Stingray Reports Third Quarter 2016 Results Now reaching an estimated 400 million Pay-TV subscribers in 152 countries

Transcription

1 NEWS RELEASE Stingray Reports Third Quarter 2016 Results Now reaching an estimated 400 million Pay-TV subscribers in 152 countries Third Quarter Highlights Revenues increased 24.6% to $23.1 million Recurring revenues of $19.7 million or 85% of total revenues, an increase of 20.0% Net income increased 111.4% to $3.2 million or $0.06 per share (diluted) compared to last year Adjusted EBITDA increased 14.6% to $8.0 million Adjusted Net income up 41.5% to $6.2 million or $0.12 per share (diluted) compared to last year Adjusted free cash flow of $6.0 million, an increase of 63.3% Acquisition of iconcerts and Digital Music Distribution for total consideration of $14.9 million Quarterly dividend increased by 17% to $0.035 per share Montreal, February 4, 2016 Stingray Digital Group Inc. (TSX: RAY.A; RAY.B) (the Corporation ; Stingray ), a leading business-to-business multi-platform music and in-store media solutions provider, today announced its financial results for the third quarter ended December 31, Financial Highlights (in thousands of dollars, except per share data) Three months ended December 31, Nine months ended December 31, % % Revenues 23,089 18, ,286 51, Recurring revenues 19,699 16, ,852 46, Adjusted EBITDA (1) 8,009 6, ,785 19, Net income 3,169 1, ,634 4, Per share diluted ($) Adjusted Net income (2) 6,194 4, ,175 12, Per share diluted ($) (7.7) (2.7) Cash flow from operating activities 6,215 5, ,259 8, Adjusted free cash flow (3) 6,047 3, ,714 11, (1) Adjusted EBITDA is a non-ifrs measure and is defined as net income before net finance expenses, change in fair value of investments, income taxes, depreciation, amortization and write-off, share-based compensation, initial public offering ( IPO ) expenses and CRTC tangible benefits and acquisition, restructuring and other various costs. (2) Adjusted Net income is a non-ifrs measure and is defined as net income before amortization of intangible assets, share-based compensation, change in fair value of investments, IPO expenses and CRTC tangible benefits, acquisition, restructuring and other various costs, net of related income taxes. (3) Adjusted free cash flow is a non-ifrs measure and is defined as cash flow from operating activities less capital expenditures for property and equipment and separately acquired intangible assets, net change in non-cash working capital items, IPO expenses and CRTC tangible benefits and acquisition, restructuring and other various costs, net of related income taxes. 1

2 For the third quarter, we continued to deliver on our ambitious business plan since going public with solid results across the board, said Eric Boyko, President, CEO and co-founder of Stingray. During the quarter, we completed the acquisitions of Digital Music Distribution and iconcerts with expected combined annual revenue and synergized EBITDA contributions of approximately $9.0 million and $4.0 million, respectively. Since the beginning of Fiscal 2016, the Corporation dedicated $26.2 million to acquisitions including contingent considerations. These acquisitions expand the Corporation s foothold in Asia-Pacific, into high-end jazz and classical long form music concerts channels and live music concerts. Following the successful launch of the VIBES features on our Stingray Music App in Canada, we recently enhanced the music experience of the Stingray Music mobile app for Pay-TV users in Latin America and the Caribbean s by adding the VIBES channels feature. The users of the free mobile app have access to 1,500 channels in close to 100 genres curated for every activity, mood and occasion. Reflecting confidence in our financial situation and business outlook, the Board made the decision to raise the quarterly dividend by 17% to $0.035 per share. In summary, recent acquisitions allow us to expand our geographic reach and to further crossleverage our growing and extensive portfolio of music, video and concert content, one of the largest in the world. This provides us with critical economies of scale to our business model and a solid competitive position, concluded Mr. Boyko. Third Quarter Results The Corporation generated record revenues of $23.1 million in the third quarter of 2016, an increase of 24.6% compared with revenues of $18.5 million a year ago. The increase was primarily due to acquisitions combined with growth in international markets, including a new contract with AT&T in the US and additional sales from installation and equipment. Revenues were also positively impacted by the favorable exchange rate with the US dollar. Recurring revenues were up 20.0% to $19.7 million in the third quarter of 2016 over the same period last year and decreased slightly as a percentage of total revenues to 85%. International revenues again posted solid growth and represented 40.4% of total revenues, up from 34.5% last year. Music Broadcasting revenues increased 22.4% to $17.0 million, mainly due to the acquisitions of Digital Media Distribution Pty Ltd. ( DMD ) and iconcerts that occurred in December 2015, as well as the impact of the Brava acquisition. Commercial Music revenues rose 31.1% to $6.1 million, mainly as a result of the acquisition of Les Réseaux Urbains Viva Inc. and new customer contracts, which were all reflected in full in the third quarter of Adjusted EBITDA for the third quarter of 2016 was $8.0 million or 34.7% of revenues, compared to $7.0 million or 37.7% of revenues a year earlier. The 14.6% increase in Adjusted EBITDA was primarily due to the acquisitions of Brava, DMD and iconcerts, organic growth in international markets and non-recurring revenues from installation and equipment sales. For the third quarter, the Corporation reported a net income of $3.2 million, or $0.06 per share (diluted), compared to $1.5 million, or $0.04 per share (diluted) for the same period in The increase was mainly due to stronger operating results and lower financing costs, offset by higher income taxes. Adjusted net income increased 41.5% to $6.2 million, or $0.12 per share (diluted), compared to $4.4 million, or $0.13 per share (diluted) a year ago. The increase was due to recent acquisitions combined with international growth, additional sales from installation and equipment and lower finance expenses, partially offset by higher income tax expenses. 2

3 Cash flow from operating activities was $6.2 million in the third quarter of 2016, versus $5.4 million a year earlier. Adjusted free cash flow for the three-month period ending December 31, 2015, increased 63.3% to $6.0 million, compared to $3.7 million for the same period a year ago. As of December 31, 2015, the Corporation had cash and cash equivalents of $2.5 million and a revolving credit facility of $100.0 million, of which approximately $63.4 million was unused, allowing it to pursue strategic acquisitions and achieve its growth objectives. Nine Months Results Revenues for the first nine months of Fiscal 2016 increased 25.2% to $64.3 million compared to $51.3 million a year ago. The increase was primarily due to acquisitions combined with significant growth in international markets and the launch of new products. Adjusted EBITDA increased 16.6% to $22.8 million for the first nine months of Fiscal 2016 from $19.5 million in Fiscal The increase was due to recent acquisitions of Brava, DMD and iconcerts, organic growth in international markets, and non-recurring revenues related to installation and equipment sales. As a result, Adjusted net income rose 36.9% to $17.2 million, or $0.36 per share (diluted), compared to $12.6 million, or $0.37 per share (diluted) a year ago. Declaration of Dividend On February 3, 2016, the Corporation has declared a dividend of $0.035 per subordinate voting share, variable subordinate voting share and multiple voting share that will be payable on or around March 15, 2016 to holders of subordinate voting share, variable subordinate voting share and multiple voting share on record as of February 29, The Corporation s dividend policy is at the discretion of the Board of Directors and may vary depending upon, among other things, our available cash flow, results of operations, financial condition, business growth opportunities and other factors that the Board of Directors may deem relevant. The dividends paid are designated as "eligible" dividends for the purposes of the Income Tax Act (Canada) and any corresponding provisions of provincial and territorial tax legislation. Additional Business Highlights On December 14, 2015, the Corporation announced that it entered into a definitive agreement to acquire Digital Music Distribution Pty. Ltd., Australia s most important digital music service provider. This acquisition is expected to provide Stingray with a strategic foothold in the Asia-Pacific region. Also, on December 17, 2015, the Corporation announced that it has reached an agreement to acquire Swiss-based iconcerts, a TV channel operated by Transmedia Communication SA that is dedicated solely to live music currently distributed to more than 100 Pay-TV and OTT operators in 85 countries and available to an estimated 250 million households across Europe, Asia, Africa and the Middle East. Stingray is now the world s largest broadcaster of live music concerts on television, with access to the largest library of digital live music worldwide. Conference Call The Corporation will hold a conference call to discuss these results on Thursday, February 4, 2016, at 10:00 AM (ET). Interested parties can join the call by dialing (Toronto) or (toll free). If you are unable to call at this time, you may access a tape recording of the conference call by dialing (Toronto) or (toll free) followed by access code: This tape recording will be available until March 2,

4 About Stingray Stingray (TSX: RAY.A; RAY.B) is a leading business-to-business multi-platform music and in-store media solutions provider operating on a global scale, reaching an estimated 400 million Pay-TV subscribers (or households) in 152 countries. Geared towards individuals and businesses alike, Stingray's products include the following leading digital music and video services: Stingray Music, Stingray Concerts, Stingray Brava, Stingray Djazz, Stingray Music Videos, Stingray Lite TV, Stingray Ambiance and Stingray Karaoke. Stingray also offers various business solutions, including music and digital display-based solutions through its Stingray Business division. Stingray is headquartered in Montreal and currently has over 300 employees across the world, including in the United States, the United Kingdom, the Netherlands, Switzerland, France, Israel, Australia and South Korea. Stingray was recognized in 2013 and 2014 as a finalist in the Top 50 of Deloitte's Technology Fast 50 list, and figures amongst PROFIT magazine's fastest-growing Canadian companies. For more information, please visit Forward-Looking Information This news release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Such forward-looking information includes information with respect to Stingray's goals, beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking information is identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", and "continue", or the negative of these terms and similar terminology, including references to assumptions. Please note, however, that not all forward-looking information contains these terms and phrases. Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Stingray's control. These risks and uncertainties could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's prospectus dated May 26, 2015, which is available on SEDAR at Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that Stingray anticipates will be realized or, even if substantially realized, that they will have the expected consequences or effects on Stingray's business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained herein is provided as of the date hereof, and Stingray does not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law. Non-IFRS Measures The Corporation believes that Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Net income per share, Adjusted free cash flow are important measures in evaluating our performance. Each of these non-ifrs financial measures is not an earnings or cash flow measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Our method of calculating such financial measures may differ from the methods used by other issuers and, accordingly, our definition of these non-ifrs financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-ifrs financial measures should not be construed as an alternative to Net income determined in accordance with IFRS as indicators of our performance or to Cash flows from operating activities as measures of liquidity and cash flows. 4

5 Adjusted EBITDA and Adjusted Net income reconciliation to Net income Three-month periods ended Nine-month periods ended (in thousands of Canadian dollars) Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Q Q YTD 2016 YTD 2015 Net income 3,169 1,499 10,634 4,684 Net finance expenses (850) 1,310 (1,254) 3,744 Change in fair value of investments (646) (450) (8,458) (1,350) Income taxes 920 (114) 1,703 (596) Depreciation of property and equipment and write-off ,552 1,528 Amortization of intangibles 3,443 3,583 10,258 9,201 Stock-based compensation Restricted and deferred share unit expenses IPO expenses and CRTC tangible benefits - - 5,800 - Acquisition, restructuring and other various costs ,909 Adjusted EBITDA 8,009 6,986 22,785 19,544 Net finance expenses 860 (1,310) 1,304 (3,744) Income taxes (920) 114 (1,703) 596 Depreciation of property and equipment and write-off (609) (586) (1,552) (1,528) Income taxes related to change in fair value of investments, share-based compensation, restricted and deferred share unit expenses, amortization of intangible assets, IPO expenses and CRTC tangible benefits and acquisition, restructuring and other various costs (1,096) (828) (3,609) (2,294) Adjusted Net income 6,194 4,376 17,175 12,574 Adjusted free cash flow reconciliation to Cash flow from operating activities Three-month periods ended Nine-month periods ended (in thousands of Canadian dollars) Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Q Q YTD 2016 YTD 2015 Cash flow from operating activities 6,215 5,366 11,259 8,571 Add / Less : Capital expenditures (717) (956) (2,329) (1,911) Net change in non-cash operating working capital items 17 (976) 2,294 3,854 Acquisition, restructuring and other various costs (1) ,172 IPO expenses and CRTC tangible benefits (1) - - 5,800 - Adjusted free cash flow 6,047 3,702 17,714 11,686 Note to readers: Condensed interim consolidated financial statements and Management s Discussion & Analysis of Operating Results and Financial Position are available on the Corporation s website at and on SEDAR at Contact information: Mathieu Peloquin Senior Vice-President, Marketing and Communications Stingray (514) , ext mpeloquin@stingray.com 5