a bit weaker, but generally speaking, we're really outperforming, thanks again to a very strong local sales team and digital sales.

So, no, very happy with the start of the year in Radio and for the forecast for the year.

It's Ryland on for Drew. So just a couple from me.

Firstly, for Broadcasting and Commercial Music, I believe you had previously alluded to double-digit revenue growth. So, I was just wondering if you had any color on the sequential step-down in revenue growth for Q4.

And then back to Radio. Just wanted to confirm that 2% to 4%, is that your expectation for revenue growth for fiscal 2025?

And then as well, just wondering what margin contribution you're expecting.

Okay. No, for Commercial Music, again, we have a lot of new contracts.

We're winning most of our accounts. So we got good growth there, I think, generally speaking.

We have to be careful with the E&L part, equipment and labor. So, that one is we do the equipment and labor because when we do that, we get the recurring revenues.

It's not as high gross margin. Selling equipment is not as high gross margin as selling music or selling software.

So, we got to be careful on when those come in. We have a lot of big contracts.

But I think, again, Commercial Music is very strong and a strong pipeline, so happy. And yes, on the Radio side, we see 2% to 4% organic growth this year.

Again, we started the year strong. Our pipeline in Radio is strong.

And so, we're very positive. And like I said, we're taking advantage of the fact that maybe our competition is a bit weaker or not as focused on radio and audio.

And at Stingray, when you think about it, we're one of the third-largest audio companies in the world. So, it is a core business to sell audio ads.

So I think we're positive there.

And then just one follow-up, just for modeling with respect to free cash flow. Could you remind us the cash tax rate we should be assuming for fiscal 2025?

And then, as well, just where CapEx could come in?

Yes. A very good question.

So, this year, we had, again, incredible free cash flow. This year we were up 28.7% in free cash flow.

So, imagine sales up 6%, EBITDA up 10%, but free cash flow up 28%. So, a very impressive year.

But you're right, this year we had very low taxes. We had some losses that we were able to take in some of the units in Radio and all that.

So, this year was a very low tax year. Next year, there will be more taxes.

CapEx are under control, will even be smaller. But I think we expect free cash flow to maintain and beat last year.

So, again, CAD 1.18 of free cash flow per share. We're trading at not even 6x free cash flow.

And so, I'm positive on that. But, yes, I think we'll go offline in terms of taxation, but there will be more taxes this year.

But CapEx under control. Interest rate, good news this morning.

We're happy about 25 bps. And also the fact that our debt to EBITDA is lower.

We're getting savings from the banks, including you, including RBC. So, we're getting savings when we decrease our debt level.

So I think we'll see a good decline in interest for the coming year.

Yes. So, again, very happy to finish a strong year.

Happy to start a strong Q1. Very positive on the outlook.

And, again, thank you for all the analysts for all your good questions, your time. And it's always good because we learn a lot as a management team.

And people say, how is it to be public? I say, when you're public, you get these analyst calls, and they give you advice for free.

Not for free, but yes. So very happy to have the team around us.

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