Stingray Group Inc. (RAY.A:CA) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session reveal several positive indicators: improved financial performance, strong cash flow, and promising synergies from the TuneIn acquisition. The management's confidence in achieving significant growth in programmatic sales and cost synergies, along with potential dividend increases, are encouraging. Although there are some uncertainties in margin guidance, the overall sentiment is positive, supported by strong operational results and growth prospects.
Key Financial Performance
Revenue Revenues reached $124.8 million in the third quarter of fiscal 2026, up 15.4% from $108.2 million in Q3 '25. The year-on-year growth was mainly driven by enhanced advertising revenues from the recent TuneIn acquisition, higher equipment sales related to the acquisition of The Singing Machine, and greater FAST channel revenues.
Revenue in Canada Revenues in Canada decreased 1.1% to $53.6 million in the third quarter. The year-over-year decline can be attributed to lower equipment and installation sales related to digital signage, partially offset by higher radio revenue.
Revenue in the U.S. Revenues in the U.S. grew 42.5% to $60.3 million in Q3 '26, reflecting enhanced advertising revenues from the recent TuneIn acquisition, higher equipment sales related to The Singing Machine Company transactions.
Revenue in other countries Revenues in other countries decreased 6.7% to $10.9 million in the most recent quarter. The year-over-year decline was mainly due to lower subscription revenues, partially offset by greater FAST channel sales.
Broadcasting and Commercial Music revenues Broadcasting and Commercial Music revenues increased 22% to $88.1 million in the third quarter of 2026. The growth was driven by enhanced advertising revenues from the recent TuneIn acquisition, higher equipment sales related to the acquisition of The Singing Machine and greater FAST channel revenues.
Radio revenues Radio revenues rose 2% to $36.7 million in Q3 on higher digital advertising sales, partially offset by lower airtime revenues.
Adjusted EBITDA Consolidated adjusted EBITDA improved 5.7% to $44.5 million in the third quarter. Adjusted EBITDA margin reached 35.7% in Q3 compared to 38.9% for the same period in 2025. The increase in adjusted EBITDA was mainly driven by organic revenue growth as well as the impact of the acquisitions. The decline in EBITDA margin, meanwhile, can be attributed to lower gross margin on sales related to the TuneIn and The Singing Machine acquisitions.
Broadcasting and Commercial Music adjusted EBITDA Broadcasting and Commercial Music adjusted EBITDA grew 4.6% to $33 million in the third quarter. Like consolidated adjusted EBITDA, the increase was due to organic revenue growth as well as the impact of the acquisition.
Radio business adjusted EBITDA Adjusted EBITDA for our Radio business improved 5.5% year-over-year to $13.2 million in the third quarter on the strength of higher revenues.
Net income Stingray reported net income of $7.5 million or $0.11 per diluted share in the third quarter of '26 compared to $15.7 million or $0.23 per diluted share in Q3 '25. The year-over-year decline was mainly due to the higher performance and deferred share units expense related to an increase in the Corporation's share price, as well as greater acquisition, legal restructuring and other expenses. These factors were partially offset by an unrealized gain on the fair value of derivative financial instruments and by a foreign exchange gain.
Adjusted net income Adjusted net income totaled $26.3 million or $0.38 per diluted share in Q3 2026 compared to $23.4 million or $0.34 per diluted share in the same period in 2025. The increase can be attributed to a foreign exchange gain and higher operating results, partially offset by greater income tax expense.
Cash flow from operating activities Cash flow from operating activities amounted to a record $38 million in Q3 '26 compared to $35.4 million in Q3 2025. The year-over-year improvement was mainly due to a foreign exchange and positive net change in non-cash operating items. These factors were partially offset by higher acquisition, legal, restructuring, and other expenses.
Adjusted free cash flow Adjusted free cash flow totaled $34.8 million in Q3 compared to $28.6 million in the same period of '25. The improvement can be attributed to higher operating results, combined with lower income taxes and interest paid.
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Operating Highlights
FAST channels: Drove robust financial results by leveraging Stingray premium ad networks to monetize unsold inventory and benefit from new deployment across the LG platform.
In-car entertainment: Expanded through agreements with brands like BYD, Mercedes, and Nissan, integrating Stingray Music, Karaoke, and TuneIn content into vehicles.
TuneIn acquisition: Progressed better than planned, creating synergies with an annual run rate of $16 million in revenues and $5 million in cost savings.
Global automotive presence: Strengthened through partnerships with BYD, Mercedes, and Nissan, expanding Stingray's footprint in connected cars.
Calgary radio market: Acquired CHUP-FM assets to solidify position and improve efficiency in the Calgary market.
Revenue growth: Achieved 15.4% year-on-year growth, driven by TuneIn acquisition, higher equipment sales, and greater FAST channel revenues.
Adjusted EBITDA: Improved 5.7% to $44.5 million, driven by organic revenue growth and acquisitions.
Leverage ratio: Reduced to 2.49x, with plans to drop below 2x by the end of the calendar year.
Monetization strategy: Focused on leveraging TuneIn's advertising engine to achieve $500,000 daily programmatic sales, translating to CAD 250 million annually.
Content strategy: Shifted focus to creating scalable, cost-efficient content like karaoke experiences and recorded concerts, avoiding high costs of on-demand music.
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Risk or Challenges
Market Expansion Risks: The company is expanding into new markets such as in-car entertainment with partnerships like BYD, Mercedes, and Nissan. However, these expansions carry risks related to execution, integration, and achieving expected synergies.
Revenue Dependency on Acquisitions: The company's recent growth is heavily reliant on acquisitions like TuneIn and The Singing Machine. This dependency poses risks if these acquisitions fail to deliver expected revenue synergies or cost savings.
Declining Revenues in Certain Regions: Revenues in other countries decreased by 6.7% in the quarter, mainly due to lower subscription revenues. This decline could impact overall financial performance if not addressed.
Debt Levels and Leverage: The company has a net debt of $502.3 million and a leverage ratio of 2.49x. While plans are in place to reduce this, high debt levels could limit financial flexibility and increase vulnerability to economic downturns.
Declining EBITDA Margins: Adjusted EBITDA margin declined from 38.9% to 35.7% year-over-year, attributed to lower gross margins on sales related to acquisitions. This could indicate challenges in maintaining profitability.
Regulatory Approval Risks: The acquisition of CHUP-FM is subject to CRTC approval, which introduces regulatory risks that could delay or prevent the transaction.
Foreign Exchange Risks: The company reported gains from foreign exchange this quarter, but fluctuations in currency values could pose risks to future financial performance.
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Guidance & Outlook
Revenue Synergies with TuneIn: Expected to achieve $20 million to $40 million in cross-selling revenue synergies and $10 million to $15 million in cost savings within the next 18 months or by March 2027.
In-Car Entertainment Partnerships: New agreements with BYD, Mercedes, and Nissan to integrate Stingray's products into vehicles. Mercedes will launch Stingray Music and Karaoke applications in vehicles equipped with the MBUX infotainment system in the first half of calendar 2026. Nissan will offer TuneIn in select vehicles in the U.S., providing access to live sports, news, music, podcasts, and radio stations.
Debt Reduction: Targeting a leverage ratio below 2x EBITDA by the end of calendar year 2026 through debt reduction and higher adjusted EBITDA generation.
Programmatic Sales Growth: Achieving a run rate of $500,000 per day in programmatic sales, equivalent to CAD 250 million annually, up from zero a year ago.
FAST Channels and Retail Media Inventory: Currently holding over $200 million in unsold FAST channel inventory and $400 million in unsold retail media inventory, with plans to monetize these assets.
EBITDA and Free Cash Flow Growth: Anticipating accelerated EBITDA growth and free cash flow generation in the upcoming quarters.
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Shareholder Return Plan
Share Repurchase: During the third quarter, Stingray repurchased 303,000 shares for a total of $3.8 million under its NCIB (Normal Course Issuer Bid) program.
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Key Q&A
Q:How are you thinking about the cross-selling opportunity from here? And what gets you to the top versus bottom end of that $20 million to $40 million target?
A:Eric Boyko explained that the cross-selling opportunities are vast, with TuneIn already helping sell across 9 products, including CTV, Comm Radio, and Stingray Music. They achieved a $16 million run rate in January and are confident in reaching $20 million to unlimited. Programmatic sales are expected to hit $500,000 by the end of March, with significant growth potential.
Q:Can you provide some color on cost synergies and how you are thinking about Broadcast and Commercial segment margins?
A:Eric Boyko stated that cost synergies are focused on cost of goods sold, such as music rights, insurance, and audit fees. They aim to achieve $10 million+ in OpEx and COG savings by year-end, with potential savings from Amazon fees and ad service fees. They have not yet addressed personnel-related synergies.
Q:Can we confirm if the synergies are in CAD or USD?
A:Eric Boyko confirmed that the synergies are in USD, including $20 million to $40 million in positive sales and $10 million to $15 million in OpEx savings.
Q:Can you speak about the possibility of margin expansion above 35%?
A:Eric Boyko explained that margins vary depending on the product mix, with some products having 95% gross profit and others 40%-45%. He expects margins to grow back towards 40% as programmatic sales expand.
Q:What is the optimal leverage target for the company?
A:Eric Boyko stated that the optimal leverage target is below 2x, which would allow for capital allocation such as increasing dividends or share buybacks. He mentioned a potential dividend increase to $0.45-$0.50 if free cash flow per share reaches $2.40.
Q:Can you clarify the synergies on TuneIn and their impact on EBITDA?
A:Eric Boyko confirmed that cost synergies and revenue synergies are expected to add significant value, with full synergies realized by fiscal 2027. He agreed that the deal with TuneIn is highly accretive, potentially adding $50 million in EBITDA.
Q:How are you synthesizing efforts in the in-car side post-TuneIn acquisition?
A:Eric Boyko stated that all car deals now integrate both TuneIn and Stingray offerings. The merger has streamlined discussions with car manufacturers, who are excited about the combined offering. However, he noted that the car business has a long implementation process.
Q:Are the synergy guidance ranges too conservative given the updates?
A:Eric Boyko suggested that the lower end of the synergy guidance ranges might be conservative. He believes the revenue synergies could exceed $100 million, driven by programmatic sales and new inventory from partners like LG and VIZIO.
Q:What are the organic growth perspectives for TuneIn?
A:Eric Boyko highlighted that TuneIn grew 81% year-on-year in January, with strong programmatic ad growth. He mentioned opportunities to monetize third-party platforms and leverage TuneIn's ad tech platform to sell third-party inventory.
Q:Can you size up the revenue contribution from the Connected Car side for fiscal 2026 and 2027?
A:Eric Boyko estimated that the Connected Car business will generate over $10 million in fiscal 2026 and could double to $20 million in fiscal 2027. He emphasized the long-term nature of the car business, with deals providing revenue for up to 20 years.
Q:What are the updated expectations for TuneIn subscription revenue?
A:Eric Boyko mentioned that subscription revenue was budgeted to decline by 9% but is performing slightly better at a 6% decline. The focus remains on stabilizing subscription revenue while prioritizing programmatic sales growth.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on gross margin and EBITDA margin guidance, suggesting offline discussions for more clarity. Additionally, they used vague language when discussing the potential scale of programmatic sales and the exact timing of synergy realization.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BYD
Broadcasting Commercial
CAD
Co Founder
Commercial Music
Marie
Mercedes
Nissan
President CEO
Radio
Revenues
Singing Machine
acquisition equipment
advertising revenue
audience
car entertainment
channel
content
corporation
decline
engine
equipment sale
exchange
experience
gain
monetization
music
period
pillar
platform
radio station
record
revenue acquisition
revenue term
world class
MCHP Transcript
Stingray Group Inc. (RAY.A:CA) Q3 2026 Earnings Call Transcript
Positive2-11
The earnings call summary and Q&A session reveal several positive indicators: improved financial performance, strong cash flow, and promising synergies from the TuneIn acquisition. The management's confidence in achieving significant growth in programmatic sales and cost synergies, along with potential dividend increases, are encouraging. Although there are some uncertainties in margin guidance, the overall sentiment is positive, supported by strong operational results and growth prospects.
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