20
ANNUAL
REPORT
Year Ended March 31, 2020
Stingray Group Inc.
Annual Report 2020 | Stingray Group Inc. | 1
v TABLE OF
CONTENTS
04 WORD FROM THE CEO
08 WORD FROM THE CHAIRMAN
11 MANAGEMENT’S DISCUSSION AND ANALYSIS
12 COMPANY PROFILE
14 PRODUCTS
21 CURRENT COMPANY GOALS
22 PROVEN ACQUISITION STRATEGY
24 COMPETITIVE STRENGTHS
26 KEY BUSINESS RISKS
28 EXECUTIVE OFFICERS
29 NON-EXECUTIVE DIRECTORS
55 CONSOLIDATED FINANCIAL STATEMENTS
GLOSSARY OF TERMS
Annual Report 2020 | Stingray Group Inc. | 3
v
WORD FROM
THE CEO
Dear investors, partners, clients,
and colleagues,
As I write these words, the world is experi-
encing a monumental shift. The COVID-19
pandemic has transformed our lives in ways
we could not have imagined possible only
a few months ago. While social distancing
has driven us apart, it has also brought us
clo ser; often thanks to the healing power of
music. I have never been prouder to have
built a company designed to bring joy to and
positively impact millions around the world.
I also want to take this opportunity to address
our partners and shareholders directly. Your
trust has allowed us to build a company that
continues to thrive and break records even
under the most challenging of circumstan-
ces. As a result of your support, we have
grown beyond even our own expectations
and our business is stronger than it’s ever
been, even as the world faces economic
uncertainty.
I always end this yearly message with words
of thanks, but this year, gratitude comes first.
I want to thank the members of the Stingray
team for showing extraordinary resilience
in these difficult times. Every success we
achieve reflects your inspiring solidarity. You
have proven that there is no hardship that we
cannot overcome together.
In Fiscal 2020, revenues have continued to
show strong growth. Revenues increased by
44.2%, reaching $306.7 million (compared to
$212.7 million in Fiscal 2019). At the same time,
Adjusted EBITDA(1) increased by 63.5% to
$118.1 million and net income was $14 million
($0.18 per share). Cash flow from operating
activities was $88.1 million and Adjusted free
cash flow(1) increased 101.8% to $78.4 million.
Eric Boyko
President, Co-founder and CEO
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36
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v CONNECTING WITH
MUSIC FANS
Those of you who have been following the Stingray story know that we never stand still;
we are relentlessly focused on diversifying our business model and consumer base. In
2018, I shared with you our ambition to break through the direct-to-consumer market
with subscription-based ad-supported products. Our rigorous approach to product
development and deployment has paid off in audience growth and profitability.
Building connections with music fans through content that resonates on an emotional
level is crucial to outpacing the competition. This year, Qello Concerts, our multiplatform
service that transforms any screen into a live concert experience, was selected as the
exclusive livestream partner of the KABOO Del Mar festival and the Hi, How Are You Day
concert event, giving subscribers free access to some of the biggest names in music
such as Sheryl Crow, OneRepublic, Boys II Men, Cage the Elephant, Jason Falkner, and
more. The music industry is recognizing our formidable reach to promote artists across a
multiplatform range of services.
I am confident that we are taking the right steps to create a consumer brand on a par with
the industry’s most recognizable players.
GROWING PRODUCT
PORTFOLIO
It’s hard to imagine that a little over 10 years ago, Stingray was launched with only a
karaoke service to its name. How far we’ve come! Today, we can boast of music services
for every taste and demographic, each expertly curated by in-house members of our
programming team.
Most recently, we introduced Stingray Country, the only music video television channel
dedicated to country music for Canadian TV subscribers. By focusing on catering to the
needs of underserved markets, we are constantly tapping into new streams of revenue.
The channel is already carried by operators Cogeco, Bell, and Shaw amongst many long-
time partners.
The crux of our growth this year is the addition of free, ad-supported streaming (FAST)
channels to our offering. Qello Concerts, Stingray Karaoke, Stingray Classica, Stingray
Naturescape, and Stingray Music are now available in this new ad-supported format.
Distribution agreements with OTT giants Samsung, STIRR, Huawei Video, izzi, XUMO, LG,
Vizio, and TiVo Plus have grown our potential reach by over 300 million.
It bears repeating that being at the forefront of the On-Demand economy is crucial to
distinguishing ourselves and competing at the national and international levels.
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v
EXPANDING IN THE
GLOBAL MARKETPLACE
Stingray has had global ambitions from the start. As attached as we are to our Montreal
roots, we aim to expand to the four corners of the world. We are well on our way with prod-
ucts and services distributed in over 156 countries… and counting.
In the past 12 months, we have signed a distribution agreement with Asociación de Tele-
comunicaciones Independientes de Mexico to bring a wealth of music options to rural
and suburban regions of Mexico, launched Stingray Music with SKY Brazil, partnered with
Deutsche Netzmarketing GmbH to provide three native 4K UHD specialty TV channels to
German audiences, and expanded into the Maldives with the launch of Stingray Music
with leading local digital service provider Dhiraagu.
CONSOLIDATING
PARTNERSHIPS
Modern consumers expect to have their needs catered for with entertainment options that
focus on niche rather than generic content. Thanks to our keen understanding of audience
expectations and ability to bring new services to market at record speed, we can jump in
with high-quality products that give our partners a massive competitive advantage.
The numbers speak volumes. For example, according to a Canadian Listenership Study
conducted by Maru/Matchbox, in January 2020, 44% of Canadians with pay-TV subscrip-
tions reported tuning into a Stingray Music channel, a 10% increase over September and
January 2019.
Every metric demonstrates that pay-TV providers and marketers can count on our services
to engage and retain consumers.
In the spring, we announced the second launch of Stingray products with Bell in less than
a year. Bell Fibe TV subscribers can now access two Qello Concerts and Stingray Karaoke
On-Demand. Also, three of Stingray’s popular 24/7 music video channels – PalmarèsADISQ
par Stingray, Stingray Hits!, and Stingray Retro – are now available to Bell Satellite TV
subscribers at no extra charge.
We also renewed our longstanding relationship with Rogers Communications, Canada’s
largest operator. As part of the agreement, Rogers television customers (cable and IPTV)
have access to Stingray Music on TV, web, and mobile in addition to 4K channels including
Stingray Festival 4K and Stingray Now 4K. The deal also provides Rogers with rights to
distribute new Stingray products.
The world’s biggest brands expect and deserve outstanding service and value. Having
Tesla select Stingray Karaoke to power its new Caraoke feature worldwide confirms that
Stingray has built a solid reputation for excellence and is well-positioned to diversify into
new sectors and drive even more growth in the years ahead.
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v
EMPOWERING
RETAILERS
I am pleased to report that we continue to dominate the Canadian in-store music market.
To deepen our customer experience expertise, in January, we acquired Chatter Research
Inc., a Toronto-based leader in the design, development, and implementation of AI-driven
real-time customer feedback solutions for retail and hospitality businesses. Stingray
Business clients can now benefit from Chatter’s proprietary customer research and real-
time feedback platform powered by AI and big data.
As we’ve witnessed in the past months, grocery stores and pharmacies are amongst our
society’s essential services. In November, we concluded a long-term deal with METRO
to provide custom music programming and in-store messaging for over one thousand
grocery stores and pharmacies. Retail banners included in the agreement include Metro
and Metro Plus in Quebec, Metro in Ontario, Super C, Food Basics, Adonis, Les 5 Saisons,
Brunet, and Jean Coutu. Our digital media expertise gives merchants the power to control
their messaging and customize their audio offering, which is key to creating commercial
environments that align with their brand image.
LOOKING TO
THE FUTURE
I am humbled to be in a position to share such positive news this year, even from the depth
of a global health crisis. I am convinced that we will come out of this experience a stronger
and more committed organization than ever.
As always, we will continue to move forward with optimism and confidence, guided by our
purpose of building the world’s greatest music services company.
I will close as I started, with a heartfelt thank you. Thank you to every member of the Stingray
team for never losing your focus on serving our clients and bringing them happiness through
music. Thank you to our executive team for helping build a remarkable company through
inspiring leadership and for putting the health and well-being of our people first. Thank you to
our partners and shareholders for sharing our vision.
Take care of yourselves, your friends, and family in the months to come.
Sincerely,
Eric Boyko
Annual Report 2020 | Stingray Group Inc. | 7
v WORD FROM
THE CHAIRMAN
Looking back on the past year, I am proud
of what we have achieved during a very dif-
ficult time. I am proud of the Stingray team
whose steadfast dedication and profession-
alism are making a difference in people’s
lives through the powerful force of music.
Over the past weeks, it has been gratifying
to see Stingray management impressively
juggle the challenges of putting the well-
being of their people first while diligently
pursuing global deployments and con-
cluding distribution agreements with
operators around the world, from the
U.S. to Mexico and Germany – in other
words, continuing to grow our future while
managing through a challenging present.
This year, we have focused on pursuing our
entry into the direct-to-consumer market,
growing our brand notoriety, and devel-
oping an ad-supported service offering. All
with astounding success.
The introduction of AUDIO360™, an ad-
vanced, multi-platform audio sales solution,
in partnership with Bell Media, has given
Stingray a solid foothold in the advertising
space. This partnership leverages the reach
of Bell Media’s vast ad-supported audio
content and Stingray radio stations to
create Canada’s most complete end-to-end
audio advertising solution.
Mark Pathy
Chairman of the Board
Our free, ad-supported streaming channels
have quickly been adopted by
the
entertainment indus-try’s global leaders.
The recent announcement of distribution
partnerships with major OTT providers
Samsung, LG, Huawei, and TiVo – to name
just a few – demonstrates the soundness
of constantly diversifying our business
strategy and revenue sources.
Solid partnerships, advertising sales rev-
enue, stable recurring revenue, and On-
Demand subscriber growth will ensure
Stingray’s continued profitability and long-
term perspectives. We plan on accelerating
investments
in products, services, and
technology.
Looking ahead to the next 12 months, I am
confident that we have a solid business
strategy in place to stay ahead of the curve
and withstand the economic impact of the
COVID-19 outbreak. I have full confidence
in the ability of Stingray’s management
team to reliably execute on this strategy
while adapting quickly and effectively to
our rapidly changing business and social
environments. Despite challenging times
still ahead, we are prepared not only to
meet those challenges but to come out the
other side a stronger, better company.
On behalf of the board and the management
team, I extend my thanks to all of you who
contribute to Stingray’s growth and success.
Thank you to our investors, partners, and
shareholders. And especially, thank you to
every one of our 1,200 employees, many
of whom have made meaningful personal
sacrifices to ensure the continuity and long-
term success of our business during these
unusually difficult times.
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MANAGEMENT’S
DISCUSSION
AND ANALYSIS
The following is the annual report and Management’s Discussion and Analysis (“MD&A”) of
the results of operations and financial position of Stingray Group Inc. (“Stingray” or “the
Corporation”) and should be read in conjunction with the Corporation’s consolidated audit-
ed financial statements and accompanying notes for the years ended March 31, 2020 and
2019. This MD&A reflects information available to the Corporation as at June 3, 2020. Addi-
tional information relating to the Corporation is also available on SEDAR at www.sedar.com.
COMPANY
PROFILE
Montreal-based Stingray Group Inc. (TSX: RAY.A; RAY.B) is a leading music, media, and
technology company with over 1,200 employees worldwide. Stingray is a premium provider
of curated direct-to-consumer and B2B services, including audio television channels, more
than 100 radio stations, SVOD content, 4K UHD television channels, karaoke products,
digital signage, in-store music, and music apps, which have been downloaded over 150
million times. Stingray reaches 400 million subscribers (or users) in 156 countries.
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PRODUCTS
SUBSCRIPTION SERVICES
APPS & SVOD
B2C MOBILE OR OTT APPS
Expertly-curated music channels, in
all genres, for all of life’s moments.
The premium destination for
breath taking classical music
concerts, opera, ballet, and
music documentaries.
The world’s leading streaming
service for full-length concert
films and music documentaries.
Over 14,000 karaoke songs with
on-the-go convenience and easy
set-up.
Over 14,000 karaoke songs with
optional special effects, mics,
and high-quality karaoke videos.
Kid-tested and parent-approved
karaoke songs for little ones.
Fans of the television show
The Voice come together to like,
favorite, follow, and share each
other’s singing via social media.
Piano
Academy
Learn the piano from scratch,
or for those who have prior
knowledge and want to continue
learning by practice playing
along to their favourite songs.
Yokee
Karaoke
Yokee
Piano
The ultimate karaoke destination
to perform and record songs,
add voice effects and share with
a network of dedicated singers.
Yokee
Guitar
Easy-to-follow guitar tutorials
to learn and play.
Fun, professionally-designed
piano lessons, for all levels,
that entertain as well as teach.
The Piano
Keyboard
An on-the-go full keyboard to
learn, play, record, save and
share piano songs.
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v SUBSCRIPTION VIDEO ON DEMAND (SVOD)
Stingray’s SVOD offering is available through major entertainment services providers such
as Amazon, Comcast, Telefonica, and growing in reach through new carriers such as izzi,
Huawei Video, and CLIQ Digital.
The following Stingray services are available as SVOD:
•
Stingray Karaoke: songs in all the most popular genres including pop, rock,
country, R&B/hip-hop, Disney, and much more.
Stingray Classica: a catalog of classical music, opera, and ballet performances
filmed in the world’s most renowned venues.
Stingray DJAZZ: live performances by the jazz icons of yesterday and today.
Stingray Qello: the world’s leading streaming service for full-length concerts
and music documentaries.
•
•
•
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v
RISE OF ADVERTISING:
FAST CHANNELS, AD-SUPPORTED MUSIC
VIDEO TV CHANNELS, AUDIO360™
FAST CHANNELS
Stingray introduced free, ad-supported streaming TV channels (FAST channels) diversify-
ing its portfolio and offering audiences a way to access music content at no extra cost
through existing streaming subscriptions.
Like other free streaming services, Stingray’s free content doesn’t require additional sub-
scription or any other commitments but will instead be fully supported by ads.
Stingray’s FAST channels live right within its partners’ existing entertainment platforms.
• Qello Concerts now carried by Samsung, XUMO, LG and Vizio.
•
•
Stingray Karaoke now carried by XUMO and LG.
Stingray Classica now carried by STIRR.
Stingray took this opportunity to rebrand its fan-favourite Slow-TV channel, Stingray Ambiance,
as Stingray Naturescape. Stingray Naturescape broadcasts the same breathtaking scenery
from around the world to transform any home into a peaceful, relaxing oasis.
•
Stingray Naturescape now carried by Samsung, Vizio, XUMO, LG and TiVo Plus.
ADVERTISING ON MUSIC VIDEOS TV CHANNELS
In January 2020, Stingray introduced broadcast advertising across its portfolio of national
music video channels: Stingray Retro, Stingray Loud, Stingray Vibe, and Stingray Country.
This new advertising initiative compliments Stingray’s growing roster of advertising-supported
services, both domestically and globally. Stingray partnered with Anthem Media Group, one
of Canada’s largest independent media companies, to operationalize the technical delivery
and monetization of these properties, and to exclusively manage all national advertising
media sales.
A NEW AUDIO SOLUTION FOR CANADIAN ADVERTISERS
Stingray has partnered with Bell Media, Canada’s leading content creation company, to
introduce AUDIO360™, an advanced, multi-platform audio sales solution that brings together
brands and consumers through the power of sound. AUDIO360™ gives brands access to 22
million weekly Canadian listeners across an unrivaled multi-platform audio offering.
AUDIO360™ is designed to reach, engage, and influence Canadian listeners through:
Digital streaming audio on the iHeartRadio Canada and Stingray Music apps
•
Terrestrial audio on more than 200 Bell Media and Stingray radio stations
•
Podcasts on the iHeartRadio Canada app
•
Sponsorship opportunities across Stingray specialty audio channels
•
AUDIO360™ enables advertisers to target customized audio messages by grouping con-
sumers according to “Passion Segments” resulting in a personalized audio advertising
experience for listeners and more effective, platform-agnostic targeting for advertisers.
Annual Report 2020 | Stingray Group Inc. | 16
v
STINGRAY BUSINESS:
CHATTER RESEARCH, DIGITAL SIGNAGE
CHATTER RESEARCH
Stingray’s commercial services division, Stingray Business, expanded its activities with the
acquisition of Chatter Research Inc., a Toronto-based leader in the design, development,
and implementation of AI driven real-time customer feedback solutions for retail and
hospitality businesses.
Founded in 2016, Chatter has designed, developed and deployed its own proprietary
customer research and real-time feedback platform powered by AI and big data. The
company’s combination of free-text chats and machine learning captures unique customer
insights and allows business owners to improve customer satisfaction and drive sales.
Chatter serves clients in a range of industries including finance, retail, and restaurants
and major brands such as Lush, Fanatics and Purdys Chocolatier.
This strategic acquisition supports Stingray’s business plan and growth strategy by
offering Stingray Business customers a “one-stop” shop for background music, digital
signage and now customer insights.
DIGITAL SIGNAGE
Stingray Business created improved in-store experiences with a combination of digital
experiences and background music.
Among many successful installations, a collaboration with Sports Experts DIX30 yielded
RFID solutions assisting consumers in accessing instant, detailed information on products
such as key features, and inventory.
This technology incites customers to spend more time in-store interacting with potential
purchases. Jumbotron LED Solution created a “wow effect” for the store. This product
helps position the store as one of a kind, technology leader in the world.
Background music at Sports Experts helped bring the customer experience to the
next level.
Annual Report 2020 | Stingray Group Inc. | 17
v RADIO
Radio continues to play a vital role in the lives of Canadians everywhere. In Canada’s
largest cities, millions tune in every day for in-the-moment traffic reports, news and
information, and entertainment. Lengthy commute times in these urban centres make radio
essential to start the day, and those listeners turn to radio for companionship all day at
work. In smaller towns across Canada, radio provides a critical link to the community. In
many cases, radio stations are the only electronic media, providing vital information in
real-time to these smaller communities.
Stingray entered 2019 with a brand-new format in three cities. The Breeze debuted on 96.5
in Halifax, 104.3 in Vancouver, and 96.3 in Edmonton. This relaxing brand provides listeners
with soft-rock songs from the ‘70s to today in an environment created specifically to reduce
stress and provide relief from the relentless speed of modern life. The brand is designed to
appeal to listeners between 30 and 60, skewing female. While success has been slow to
materialize in Vancouver, the format has quickly gained traction in Edmonton and Halifax.
In Halifax, 96.5 The Breeze has more than doubled its share with listeners 35+. In Edmonton,
96.5 The Breeze is the market’s #1 radio station with listeners 35+ and the #1 radio station
overall. Ratings in the key advertising demo of adults 25-54 are also very strong.
Other success stories from 2019 include the launch and expansion of syndicated programs
nationwide, including The Morning Hot Tub, The Paul McGuire Show, The Late Show with
Katie & Ed, The Casey Clarke Show, Vinnie & Randi, and BJ & The Morning Crew. Stingray
has evolved into an industry-leader in the creation and distribution of world-class national
radio content.
In 2019, the company acquired boom 99.5 in Drumheller from Golden West Communi-
cations. This has expanded our presence in Alberta, where we are able to maximize our
regional content on the boom brand. There are now nine boom brands across Alberta, plus
the flagship brand in Toronto.
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v
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v Annual Report 2020 | Stingray Group Inc. | 20
CURRENT
COMPANY
GOALS
Pursue a strategic and disciplined approach to our
M&A strategy by focusing on three (3) vectors:
•
•
•
SVOD / APPs
Ad-based products
Business services (Music, Digital Display and Insights)
Develop ad-based product offerings to enter new
markets and access new platforms. Free ad-supported
channels (FAST) and traditional channels
(MV and Audio channels).
Continue to grow in the SVOD space by buying or
licensing content and increasing our reach across
platforms and markets. Offer the ultimate curated
package for best viewing and listening experiences.
Continue to develop best-in-class video apps, web-based
solutions, and mobile apps. Leverage Stingray’s strength
in technology to access the world’s most important
distribution platforms.
Expand the reach of our business services through an
international expansion strategy and insights offering.
1
2
3
4
5
Annual Report 2020 | Stingray Group Inc. | 21
PROVEN
ACQUISITION
STRATEGY
$770 M
spent on acquisitions since inception
Stingray became the undisputed world-leading provider of
classical music programming, demonstrating our ability to
act as an industry consolidator.
Annual Report 2020 | Stingray Group Inc. | 22
v 2007
•
Slep-Tone Entert. Corp/
SoundChoice
(Karaoke Channel)
2009
• Canadian Broadcast Corp.
(Galaxie)
• MaxTrax Music Ltd.
• Chum Satellites Services (CTV)
2010
• Marketing Senscity Inc.
• Concert TV Inc.
2011
• Music Choice International Ltd.
2012
• Musicoola Ltd. Zoe
Interactive Ltd.
•
2013
•
•
•
•
Executive Communication
Emedia Networks Inc.
Stage One Innovations Ltd.
Intertain Media Inc
2014
•
•
•
•
DMX LATAM (Mood Media)
Archibald Media Group
DMX Canada (Mood Media)
Telefonica – On the Spot
2015
2016
•
•
•
•
Les réseaux Urbains Viva Inc.
Brava Group
(HDTV, NL and Djazz TV)
Digital Music Distribution
iConcerts Group
•
•
•
•
Nümedia
Festival 4K B.V.
Bell Media’s specialty
music video channels
EuroArts Classical catalogue
2017
2018
Classica
Nature Vision TV
Yokee Music Ltd.
•
•
•
• C Music Entertainment Ltd.
•
•
SBA Music PTY Ltd.
Satellite Music Australia PTY Ltd.
• Qello Concerts LLC
•
Newfoundland Capital
Corporation
Novramedia
DJ Matic
New Glasgow
•
•
•
2019-
2020
•
Drumheller Radio
• Chatter Research Inc.
• Minority investment in
The Podcast Exchange (TPX)
Annual Report 2020 | Stingray Group Inc. | 23
v
COMPETITIVE
STRENGTHS
We believe that the following competitive strengths will contribute to our ongoing commercial
success and future performance:
UNIQUE AND DIVERSIFIED WORLD-LEADING MUSIC AND VIDEO
SERVICE PROVIDER
With 400 million subscribers in 156 countries, our total reach is one of the largest relative
to our peers. Our products and services are distributed through numerous platforms
including digital TV, satellite TV, IPTV, the Internet, mobile devices, Wi-Fi systems, game
consoles, and connected cars. With 101 radio licenses and more than 150 million app
downloads, Stingray reaches millions of radio listeners and app users every month.
STRONG AND PREDICTABLE CASH FLOW FROM LONG-TERM
CONTRACTS AND CLIENT RELATIONSHIPS
Our business model is based on subscription revenues and long-term agreements with
pay-TV providers, which gives us significant predictability of future cash flow, reduces
cyclicality of earnings, and increases customer retention. As a result, we have established
deeply integrated relationships with many of our customers, providing significant annual
recurring revenues.
PROPRIETARY INNOVATIVE TECHNOLOGIES
We are a leader and innovator in the digital music space, and as such have developed
a unique set of proprietary technologies that provide us with an important competitive
advantage. We have extensive experience in developing technologies to distribute digital
music on multiple platforms such as TV, mobile devices, and the Web. For instance, we
introduced a second generation of UBIQUICAST allowing multiproduct distribution and a
third generation of our Commercial platform – the SB3 allowing simultaneous distribution
of digital display and HD music.
BUSINESS AGILITY
We have nimbly adjusted to and taken advantage of emerging growth opportunities,
including steering our product development strategies by leveraging AI-driven data analysis
and decision making, and scaling our services through strategic partnerships in various
rapidly evolving markets.
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TRACK RECORD OF SUCCESSFUL ACQUISITIONS AND
INTEGRATIONS
Since Stingray’s inception in 2007, we have completed 41 acquisitions representing outlays of
approximately $770 million, which brought new clients, new products and new geographical
markets to our business. In Fiscal 2020, we have completed three (3) acquisitions for an
aggregate purchase value of $16.6 million. Stingray’s proven track record of successfully
integrating these acquisitions is a result of our experienced management team’s rigorous
and disciplined acquisition strategy. The versatility, portability and flexibility of Stingray’s
products and technologies permit us to efficiently integrate and support the complementary
products and technologies of the businesses we acquire.
LEADING CONTENT CURATION EXPERTISE
Our business strategy is based on a lean-back, rather than lean forward, music consumption
model. Stingray provides some of the world’s most comprehensive music libraries and
channels, all programmed by more than 200 expert programmers around the world. Our
music products and services are adapted to local tastes and trends to create the ultimate
user experience.
HIGH EMPLOYEE RETENTION RATE AND LOW TURN-OVER
As an entrepreneurial and growing Canadian company, we attract and retain talented
professionals. Our team of almost 1 200 dedicated individuals is comprised of experienced
and knowledgeable operations, financial, technology, marketing and communications,
sales, and legal and regulatory experts who, prior to joining Stingray, garnered extensive
experience with other industry leaders.
Annual Report 2020 | Stingray Group Inc. | 25
KEY BUSINESS
RISKS
The key risks and uncertainties of our business drive our operating strategies. Additional
risks and uncertainties not presently known to us, or that we currently consider immaterial,
may also affect us. If any of the events identified in these risks and uncertainties were
to occur, Stingray’s business, financial condition and results of operations could be
materially harmed.
For further discussion of the significant risks we face, refer to the Annual Information Form
for the year ended March 31, 2020 available on SEDAR at sedar.com.
Our key risks, in terms of severity of consequence and likelihood, are displayed as follows:
PUBLIC PERFORMANCE AND MECHANICAL RIGHTS
AND ROYALTIES
We pay public performance and mechanical royalties to songwriters and publishers
through contracts negotiated with labels and music rights collection societies in various
parts of the world. If public performance or mechanical royalty rates for digital music are
increased, our results of operations and financial performance and condition may be
adversely affected. We mitigate this risk by operating, whenever possible, under statutory
licensing regimes and structures applicable to a non-interactive music services. The royalty
rates to be paid pursuant to statutory licenses can be established by either negotiation
or through a rate proceeding conducted by the Copyright Board; such royalty rates are
generally stable and are not likely to fluctuate from year to year.
INTEGRATING BUSINESS ACQUISITIONS
The Corporation has made or entered into, and will continue to pursue, various acquisitions,
business combinations and joint ventures intended to complement or expand our business.
The Corporation may encounter difficulties in integrating acquired assets with our
operations. Furthermore, the Corporation may not realize the benefits, economies of scale
and synergies we anticipated when we entered into these transactions. To mitigate this
risk, the Corporation has committed to develop and improve our operational, financial and
management controls, enhance our reporting systems and procedures and recruit, train
and retain highly skilled personnel, all of which will enable the Corporation to properly
leverage our services into new markets, platforms and technologies.
LONG-TERM PLAN TO EXPAND INTO INTERNATIONAL MARKETS
A key element of our growth strategy is to continue to expand our operations into
international markets. For Fiscal 2020, approximately 31.6% of our revenue is derived from
customers outside of Canada. Operating in international markets requires significant
resources and management attention and will subject us to regulatory, economic and
political risks that are different from those in Canada. To mitigate this risk, the Corporation
has committed to develop and improve our operational, financial and management
controls, enhance our reporting systems and procedures and recruit, train and retain
highly skilled personnel, all of which will enable the Corporation to continue to expand
into international markets.
Annual Report 2020 | Stingray Group Inc. | 26
DEPENDENCE ON PAY-TV PROVIDERS
The majority of the Stingray Music pay-TV subscriber base is reached through a small
number of significant pay-TV providers who are all under long-term contracts. Packaging
decisions made by pay-TV providers in respect of service offerings can impact the
subscriber base. Moreover, the contractual obligations of pay-TV providers in Canada
to distribute Stingray Music are subject to changes in CRTC rules, including the CRTC’s
policy framework set forth in Broadcasting Regulatory Policy CRTC 2015- 96. We mitigate
this risk by understanding the business needs of pay-TV providers and offering compelling
services, distributed across multiple platforms and proprietary technologies, with a
demonstrable value proposition. Based on our strong relationships and our interpretation
of the long-term contracts with payTV providers, Stingray expects that all Canadian
pay-TV providers will continue to carry Stingray’s pay-audio service on the most widely
distributed unregulated first-tier package (where available).
RAPID GROWTH IN AN EVOLVING MARKET
The audio and video entertainment industry is rapidly evolving. The market for online
digital music and videos has undergone rapid and dramatic changes in our relatively short
history and is subject to significant challenges. In addition, our growth in certain markets
could be impeded by existing contractual undertakings with competitors which forbid us
to solicit customers in such markets. To mitigate this risk, our skilled and experienced sales
personnel have placed a greater emphasis on cross-selling our growing suite of products
and our capable engineers continue to innovate and develop new products and proprietary
technologies to distribute digital music, which in turn allows us to attract and retain customers
and expand our service offering on multiple digital platforms beyond the TV. To manage the
growth of our operations and personnel, we continue to improve our operational, financial
and management controls and our reporting systems and procedures.
COMPETITION FROM OTHER CONTENT PROVIDERS
The market for acquiring exclusive digital rights from content owners is competitive.
Many of the more desirable music recordings are already subject to digital distribution
agreements or have been directly placed with digital entertainment services. We face
increasing competition for listeners and/or viewers from a growing variety of businesses
that deliver audio and/or video media content through mobile phones and other wireless
devices. The growth of social media could facilitate other forms of new entry that will
compete with the Corporation. To mitigate this risk, the Corporation continues to rely
upon human programming and content curation by award-winning music experts from
around the world, each of whom adapt to the tastes and trends of listeners in order to
create the ultimate user experience. In addition, the Corporation remains determined to
create and acquire original long-form content in order to grow its proprietary catalogue.
Annual Report 2020 | Stingray Group Inc. | 27
EXECUTIVE
OFFICERS
Eric Boyko
President, CEO,
Co-founder and Director
Jean-Pierre Trahan
Chief Financial Officer
Lloyd Feldman
Senior Vice-President,
Corporate Secretary
and General Counsel
Mario Dubois
Senior Vice-President and
Chief Technology Officer
Mathieu Péloquin
Senior Vice-President,
Marketing and
Communications
David Purdy
Chief Revenue Officer
Ian Lurie
President, Radio
Valérie Héroux
Vice-President,
Content Acquisition
and Programming
Ratha Khuong
General Manager,
Stingray Business
Sébastien Côté
Vice-President,
Human Resources
Annual Report 2020 | Stingray Group Inc. | 28
v NON-EXECUTIVE
DIRECTORS
Claudine Blondin
Director and Member
of the Corporate
Governance and the
Human Resources and
Compensation Committees
François-Charles
Sirois
Director and Member
of the Human Resources
and Compensation
Committee
Gary S. Rich
Director and Chairman of
the Human Resources and
Compensation Committee
Jacques Parisien
Director and Chairman
of the Corporate
Governance and Audit
Committees
Mark Pathy
Chairman of the Board
of Directors and Member
of the Audit and the
Human Resources and
Compensation Committees
Pascal Tremblay
Director and Member
of the Corporate
Governance Committee
and Chairman of the
Audit Committee
Robert G. Steele
Director
John Steele
Director
Annual Report 2020 | Stingray Group Inc. | 29
v BASIS OF PREPARATION AND FORWARD-LOOKING STATEMENTS
The following is the annual financial report and Management’s Discussion and Analysis (“MD&A”) of the results of operations and financial position of
Stingray Group Inc., (“Stingray” or “the Corporation”), and should be read in conjunction with the Corporation’s audited consolidated financial
statements and accompanying notes for the years ended March 31, 2020 and 2019. This MD&A reflects information available to the Corporation as at
June 3, 2020. Additional information relating to the Corporation is also available on SEDAR at www.sedar.com.
This MD&A contains forward-looking information within the meaning of applicable Canadian securities laws. This forward-looking information includes,
but is not limited to, statements with respect to management’s expectations regarding the future growth, results of operations, performance and business
prospects of the Corporation. This forward-looking information relates to, among other things, our objectives and the strategies to achieve these
objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimations and intentions, and may also include other
statements that are predictive in nature, or that depend upon or refer to future events or conditions. Statements with the words “could”, “expect”,
“may”, “will”, “anticipate”, “assume”, “intend”, “plan”, “believes”, “estimates”, “guidance”, “foresee”, “continue” and similar expressions are intended
to identify statements containing forward-looking information, although not all forward-looking statements include such words. In addition, any
statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information.
Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections
regarding future events.
Although management believes the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based
on the opinions, assumptions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors
include, but are not limited to the following risk factors : increases in royalties and tariffs or restricted access to music rights; our dependence on Pay-
TV providers; the rapidly evolving audio and video entertainment industry; competition from other content providers and other media companies; the
expansion of our operations into international markets; our rapid growth and our growth strategy; our acquisitions, business combinations and joint
ventures; our reliance on third party hardware, software and related services; our dependence on key personnel; exchange rate fluctuations; economic
and political instability in emerging countries; royalty calculation methods; rapid technological and industry changes; development of new or alternative
media technologies ; unavailability of additional funding; failure to generate cash revenues; reliance on our credit facilities; costly and protracted litigation
in defence of copyrighted content; our inability to protect our proprietary technology; our inability to maintain our corporate culture; unfavourable
economic conditions; our exposure to foreign privacy and data security laws; unauthorized and pirated music and video content; natural catastrophic
events and interruption by man-made problems; pandemics, epidemics and other health risks; additional income tax liabilities; maintaining our
reputation; litigation and other claims; credit risk; liquidity risk; failure to comply with the Canadian Radio-television and Telecommunications Commission
(“CRTC”) requirements; failure to maintain or renew our CRTC licences; the increase in broadcasting licence fees payable by us; unfavourable changes
in government regulation affecting our industry.
In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and
may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such assumptions include, but are
not limited to, the following: our ability to generate sufficient revenue while controlling our costs and expenses; our ability to manage our growth
effectively; the absence of material adverse changes in our industry or the global economy; trends in our industry and markets; the absence of any
changes in law, administrative policy or regulatory requirements applicable to our business, including any change to our licences with the CRTC; minimal
changes to the distribution of the pay audio services by Pay-TV providers in light of recent CRTC policy decisions; our ability to manage risks related to
international expansion; our ability to maintain good business relationships with our clients, agents and partners; our ability to expand our sales and
distribution infrastructure and our marketing; our ability to develop products and technologies that keep pace with the continuing changes in technology,
evolving industry standards, new product introductions by competitors and changing client preferences and requirements; our ability to protect our
technology and intellectual property rights; our ability to manage and integrate acquisitions; our ability to retain key personnel; and our ability to raise
sufficient debt or equity financing to support our business growth. Accordingly, prospective purchasers are cautioned not to place undue reliance on
such statements. All of the forward-looking information in this MD&A is qualified by these cautionary statements. Statements containing forward-looking
information contained herein are made only as of the date of this MD&A. The Corporation expressly disclaims any obligation to update or alter statements
containing any forward-looking information, or the factors or assumption underlying them, whether as a result of new information, future events or
otherwise, except as required by law.
SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES
The Corporation believes that Adjusted EBITDA and Adjusted EBITDA margin are important measures when analyzing its operating profitability without
being influenced by financing decisions, non-cash items and income taxes strategies. Comparison with peers is also easier as companies rarely have
the same capital and financing structure. The Corporation believes that Adjusted Net income and Adjusted Net income per share are important measures
as it demonstrates its core bottom-line profitability. The Corporation believes that Adjusted free cash flow and Adjusted free cash flow per share are
important measures when assessing the amount of cash generated after accounting for capital expenditures and non-core charges. It demonstrates
cash available to make business acquisitions, pay dividend and reduce debt. The Corporation believes that Net debt, Net debt to Adjusted EBITDA and
Pro Forma Adjusted EBITDA are important measures when analyzing the significance of debt on the Corporation’s statement of financial position. Each
of these non-IFRS financial measures is not an earnings or cash flow measure recognized by International Financial Reporting Standards (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.
Annual Report 2020 | Stingray Group Inc. | 30
KEY PERFORMANCE INDICATORS(1)
For the three-month period ended March 31, 2020 (“Q4 2020”):
$68.4 M
$10.1 M
$18.0 M
▼ 6.0% from Q4 2019
Revenues
Or $0.13 per share
Adjusted Net income
▲ 82.6% from Q4 2019
Adjusted free cash flow
$28.2 M
▲ 25.9% from Q4 2019
Adjusted EBITDA
$(8.5) M
Or $(0.11) per share
Net loss
$14.1 M
▼ 22.2% from Q4 2019
Cash flow from
operating activities
For the year ended March 31, 2020 (“Fiscal 2020”):
$306.7 M
$55.9 M
$78.4 M
▲ 44.2% from Fiscal 2019
Revenues
Or $0.74 per share
Adjusted Net income
▲ 101.8% from Fiscal 2019
Adjusted free cash flow
$118.1 M
▲ 63.5% from Fiscal 2019
Adjusted EBITDA
$14.0 M
Or $0.18 per share
Net income
$88.1 M
▲ 97.2% from Fiscal 2019
Cash flow from
operating activities
Notes:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 31
FINANCIAL AND BUSINESS HIGHLIGHTS
Highlights of the fourth quarter ended March 31, 2020
Compared to the quarter ended March 31, 2019 (“Q4 2019”):
Revenues decreased 6.0% to $68.4 million from $72.7 million;
Adjusted EBITDA(1) increased 25.9% to $28.2 million from $22.4 million. Excluding the impact of IFRS 16, Adjusted
EBITDA(1) would have been $26.6 million. IFRS 16 - Leases accounting standard was adopted on April 1, 2019 resulting
in a reduction of $1.6 million in operating lease expenses for the quarter. Please refer to IFRS 16 - Leases in the section
New standard adopted by the Corporation on page 51;
Adjusted EBITDA(1) margin was 41.3% compared with 30.8%;
Adjusted EBITDA(1) by segment was $19.0 million or 49.3% of revenues for Broadcasting and Commercial Music,
$9.5 million or 31.9% of revenues for Radio and $(0.3) million for Corporate;
Net loss was $8.5 million ($(0.11) per share) compared with a Net income of $3.9 million ($0.06 per share);
Adjusted Net income(1) of $10.1 million ($0.13 per share) compared with $14.7 million ($0.21 per share);
Cash flow from operating activities decreased 22.2% to $14.1 million compared to $18.1 million;
Adjusted free cash flow(1) increased 82.6% to $18.0 million, or $0.24 per share, compared to $9.8 million or $0.14 per
share;
Net debt to Pro Forma Adjusted EBITDA(1) ratio of 3.01x, and;
1,754,324 shares repurchased and cancelled for a total of $9.6 million.
Highlights of the year ended March 31, 2020
Compared to the year ended March 31, 2019 (“Fiscal 2019”):
Revenues increased 44.2% to $306.7 million from $212.7 million;
Adjusted EBITDA(1) increased 63.5% to $118.1 million from $72.2 million. Excluding the impact of IFRS 16, Adjusted
EBITDA(1) would have been $111.6 million. IFRS 16 - Leases accounting standard was adopted on April 1, 2019 resulting
in a reduction of $6.5 million in operating lease expenses for the year. Please refer to IFRS 16 - Leases in the section
New standard adopted by the Corporation on page 51;
Adjusted EBITDA(1) margin was 38.5% compared with 34.0%;
Adjusted EBITDA(1) by segment was $63.7 million or 41.2% of revenues for Broadcasting and Commercial Music,
$58.5 million or 38.4% of revenues for Radio and $(4.2) million for Corporate;
Net income was $14.0 million ($0.18 per share) compared with a Net loss of $12.0 million ($(0.19) per share);
Adjusted Net income(1) of $55.9 million ($0.74 per share) compared with $39.7 million ($0.61 per share);
Cash flow from operating activities increased 97.2% to $88.1 million compared to $44.7 million;
Adjusted free cash flow(1) increased 101.8% to $78.4 million, or $1.03 per share, compared to $38.8 million or $0.59 per
share, and;
2,957,799 shares repurchased and cancelled for a total of $17.6 million.
Notes:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 32
Additional business highlights for the fourth quarter and subsequent events:
During the fourth quarter of 2020, global economies and financial markets were impacted by the coronavirus (“COVID-
19”) outbreak as it quickly spread around the world and on March 11, 2020, the World Health Organization declared it a
global pandemic. Government authorities around the world have taken actions in an effort to slowdown the spread of
COVID-19, including measures such as the closure of non-essential businesses and social distancing. The tangible impact
on the Corporation started in the Radio segment towards the end of the fourth quarter, as many non-essential local
businesses were forced to temporarily close leading to a decrease in advertising and related revenues. In the early days
of the crisis, the decision was made by the Corporation’s management to implement significant cost saving measures to
maintain a solid financial position. Management expects that the Corporation’s Radio segment, and Broadcast and
Commercial Music segment, but to a lesser extent, will be further impacted during the first quarter of 2021. Beyond that
period, the extent to which COVID-19 will impact the Corporation’s business will depend on future developments, which
are highly uncertain and cannot be predicted at this time. The Corporation’s focus will be to closely monitor its cash
position and control its operating expenses.
On May 29, 2020, the Corporation secured an additional term loan of $20.0 million, with a maturity date of May 29, 2021.
The additional loan amount was applied against the revolving facility.
On May 20, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend will be payable on or around June 15, 2020, to shareholders on
record as of May 29, 2020.
On May 7, 2020, the Corporation announced that it will provide a minimum of $15.0 million in radio advertising grants to
local businesses in markets across Canada where Stingray operates local radio stations. Stimulant grants will range from
a minimum of $1,000 up to a maximum of $100,000 in radio advertising per business. The recipient business will have
twelve months to utilize the radio advertising grant provided towards booking and airing a radio advertising campaign
and will not be required to invest additional sums with Stingray radio stations to receive the grant.
On May 6, 2020 (the “Effective Date”), the Corporation announced that it had acquired its trusted affiliate Marketing
Sensorial México (“MSM”), the Mexican leader in point-of-sale marketing solutions. The agreement furthers Stingray
Business’ foothold in Mexico. As the current partner of Stingray Business for the 1,500 pharmacy locations and additional
1,500 medical clinics operated by Farmacias del Ahorro in Mexico, MSM specializes in digital signage content production,
in-store music and the sale and/or lease of audio and visual equipment. The company serves customers in a range of
industries (more than 5,800 locations) including banking, retail pharmacy and automotive dealership sectors with clients
such as Grupo Financiero Santander México, Scotiabank México and BMW. Total consideration consists of an initial
amount of MXN 45.0 million ($2.7 million) to be paid upon the latest of a) 30 days following the Effective Date and b) 2
business days following the delivery by MSM of the closing deliverables, and contingent consideration.
On April 14, 2020, the Corporation announced the launch of free, ad supported TV channels and premium SVOD services
with eight major over-the-top providers: Huawei (world), izzi (Mexico), XUMO (U.S.), LG (U.S.), Vizio (U.S.), Samsung
(U.S.), TiVo Plus (U.S.) and Cliq Digital (U.S.). These distribution agreements grow Stingray’s potential reach by over 300
million viewers.
On March 23, 2020, the Corporation announced that it had received approval of the Toronto Stock Exchange (“TSX”) to
amend its normal course issuer bid (“NCIB”) in order to increase the maximum number of subordinate voting shares and
variable subordinate voting shares (collectively, “Subordinate Shares”) that it intends to repurchase for cancellation
during the twelve month period ending August 15, 2020 from 2,924,220 Subordinate Shares to 4,903,887 Subordinate
Shares, representing approximately 10% of the public float of Subordinate Voting Shares as at August 7, 2019. All other
terms and conditions of the NCIB remain unchanged. The Subordinate Shares will be purchased on behalf of Stingray
by a registered broker through the facilities of the TSX or alternative Canadian trading systems. The price paid for the
Subordinate Shares will be the market price at the time of the acquisition, and the number of Subordinate Shares
purchased and the timing of any such purchases will be determined by Stingray. All shares repurchased under the NCIB
will be cancelled.
Annual Report 2020 | Stingray Group Inc. | 33
On March 6, 2020, the Corporation announced that it had acquired a 30% interest in The Podcast Exchange (TPX), the
Canadian leader in podcast advertising representing thousands of shows with over 70 million impressions per month
across multiple genres and networks. This transaction will give Stingray a head start in podcast digital ad revenue and
support the company’s growth in the key 18-34 demographic.
On February 18, 2020, the Corporation announced the premiere launch of Stingray Country, a music video television
channel dedicated to Country music for Canadian TV subscribers, featuring the best of new country, bro-country, ‘90s
country hits, pop country and more. Stingray Country is the only dedicated country music channel in Canada.
On February 5, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend has been paid on March 16, 2020, to shareholders on record as of
February 28, 2020.
On February 3, 2020, the Corporation and Music Choice executed and exchanged a Settlement Agreement which puts
a definitive end to the parties’ patent litigation in the United States and fully and finally settles all claims, counterclaims
and defenses asserted in connection with that litigation. The settlement amount of US$13.3 million ($17.2 million at the
date of the settlement), will be paid in two equal instalments; the first payment was made on the date of settlement and
the second payment is to be made on or before February 15, 2021. Accordingly, an amount of $17.1 million was booked
as part of acquisition, legal, restructuring and other expenses in Q3 2020. The terms of the settlement do not impact the
services currently offered by Stingray in the United States, which shall continue uninterrupted.
On January 27, 2020, the Corporation purchased all of the outstanding shares of Chatter Research Inc., a Toronto-based
leader in the design, development, and implementation of artificial intelligence driven real-time customer feedback
solutions for retail and hospitality businesses. Total consideration consists of $9.5 million being an amount of $2.1 million
paid upon closing and a contingent consideration of $7.4 million.
Annual Report 2020 | Stingray Group Inc. | 34
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands of Canadian dollars, except
per share amounts)
Revenues
Operating expenses
CRTC Tangible benefits
Depreciation, amortization and
write-off
Net finance expense (income)(1)
Change in fair value of investments
Acquisition, legal, restructuring and
other expenses
Income (loss) before income taxes
Income taxes
Net income (loss)
Adjusted EBITDA(2)
Adjusted Net income(2)
Cash flow from operating activities
(restated due to a change in accounting
policy - see page 53)
Adjusted free cash flow(2)
Net debt(2)
Net debt to Pro Forma Adjusted
EBITDA(2)(3)(4)
Net income (loss) per share basic and
diluted
Adjusted Net income per share basic
and diluted(2)
Revenues by segment
Broadcasting and Commercial Music
Radio
Corporate
Revenues
Revenues by geography
Canada
United States
Other Countries
Revenues
3 months
March 31, 2020
Q4 2020
% of
revenues
$
March 31, 2019
Q4 2019
% of
revenues
$
March 31, 2020
Fiscal 2020
$
% of
revenues
12 months
March 31, 2019
Fiscal 2019
$
% of
revenues
March 31, 2018
Fiscal 2018
$
% of
revenues
68,398
38,932
–
100.0 %
56.9 %
0.0 %
72,730
51,250
–
100.0 %
70.5 %
0.0 %
306,721 100.0 % 212,650 100.0 % 130,214 100.0 %
190,381 62.0 % 142,877 67.3 % 92,239 70.8 %
25,306 11.9 %
0.0 %
0.0 %
–
–
9,875
33,463
(1,914)
14.4 %
49.0 %
(2.8) %
693
(12,651)
(4,165)
(8,486)
1.0 %
(18.5) %
(6.1) %
(12.4) %
9,978
2,259
336
3,132
5,775
1,833
3,942
13.7 %
3.1 %
0.5 %
40,302 13.1 %
42,822 14.0 %
(6,550)
(2.1) %
31,133 14.6 % 21,287 16.3 %
12,298
2.4 %
(565)
3,174
600
(0.3) %
5.8 %
0.5 %
4.3 %
7.9 %
2.5 %
5.4 %
24,104
15,662
1,692
13,970
7.9 %
5.1 %
0.5 %
4.6 %
16,817
(15,216)
(3,228)
(11,988)
7.9 % 10,631
2,283
(7.2) %
8.2 %
1.8 %
(13) 0.0 %
(1.5) %
(5.7) %
2,296
1.8 %
28,217
10,095
41.3 %
14.8 %
22,407
14,725
30.8 %
20.2 %
118,086 38.5 %
55,908 18.2 %
72,234 34.0 % 41,524 31.9 %
39,727 18.7 % 26,858 20.6 %
14,062
17,974
361,251
3.01x
(0.11)
0.13
–
–
–
–
20.6 %
26,3 %
18,072
9,845
357,821
24.8 %
13.5 %
88,145 28.7 %
78,350 25.5 %
44,703 21.0 % 19,914 15.3 %
38,834 18.3 % 30,561 23.5 %
–
–
–
–
361,251
–
357,821
3.01x
–
3.13x
–
–
35,265
0.85x
–
–
0.18
–
(0.19)
–
0.04
–
0.74
–
0.61
–
0.50
–
3.13x
0.06
0.21
38,483
29,915
–
68,398
56.3 %
43.7 %
0.0 %
100.0 %
38,718
34,012
–
72,730
53.2 %
46.8 %
0.0 %
100.0 %
154,466 50.4 % 146,741 69.0 % 130,214 100.0 %
65,227 30.7 %
152,255 49.6 %
0.0 %
–
0.3 %
0.0 %
0.0 %
306,721 100.0 % 212,650 100.0 % 130,214 100.0 %
682
–
–
43,498
10,236
14,664
68,398
63.6 %
15.0 %
21.4 %
100.0 %
47,318
9,351
16,061
72,730
65.0 %
12.9 %
22.1 %
100.0 %
209,843 68.4 % 121,919 57.3 % 59,248 45.5 %
34,439 16.2 % 25,294 19.4 %
56,292 26.5 % 45,672 35.1 %
306,721 100.0 % 212,650 100.0 % 130,214 100.0 %
37,987 12.4 %
58,891 19.2 %
Notes:
(1)
Interest paid during the Q4 2020 was $3.8 million (Q4 2019; $4.4 million) and $17.4 million Fiscal 2020 (Fiscal 2019; $10.0 million and Fiscal 2018;
$1.4 million)
(2) Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 30 and for reconciliations to the most directly
comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures” on page 36.
(3) As at March 31, 2018, Net debt to Adjusted EBITDA consists of Net debt divided by Adjusted EBITDA trailing twelve months (TTM).
(4) Pro Forma Adjusted EBITDA for 2020 and 2019 is calculated as the Corporation’s last twelve months Adjusted EBITDA ($118.1 million, Fiscal 2019;
$72.2 million), plus synergies and pro forma Adjusted EBITDA for the months prior to the acquisitions which are not already reflected in the results ($2.0
million, Fiscal 2019; $42.0 million). Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 30 and for
reconciliations of Adjusted EBITDA to the most directly comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures”
on page 36.
Annual Report 2020 | Stingray Group Inc. | 35
SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Net income per share, Adjusted free cash flow,
Adjusted free cash flow per share, Net debt and Net debt to Proforma Adjusted EBITDA are non-IFRS measures that the
Corporation uses to assess its operating performance. See “Supplemental information on Non-IFRS Measures” on page 30.
The following tables show the reconciliation of Net income to Adjusted EBITDA and to Adjusted Net income:
3 months
12 months
(in thousands of Canadian dollars)
Net income (loss)
Net finance expense (income)
Change in fair value of investments
Income taxes
Depreciation and write-off of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Share-based compensation
Performance and deferred share unit expense
CRTC Tangible benefits
Acquisition, legal, restructuring and other expenses
Adjusted EBITDA
Net finance expense (income), excluding mark-to-market
losses (gains) on derivative financial instruments
Income taxes
Depreciation of property and equipment and write-off
Depreciation of right-of-use assets
Income taxes related to change in fair value of investments,
share-based compensation, performance and deferred
share unit expense, amortization of intangible assets, CRTC
Tangible benefits, mark-to-market losses (gains) on
derivative financial instruments and acquisition, legal,
restructuring and other expenses
Adjusted Net income
March 31,
2020
Q4 2020
(8,486)
33,463
(1,914)
(4,165)
2,790
1,426
5,659
258
(1,507)
–
693
28,217
(10,976)
4,165
(2,790)
(1,426)
March 31,
2019
Q4 2019
3,942
2,259
336
1,833
2,791
–
7,187
297
630
–
3,132
22,407
739
(1,833)
(2,791)
–
March 31,
2020
Fiscal 2020
13,970
42,822
(6,550)
1,692
11,477
5,618
23,207
1,001
745
–
24,104
118,086
March 31,
2019
Fiscal 2019
(11,988)
12,298
(565)
(3,228)
7,703
–
23,430
1,093
1,368
25,306
16,817
72,234
(27,122)
(1,692)
(11,477)
(5,618)
(9,300)
3,228
(7,703)
–
(7,095)
10,095
(3,797)
14,725
(16,269)
55,908
(18,732)
39,727
The following table shows the reconciliation of Cash flow from operating activities to Adjusted free cash flow:
(in thousands of Canadian dollars)
Cash flow from operating activities
Add / Less :
Acquisition of property and equipment
Acquisition of intangible assets other than internally
developed intangible assets
Addition to internally developed intangible assets
Interest paid
Repayment of lease liabilities
Net change in non-cash operating working capital items
Unrealized loss (gain) on foreign exchange
Acquisition, legal, restructuring and other expenses
Adjusted free cash flow
The following table shows the calculation of Net debt:
(in thousands of Canadian dollars)
Credit facilities
Subordinated debt
Cash and cash equivalents
Net debt
3 months
12 months
March 31,
2020
Q4 2020
14,062
March 31,
2019
Q4 2019
18,072
March 31,
2020
Fiscal 2020
88,145
March 31,
2019
Fiscal 2019
44,703
(2,153)
(1,935)
(6,704)
(7,623)
(463)
(1,534)
(3,819)
(1,180)
7,262
5,106
693
17,974
(669)
(1,742)
(4,441)
–
(1,890)
(682)
3,132
9,845
(1,769)
(5,902)
(17,442)
(4,873)
(2,169)
4,961
24,104
78,351
(3,671)
(6,164)
(9,950)
–
4,059
663
16,817
38,834
March 31,
2020
324,123
39,640
(2,512)
361,251
March 31,
2019
312,955
49,539
(4,673)
357,821
Annual Report 2020 | Stingray Group Inc. | 36
FINANCIAL RESULTS FOR THE QUARTERS AND YEARS ENDED
MARCH 31, 2020 AND 2019
CONSOLIDATED PERFORMANCE
Revenues
Revenues are detailed as follows:
(in thousands of Canadian dollars)
2020
2019 % Change
2020
2019 % Change
3 months
12 months
Revenues by geography
Canada
United States
Other Countries
Revenues
Global
43,498
10,236
14,664
68,398
47,318
9,351
16,061
72,730
(8.1)
9.5
(8.7)
(6.0)
209,843
37,987
58,891
306,721
121,919
34,439
56,292
212,650
72.1
10.3
4.6
44.2
Revenues in Q4 2020 decreased $4.3 million or 6.0% to $68.4 million, from $72.7 million for Q4 2019. The decrease was
primarily due to the initial impact of the COVID-19 pandemic on Radio revenues.
Revenues for Fiscal 2020 increased $94.0 million or 44.2% to $306.7 million, from $212.7 million for Fiscal 2019. The increase
was primarily due to the acquisition of Newfoundland Capital Corporation Inc. (“NCC”), DJ Matic and Novramedia, combined
with organic growth in subscriptions, partially offset by the termination of some low margin international contracts.
Canada
Revenues in Canada in Q4 2020 decreased $3.8 million or 8.1% to $43.5 million, from $47.3 million for Q4 2019. The decrease
was primarily due to the initial impact of the COVID-19 pandemic on Radio revenues.
Revenues in Canada for Fiscal 2020 increased $87.9 million or 72.1% to $209.8 million, from $121.9 million for Fiscal 2019.
The increase was primarily due to the acquisition of NCC and Novramedia.
United States
Revenues in the United States in Q4 2020 increased $0.9 million or 9.5% to $10.2 million, from $9.3 million for Q4 2019.
Revenues in the United States for Fiscal 2020 increased $3.6 million or 10.3% to $38.0 million, from $34.4 million for Fiscal
2019. Both increases were primarily due to organic growth in subscriptions.
Other Countries
Revenues in Other countries in Q4 2020 decreased $1.4 million or 8.7% to $14.7 million, from $16.1 million for Q4 2019. The
decrease was primarily due to the termination of some low margin contracts.
Revenues in Other countries for Fiscal 2020 increased $2.5 million or 4.6% to $58.9 million, from $56.4 million for Fiscal 2019.
The increase was primarily due to the acquisition of DJ Matic and to organic growth in subscriptions, partially offset by the
termination of some low margin contracts.
Annual Report 2020 | Stingray Group Inc. | 37
Operating Expenses
Operating expenses in Q4 2020 decreased $12.4 million or 24.0% to $38.9 million, from $51.3 million for Q4 2019. The
decrease was primarily related to the reversal of certain accrued liabilities, to efficiencies in operations as a result of scale, to
a reduction in operating lease expenses related to the adoption of IFRS 16 and to a gain on Restricted, performance and
deferred share unit expense due to the decrease in the share price.
Operating expenses for Fiscal 2020 increased $47.5 million or 33.2% to $190.4 million, from $142.9 million for Fiscal 2019.
The increase was primarily due to the acquisition of NCC and DJ Matic, partially offset by a reduction in operating lease
expenses related to the adoption of IFRS 16, by efficiencies in operations as a result of scale and by the reversal of certain
accrued liabilities.
Adjusted EBITDA(1)
Adjusted EBITDA in Q4 2020 increased $5.8 million or 25.9% to $28.2 million from $22.4 million for Q4 2019. Adjusted EBITDA
margin was 41.3% compared to 30.8% for Q4 2019. The increase in Adjusted EBITDA was primarily due the reversal of certain
accrued liabilities, to reduced operating costs and to the adoption of IFRS 16, partially offset by the initial impact of the COVID-
19 pandemic on Radio revenues. Excluding the impact of IFRS 16, the Adjusted EBITDA would have been $26.6 million with a
margin of 39.0%.
Adjusted EBITDA for Fiscal 2020 increased $45.9 million or 63.5% to $118.1 million from $72.2 million for Fiscal 2019.
Adjusted EBITDA margin was 38.5% compared to 34.0% for Fiscal 2019. The increase in Adjusted EBITDA was primarily due
to the acquisition of NCC and DJ Matic, to the adoption of IFRS 16, to reduced operating costs, to the organic growth in
subscriptions and to the reversal of certain accrued liabilities, partially offset by the initial impact of the COVID-19 pandemic
on Radio revenues. Excluding the impact of IFRS 16, the Adjusted EBITDA would have been $111.6 million with a margin of
36.4%.
CTRC Tangible benefits
The CRTC approved the change in ownership and effective control of NCC on October 23, 2018. Pursuant to the decision, the
CRTC required the Corporation to pay tangible benefits corresponding to an amount of $31.0 million over a seven-year period
in equal annual payments. In Fiscal 2019, the Corporation recognized an expense of $25.3 million, which reflects the fair value
of the payment stream using a discount rate of 5.70%, which is the Corporation effective interest rate plus a risk premium.
There was no CRTC Tangible benefits expense for Q4 2019, Q4 2020 and Fiscal 2020.
Depreciation, amortization and write off
Depreciation, amortization and write off in Q4 2020 decreased $0.1 million or 1.0% to $9.9 million, from $10.0 million for
Q4 2019. The decrease was primarily due to an intangible asset write-off in Q4 2019, largely offset by the adoption of IFRS 16,
which resulted in a depreciation charge for the right-of-use assets of $1.4 million in Q4 2020 compared to nil for Q4 2019.
Depreciation, amortization and write off for Fiscal 2020 increased $9.2 million or 29.5% to $40.3 million, from $31.1 million for
Fiscal 2019. The increase was primarily due to the acquisition of NCC and DJ Matic and to the adoption of IFRS 16, which
resulted in a depreciation charge for the right-of-use assets of $5.6 million in cumulative Fiscal 2020 compared to nil for Fiscal
2019.
Net Finance Expense (Income)
In Q4 2020, the net finance expense was $33.5 million compared to $2.3 million for Q4 2019. The increase was mainly related
to the mark-to-market losses on derivative instruments of $22.5 million, to the foreign exchange loss and to the gain on write-
off of balance payable on acquisition recorded in Q4 2019.
In Fiscal 2020, the net finance expense was $42.8 million compared to $12.3 million for Fiscal 2019. The increase was mainly
related to the mark-to-market losses on derivative instruments of $15.7 million, to higher interest expense due to the additional
debt related to the funding of the acquisition of NCC, to the gain on write-off of balance payable on acquisition recorded in
Q4 2019 and to the foreign exchange loss. The incremental interest accretion on lease liabilities from the adoption of IFRS 16
also contributed to the increase of net finance expense in the amount of $1.7 million.
Change in fair value of investments
In Q4 2020, a gain on fair value of $1.9 million was recorded compared to a loss on fair value of $0.3 million for Q4 2019. A
gain on fair value of $6.6 million was recorded for Fiscal 2020 compared to $0.6 for Fiscal 2019. Both variances are related to
the revaluation of the fair value of the investment in AppDirect.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 38
Acquisition, legal, restructuring and other expenses
(in thousands of Canadian dollars)
Acquisition
Legal
Restructuring and other
Acquisition, legal, restructuring
and other expenses
3 months
2019
2020
Change $
2020
12 months
2019
Change $
166
(1,955)
2,482
2,564
453
115
(2,398)
(2,408)
2,367
1,556
19,540
3,008
13,738
2,099
980
(12,182)
17,441
2,028
693
3,132
(2,439)
24,104
16,817
7,287
In Q4 2020, acquisition expenses decreased to $0.2 million from $2.6 million for Q4 2019. In Fiscal 2020, acquisition expenses
decreased to $1.6 million from $13.7 million for Fiscal 2019. For both periods, the decrease was mainly related to the acquisition
of NCC in Fiscal 2019.
In Q4 2020, an appeals court in Switzerland found in favour of Stingray Digital International Limited and reversed the decision
of the trial judge. The appeals court confirmed that a contested earn-out was not due and payable. As such, the Corporation
recorded a gain upon the reversal of a provision.
On February 3, 2020, the Corporation and Music Choice executed and exchanged a Settlement Agreement which puts
definitive end to the parties’ patent litigation in the United States and fully and finally settles all claims, counterclaims and
defenses asserted in connection with that litigation. The settlement amount of US$13.3 million ($17.2 million as of the date of
the settlement), will be paid in two equal instalments; the first payment was made on the date of settlement and the second
payment is to be made on or before February 15, 2021. The terms of the settlement do not impact the services currently
offered by Stingray in the United States, which shall continue uninterrupted. Accordingly, an amount of $17.1 million was
booked as part of the acquisition, legal, restructuring and other expenses in Q3 2020, which explains the increase in legal
expenses in Fiscal 2020 compared to Fiscal 2019.
The increases in restructuring and other expenses in Q4 2020 and Fiscal 2020 compared to Q4 2019 and Fiscal 2019 were
mainly due to severances related to temporary layoffs as a result of the impact of the COVID-19 pandemic on Radio operations.
Income Taxes
The income taxes recovery recognized in comprehensive income was $4.2 million for Q4 2020 compared to an income taxes
expense of $1.8 million for Q4 2019. The effective tax rate for Q4 2020 was 32.9% compared to 31.7% for Q4 2019. Income
taxes expense for Fiscal 2020 was $1.7 million, compared to an income taxes recovery of $3.2 million for Fiscal 2019. The
effective tax rate for cumulative Fiscal 2020 was 10.8% compared to 21.2% for cumulative Fiscal 2019. Both variations in the
effective tax rate are mainly due to the relative importance of permanent differences compared to net income before income
taxes as well as changes to certain substantively enacted tax rates.
In Fiscal 2020, there were no share issuance costs recognized as a reduction of share capital on which income taxes were
booked. In Fiscal 2019, share issuance costs amounted to $6.7 million and were recognized as a reduction of share capital
net of income taxes of $1.8 million.
Net income (loss) and net income (loss) per share
Net loss in Q4 2020 was $8.5 million ($(0.11) per share) compared to a Net income of $3.9 million ($0.06 per share) for
Q4 2019. The difference was mainly due to the negative change in mark-to-market on derivative instruments, the foreign
exchange loss and the gain on write-off of balance payable on acquisition recorded in Q4 2019, partially offset by income
taxes recovery and higher operating results.
Net income for Fiscal 2020 was $14.0 million ($0.18 per share) compared to a Net loss of $12.0 million ($(0.19) per share) for
Fiscal 2019. The difference was mainly explained by higher operating results, non-recurring CRTC Tangible benefits expense
of $25.3 million related to the NCC acquisition recorded in Fiscal 2019, lower acquisition expenses and positive change in fair
value of investments, partially offset by higher legal expenses due to the settlement with Music Choice, negative change in
mark-to-market on derivative instruments, higher interest and income taxes expenses, gain on write-off of balance payable on
acquisition recorded in Q4 2019, foreign exchange loss and higher depreciation expense.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 39
Adjusted Net income(1) and Adjusted Net income per share(1)
Adjusted Net income in Q4 2020 was $10.1 million ($0.13 per share), compared to $14.7 million ($0.21 per share) for Q4 2019.
The decrease is mainly due to the foreign exchange loss and to the gain on write-off of balance payable on acquisition recorded
in Q4 2019, partially offset by higher operating results.
Adjusted Net income for Fiscal 2020 was $55.9 million ($0.74 per share), compared to $39.7 million ($0.61 per share) for
Fiscal 2019. The increase is mainly due to higher operating results, partially offset by higher interest, gain on write-off of
balance payable on acquisition recorded in Q4 2019, foreign exchange loss, and higher depreciation and income taxes
expenses.
BUSINESS SEGMENT PERFORMANCE
BROADCASTING AND COMMERCIAL MUSIC
(in thousands of Canadian dollars)
Revenues
Operating expenses
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Revenues
3 months
12 months
2020
38,483
19,501
18,982
49.3%
2019 % Change
(0.6)
(19.0)
29.6
30.4
38,718
24,069
14,649
37.8%
2020
154,466
90,765
63,701
41.2%
2019 % Change
5.3
(3.4)
20.6
14.6
146,741
93,913
52,828
36.0%
In Q4 2020, Broadcasting and Commercial Music revenues decreased $(0.2) million or 0.6% to $38.5 million, from $38.7 million
for Q4 2019. The decrease was primarily due to the termination of some low margin international contracts, partially offset by
organic growth in subscriptions.
Broadcasting and Commercial Music revenues for Fiscal 2020 increased $7.8 million or 5.3% to $154.5 million, from
$146.7 million for Fiscal 2019. The increase was primarily due to the acquisition of DJ Matic and Novramedia, combined with
organic growth in subscriptions, partially offset by the termination of some low margin international contracts.
Adjusted EBITDA(1)
In Q4 2020, Broadcasting and Commercial Music Adjusted EBITDA increased $4.4 million or 29.6% to $19.0 million from
$14.6 million for Q4 2019. The increase in Adjusted EBITDA was primarily due to the reversal of certain accrued liabilities and
to reduced operating costs.
Broadcasting and Commercial Music Adjusted EBITDA for Fiscal 2020 increased $10.9 million or 20.6% to $63.7 million from
$52.8 million for Fiscal 2019. The increase in Adjusted EBITDA was primarily due to the reversal of certain accrued liabilities,
to the organic growth in subscriptions, to the acquisition of DJ Matic and Novramedia, to the adoption of IFRS 16 and to
reduced operating costs.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 40
RADIO
(in thousands of Canadian dollars)
Revenues
Operating expenses
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Revenues
3 months
12 months
2020
29,915
20,358
9,557
31.9%
2019 % Change
(12.0)
(18.9)
7.2
21.8
34,012
25,094
8,918
26.2%
2020
152,255
93,760
58,495
38.4%
2019 % Change
133.4
127.5
143.5
4.3
65,227
41,209
24,018
36.8%
Radio revenues are derived from the sale of advertising airtime, which is subject to the seasonal fluctuations of the
Canadian radio industry. Accordingly, the first and third quarter results tend to be the strongest and the second and fourth
quarter results tend to be the weakest in a fiscal year. However, for Fiscal 2021 Radio revenues are not expected to follow
historical patterns due to the ongoing impact of the COVID-19 pandemic.
In Q4 2020, Radio revenues decreased $4.1 million or 12.0% to $29.9 million from $34.0 million for Q4 2019. The decrease is
mostly due to the initial impact of the COVID-19 pandemic.
Radio revenues for Fiscal 2020 increased $87.1 million or 133.4% to $152.3 million from $65.2 million for Fiscal 2019. The
increase reflects the contribution from the acquisition of NCC starting on October 26th, 2018.
Adjusted EBITDA(1)
In Q4 2020, Radio Adjusted EBITDA increased $0.6 million or 7.2% to $9.5 million from $8.9 million for Q4 2019. The increase
in Adjusted EBITDA was primarily due to reduced operating costs, to the adoption of IFRS 16 and to the reversal of certain
accrued liabilities, partially offset by the initial impact of the COVID-19 pandemic on revenues.
Radio Adjusted EBITDA for Fiscal 2020 increased $34.5 million or 143.5% to $58.5 million from $24.0 million for Fiscal 2019.
The increase in Adjusted EBITDA was primarily due to the acquisition of NCC and to the adoption of IFRS 16, partially offset
by the initial impact of the COVID-19 pandemic on revenues and by the reversal of certain accrued liabilities in Q3 2019.
CORPORATE
(in thousands of Canadian dollars)
Revenues
Operating expenses
Adjust:
Share-based compensation
Restricted, performance and
deferred share unit expense
Adjusted EBITDA(1)
3 months
12 months
2020
-
(927)
2019 % Change
-
(144.4)
-
2,087
2020
-
5,856
2019 % Change
(100.0)
(24.5)
682
7,755
(258)
(297)
(13.1)
(1,001)
(1,093)
(8.4)
1,507
(322)
(630)
(1,160)
(339.2)
(72.2)
(745)
(4,110)
(1,368)
(4,612)
(45.5)
(10.9)
The Corporate segment derived its revenue from hotel operations, which was acquired through the NCC acquisition. Corporate
expenses are related to head office functions and hotel operations. The hotel was disposed of on December 28, 2018. No gain
or loss on disposal were recorded in the results as the assets and liabilities were recognized at fair value through the purchase
price allocation of NCC.
Revenues
Corporate revenues were nil for Q4 2020, Q4 2019 and Fiscal 2020 and represented $0.7 million for Fiscal 2019. This decrease
is attributable to the sale of the hotel at the end of Q3 2019.
Adjusted EBITDA(1)
Corporate Adjusted EBITDA represented the head office operating expenses less the share-based compensation and
performance and deferred share unit expense. The gain on Restricted, performance and deferred share unit expense is due
to the decrease in the share price. The decrease in operating expenses is related to the reversal of certain accrued liabilities.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 41
Quarterly results
Revenues increased over the last eight quarters from $34.5 million in the first quarter of Fiscal 2019 to $68.4 million in the
fourth quarter of Fiscal 2020. The increase was mainly attributable to the successful integration of acquisitions and organic
growth including new contracts in all geographic locations. The increases in Q3 2019 and Q4 2019 were mainly explained by
the acquisition of NCC on October 26, 2018. In Q3 2019, revenues in the Corporate segment derived from hotel operations,
which was acquired through the NCC acquisition, but disposed of in the same quarter. The increase in Q1 2020, decrease in
Q2 2020 and increase in Q3 2020 are mainly due to normal business seasonality in the Radio segment. The decrease in Q4
2020 was due to the initial impact of the COVID-19 pandemic and normal business seasonality in the Radio segment.
Adjusted EBITDA(1) increased over the last eight quarters from $11.2 million in the first quarter of Fiscal 2019 to $28.2 million
in the fourth quarter of Fiscal 2020. The increase was mainly attributable to the successful integration of acquisitions and
organic growth including new contracts. The increase in Q3 2019 was primarily due to the acquisition of NCC. The decrease
in Q4 2019 was mainly due to normal business seasonality in the Radio segment and to the reversal of certain accrued liabilities,
which positively contributed to the Adjusted EBITDA(1) of the Radio segment in Q3 2019. The increase in Q1 2020, decrease
in Q2 2020 and increase in Q3 2020 were mainly due to normal business seasonality in the Radio segment. The decrease in
Q4 2020 was mainly due to normal business seasonality in the Radio segment and to the initial impact of the COVID-19
pandemic on Radio revenues, partially offset by the reversal of certain accrued liabilities.
Net income (loss) fluctuated over the last eight quarters from a net income of $1.3 million in the first quarter of Fiscal 2019 to
a Net loss of $8.5 million in the fourth quarter of Fiscal 2020. In Q3 2019, the decrease was mainly attributable to the CRTC
Tangible benefits expense related to the NCC acquisition, higher interest and acquisition expenses, partially offset by higher
operating results. In Q4 2019, the increase was mainly explained by the absence of CRTC Tangible benefits expense, lower
acquisition expenses and write-off of balance payable on acquisition, partially offset by higher income taxes and lower
operating results. In Q1 2020, the increase was mainly explained by higher operating results, lower acquisition expenses and
lower mark-to-market losses on derivative financial instruments, partially offset by the absence of write-off of balance payable
on acquisition and positive change in fair value of contingent considerations. In Q2 2020, the decrease was mainly explained
by lower operating results, higher income taxes and acquisition, legal, restructuring and other expenses, partially offset by
lower mark-to-market losses on derivative financial instruments, positive change in fair value of contingent considerations and
lower interest expense. In Q3 2020, the increase was mainly explained by mark-to-market gains on derivative financial
instruments, positive change in fair value of investments, higher operating results and gain in foreign exchange, partially offset
by higher legal expenses due to the settlement with Music Choice. In Q4 2020, the decrease was mainly explained by mark-
to-market losses on derivative financial instruments, foreign exchange loss, lower positive change in fair value of investments
and lower operating results, partially offset by lower income taxes expense.
Summary of Consolidated Quarterly Results
(in thousands of Canadian dollars,
except per share amounts)
Revenues by segment
Broadcasting and Commercial
Music
Radio
Corporate
Total revenues
Revenues by geography
Canada
United States
Other countries
Total revenues
Adjusted EBITDA(1)
Net income (loss)
Net income (loss) per share basic
and diluted
Adjusted Net income(1)
Adjusted Net income per share
basic and diluted(1)
Cash flow from operations
(restated - see page 53)
Adjusted free Cash Flow(1)
Quarterly dividend
March 31,
2020
FY2020
Dec. 31,
2019
FY2020
Sept. 30,
2019
FY2020
June 30,
2019
FY2020
March 31,
2019
FY2019
Dec. 31,
2018
FY2019
Sept. 30,
2018
FY2019
June 30,
2018
FY2019
3 months
38,483
29,915
-
68,398
43,498
10,236
14,664
68,398
39,894
41,419
-
81,313
57,515
9,575
14,223
81,313
28,217
(8,486)
31,033
8,089
(0.11)
10,095
0.11
16,710
38,742
37,831
-
76,573
52,723
9,035
14,815
76,573
27,671
5,184
0.07
12,416
37,347
43,090
-
80,437
56,107
9,141
15,189
80,437
31,165
9,183
38,718
34,012
-
72,730
47,318
9,351
16,061
72,730
38,875
31,215
682
70,772
46,738
8,834
15,200
70,772
34,692
-
-
34,692
14,222
8,069
12,401
34,692
34,456
-
-
34,456
13,641
8,185
12,630
34,456
22,407
3,942
27,219
(18,053)
11,429
777
11,179
1,346
0.12
16,687
0.06
14,725
(0.26)
12,396
0.01
6,708
0.02
5,898
0.13
0.22
0.16
0.22
0.21
0.18
0.12
0.10
14,062
17,974
0.075
28,833
21,033
0.075
18,952
18,756
0.070
26,298
20,587
0.070
18,072
9,845
0.065
13,809
16,983
0.065
5,610
5,751
0.060
7,212
6,255
0.060
(1) Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 30 and for reconciliations to the most directly
comparable IFRS financial measure, refer to “Reconciliation of Quarterly Non-IFRS Measures” on page 36. Adjusted Net income excludes mark-to-
market losses (gains) on derivative financial instruments. Refer to the reconciliation of Adjusted Net income on page 36.
Annual Report 2020 | Stingray Group Inc. | 42
Reconciliation of Quarterly Non-IFRS Measures
(in thousands of Canadian dollars)
Net income (loss)
Net finance expense (income)
Change in fair value of investments
Income taxes
Depreciation and write-off of
property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Share-based compensation
Performance and deferred share
unit expense
CRTC Tangible benefits
Acquisition, legal, restructuring and
other expenses
Adjusted EBITDA
Net finance expense (income),
excluding mark-to-market losses
(gains) on derivative financial
instruments
Income taxes
Depreciation and write-off of
property and equipment
Depreciation of right-of-use assets
Income taxes related to change in
fair value of investments, share-
based compensation,
performance and deferred share
unit expense, amortization of
intangible assets, CRTC
Tangible benefits, mark-to-
market losses (gains) on
derivative financial instruments
and acquisition, legal,
restructuring and other
expenses
Adjusted Net income
(in thousands of Canadian dollars)
Cash flow from operating
March 31,
2020
Fiscal
2020
(8,486)
33,463
(1,914)
(4,165)
Dec. 31,
2019
Fiscal
2020
8,089
(4,383)
(4,781)
1,897
Sept. 30,
2019
Fiscal
2020
5,184
6,362
(188)
2,479
3 months
June 30,
2019
Fiscal
2020
9,183
7,380
333
1,481
March 31,
2019
Fiscal
2019
3,942
2,259
336
1,833
Dec. 31,
2018
Fiscal
2019
(18,053)
7,208
(840)
(6,117)
Sept. 30,
2018
Fiscal
2019
777
910
436
567
June 30,
2018
Fiscal
2019
1,346
1,921
(497)
489
2,790
1,426
5,659
258
(1,507)
-
2,876
1,402
5,494
238
677
-
2,989
1,419
5,935
257
794
-
2,822
1,371
6,119
248
781
-
2,791
-
7,187
297
2,469
-
6,401
263
630
-
(147)
25,306
1,274
-
5,255
358
518
-
1,169
-
4,587
175
367
-
693
28,217
19,524
31,033
2,440
27,671
1,447
31,165
3,132
22,407
10,729
27,219
1,334
11,429
1,622
11,179
(10,976)
4,165
(2,790)
(1,426)
(4,184)
(1,897)
(2,876)
(1,402)
(5,767)
(2,479)
(2,989)
(1,419)
(6,195)
(1,481)
(2,822)
(1,371)
739
(1,833)
(2,791)
-
(7,208)
6,117
(2,469)
-
(910)
(567)
(1,274)
-
(1,921)
(489)
(1,169)
-
(7,095)
10,095
(3,964)
16,710
(2,601)
12,416
(2,609)
16,687
(3,797)
14,725
(11,263)
12,396
(1,970)
6,708
(1,702)
5,898
March 31,
2020
Fiscal
2020
Dec. 31,
2019
Fiscal
2020
Sept. 30,
2019
Fiscal
2020
June 30,
2019
Fiscal
2020
March 31,
2019
Fiscal
2019
Dec. 31,
2018
Fiscal
2019
Sept. 30,
2018
Fiscal
2019
June 30,
2018
Fiscal
2019
3 months
activities (restated - see page 53)
14,062
28,833
18,952
26,298
18,072
13,809
5,610
7,212
Acquisition of property and
equipment
Acquisition of intangible assets
other than internally developed
intangible assets
Addition to internally developed
intangible assets
Interest paid
Repayment of lease liabilities
Net change in non-cash operating
working capital items
Unrealized loss (gain) on foreign
(2,153)
(1,479)
(1,459)
(1,613)
(1,935)
(1,972)
(1,488)
(2,228)
(463)
(495)
(292)
(519)
(669)
(1,272)
(1,383)
(347)
(1,534)
(3,819)
(1,180)
(1,286)
(4,150)
(1,295)
(1,559)
(4,493)
(1,303)
(1,523)
(4,980)
(1,095)
(1,742)
(4,441)
-
(1,827)
(4,649)
-
(1,390)
(424)
-
(1,205)
(436)
-
7,262
(17,702)
6,143
2,127
(1,890)
1,180
3,189
1,580
exchange
5,106
(917)
327
445
(682)
985
303
57
Acquisition, legal, restructuring and
other expenses
Adjusted free cash flow
693
17,974
19,524
21,033
2,440
18,756
1,447
20,587
3,132
9,845
10,729
16,983
1,334
5,751
1,622
6,255
Annual Report 2020 | Stingray Group Inc. | 43
LIQUIDITY AND CAPITAL RESOURCES FOR THE QUARTERS AND YEARS ENDED
MARCH 31, 2020 AND 2019
(in thousands of Canadian dollars)
Operating activities (restated – see page 53)
Financing activities (restated – see page 53)
Investing activities
Net change in cash
Cash – beginning of period
Cash – end of period
Adjusted free cash flow(1)
Operating activities
3 months
12 months
2020
14,062
(12,293)
(6,572)
(4,803)
7,315
2,512
17,974
2019
18,072
(14,158)
(4,346)
(432)
5,105
4,673
9,845
2020
88,145
(72,359)
(17,947)
(2,161)
4,673
2,512
78,350
2019
44,703
440,190
(483,582)
1,311
3,362
4,673
38,834
Cash flow generated from operating activities amounted to $14.1 million for Q4 2020 compared to $18.1 million for Q4 2019.
The decrease was mainly due to the negative change in non-cash operating items, partially offset by higher operating results
and lower income taxes paid.
Cash flow generated from operating activities amounted to $88.1 million for Fiscal 2020 compared to $44.7 million for Fiscal
2019. The increase was mainly due to the acquisition of NCC, to higher operating results, to lower income taxes paid and to
the positive change in non-cash operating items.
During Fiscal 2020, the Corporation changed its accounting policy with respect to the disclosure of interest paid in the
Consolidated Statements of Cash Flows. The Corporation now discloses interest paid in financing activities. Prior to this change
of policy, the Corporation disclosed interest paid in operating activities. Refer to page 53 for more information.
Financing Activities
Net cash flow used in financing activities amounted to $12.3 million for Q4 2020 compared to $14.2 million for Q4 2019. The
decrease was mainly attributable to higher borrowing, partially offset by the shares repurchased in the course of the NCIB.
Net cash flow used in financing activities amounted to $72.4 million for Fiscal 2020 compared to net cash flow generated by
financing activities of $440.2 million for Fiscal 2019. The net change was mainly attributable to the funding of the NCC
acquisition in Fiscal 2019, which was financed through credit facilities, a subordinated debt and share issuances. The net
change is also impacted by shares repurchased in the course of the NCIB, higher interest paid and higher dividend payments.
Investing Activities
Net cash flow used in investing activities amounted to $6.6 million for Q4 2020 compared to $4.3 million for Q4 2019. The
increase was primarily due to higher business and assets acquisitions.
Net cash flow used in investing activities amounted to $17.9 million for Fiscal 2020 compared to $483.6 million for Fiscal 2019.
The decrease was primarily due to the payment of the NCC acquisition, partially offset by the disposal of non-core assets, both
of which occurred in Fiscal 2019.
Adjusted free cash flow(1)
Adjusted free cash flow generated in Q4 2020 amounted to $18.0 million compared to $9.8 million for Q4 2019. The increase
was mainly related to higher operating results and to lower income taxes paid.
Adjusted free cash flow generated in Fiscal 2020 amounted to $78.4 million compared to $38.8 million for Fiscal 2019. The
increase was mainly related to the acquisition of NCC, to higher operating results, to lower income taxes paid and capital
expenditures, partially offset by higher interest paid.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
Annual Report 2020 | Stingray Group Inc. | 44
Contractual Obligations
The Corporation is committed under the terms of contractual obligations with various expiration dates, primarily the rental of
properties and equipment, broadcast licences commitments and financial obligations under our credit agreement and
subordinated debt. The following table summarizes the Corporation’s undiscounted significant contractual obligations as at
March 31, 2020, including its estimated payments and commitments related to leasing contracts:
(in thousands of Canadian dollars)
Lease liabilities
Operating obligations
Broadcast licences commitments
Credit facility
Subordinated debt
Accounts payables and accrued liabilities
Other liabilities
Total obligations
Broadcast licences and royalties
Less than
1 year
4,587
3,044
6,282
15,000
-
62,101
27,682
118,696
1 to 5
years
18,403
1,455
21,638
310,630
40,000
-
33,464
425,590
More
than 5
years
15,285
373
516
-
-
-
26,269
42,443
Total
38,275
4,872
28,436
325,630
40,000
62,101
87,415
586,729
A condition of the broadcast licences owned by the Corporation is to commit to fund Canadian Content Development (“CCD”)
over the initial term of the licences, which is usually 7 years. The Corporation must also pay royalties for the use of music for
the majority of its music services. Through copyright collective societies, the Corporation pays royalties to two sets of rights
holders: rights holders in music works, which are the music and the lyrics; and, rights holders in artists’ performances and
sounds recordings, which are the actual performances and recordings of the musical works.
Annual Report 2020 | Stingray Group Inc. | 45
Capital resources
As at March 31, 2020, the Corporation has a credit facility consisting of a revolving credit facility for an authorized amount up
to $230,000 with a maturity date of October 25, 2022, and a non-revolving term facility in the amount of $135,000 with a
maturity date of October 25, 2021.
The credit facility may be drawn in Canadian dollars in the form of prime rate loan or banker’s acceptances, in US dollars in
the form of US base rate loans or LIBOR loans, or in Euro and British Pound in the form of LIBOR loans and in Australian dollars
in the form of BBSY loans.
The Credit facility bears interest at (a) the bank’s prime rate (2.45% and 3.95% as at March 31, 2020 and 2019, respectively)
or US base rate if denominated in US dollars (3.75% and 6.00% as at March 31, 2020 and 2019, respectively) plus an applicable
margin based on a financial covenant, or (b) the banker’s acceptance rate (1.23% and 1.98% as at March 31, 2020 and 2019,
respectively) plus an applicable margin based on a financial covenant, or (c) LIBOR (0.99% and 2.50% as at March 31, 2020
and 2019, respectively) plus an applicable margin based on a financial covenant, at the Corporation’s option.
The following table summarizes the net change in Net debt that occurred in the year ended March 31, 2020 including related
ratios:
Movement in Net debt(1)(2)
21.2$
(62.2$)
17.6$
17.4$
9.5$
357.8$
As at March 31,
2019
Business
acquisitions
outlays, balance
payable and
contingent
consideration
payments
361.3$
Interests
payment
Share
repurchases
Dividend
payment
Remaining net
change of
revolving facility
and cash
As at March 31,
2020
$114.2
3.13
Pro Forma Adjusted EBITDA(1)(2)(3)
Net debt to Adjusted EBITDA(1)(2)(3)
$120.1
3.01
In millions of Canadian dollars.
Notes:
(1)
(2) Refer to “Supplemental information on Non-IFRS measures” on page 30 and 36.
(3) Pro Forma Adjusted EBITDA for 2020 and 2019 is calculated as the Corporation’s last twelve months Adjusted EBITDA ($118.1 million, Fiscal 2019;
$72.2 million), plus synergies and pro forma Adjusted EBITDA for the months prior to the acquisitions which are not already reflected in the results
($2.0 million, Fiscal 2019; $42.0 million). Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 30
and for reconciliations of Adjusted EBITDA to the most directly comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS
measures” on page 36.
Annual Report 2020 | Stingray Group Inc. | 46
CONSOLIDATED FINANCIAL POSITION
The following table shows the main variances that have occurred in the consolidated financial position of the Corporation for
the year ended March 31, 2020:
(in thousands of Canadian dollars)
Trade and other receivables
March 31,
2020
73,216
March 31,
2019
68,844
Variance
4,372 ▲
Right-of-use assets on leases
29,460
-
29,460 ▲
Intangible assets
54,890
64,395
(9,505) ▼
Broadcast licenses
272,910
271,710
1,200 ▲
Goodwill
337,770
331,332
6,438 ▲
Accounts payables and accrued
liabilities
Lease liabilities
62,101
30,853
61,956
145 ▲
-
30,853 ▲
Other liabilities
81,281
60,185
21,096 ▲
Credit facility
Subordinated debt
Music Choice Litigation
324,123
39,640
312,955
49,539
11,168 ▲
(9,899) ▼
Significant contributions
Timing of payments by clients
Recognition of right-of-use assets
on leases following the adoption of
IFRS16
Amortization of intangible assets,
offset internally developed
intangible assets additions and
additions through business
acquisitions
Acquisition of CHOO-FM
Acquisition of Chatter Research
Inc., partially offset by foreign
exchange differences
Timing of payments to suppliers
Recognition of lease liabilities
following the adoption of IFRS16
Liabilities on derivative
instruments, settlement agreement
payable to Music Choice and
contingent consideration payable
on Chatter Research Inc.
acquisition, partially offset by
payments of CRTC tangible
benefits and payment of part of the
Yokee acquisition contingent
consideration
Refer to the graph on previous
page
Debt repayment
On February 3, 2020, the Corporation and Music Choice executed and exchanged a Settlement Agreement which puts
definitive end to the parties’ patent litigation in the United States and fully and finally settles all claims, counterclaims and
defenses asserted in connection with that litigation. The settlement amount of US$13.3 million ($17.2 million at the date of the
settlement), will be paid in two equal instalments; the first payment was made on the date of settlement and the second payment
is to be made on or before February 15, 2021. Accordingly, an amount of $17.1 million was booked as part of the acquisition,
legal, restructuring and other expenses in Q3 2020. The terms of the settlement do not impact the services currently offered
by Stingray in the United States, which shall continue uninterrupted.
SOCAN and Re:Sound legal proceedings
From May 2, 2017 until May 10, 2017, the Corporation, together with its Canadian Broadcast Distribution Undertaking
customers (together, the “Objectors”), presented an affirmative case before the Copyright Board of Canada to seek a reduction
in the prescribed rates and terms for the Pay Audio Services Tariff for the 2007-2016 period. SOCAN and Re:Sound (together,
the “Collectives”) opposed that case, but in the opinion of the Objectors failed to offer compelling alternatives other than a
request to maintain the status quo. While the Objectors and the Collectives await the final determination of the Board on the
proper quantum of the Tariff, in early 2018 the Board released a tentative ruling proposing that allocation of affiliation payments
across the suite of Stingray services is reasonable and appropriate and asking the parties to propose favoured approaches to
allocation. The parties have responded to the Board’s request, with the Objectors proposing an allocation based on a “cost
approach”, as supported by independent, expert advice. The Copyright Board of Canada continues its consideration of the
matter, and the Corporation anticipates a decision within approximately 12 months, based on past experience and the
complexity of this proceeding.
Annual Report 2020 | Stingray Group Inc. | 47
Transactions Between Related Parties
The key management personnel of the Corporation are the Chief Executive Officer, Chief Financial Officer and certain other
key employees of the Corporation.
Key management personnel compensation and director’s fees include the following:
(in thousands of Canadian dollars)
Short-term employee benefits
Share-based compensation
Restricted and performance share units
Deferred share units
Off-Balance Sheet Arrangements
12 months
2020
2019
3,568
783
208
514
5,073
4,497
630
811
-
5,938
Upon adoption of IFRS 16 on April 1, 2019, commitments under operating leases previously disclosed in note 25 of the audited
consolidated financial statements of the Corporation for the year ended March 31, 2019 are now largely recorded on balance
sheet as right-of-use assets and lease liabilities. As of March 31, 2020, the balance of lease liabilities for the related operating
leases was $30.9 million.
The Corporation therefore has no off-balance sheet arrangements, except for the operating leases with terms of twelve months
or less, leases of low-value assets or leases that are not in scope of IFRS 16, that have, or are reasonably likely to have, a
current or future material effect on its consolidated financial position, financial performance, liquidity, capital expenditures or
capital resources.
Disclosure of Outstanding Share Data
Issued and outstanding shares and outstanding stock options consisted of:
Issued and outstanding shares:
Subordinate voting shares
Subordinate voting shares held in trust through employee share
purchase plan
Variable subordinate voting shares
Multiple voting shares
Outstanding stock options:
Stock options
May 31, 2020
March 31, 2020
54,960,072
55,021,172
(25,227)
666,578
17,941,498
73,542,921
(18,694)
605,478
17,941,498
73,549,454
2,431,819
2,431,819
The Corporation has a stock option plan to attract and retain employees, directors, officers and consultants. The plan provides
for the granting of options to purchase subordinate voting shares. Under this plan,10% of all multiple voting shares, subordinate
voting shares and variable subordinate voting shares issued and outstanding on a non-diluted basis is reserved for issuance.
In Fiscal 2020, 275,000 options were exercised, 91,584 options were forfeited, and 694,303 options were granted to eligible
employees, subject to service vesting periods of 4 years.
Financial Risk Factors
Currency risk:
The Corporation is exposed to currency risk on sales and expenses that are denominated in currencies other than the
functional currency of the Corporation’s subsidiaries, primarily the US dollar and the euro. Also, additional earnings variability
arises from the translation of monetary assets and liabilities denominated in currencies other than the functional currency of
Annual Report 2020 | Stingray Group Inc. | 48
the Corporation’s subsidiaries at the rate of exchange at each balance sheet date, the impact of which is reported as a foreign
exchange gain or loss in the consolidated statements of comprehensive income (loss).
The Corporation's objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows,
by transacting with third parties in the above currencies to the maximum extent possible and practical, given that this will act
as natural economic hedges for each of these currencies.
Liquidity risk:
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they become due. The
Corporation manages liquidity risk by continuously monitoring actual and budgeted cash flows under both normal and stressed
conditions. The Board of Directors also reviews and approves the Corporation’s operating and capital budgets, as well as any
material transactions out of the ordinary course of business, including proposals on mergers, acquisitions or other major
investments or divestitures.
The unprecedented market challenges as a result of COVID-19 may adversely affect the Corporation’s liquidity. In the early
days of the crisis, the decision was made by the Corporation’s management to implement significant cost saving measures to
maintain a solid financial position. Subsequent to March 31, 2020, the Corporation also obtained an additional term loan in the
amount of $20.0 million (refer to the subsequent events section). The Corporation’s focus remains to closely monitor its cash
position and control its operating expenses.
Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
market interest rates. The Corporation holds the majority of its cash and cash equivalents balance in accounts bearing interest
at rates less than 1.25%. The Corporation is, therefore, not materially exposed to future cash flow fluctuations coming from
changes in market interest rates for its cash and cash equivalents.
The credit facility is a variable interest rate instrument that is due in more than one year. This instrument is exposed to changes
in future interest rates that could result in future cash flow fluctuations. To manage its interest rate risk, the Corporation entered
into the following interest rate swap agreements:
(in thousands of Canadian dollars)
Maturity
Swaps
October 25, 2024
October 25, 2024
October 25, 2024
October 25, 2024
August 29, 2029
August 31, 2029
Swaptions
October 25, 2024
October 25, 2024
Total
Credit risk:
Currency
Fixed interest rate
(when applicable)
Initial nominal value
Mark-to-market liabilities as
at March 31, 2020
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
0.81%
1.33%
2.19%
2.29%
1.73%
1.73%
—
—
$
50,000
50,000
50,000
50,000
40,000
60,000
300,000
100,000
100,000
200,000
500,000
$
1,349
904
1,164
2,912
2,098
2,963
11,390
3,064
3,878
6,942
18,332
Credit risk is the risk of an unexpected financial loss to the Corporation if a customer or counterparty to a financial instrument
fails to meet contractual obligations, and it arises primarily from the Corporation's trade and other receivables.
The Corporation’s credit risk is principally attributable to its trade receivables. The amounts presented in the consolidated
statements of financial position are net of an allowance for expected credit risk, estimated by the Corporation’s management
and based, in part, on the age of the specific receivable balance and the current and expected collection trends. The
Corporation's exposure to credit risk is mainly influenced by the characteristics of each customer. Generally, the Corporation
Annual Report 2020 | Stingray Group Inc. | 49
does not require collateral or other security from customers for trade receivables; however, credit is extended following an
evaluation of creditworthiness. In addition, the Corporation performs ongoing credit reviews of its customers.
During these unprecedented market challenges as a result of COVID-19, collection of accounts receivable remains a priority
of the Corporation. A substantial portion of the Corporation's accounts receivable are subject to normal industry credit risks.
As at March 31, 2020, there was no counterparty whose accounts receivable individually accounted for more than
10% of the total accounts receivable balance.
An allowance for expected credit losses is maintained to reflect an impairment risk for trade accounts receivable based on an
expected credit loss model which factors in changes in credit quality since the initial recognition of trade accounts receivable
based on customer risk categories. Bad debts are also provided for based on collection history and specific risks identified on
a customer-by-customer basis.
Critical Accounting Estimates
The preparation of the Corporation’s consolidated financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Below is an overview of the areas that involved more judgement or complexity, and of items which are more likely to be
materially adjusted due to estimates and assumptions turning out to be wrong. Estimates are based on management’s best
knowledge of current events and actions that the Corporation may undertake in the future. Estimates and underlying
assumptions are reviewed on an ongoing basis. Any revision to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected by these revisions.
The areas involving significant estimates or judgments are:
Estimation of current tax payable and current tax expense
In the calculation of current tax, the Corporation is required to make significant estimates due to the fact that it is subject to tax
laws of the many jurisdictions in which it operates. Recorded income taxes and tax credits are subject to review and approval
by tax authorities and therefore, could be different from the amounts recorded.
Recognition of deferred tax assets for tax losses available for carry-forward
In the calculation of deferred tax, estimates must be used to determine the appropriate rates and amounts and to take into
account the probability of their occurrence. Deferred income tax assets also reflect the benefit of unutilized tax losses that can
be carried forward to reduce income taxes in future years. The deferred tax assets include an amount which relates to carried
forward tax losses of some European and Australian subsidiaries. The subsidiaries have incurred the losses over the last
financial years before the acquisition by the Corporation. The subsidiaries now generate taxable income. The Corporation has
concluded that the deferred assets will be recoverable using the estimated future taxable income based on the approved
business plans and budgets for the subsidiaries.
Estimation of cost of defined benefit pension plans and present value of the net pension obligation
The cost of defined benefit pension plans and the present value of the net pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future.
These include the determination of the discount rate, mortality rates and future pension increases. Due to the complexity of
the valuation, the underlying assumptions and its long-term nature, the net pension obligation is highly sensitive to changes in
these assumptions.
Management engages the services of external actuaries to assist in the determination of the appropriate discount rate.
Management, with the assistance of actuaries, considers the interest rates of high quality corporate bonds that have terms to
maturity approximating the terms related to the defined benefit obligation. The mortality rate is based on publicly available
mortality tables. Future pension increases are based on expected future inflation rates.
Estimated fair value of certain investments
The fair value of investments that are not traded in an active market is determined using valuation techniques. The Corporation
uses judgement to select a valuation method and make assumptions that are mainly based on market conditions existing at
the end of each reporting period.
Annual Report 2020 | Stingray Group Inc. | 50
Estimated value in use and/or fair value less costs to sell of CGUs used in goodwill and broadcasting licences impairment
testing
Broadcast licences and goodwill are not amortized but are tested annually for impairment, or more frequently if events or
circumstances indicate that it is more likely than not that the value of broadcast licences and/or goodwill may be impaired.
Impairment exists when the carrying value of an asset or cash generating unit (“CGU”) exceeds its recoverable amount, which
is the higher of its fair value less costs to sell and its value-in-use. The fair value less costs to sell calculation is based on
available data from binding sales transactions in an arm’s-length transaction of similar assets, observable market prices, or
discounted cash flow projections less incremental costs for disposing of the asset. The value-in-use calculation is based on a
discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring
activities that the Corporation is not yet committed to or significant future investments that will enhance the asset’s performance
of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The impact of COVID-
19 on the Corporation was also considered in calculating the future cash flows. Depending on the measures taken by the
federal and provincial authorities to slow or stop the spread of COVID-19, such as the closure of non-essential businesses and
social distancing, actual results could differ materially from estimates used.
Estimation of fair value of identified assets, liabilities and contingent consideration recorded in business acquisitions
The contingent consideration and balance payable on business acquisitions related to business combinations is payable based
on the achievement of targets for growth in revenues for a period from the date of the acquisition and upon renewal of client
contracts. The fair value of the contingent consideration and balance payable on business acquisitions were estimated by
calculating the present value of the future expected cash flows.
Business Combinations
Under the acquisition method, on the date that control is obtained, the identifiable assets, liabilities and contingent liabilities of
the acquired business are measured at their fair values. Depending on the complexity of determining the valuation for certain
assets, the Corporate uses appropriate valuation techniques in arriving at the estimated fair value at the acquisition date for
these assets. These valuations are generally based on a forecast of the total expected future net discounted cash flows and
relate closely to the assumptions made by management regarding the future performance of the related assets and the
discount rate applied as it would be assumed by a market participant.
New standard adopted by the Corporation
IFRS 16 - Leases
Effective April 1, 2019, the Corporation adopted IFRS 16 - Leases, which supersedes IAS 17 - Leases and its related
interpretations. IFRS 16 introduces a single lease accounting model under which most of the lease-related assets and liabilities
are recognized in the statement of financial position. The Corporation has recognized an asset related to the right of use and
a liability at the present value of future lease payments. Depreciation of the right-of-use asset and interest expense on the lease
obligation have replaced rent expense related to operating leases. This applies to the lease contracts that convey the right to
control the use of an identified asset in exchange for consideration, unless the Corporation elects to exclude short term leases
(lease term of twelve months or less) and leases of low-value assets. The standard also specifies how to recognize, measure,
present, and disclose leases.
Under IAS 17- Leases and IFRIC 4 - Determining whether an arrangement contains a lease, the Corporation's accounting
policy was to record all leases, as either operating or finance, based on the substance of the transaction at the inception of the
lease. The Corporation classified all leases as operating leases prior to April 1, 2019. Payments made under operating leases
(net of any incentives received from the lessor) are charged to net earnings on a straight-line basis over the lease term.
The Corporation adopted IFRS 16 using the modified retrospective method with the date of initial application of April 1, 2019.
Under this method, the standard is applied retrospectively and the comparatives figures from Fiscal 2019 are not restated.
Upon transition, for leases classified as operating leases under IAS 17, lease liabilities have been measured at the present
value of the remaining lease payments, discounted using the Corporation’s incremental borrowing rate as at April 1, 2019.
Right-of-use assets have been measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments.
At transition, the Corporation has elected to apply the practical expedient to grandfather the assessment of which transactions
are leases on the date of initial application, as previously assessed under IAS 17 and IFRIC 4. The Corporation applied the
definition of a lease under IFRS 16 to contracts entered into or modified on or after April 1, 2019. The Corporation has also
elected to apply the following practical expedients to leases previously classified as operating leases under IAS17:
Annual Report 2020 | Stingray Group Inc. | 51
Application of a single discount rate to a portfolio of leases with similar characteristics;
Use of hindsight in determining the lease term where the contract contains purchase, extension, or termination
Exclusion of initial direct costs from measuring the right-of-use asset as at April 1, 2019;
options; and
Exclusion of leases for which the lease term ends within twelve months of the date of the initial application.
The following describes the Corporation’s accounting policy under IFRS 16 - Leases:
At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease based on whether the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Corporation
allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone
prices. However, for leases of properties for which it is a lessee, the Corporation has elected not to separate non-lease
components and will instead account for the lease and non-lease components as a single lease component. The right-of-use
asset and a lease liability are recognized at the lease commencement date.
Right-of-use asset
The right-of-use asset is measured at cost. The cost is based on the initial amount of the lease liability plus initial direct costs
incurred, less any lease incentives received, if any.
The cost of right-of-use asset is periodically reduced by depreciation expenses and impairment losses, if any, and adjusted for
certain remeasurements of the lease liability. Right-of-use asset is amortized to reflect the expected pattern of consumption of
the future economic benefits which is based on the lesser of the useful life of the asset or the lease term using the straight-line
method. The lease term includes the renewal option only if it is reasonably certain to be exercised. The lease terms range from
1 to 19 years for buildings and towers, from 6 to 57 years for lands and from 1 to 5 years for vehicles.
The Corporation elected not to recognize a right-of-use asset and liability for the leases where the total lease term is less than
or equal to twelve months and for the leases of low valued assets in nature; such as but not limited to, office equipment. The
lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
Lease liabilities
At the commencement date of the lease, the Corporation recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Corporation
and payments of penalties for terminating a lease, if the lease term reflects the Corporation exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the
event or condition that triggered the payment has occurred.
In calculating the present value of lease payments, the Corporation uses the incremental borrowing rate as at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the
amount of the lease liability is increased to reflect the accretion of interest and reduced to reflect the lease payments made. In
addition, the carrying amount of the lease liability is remeasured if there has been a modification, a change in the lease term,
a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Significant judgement in determining the lease term of contracts with renewal options
The Corporation determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease,
if it is reasonably certain not to be exercised. After the commencement date, the Corporation reassesses the lease term for
whether significant event or change in circumstances that is within its control and affects its ability to exercise (or not to
exercise) the option to renew (e.g., a change in business strategy) has occurred.
Impact on transition to IFRS 16 - Leases
As at April 1, 2019, the Corporation recorded lease liabilities of $34.0 million and right-of-use assets of $33.4 million, net of the
deferred lease inducements and lease payments made on or before the commencement of the lease, with no net impact on
deficit.
When measuring lease liabilities for those leases previously classified as operating leases under IAS 17, the Corporation has
discounted future lease payments using its incremental borrowing rate as at April 1, 2019. The weighted-average rate applied
is 5.03%.
Annual Report 2020 | Stingray Group Inc. | 52
The following table presents the reconciliation of the Corporation’s commitments as of March 31, 2019 to the lease liabilities
recognized on initial application of IFRS 16 as at April 1, 2019:
(in thousands of Canadian dollars)
Commitments as at March 31, 2019
Non-lease commitments
Renewal options reasonably certain to be exercised
Variable commitments excluded from the lease liabilities
Commitments relating to short-term and low-value assets
Discounting impact
Lease liabilities as at April 1, 2019
Change in accounting policy
39,162
(17,248)
23,613
(1,866)
(767)
(8,846)
34,048
In Q1 2020, the Corporation changed its accounting policy with respect to the disclosure of interest paid in the Consolidated
Statements of Cash Flows. The Corporation now disclose interest paid in financing activities. Prior to this change of policy, the
Corporation disclosed interest paid in operating activities.
The Corporation believes the new policy is preferable as it more closely aligns the interest payments with the use of the
proceeds from financing, such as business acquisitions. Also, interest payments increased as a result of the NCC acquisition
financing and the adoption of IFRS 16, and both items are not related to operating activities.
This change did not result in a material impact on the current period or any periods included within these consolidated financial
statements and only affected the presentation of interest paid in the Consolidated Statements of Cash Flows.
Future Accounting Changes
There are no material future accounting changes as of March 31, 2020.
Evaluation of Disclosure Controls and Procedures and Internal Control Over Financial Reporting
Internal control over financial reporting ("ICFR") is a process designed to provide reasonable, but not absolute, assurance
regarding the reliability of financial reporting and of the preparation of financial statements for external purposes in accordance
with IFRS. The President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), together with
Management, are responsible for establishing and maintaining adequate disclosure controls and procedures ("DC&P") and
ICFR, as defined in National Instrument 52-109. The Corporation’s internal control framework is based on the criteria published
in the updated version released in May 2013 of the report Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“2013 COSO Framework”).
The DC&P have been designed to provide reasonable assurance that material information relating to the Corporation is made
known to the CEO and CFO by others, and that information required to be disclosed by the Corporation in its annual filings,
interim filings or other reports filed or submitted by the Corporation under securities legislation is recorded, processed,
summarized and reported within the time periods specified in securities legislation.
As at March 31, 2020, an evaluation was carried out, under the supervision of the CEO and the CFO, of the design and
operating effectiveness of the Corporation’s DC&P. Based on this evaluation, the CEO and the CFO concluded that the
Corporation’s DC&P were appropriately designed and were operating effectively as at March 31, 2020.
As at March 31, 2020, an evaluation was carried out, under the supervision of the CEO and the CFO, of the effectiveness of
the ICFR based on the 2013 COSO Framework. Based on this evaluation, they have concluded that the Corporation’s ICFR
were effective as at March 31, 2020.
There have been no changes in the Corporation’s internal control over financial reporting that occurred during the period that
have materially affected, or are likely to materially affect, the Corporation’s ICFR.
Annual Report 2020 | Stingray Group Inc. | 53
Subsequent Events
Acquisition
On May 6, 2020 (the “Effective Date”), the Corporation entered into an agreement to acquire the assets of Marketing Sensorial
Mexico (the “Seller”), a curated background music and state-of-the-art digital content and technology business. Total
consideration consists of an amount of MXN 45.0 million ($2.7 million) to be paid upon the latest of a) 30 days following the
Effective Date and b) 2 business days following the delivery by the Seller of the closing deliverables, and a contingent
consideration.
Dividend
On May 20, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate voting
share and multiple voting share. The dividend will be payable on or around June 15, 2020, to shareholders on record as of
May 29, 2020.
Additional term loan
On May 29, 2020, the Corporation secured an additional term loan of $20.0 million, with a maturity date of May 29, 2021. The
additional loan amount was applied against the revolving facility.
Additional Information
Additional information about the Corporation is available on our website at www.stingray.com and on the SEDAR website at
www.sedar.com
Annual Report 2020 | Stingray Group Inc. | 54
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Canada
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Stingray Group Inc.
Opinion
We have audited the consolidated financial statements of Stingray Group Inc. (the "Entity"), which
comprise:
•
•
•
•
•
the consolidated statements of financial position as at March 31, 2020 and March 31, 2019,
the consolidated statements of comprehensive income (loss) for the years then ended,
the consolidated statements of changes in equity for the years then ended,
the consolidated statements of cash flows for the years then ended,
and notes to the consolidated financial statements, including a summary of significant accounting
policies.
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at March 31, 2020 and March 31, 2019, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the "Auditors’ Responsibilities for the
Audit of the Financial Statements" section of our auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled "Annual Report 2020".
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Annual Report 2020 | Stingray Group Inc. | 55
Page 2
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit and remain alert for indications that the
other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled "Annual Report 2020" is expected to be made available to us after the
date of this auditors’ report. If, based on the work we will perform on this other information, we conclude
that there is a material misstatement of this other information, we are required to report that fact to
those charged with governance.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
Annual Report 2020 | Stingray Group Inc. | 56
Page 3
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Entity's internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Entity's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditors’ report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
•
Provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
Annual Report 2020 | Stingray Group Inc. | 57
Page 4
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group Entity to express an opinion on the financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
The engagement partner on the audit resulting in this auditors’ report is Alain Bessette.
Montréal, Canada
June 3, 2020
*CPA auditor, CA, public accountancy permit No. A115894
Annual Report 2020 | Stingray Group Inc. | 58
Consolidated Statements of Comprehensive Income (Loss)
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, except per share amounts)
Note
2020
2019
Revenues
6
$
306,721
$
212,650
Operating expenses
CRTC tangible benefits
Depreciation, amortization and write-off
Net finance expense (income)
Change in fair value of investments
Acquisition, legal, restructuring and other expenses
22
8
17, 29
9
190,381
—
40,302
42,822
(6,550)
24,104
142,877
25,306
31,133
12,298
(565)
16,817
Income (loss) before income taxes
15,662
(15,216)
Income tax expense (recovery)
10
1,692
(3,228)
Net income (loss)
$
13,970
$
(11,988)
Net income (loss) per share — Basic
Net income (loss) per share — Diluted
Weighted average number of shares — Basic
Weighted average number of shares — Diluted
11
11
11
11
0.18
0.18
(0.19)
(0.19)
75,845,030
75,958,871
64,709,965
64,709,965
Comprehensive income (loss)
Net income (loss)
Other comprehensive income (loss), net of tax
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations
Items that will not be reclassified to profit and loss
Remeasurement loss on pension benefit obligations,
net of income tax recovery of $89 (2019 — $62)
Total other comprehensive income (loss)
$
13,970
$
(11,988)
4,826
(2,450)
(303)
4,523
(120)
(2,570)
Total comprehensive income (loss)
$
18,493
$
(14,558)
Net income (loss) is entirely attributable to Shareholders.
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2020 | Stingray Group Inc. | 59
Consolidated Statements of Financial Position
March 31, 2020 and 2019
(In thousands of Canadian dollars)
Note
March 31,
2020
March 31,
2019
Restated (note 4)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
Inventories
Other current assets
Non-current assets
Property and equipment
Right-of-use assets on leases
Intangible assets, excluding broadcast licences
Broadcast licences
Goodwill
Investments
Other non-current assets
Deferred tax assets
Total assets
Liabilities and Equity
Current liabilities
Credit facility
Accounts payable and accrued liabilities
Dividend payable
Deferred revenues
Current portion of lease liabilities
Current portion of other liabilities
Income taxes payable
Non-current liabilities
Credit facility
Subordinated debt
Lease liabilities
Other liabilities
Deferred tax liabilities
Total liabilities
Shareholders’ equity
Share capital
Contributed surplus
Deficit
Accumulated other comprehensive income (loss)
Total equity
Commitments (note 27)
Subsequent events (note 3)
Total liabilities and equity
$
12
$
$
13
14
15
16
16
17
10
19
18
24
21
22
19
20
21
22
10
24
$
2,512
73,216
549
3,336
10,110
89,723
45,732
29,460
54,890
272,910
337,770
25,732
1,095
10,682
4,673
68,844
972
2,620
9,033
86,142
50,326
—
64,395
271,710
331,332
18,738
1,367
10,672
867,994
$
834,682
$
15,000
62,101
—
1,747
4,517
16,672
4,850
104,887
309,123
39,640
26,336
64,609
49,503
594,098
322,366
4,620
(56,407)
3,317
273,896
14,086
61,956
4,956
1,634
—
16,186
3,889
102,707
298,869
49,539
—
43,999
52,033
547,147
337,714
4,344
(53,317)
(1,206)
287,535
$
867,994
$
834,682
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors,
(Signed) Eric Boyko, Director
(Signed) Pascal Tremblay, Director .
Annual Report 2020 | Stingray Group Inc. | 60
Consolidated Statements of Changes in Equity
Years ended March 31, 2020 and 2019
(In thousands of Canadian
dollars, except number of share
capital)
Share Capital
Number
Amount
Contributed
surplus
Deficit
Accumulated other
comprehensive income
(loss)
Cumulative
Translation
Account
Defined
Benefit Plans
Total
shareholders’
equity
Balance at March 31, 2018
56,305,753 $ 146,354
$ 3,825
$
(21,936)
$ 1,364
$ —
$ 129,607
147,500
—
618
—
(279)
—
—
(19,393)
Issuance of shares upon
exercise of options
(note 24)
Dividends
Issuance of subordinate
voting shares and variable
subordinate voting shares
(note 24)
Issuance of multiple voting
18,144,470
178,559
shares (note 24)
1,647,213
17,110
Share issuance costs, net of
income taxes of $1,780
(note 24)
Share-based compensation
Employee share purchase
plan (notes 24 and 26)
Realized loss on sales of
treasury shares held by the
Corporation
Net loss
Other comprehensive loss
—
—
(4,899)
—
(7,033)
(28)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
339
(19,393)
178,559
17,110
(4,899)
941
(23)
(148)
(11,988)
—
—
—
—
—
—
—
—
—
—
—
—
921
(16,262)
(17,621)
792
38
13,970
—
—
—
941
5
(148)
—
—
—
—
—
—
—
—
(11,988)
(798)
—
—
13,970
Balance at March 31, 2019
76,237,903 $ 337,714
$ 4,344
$
(53,317)
$
(1,024)
$
(182)
$ 287,535
—
(2,388)
(182)
(2,570)
Issuance of shares upon
exercise of options
(note 24)
275,000
1,517
(596)
—
Dividends
—
—
—
(16,262)
Repurchase and cancellation
of shares (note 24)
(2,957,799)
(16,823)
Share-based compensation
—
—
Employee share purchase
plan (notes 24 and 26)
(5,650)
(42)
Net income
Other comprehensive
income (loss)
—
—
—
—
—
792
80
—
—
—
4,915
(392)
4,523
Balance at March 31, 2020
73,549,454 $ 322,366
$ 4,620
$
(56,407)
$ 3,891
$
(574)
$ 273,896
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2020 | Stingray Group Inc. | 61
Consolidated Statements of Cash Flows
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars)
Note
2020
2019
$
13,970
$
(11,988)
Operating activities:
Net income (loss)
Adjustments for:
CRTC tangible benefits
Depreciation, disposal and write-off of property and
equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Share-based compensation, PSU and DSU expenses
Interest expense and standby fees
Mark-to-market losses on derivative financial instruments
Change in fair value of investments
Share of results of joint venture
Change in fair value of contingent consideration
Write-off of balance payable on business acquisition
Depreciation, amortization and accretion of other
liabilities
Interest expense on lease liabilities
Income tax expense (recovery)
Income taxes paid
Net change in non-cash operating items
Financing activities:
Increase of credit facility
Increase (decrease) of subordinated debt
Issuance of shares
Share issuance costs
Deferred financing fees
Payment of dividend
Proceeds from the exercise of stock options
Proceeds from disposal of treasury shares held by a
subsidiary
Share repurchased and cancelled
Shares purchased under the employee share purchase plan
Interest paid
Repayment of lease liabilities
Repayment of other payables
Investing activities:
Business acquisitions, net of cash acquired
Addition to investments in associate
Acquisition of an investment
Disposal of non-core assets
Acquisition of property and equipment
Intangible assets acquired through asset acquisitions
Acquisition of intangible assets other than internally
developed intangible assets
Addition to internally developed intangible assets
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
22
14
15
8
8
17
17
8
8
8
21
25
20
24
24
24
24
26
21
4
17
17
13
—
11,477
5,618
23,207
1,746
15,790
15,700
(6,550)
(6)
1,652
—
2,900
1,668
1,692
(2,888)
85,976
2,169
88,145
10,234
(10,000)
—
—
—
(21,218)
921
—
(17,621)
(393)
(17,442)
(4,873)
(11,967)
(72,359)
(3,572)
(450)
—
450
(6,704)
—
(1,769)
(5,902)
(17,947)
(2,161)
4,673
25,306
7,703
—
23,430
2,461
10,295
2,998
(565)
200
534
(4,264)
1,886
—
(3,228)
(6,006)
48,762
(4,059)
44,703
276,540
50,000
165,111
(6,679)
(3,089)
(16,007)
339
565
—
(199)
(9,950)
—
(16,441)
440,190
(473,624)
—
(900)
11,500
(7,623)
(3,100)
(3,671)
(6,164)
(483,582)
1,311
3,362
4,673
Cash and cash equivalents, end of year
$
2,512
$
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2020 | Stingray Group Inc. | 62
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
1. BUSINESS DESCRIPTION
Stingray Group Inc. (the “Corporation”) is incorporated under the Canada Business Corporations Act. The Corporation is
domiciled in Canada and its registered office is located at 730 Wellington, Montréal, Québec, H3C 1T4. The Corporation
is a provider of multi-platform music services. It broadcasts high quality music and video content on a number of platforms
including radio stations, premium television channels, digital TV, satellite TV, IPTV, the Internet, mobile devices and game
consoles. A portion of the Corporation’s revenue is derived from the sale of advertising airtime, which is subject to the
seasonal fluctuations of the Canadian radio industry. Accordingly, the first and third quarter results tend to be the strongest
and the second and fourth quarter results tend to be the weakest in a fiscal year. However, for the year ended
March 31, 2020 advertising revenues are not expected to follow historical patterns due to the impact of the ongoing
coronavirus (“COVID-19”) pandemic.
2. SIGNIFICANT CHANGES AND HIGHLIGHTS
The consolidated financial position and performance of the Corporation was particularly affected by the following events
and transactions during the year ended March 31, 2020:
During the fourth quarter of 2020, global economies and financial markets were impacted by the COVID-19 outbreak
as it quickly spread around the world and on March 11, 2020, the World Health Organization declared it a global
pandemic. Government authorities around the world have taken actions in an effort to slowdown the spread of
COVID-19, including measures such as the closure of non-essential businesses and social distancing. The tangible
impact on the Corporation started in the Radio segment towards the end of the fourth quarter, as many non-essential
local businesses were forced to temporarily close leading to a decrease in advertising and related revenues. In the
early days of the crisis, the decision was made by the Corporation’s management to implement significant cost saving
measures to maintain a solid financial position. Management expects that the Corporation’s Radio segment, and
Broadcast and Commercial Music segment, but to a lesser extent, will be further impacted during the first quarter of
2021. Beyond that period, the extent to which COVID-19 will impact the Corporation’s business will depend on future
developments, which are highly uncertain and cannot be predicted at this time. The Corporation’s focus will be to
closely monitor its cash position and control its operating expenses.
On February 3, 2020, the Corporation and Music Choice executed and exchanged a settlement agreement which puts
a definitive end to the parties’ patent litigation in the United States and fully and finally settles all claims, counterclaims
and defenses asserted in connection with that litigation. The settlement amount of US$13,250 ($17,209), is payable in
two equal instalments; the first payment was made on the date of settlement and the second payment is to be made
on or before February 15, 2021. Accordingly, the Corporation recognized an expense of $17,050 as part of acquisition,
legal, restructuring and other expenses (note 9) and the related accrual is presented in other liabilities (note 22).
On January 27, 2020, the Corporation purchased all of the outstanding shares of Chatter Research Inc., a
Toronto-based leader in the design, development, and implementation of artificial intelligence driven real-time
customer feedback solutions for retail and hospitality businesses, for total consideration of $9,493. It resulted in the
recognition of goodwill (note 16), intangible assets (note 15) and contingent consideration (note 22).
On August 26, 2019, the Corporation entered into an agreement to acquire the assets of CHOO-FM, a radio station in
Drumheller, Alberta, for total consideration of $1,640. It resulted in the recognition of property and equipment (note 13)
and broadcast licences (note 16).
On August 14, 2019, the Corporation announced that the Toronto Stock Exchange (the “TSX”) had approved its share
repurchase program, authorizing the Corporation to repurchase up to an aggregate 2,924,220 subordinate voting
shares and variable subordinate voting shares (collectively, the “Subordinate Shares”), representing approximately
Annual Report 2020 | Stingray Group Inc. | 63
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
5% of the 58,484,449 Subordinated Shares issued and outstanding as at August 7, 2019. On March 20, 2020, the TSX
approved an increase in the maximum number of Subordinate Shares from 2,924,220 to 4,903,887 Subordinate
Shares, representing approximately 10% of the public float as at August 7, 2019. For more information, refer to note 24.
On August 19, 2019, the Corporation renegotiated the fixed interest rates and maturities of some of its existing interest
rate swap agreements and entered into new derivative financial instrument agreements. For more information, refer
to note 29.
On July 9, 2019, the Corporation extended the maturity of its revolving facility by one year, with a new maturity date
of October 25, 2022 and reduced its authorized amount by $70,000 bringing it down to $230,000. The interest pricing
grid was also reviewed for both the revolving facility and the term facility, which will reduce future interest expense
(note 19).
Effective April 1, 2019, the Corporation adopted IFRS 16 - Leases, which supersedes IAS 17 - Leases and its related
interpretations. IFRS 16 introduces a single lease accounting model under which most of the lease-related assets and
liabilities are recognized in the statement of financial position. The Corporation has recognized an asset related to the
right of use and a liability at the present value of future lease payments. Depreciation of the right-of-use asset and
interest expense on the lease obligation have replaced rent expense related to operating leases. This applies to the
lease contracts that convey the right to control the use of an identified asset in exchange for consideration, unless the
Corporation elects to exclude short term leases (lease term of twelve months or less) and leases of low-value assets.
The standard also specifies how to recognize, measure, present, and disclose leases.
Under IAS 17- Leases and IFRIC 4 - Determining whether an arrangement contains a lease, the Corporation's
accounting policy was to record all leases, as either operating or finance, based on the substance of the transaction
at the inception of the lease. The Corporation classified all leases as operating leases prior to April 1, 2019. Payments
made under operating leases (net of any incentives received from the lessor) are charged to net earnings on a straight-
line basis over the lease term.
The Corporation adopted IFRS 16 using the modified retrospective method with the date of initial application of April
1, 2019. Under this method, the standard is applied retrospectively and the comparatives figures from Fiscal 2019 are
not restated. Upon transition, for leases classified as operating leases under IAS 17, lease liabilities have been
measured at the present value of the remaining lease payments, discounted using the Corporation’s incremental
borrowing rate as at April 1, 2019. Right-of-use assets have been measured at an amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments.
At transition, the Corporation has elected to apply the practical expedient to grandfather the assessment of which
transactions are leases on the date of initial application, as previously assessed under IAS 17 and IFRIC 4. The
Corporation applied the definition of a lease under IFRS 16 to contracts entered into or modified on or after April 1,
2019. The Corporation has also elected to apply the following practical expedients to leases previously classified as
operating leases under IAS17:
o Application of a single discount rate to a portfolio of leases with similar characteristics;
o Exclusion of initial direct costs from measuring the right-of-use asset as at April 1, 2019;
o Use of hindsight in determining the lease term where the contract contains purchase, extension, or
termination options; and
o Exclusion of leases for which the lease term ends within twelve months of the date of the initial application.
Annual Report 2020 | Stingray Group Inc. | 64
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
As at April 1, 2019, the Corporation recorded lease liabilities of $34,048 and right-of-use assets of $33,411, net of the
deferred lease inducements and lease payments made on or before the commencement of the lease, with no net
impact on deficit. For more information, refer to notes 14 and 21.
When measuring lease liabilities for those leases previously classified as operating leases under IAS 17, the
Corporation has discounted future lease payments using its incremental borrowing rate as at April 1, 2019. The
weighted-average rate applied is 5.03%.
3. SUBSEQUENT EVENTS
On May 29, 2020, the Corporation secured an additional term loan of $20,000, with a maturity date of May 29, 2021.
The additional loan amount was applied against the revolving facility.
On May 20, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend will be payable on or around June 15, 2020, to shareholders on
record as of May 29, 2020
On May 6, 2020 (the “Effective Date”), the Corporation entered into an agreement to acquire the assets of Marketing
Sensorial Mexico (the “Seller”), a curated background music and state-of-the-art digital content and technology
business. Total consideration consists of an initial amount of MXN45,000 ($2,701) to be paid upon the latest of a)
30 days following the Effective Date and b) 2 business days following the delivery by the Seller of the closing
deliverables, and contingent consideration.
Annual Report 2020 | Stingray Group Inc. | 65
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
4. BUSINESS ACQUISITIONS
FISCAL 2020
Chatter Research Inc.
On January 27, 2020, the Corporation purchased all of the outstanding shares of Chatter Research Inc.
(thereafter “Chatter”), a Toronto-based leader in the design, development, and implementation of artificial intelligence
driven real-time customer feedback solutions for retail and hospitality businesses, for total consideration of $9,493. As a
result of the acquisition, goodwill of $4,654 was recognized related to the operating synergies expected to be achieved
from integrating the acquired business into the Corporation’s existing business. The goodwill will not be deductible for tax
purposes.
The fair value of acquired trade receivables was $303, which represented the gross contractual amount. The contingent
consideration arrangement requires the Corporation to pay, in cash, to the former owners, an amount not exceeding
$14,000 over the next three years ending in January 2023, based on the recurring monthly revenues targets. The fair value
of the contingent consideration was determined using an income approach based on the estimated amount and timing of
projected cash flows.
The results of the business acquisition of Chatter for the period of March 31, 2020 are included in the result since the date
of acquisition. Revenues recorded from the acquisition date to March 31, 2020 were $133 and the net loss was $558. Had
the acquisition occurred at the beginning of the fiscal year, revenues related to this acquired business would have been
approximately $4,255 and net loss would have been $(729).
Assets acquired:
Cash and cash equivalents
Trade and other receivables
Intangible assets
Goodwill
Deferred tax assets
Liabilities assumed:
Accounts payable and accrued liabilities
Deferred revenues
Deferred tax liabilities
Net assets acquired at fair value
Consideration given:
Cash
Contingent consideration
Working capital payable
Preliminary
168
303
5,446
4,654
587
11,158
208
14
1,443
1,665
$
9,493
2,140
7,344
9
$
9,493
As of the reporting date, the Corporation has not completed the purchase price allocation over the identifiable net assets
and goodwill as information to confirm the fair value of certain assets and liabilities remains to be obtained.
Annual Report 2020 | Stingray Group Inc. | 66
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Drumheller
On August 26, 2019, the Corporation purchased the assets of CHOO-FM, a radio station in Drumheller, Alberta, from
Golden West Broadcasting Ltd., for total consideration of $1,640.
Assets acquired:
Trade and other receivables
Property and equipment
Broadcasting licences
Liabilities assumed:
Accounts payable and accrued liabilities
Net assets acquired at fair value
Consideration given:
Cash
Working capital payable
Preliminary
70
400
1,200
1,670
30
$
1,640
1,600
40
$
1,640
As of the reporting date, the Corporation has not completed the purchase price allocation over the identifiable net assets
and goodwill as information to confirm the fair value of certain assets and liabilities remains to be obtained.
Annual Report 2020 | Stingray Group Inc. | 67
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
FISCAL 2019
New Glasgow
On November 26, 2018, the Corporation purchased the assets of two radio stations, CKEC-FM and CKEZ-FM, located in
New Glasgow, Nova Scotia (referred as “New Glasgow” acquisition) from Hector Broadcasting Company Limited for total
consideration of $2,846.
The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this
acquisition and no adjustments to the preliminary assessment have been recorded in the statement of financial position.
Assets acquired:
Trade and other receivables
Property and equipment
Broadcasting licences
Deferred tax assets
Goodwill
Liabilities assumed:
Accounts payable and accrued liabilities
Net assets acquired at fair value
Consideration given:
Cash
Balance payable on business acquisitions
Preliminary and
Final
237
676
1,885
52
100
2,950
104
104
$
2,846
2,194
652
$
2,846
Annual Report 2020 | Stingray Group Inc. | 68
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Newfoundland Capital Corporation
On October 26, 2018, the Corporation acquired all of the issued and outstanding shares of Newfoundland Capital
Corporation (thereafter “NCC”) for total consideration of $484,252, of which $453,694 was paid in cash and the remaining
$30,558 through the issuance of 3,887,826 subordinate voting shares of the Corporation. NCC is a radio broadcaster that
operates radio stations across Canada. As a result of the acquisition, goodwill of $218,304 was recognized related to the
operating synergies expected to be achieved from integrating the acquired business into the Corporation’s existing
business. The goodwill will not be deductible for tax purposes.
The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this
acquisition and some adjustments to the preliminary assessment have been recorded in the statement of financial position
as shown below.
Assets acquired:
Cash and cash equivalents
Trade and other receivables
Other current assets
Property and equipment
Broadcast licences
Goodwill
Other non-current assets
Deferred tax assets
Liabilities assumed:
Accounts payable and accrued liabilities
Income taxes payable
Other liabilities
Deferred tax liabilities
As of March 31,
2019
Adjustments
Final
$
$
909
33,224
1,768
48,432
268,670
219,138
1,325
2,045
575,511
20,328
3,264
10,712
56,955
91,259
$
—
—
—
—
1,155
(834)
—
—
321
—
—
—
321
321
909
33,224
1,768
48,432
269,825
218,304
1,325
2,045
575,832
20,328
3,264
10,712
57,276
91,580
Net assets acquired at fair value
$
484,252
$
—
$
484,252
Consideration given:
Cash
Share capital
453,694
30,558
$
484,252
$
—
—
—
453,694
30,558
$
484,252
Purchase price adjustments within the measurement period have been recorded as at March 31, 2019 (recasted).
Annual Report 2020 | Stingray Group Inc. | 69
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
DJ-Matic
On October 12, 2018, the Corporation purchased all of the outstanding shares of DJ-Matic, a European provider of in-store
media solutions for businesses for total consideration of EUR$10,163 ($15,775). As a result of the acquisition, goodwill of
$12,344 was recognized related to the operating synergies expected to be achieved from integrating the acquired business
into the Corporation’s existing business. The goodwill will not be deductible for tax purposes.
The fair value of acquired trade receivables was $1,088 which represented the gross contractual amount. The contingent
consideration arrangement requires the Corporation to pay, in cash, to the former owners, an amount not exceeding
EUR$7,473 ($11,118) over the next three years ending in October 2021, based on an adjusted EBITDA ratio. The fair value
of the contingent consideration was determined using an income approach based on the estimated amount and timing of
projected cash flows.
The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this
acquisition and some adjustments to the preliminary assessment have been recorded in the statement of financial position
as shown below.
Assets acquired:
Cash and cash equivalents
Trade and other receivables
Inventories
Property and equipment
Intangible assets
Goodwill
Liabilities assumed:
Accounts payable and accrued liabilities
Deferred revenues
Other liabilities
Income taxes payable
Deferred tax liabilities
As of March 31,
2019
Adjustments
Final
$
$
543
1,088
312
589
9,951
12,339
24,822
5,821
652
—
30
2,544
9,047
$
—
—
—
—
(716)
5
(711)
(416)
—
416
—
(711)
(711)
543
1,088
312
589
9,235
12,344
24,111
5,405
652
416
30
1,833
8,336
Net assets acquired at fair value
$
15,775
$
—
$
15,775
Consideration given:
Cash
Contingent consideration
13,692
2,083
$
15,775
$
—
—
—
13,692
2,083
$
15,775
Purchase price adjustments within the measurement period have been recorded as at March 31, 2019 (recasted).
Annual Report 2020 | Stingray Group Inc. | 70
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Novramedia
On August 1, 2018, the Corporation purchased all of the outstanding shares of Novramedia Inc. (“Novramedia”) for total
consideration of $7,755. Novramedia is a Canadian provider of digital media solution. As a result of the acquisition, goodwill
of $3,460 was recognized related to the operating synergies expected to be achieved from integrating the acquired
business into the Corporation’s existing business. The goodwill will not be deductible for tax purposes.
The fair value of acquired trade receivables was $737 which represented the gross contractual amount. The contingent
consideration arrangement requires the Corporation to pay, in cash, to the former owners, an amount not exceeding $2,500
over the next 12 months if certain revenues-based targets are met. The fair value of the contingent consideration was
determined using an income approach based on the estimated amount and timing of projected cash flows.
The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this
acquisition and some adjustments to the preliminary assessment have been recorded in the statement of financial position
as shown below.
Assets acquired:
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Property and equipment
Intangible assets
Goodwill
Liabilities assumed:
Accounts payable and accrued liabilities
Deferred revenues
Deferred tax liabilities
As of March 31,
2019
Adjustments
Final
$
$
4
754
863
142
50
5,827
3,431
11,071
942
842
1,550
3,334
$
—
(17)
(4)
—
—
—
29
8
(10)
—
—
(10)
4
737
859
142
50
5,827
3,460
11,079
932
842
1,550
3,324
Net assets acquired at fair value
$
7,737
$
18
$
7,755
Consideration given:
Cash
Working capital receivable
Contingent consideration
5,500
(171)
2,408
—
18
—
5,500
(153)
2,408
$
7,737
$
18
$
7,755
Purchase price adjustments within the measurement period have been recorded as at March 31, 2019 (recasted).
Annual Report 2020 | Stingray Group Inc. | 71
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
5. SEGMENT INFORMATION
OPERATING SEGMENTS
The Corporation’s operating segments are aggregated in two segments: Broadcasting and commercial music and Radio.
The operating segments reflect how the Corporation manages its operations, resources and assets and how it measures
its performance. Both operating segment’s financial results are reviewed by the Chief operating decision maker (“CDOM”)
to make decisions about resources to be allocated to the segment and asses its performance based on adjusted EBITDA,
and for which distinct financial information is available. Adjusted EBITDA excludes from income (loss) before income taxes
the following expenses: share-based compensation, PSU and DSU expenses, CRTC tangible benefits, depreciation,
amortization and write-off, net finance expense (income), change in fair value of investments and acquisition, legal,
restructuring and other expenses. There are no inter-segment revenues for the periods.
The Broadcasting and commercial music segment specializes in the broadcast of music and videos on multiple platforms
and digital signage experiences and generates revenues from subscriptions or contracts.
The Radio segment operates several radio stations across Canada and generates revenues from advertising.
Corporate and eliminations is a non-operating segment comprising corporate and administrative functions that provide
support and governance to the Corporation’s operating business units.
The following tables present financial information by segment for years ended March 31, 2020 and 2019.
Year ended
2020
2019
2020
2019
Broadcasting and
commercial music
Radio
Corporate and
eliminations
2020
2019
Consolidated
2020
2019
Revenues
Operating expenses
(excluding Share-
based
compensation, PSU
and DSU expenses)
Adjusted EBITDA
Share-based
compensation
PSU and DSU
expenses
CRTC tangible
benefits
Depreciation,
amortization and
write-off
Net finance expense
(income)
Change in fair value of
investments
Acquisition, legal,
restructuring and
other expenses
Income (loss) before
income taxes
Income taxes
Net income (loss)
$ 154,466 $ 146,741 $ 152,255 $ 65,227 $
— $
682 $ 306,721 $ 212,650
90,765
63,701
93,913
52,828
93,760
58,495
41,209
24,018
4,110
(4,110)
5,294
188,635
(4,612) 118,086
140,416
72,234
1,001
1,093
1,001
1,093
745
1,368
745
1,368
—
25,306
—
25,306
40,302
31,133
40,302
31,133
42,822
12,298
42,822
12,298
(6,550)
(565)
(6,550)
(565)
24,104
16,817
24,104
16,817
15,662
(15,216)
1,692
(3,228)
$ 13,970 $ (11,988)
Annual Report 2020 | Stingray Group Inc. | 72
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Broadcasting and
commercial music
Radio
Corporate and
eliminations
Consolidated
March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
March 31,
2020
March 31,
2019
Total assets
Total liabilities(1)
$ 268,648 $ 262,010 $ 599,346 $ 572,672 $
— $
— $ 867,994 $ 834,682
$ 88,012 $
72,255 $ 123,625 $ 104,444 $ 382,461 $ 370,448 $ 594,098 $ 547,147
(1) Total liabilities include operating liabilities, the Credit facility and the Subordinated debt
Broadcasting and
commercial music
Radio
Corporate and
eliminations
Consolidated
2020
2019
2020
2019
2020
2019
2020
2019
$
3,258 $
8,280 $
4,300 $ 50,684 $
— $
— $
7,558 $
58,964
Year ended
Acquisition of
property and
equipment
Addition to
right-of-use
assets on leases $
Acquisition of
1,168 $
— $
540 $
— $
— $
— $
1,708 $
—
intangible assets $ 13,140 $
34,378 $
— $
— $
— $
— $
13,140 $
34,378
Acquisition of
broadcast
licences
Goodwill recorded
on business
acquisitions
$
— $
— $
1,200 $ 271,710 $
— $
— $
1,200 $ 271,710
$
4,654 $
15,804 $
— $ 218,404 $
— $
— $
4,654 $ 234,208
Acquisition of property and equipment, intangible assets, broadcast licences and goodwill, includes those acquired through
business acquisitions, whether they were paid or not.
Approximately 79% of the Corporation’s non-current assets are located in Canada.
Annual Report 2020 | Stingray Group Inc. | 73
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
6. REVENUES
DISAGGREGATION OF REVENUES
The following table presents the Corporation’s revenues disaggregated by reportable segment, primary geographical
market and product.
Year ended
2020
2019
2020
2019
2020
2019
2020
2019
Broadcasting and
commercial music
Radio
Corporate
Total revenues
Reportable segments
Geography
Canada
United States
Other countries
Products
Subscriptions (1)
Media solutions (2)
Advertising (3)
Other
$
57,588
37,987
58,891
56,010 $ 152,255
—
34,439
—
56,292
152,255
154,466 146,741
130,437 127,991
18,194
556
—
—
—
152,255
—
$ 154,466 146,741 $ 152,255
22,191
1,838
—
65,227 $
—
—
65,227
—
—
65,227
—
65,227 $
—
—
—
—
—
—
—
—
—
682 $ 209,843 121,919
34,439
37,987
56,292
58,891
306,721 212,650
—
—
682
130,437 127,991
—
18,194
—
65,783
—
682
682
682 $ 306,721 212,650
22,191
154,093
—
(1) Generally recognized over time
(2) Approximately 50% of revenues are recognized overtime and 50% at a point in time
(3) Generally recognized at a point in time
UNSATISFIED PORTION OF PERFORMANCE OBLIGATIONS
The following table presents the revenues expected to be recognized in the future related to unsatisfied or partially satisfied
performance obligations as at March 31, 2020. The table below excludes i) contracts with a duration of one year or less
and ii) variable consideration, such as revenues based on a number of subscribers or location as they will likely vary
throughout the term of the contracts.
The unsatisfied portion of the transaction price of the performance obligations relates to monthly services expected to be
recognize over the next 3 years and thereafter.
Media solutions
Subscriptions
2021
2022
2023 Thereafter
$
$
3,398
13,023
16,421
—
8,305
8,305
—
3,969
3,969
—
2,451
$
2,451
$
Total
3,398
27,748
31,146
Unpon adoption of, and transition to, IFRS 15, the Corporation elected to utilize the following practical expedients and not
disclose:
The unsatisfied portions of performance obligations related to contracts with a duration of one year or less;
The unsatisfied portions of performance obligations where the revenue recognized corresponds to the amount
invoiced to customers.
Annual Report 2020 | Stingray Group Inc. | 74
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
7. OTHER INFORMATION
Expenses by nature are as follows:
Salaries and other short-term employee benefits
Research and development
Equipment costs
Share-based compensation
PSU and DSU expenses
8. NET FINANCE EXPENSE (INCOME)
Interest expense and standby fees
Mark-to-market losses on derivative financial instruments
Change in fair value of contingent consideration
Write-off of balance payable on business acquisition
Depreciation, amortization and accretion of other liabilities
Interest expense on lease liabilities
Foreign exchange loss
$
$
$
9. ACQUISITION, LEGAL, RESTRUCTURING AND OTHER EXPENSES
Acquisition
Legal
Restructuring and other
10. INCOME TAXES
The income tax expense (recovery) consists of the following:
Current income tax:
Current year
Adjustment for prior years
Deferred income tax:
Origination and reversal of temporary differences
Change in substantively enacted tax rate
Adjustment for prior years
Change in recognized tax losses and deductible
temporary differences
Total income tax expense (recovery)
$
$
$
$
2020
90,164
7,245
7,131
1,001
745
2020
15,790
15,700
1,652
—
2,900
1,668
5,112
42,822
2020
1,556
19,540
3,008
24,104
2020
5,360
(405)
4,955
(1,353)
(2,643)
458
275
(3,263)
1,692
Annual Report 2020 | Stingray Group Inc. | 75
2019
55,949
7,244
5,849
1,093
1,368
2019
10,295
2,998
534
(4,264)
1,886
—
849
12,298
2019
13,738
2,099
980
16,817
2019
4,956
(331)
4,625
(8,635)
—
(242)
1,024
(7,853)
(3,228)
$
$
$
$
$
$
$
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The following table reconciles income tax computed at the Canadian statutory rate of 26.6% (2019 — 26.7%) and the
total income tax expense for the years ended March 31:
2020
2019
Income (loss) before income taxes
$
15,662
$
(15,216)
Income tax at the combined Canadian statutory rate
(Decrease) increase resulting from:
Impact of foreign tax rate differences
Income taxes on non-deductible expenses and
non-taxable revenues
Change in recognized tax losses and deductible
temporary differences
Change in substantively enacted tax rate
Other
Total income tax expense (recovery)
$
SIGNIFICANT ESTIMATE
4,166
(1,538)
948
275
(2,643)
484
1,692
(4,063)
(1,798)
1,722
1,024
—
(113)
(3,228)
$
Recorded income taxes and tax credits are subject to review and approval by tax authorities and therefore, final amounts
could be different from the amounts recorded.
RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES
The tax effects of significant components of temporary differences that give rise to deferred tax assets and liabilities are
as follows:
Property and equipment
Intangible assets and goodwill
Financing fees
Tax losses and Scientific Research and
$
Experimental Development
Expenditures (“SR&ED”) carried
forward
Investments
CRTC tangible benefits
Restricted and performance share unit
Right-of-use assets on leases
Accrued pension benefit liability
Other
Tax assets and liabilities
Offsetting of assets and liabilities
2020
2019
Assets
Liabilities
Assets
Liabilities
1,658 $
1,138
1,304
$
2,884
64,054
—
1,117 $
302
2,708
3,372
65,294
—
15,491
—
7,113
1,313
324
2,238
367
30,946
(20,264)
—
2,829
—
—
—
—
—
69,767
(20,264)
11,424
—
9,490
1,308
—
1,776
1,233
29,358
(18,686)
—
1,973
—
—
—
—
80
70,719
(18,686)
Net deferred tax assets and liabilities
$
10,682 $
49,503
$
10,672 $
52,033
Annual Report 2020 | Stingray Group Inc. | 76
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Changes in deferred tax assets and liabilities for the year ended March 31, 2020 are as follow:
Property and equipment
Intangible assets and goodwill
Financing fees
Tax losses and SR&ED carried
forward
Investments
CRTC tangible benefits
Performance share unit
Right-of-use assets on leases
Accrued pension benefit liability
Other
Balance
as at
March 31,
2019
(2,255)
(64,992)
2,708
Recognized
in net
income
1,029
3,358
(1,404)
Recognized in
other
comprehensive
income
—
—
—
$
Exchange
rate change
—
160
—
Business
acquisitions
—
(1,443)
—
11,424
(1,973)
9,490
1,308
—
1,776
1,153
$
(41,361)
3,508
(856)
(2,377)
5
324
373
(697)
3,263
—
—
—
—
—
89
—
89
(28)
—
—
—
—
—
(88)
44
Balance
as at
March 31,
2020
(1,226)
(62,917)
1,304
15,491
(2,829)
7,113
1,313
324
2,238
368
587
—
—
—
—
—
—
(856)
(38,821)
Changes in deferred tax assets and liabilities for the year ended March 31, 2019 are as follow:
Property and equipment
Intangible assets and goodwill
Financing fees
Tax losses and SR&ED carried
forward
Investments
CRTC tangible benefits
Performance share unit
Balance payable on business
acquisitions
Accrued pension benefit liability
Other
Balance
as at
March 31,
2018
1,184
(7,301)
1,523
$
11,416
(1,897)
845
1,127
729
—
168
7,794
$
Recognized
in net loss
445
(6)
(595)
Recognized in
equity
—
—
1,780
Exchange
rate change
—
291
—
Business
acquisitions
(3,884)
(57,976)
—
(672)
(76)
8,645
181
(695)
(110)
736
7,853
—
—
—
—
—
62
—
1,842
(534)
—
—
—
(34)
—
(10)
(287)
1,214
—
—
—
—
1,824
259
(58,563)
Balance
as at
March 31,
2019
(2,255)
(64,992)
2,708
11,424
(1,973)
9,490
1,308
—
1,776
1,153
(41,361)
Annual Report 2020 | Stingray Group Inc. | 77
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
UNRECOGNIZED DEFERRED TAX ASSETS
The Corporation has operating tax losses carried forward of $89,269 that are available to reduce future taxable income. A
tax benefit was not recognized for $30,129 of these tax losses carried forward. Deferred tax assets have not been
recognized in respect of these items because it is not probable that future taxable profit will be available against which the
Corporation can utilized the benefits therefrom.
As at March 31, 2020 and 2019, the amounts and expiry dates of the tax losses carried forward were as follows:
Canada (1)
Singapore
Netherlands
Switzerland
2020
$
2020
2021
2022
2023
2024
2027
2032
2033
2034
2036
2037
2038
2039
2040
Indefinite
$
—
—
—
—
—
—
315
—
589
51
395
6,367
2,679
7,440
—
$
17,836
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
518
518
$
$
—
—
—
27
—
—
190
310
—
—
—
—
—
—
—
527
$
$
—
5,176
3,775
2,241
—
—
—
—
—
—
—
—
—
—
—
$
11,192
$
United
Kingdom
—
—
—
—
—
—
—
—
—
—
—
—
—
—
59,196
59,196
(1) Represents tax losses carried forward as per federal jurisdiction and tax losses available as per provincial jurisdictions may differ.
Canada (1)
Singapore
Netherlands
Switzerland
2019
$
2020 (2)
2021
2022
2023
2024
2027
2032
2033
2034
2036
2037
2038
2039
2040
Indefinite
$
—
—
—
—
—
25
355
—
589
51
432
3,416
8,703
—
—
$
13,571
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
484
484
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
4,984
4,804
3,445
2,045
—
—
—
—
—
—
—
—
—
—
—
$
15,278
$
United
Kingdom
—
—
—
—
—
—
—
—
—
—
—
—
—
—
63,631
63,631
(1) Represents tax losses carried forward as per federal jurisdiction and tax losses available as per provincial jurisdictions may differ.
(2)
These losses expired during the year ended March 31, 2020.
Annual Report 2020 | Stingray Group Inc. | 78
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
UNRECOGNIZED DEFERRED TAX LIABILITIES
The Corporation has not recognized a deferred tax liability for the undistributed earnings of its subsidiaries in the current
and prior years because the Corporation does not currently expect those undistributed earnings to reverse and become
taxable in the foreseeable future. A deferred income tax liability will be recognized when the Corporation expects that it
will recover those undistributed earnings in a taxable manner, such as the sale of the investment or through the receipt of
dividends.
11. EARNINGS PER SHARE
2020
2019
Net income (loss)
$
13,970
$
(11,988)
Basic weighted average number of subordinate voting shares,
variable subordinate voting shares and multiple voting shares
Dilutive effect of stock options
Diluted weighted average number of subordinated voting shares,
variable subordinated voting shares and multiple voting shares
Earnings per share — Basic
Earnings per share — Diluted
75,845,030
113,841
64,709,965
—
75,958,871
64,709,965
$
$
0.18
0.18
$
$
(0.19)
(0.19)
As at March 31, 2019, 801,855 stock options were excluded from the diluted weighted average number of subordinated
voting shares, variable subordinated voting shares and multiple voting shares as their effect would have been anti-dilutive.
12. TRADE AND OTHER RECEIVABLES
Trade
Other receivables
Sales taxes receivable
Research and development tax credits
2020
64,705
3,915
1,922
2,674
73,216
$
$
2019
62,816
3,858
863
1,307
68,844
$
$
Tax credits receivable of $2,674 (2019 – $1,307) comprise research and development tax credits receivable from the
provincial and federal governments which relate to qualified research and development expenditures under the applicable
tax laws. The amounts recorded as receivables are subject to a government tax audit and the final amounts received may
differ from those recorded.
Annual Report 2020 | Stingray Group Inc. | 79
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
13. PROPERTY AND EQUIPMENT
Land,
buildings and
leasehold
improvements
Broadcasting
infrastructure
Furniture,
fixtures and
equipment
Computer
hardware
$
1,963 $
1,330
— $
13,832 $
466
4,905
23,286
(11,177)
15,504
—
—
15,402
891
—
(458)
34
15,869
1,334
1,050
—
3
2,387
1,687
(36)
—
15,970
1,690
—
—
—
17,660
—
715
—
—
715
2,370
—
6,266
(1,166)
(135)
23,702
2,525
—
(718)
(438)
25,071
5,891
3,451
(252)
52
9,142
3,860
(113)
8,442 $
2,516
2,890
(6)
(114)
13,728
1,691
—
(3)
(25)
15,391
5,877
2,051
—
(83)
7,845
2,531
—
Other
Total
$
—
—
24,237
9,217
1,801
—
—
1,801
361
400
—
—
2,562
—
188
—
—
188
418
—
49,747
(12,349)
(249)
70,603
7,158
400
(1,179)
(429)
76,553
13,102
7,455
(252)
(28)
20,277
10,866
(149)
28
—
(161)
(40)
—
(173)
Cost:
Balance at March 31, 2018
Additions
Additions through business
acquisitions
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2019
Additions
Additions through business
acquisitions
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2020
Accumulated depreciation:
Balance at March 31, 2018
Depreciation for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2019
Depreciation for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2020
$
4,066 $
3,085 $
12,728 $
10,336 $
606
$
30,821
Net carrying amounts:
March 31, 2019
March 31, 2020
$
$
13,015 $
11,803 $
15,255 $
14,575 $
14,560 $
12,343 $
5,883 $
5,055 $
1,613
1,956
$
$
50,326
45,732
Annual Report 2020 | Stingray Group Inc. | 80
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
14. RIGHT-OF-USE ASSETS ON LEASES
Cost:
Balance at March 31, 2019
Additions resulting from adoption of IFRS 16
Additions
Foreign exchange differences
Balance at March 31, 2020
Accumulated depreciation:
Balance at March 31, 2019
Depreciation for the year
Foreign exchange differences
Balance at March 31, 2020
Net carrying amounts:
March 31, 2019
March 31, 2020
Land and
buildings
Vehicles
Total
$
$
$
$
—
32,763
1,548
(57)
34,254
—
5,179
110
5,289
—
28,965
$
$
$
$
—
648
160
43
851
—
439
(83)
356
—
495
$
$
$
$
—
33,411
1,708
(14)
35,105
—
5,618
27
5,645
—
29,460
Annual Report 2020 | Stingray Group Inc. | 81
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
15. INTANGIBLE ASSETS, EXCLUDING BROADCAST LICENCES
Internally
developed
intangible
assets
Music
catalog
Client list
and
relationships Trademark
Licences,
website
application
and
computer
software
Non-
compete
agreement
Total
$
1,975 $
6,164
11,243 $
469
99,285 $
—
10,518 $
2
19,435
3,581
$
6,488 $
—
148,944
10,216
—
—
—
1
8,140
5,901
—
263
—
—
—
12,474
—
—
—
—
—
(10)
11,702
429
(789)
110,970
—
(256)
10,264
7
—
23
1,609
589
—
350
14,304
12,154
113,168
10,621
—
1,144
—
14
1,158
3,112
5,028
891
—
2
5,921
924
73,705
11,021
—
(450)
84,276
10,073
2,713
1,050
—
(57)
3,706
1,093
618
1,970
15,062
—
(2,538)
(261)
20,835
1,357
3,008
725
25,925
9,011
5,951
(2,538)
(2)
12,422
4,035
9,100
—
(103)
17,455
—
829
172
9,100
(2,538)
(1,418)
179,366
7,694
5,446
2,122
18,456
194,628
4,132
3,373
—
(17)
7,488
3,970
94,589
23,430
(2,538)
(510)
114,971
23,207
173
19
563
144
547
114
1,560
Cost:
Balance at March 31, 2018
Additions
Additions through
business acquisitions
Additions through
asset acquisition
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2019
Additions
Additions through
business acquisitions
Foreign exchange
differences
Balance at March 31, 2020
Accumulated depreciation:
Balance at March 31, 2018
Amortization for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2019
Amortization for the year
Foreign exchange
differences
Balance at March 31, 2020
$
4,443 $
6,864 $
94,912 $
4,943 $
17,004
$
11,572 $
139,738
Net carrying amounts:
March 31, 2019
March 31, 2020
$
$
6,982 $
9,861 $
5,781 $
5,290 $
26,694 $
18,256 $
6,558 $
5,678 $
8,413
8,921
$
$
9,967 $
6,884 $
64,395
54,890
Annual Report 2020 | Stingray Group Inc. | 82
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
16. GOODWILL AND BROADCAST LICENCES
Balance at March 31, 2018
Additions through business acquisitions (note 4)
Foreign exchange differences
Balance at March 31, 2019
Additions through business acquisitions (note 4)
Foreign exchange differences
Balance at March 31, 2020
ANNUAL IMPAIRMENT ASSESSMENTS
Goodwill
Broadcast licences
$
$
98,467
234,208
(1,343)
331,332
4,654
1,784
337,770
$
$
—
271,710
—
271,710
1,200
—
272,910
Goodwill and broadcast licences are tested for impairment annually and when circumstances indicate the carrying value
may be impaired. The Corporation’s impairment test for goodwill and broadcast licences having indefinite useful lives was
based on value-in-use (“VIU”) and fair value less cost to sell (“FVLCS”) calculations determined by using a discounted
cash flow model. As VIU and FVLCS of cash generating units (“CGUs”) is determined with significant unobservable inputs,
it is considered level 3 within the fair value hierarchy.
CASH-GENERATING UNITS
For the purposes of assessing impairment, goodwill is allocated to those CGUs that are expected to benefit from synergies
of the related business combination and represent the lowest level within the Corporation at which management monitors
goodwill.
Broadcast licences are grouped at the CGU level, which is the lowest level for which there are largely independent cash
inflows. For broadcast licence impairment testing purposes, the Corporation has identified 14 CGUs, based on
geographical areas where interdependent cash inflows exist. Impairment charges and reversals, if any, are included as a
separate line on the consolidated statements of income.
The carrying amounts of goodwill and broadcast licences allocated to each CGU and/or group of CGUs are set out in the
following tables:
Goodwill
Radio
Broadcast and commercial music
Broadcast licences
Toronto
Ottawa
Other(1)
2020
218,404
119,366
337,770
90,040
48,420
134,450
272,910
$
$
$
$
2019
219,238
112,094
331,332
90,040
48,420
133,250
271,710
$
$
$
$
(1) The carrying value of broadcast licences in each of the other CGUs is less than 10% of the total carrying value of broadcast licences.
Consequently, these other CGUs are grouped together for the purpose of note disclosure.
Annual Report 2020 | Stingray Group Inc. | 83
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
RADIO GOODWILL AND BROADCAST LICENCES IMPAIRMENT ASSESSMENTS
The recoverable amounts of the CGUs have been determined based on their VIU. The recoverable values have been
determined to be higher than the carrying amounts. As a result, no impairment was recorded.
The VIUs were calculated using unobservable (Level 3) inputs such as cash flow projections from financial budgets
approved by the Board of Directors. Growth rates used over the budget period are based on management’s estimates of
performance, which is established by considering historical growth rates achieved as well as anticipated fluctuations
including those resulting from the current economic environment. The growth rates depend also on whether the CGU
includes mature market stations versus start-up or evolving stations. Management assesses how the CGU’s market
position, relative to its competitors, might change over the budget period. The key assumptions used in the estimation of
the recoverable amount for the CGUs are the risk adjusted forecasted adjusted EBITDA and the adjusted EBITDA multiples.
For most CGUs, the adjusted EBITDA margin used in the five-year budget period ranged between 17.5% and 53.8% and
the adjusted EBITDA multiples ranged between 7.7x and 9.2x. The most significant assumptions that form part of the risk
adjusted forecasted adjusted EBITDA relate to estimated growth in revenues and savings in operating expenses.
Cash flows beyond the five-year period were extrapolated using growth rate of 1.5%, which is based on the Corporation’s
estimate of future performance for this mature industry. Management expects the Corporation’s share of the market to be
stable over the long-term budget period, despite that changes in rating results could affect local market shares and relating
growth rates.
The pre-tax discount rates applied to cash flow projections, which were derived from the Corporation’s weighted average
cost of capital (“WACC”), ranged from 9.7% to 10.0% as at the date of the assessment. The discount rate calculation is
based on the specific circumstances of the Corporation and its CGUs and is derived from its WACC. The WACC takes into
account both debt and equity. The cost of equity is derived from the expected return on investment by the Corporation’s
investors. The cost of debt is based on the interest-bearing borrowings the Corporation is obliged to service. CGU-specific
risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available
market data.
The possibility of new market entrants can have an impact on growth rate assumptions, as can adverse ratings results,
which would impact market share. However, management does not believe these would have a significant adverse effect
on the forecasts included in the budget and management’s conclusions on impairment would not be materially different as
a result. The determination of VIU is sensitive to the discount rates used and therefore management’s conclusions on
impairment could be materially different if the assumptions used to determine the discount rates changed.
A quantitative sensitivity analysis of the significant assumptions for the impairment test is presented below, showing the
impact of a 50 basis point change in each of the assumptions listed:
Assumption change
Increase in pre-tax discount rate
Decrease in growth rate during five-year budget period
Decrease in terminal growth rate
Decrease in EBITDA multiples
Goodwill impairment
charge - Radio
Broadcast licences
impairment charge
$
26,534
12,370
19,744
28,546
$
—
—
—
—
Annual Report 2020 | Stingray Group Inc. | 84
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
BROADCAST AND COMMERCIAL MUSIC GOODWILL IMPAIRMENT ASSESSMENT
The recoverable amount of the CGU has been determined based on its VIU. The recoverable amount has been determined
to be higher than the carrying amount. As a result, no impairment was recorded.
The VIU was calculated using unobservable (Level 3) inputs such as revenues and EBITDA margins from financial budgets
approved by the Board of Directors covering a five-year period. The EBITDA is defined as net income before net finance
costs, change in fair value of investments, income taxes, depreciation and amortization. The Corporation considered past
experience, economic trends as well as industry and market trends in assessing the level of revenues and EBITDA that
can be maintained in the future and derived cash flow projections from these assumptions.
An average growth rate of 3.7% was used to estimate revenues in the five-year period and cash flows beyond the five-year
period were extrapolated using a 2.5% growth rate, which is based on the Corporation’s estimate of future performance
for this industry.
The Corporation also applied a pre-tax discount rate of 9.6% to cash flow projections, which represents WACC as at the
date of the assessment. Refer to the section above for more information on discount rates calculation.
By their nature, these estimates and assumptions are subject to measurement uncertainty, and consequently, actual results
could differ from estimates used. However, it has been determined that there is no reasonable change in assumptions that
would cause the carrying amount to exceed the estimated recoverable amount.
Annual Report 2020 | Stingray Group Inc. | 85
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
17. INVESTMENTS
The table below provides a continuity of investments, investment in a joint venture and investments in associate:
Balance at March 31, 2018
Addition
Share of results of joint venture
Change in fair value, including foreign
exchange differences
Balance at March 31, 2019
Addition
Share of results of joint venture
Change in fair value, including foreign
exchange differences
Balance at March 31, 2020
INVESTMENTS
Investments
Investment in a
joint venture
Investments
in associates
$
15,533 $
900
—
834 $
—
(200)
1,106 $
—
—
565
16,998
—
—
—
634
—
(6)
—
1,106
450
—
Total
17,473
900
(200)
565
18,738
450
(6)
$
6,550
23,548 $
—
628 $
—
1,556 $
6,550
25,732
As at March 31, 2020, the Corporation has two equity instruments in private entities: AppDirect and Nextologies. Fair value
as at March 31, 2020 was $22,648 (2019 — $16,098) and $900 (2019 — $900), respectively. Both equity instruments are
classified as financial assets at fair value through profit and loss.
During the year ended March 31, 2020, the Corporation revalued the fair value of its investment in AppDirect and
consequently a gain of US$3,918 ($5,089) was recognized as part of the change in fair value through profit and loss. The
fair value was measured by using the latest external equity transaction, minus a liquidity discount of 15%. The liquidity
discount was used to reflect the marketability of the asset. In measuring fair value, management used the best information
available in the circumstances and also an approach that it believes market participants would use.
SIGNIFICANT ESTIMATE
The fair value of investments that are not traded in an active market is determined using valuation techniques. The
Corporation uses judgment to select a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting year. For details on the key assumptions used and the impact of changes
to these assumptions see note 29.
INVESTMENTS IN ASSOCIATES
As at March 31, 2020, the Corporation has two investments in associates: a 40% interest in Business Transportation
Services Limited Partnership, a partnership formed to own and operate one or more airplanes for the benefit of the limited
partners and third parties and a 30% interest in The Podcast Exchange (“TPX”), a Canadian leader in podcast advertising.
The investment of $450 in TPX was made on March 2, 2020.
The associates had no capital commitments as at March 31, 2020.
Annual Report 2020 | Stingray Group Inc. | 86
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
18. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade
Accrued liabilities
Sales taxes payable
19. CREDIT FACILITY
2020
17,984
40,101
4,016
62,101
$
$
2019
13,334
46,340
2,282
61,956
$
$
The Credit facility consists of a revolving credit facility (the “revolving facility”) for an authorized amount up to $230,000
and a non-revolving term facility (the “term facility”) in the amount of $135,000. On July 9, 2019, the Corporation extended
the maturity of its revolving facility by one year, with a new maturity date of October 25, 2022 and reduced its authorized
amount by $70,000 bringing it down to $230,000.
The Credit facility may be drawn in Canadian dollars in the form of prime rate loan or banker’s acceptances, in US dollars
in the form of US base rate loans or LIBOR loans, or in Euro and British Pound in the form of LIBOR loans and in Australian
dollars in the form of BBSY loans.
The Credit facility bears interest at (a) the bank’s prime rate (2.45% and 3.95% as at March 31, 2020 and 2019, respectively)
or US base rate if denominated in US dollars (3.75% and 6.00% as at March 31, 2020 and 2019, respectively) plus an
applicable margin based on a financial covenant, or (b) the banker’s acceptance rate (1.23% and 1.98% as at
March 31, 2020 and 2019, respectively) plus an applicable margin based on a financial covenant, or (c) LIBOR (0.99% and
2.50% as at March 31, 2020 and 2019, respectively) plus an applicable margin based on a financial covenant, at the
Corporation’s option.
In addition, the Corporation incurs standby fees based on a financial covenant, on the unused portion of the Credit facility
(0.40% and 0.48% as at March 31, 2020 and 2019, respectively). The Credit facility is secured by guarantees from
subsidiaries and first ranking lien on universality of all assets, tangible and intangibles, present and future.
The table below is a summary of the Credit facility at March 31, 2020:
Total available
Drawn Letters of credit
Net available
Committed credit facilities
Revolving facility
Term facility
Total committed credit facilities
Less: unamortized deferred financing fees
Balance, end of year
$
$
230,000
135,000
365,000
Current portion
Non-current portion
$
$
$
$
$
$
194,380
131,250
325,630
(1,507)
324,123
15,000
309,123
10,392
—
10,392
$
$
25,228
—
25,228
As at March 31, 2020, letters of credit amounting to $10,392 (2019 – $1,050) reduced the availability on the revolving
facility.
Annual Report 2020 | Stingray Group Inc. | 87
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial drawdown amount of
$150,000 of its term facility. Additionally, the Corporation must make an annual capital repayment, equivalent to 50% of
the excess cash flow, defined in the credit facility agreement, if a certain financial covenant target is not met. The remaining
capital balance will be payable on maturity date, on October 25, 2021. Minimum capital repayments to be made by the
Corporation on the term facility in the forthcoming years are as follows:
2021
2022
$
Capital repayments
15,000
116,250
131,250
$
As at March 31, 2020, the Corporation was in compliance with all the requirements of its credit agreement.
20. SUBORDINATED DEBT
On July 11, 2018, effective October 26, 2018, the Corporation entered into a loan agreement in the amount of $50,000.
During the year ended March 31, 2020, the Corporation made a capital repayment of $10,000. The loan is unsecured and
bears interest at an annual rate of 6.95% based on a financial covenant (6.95% as at March 31, 2020 and 2019). The loan
matures on October 26, 2023 and is entirely payable on maturity date.
Unamortized deferred financing fees amounted to $360 as at March 31, 2020 (2019 – $461).
21. LEASE LIABILITIES
The following table presents a summary of the activity related to the lease liabilities of the Corporation for year ended
March 31, 2020:
Lease liabilities as at March 31, 2019
Additions resulting from adoption of IFRS 16
Additions
Payment of lease liabilities, including related interest
Interest expense on lease liabilities
Foreign exchange differences
Lease liabilities as at March 31, 2020
$
$
2020
—
34,048
1,708
(6,541)
1,668
(30)
30,853
The following table presents the maturity analysis of contractual undiscounted cashflows related to the lease liabilities of
the Corporation as of March 31, 2020:
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities as at March 31, 2020
Lease liabilities included in the Interim Consolidated Statements of Financial
Position as at March 31, 2020
Current portion
Non-current portion
$
$
$
$
$
4,587
18,403
15,285
38,275
30,853
4,517
26,336
Annual Report 2020 | Stingray Group Inc. | 88
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The following table presents the reconciliation of the Corporation’s commitments as of March 31, 2019 to the lease liabilities
recognized on initial application of IFRS 16 as at April 1, 2019:
Commitments as at March 31, 2019
Non-lease commitments
Renewal options reasonably certain to be exercised
Variable commitments excluded from the lease liabilities
Commitments relating to short-term and low-value assets
Discount impact
Lease liabilities as at April 1, 2019
$
$
39,162
(17,248)
23,613
(1,866)
(767)
(8,846)
34,048
22. OTHER LIABILITIES
CRTC tangible benefits
Settlement payable
Contingent consideration
Balance payable on business acquisitions
Accrued pension benefit liability (note 23)
Derivative financial instruments (note 29)
Other
Current portion
$
2020
26,694
9,316
17,831
784
6,139
18,698
1,819
81,281
$
2019
31,797
—
12,430
3,359
6,673
2,998
2,928
60,185
(16,672)
(16,186)
$
64,609
$
43,999
CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION (CRTC) TANGIBLE BENEFITS
On October 23, 2018, the CRTC approved the change in ownership and effective control of NCC, a subsidiary of the
Corporation since October 26, 2018. Pursuant to the decision, the CRTC requires the Corporation to pay tangible benefits
corresponding to an amount of $30,963 over a seven-year period in equal annual payments. The Corporation recognized
an expense of $25,306 during the year ending March 31, 2019, which reflects the fair value of the payment stream using
a discount rate of 5.70%, which was the Corporation’s effective interest rate plus a risk premium for a similar financial
instrument.
SIGNIFICANT ESTIMATE — CONTINGENT CONSIDERATION
In the event that certain predetermined sales volumes, specific contract renewals and other conditions are achieved by
the acquired companies, additional consideration may be payable in the future.
The fair value of the contingent consideration of $17,831 was estimated by calculating the present value of the future
expected outflows. For details of the key assumptions used and the impact of changes to these assumptions, see note 29.
The estimates are based on discounts rates ranging from 18% to 36%. During the year ended March 31, 2020, the
Corporation reassessed certain contingent consideration, as the actual sales revenues expected to be achieved by the
acquired companies were either above or below the maximum threshold, contingent services to be received are not
expected to be received in the future for one acquired company, and because of contractual rights to offset an amount
against a claim made by the Corporation to sellers of an acquired company.
Annual Report 2020 | Stingray Group Inc. | 89
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
23. EMPLOYEE BENEFIT PLANS
The Corporation maintains a defined contribution pension plan and defined benefit pension plans.
DEFINED CONTRIBUTION PENSION PLAN
The defined contribution pension plan covers the majority of the Corporation’s employees. The Corporation’s contributions
to the defined contribution pension plan are based on percentages of gross salaries and totalled $1,667 (2019 – $711).
DEFINED BENEFIT PENSION PLANS
The Corporation maintains a defined benefit pension plan (the “Basic Plan”) for a small group of the Corporation’s former
employees, which is not accepting new entrants at this time. The Basic Plan provides pension benefits based on the length
of service and the last five years of average earnings of each member.
The Basic Plan meets the definition of a designated plan under the Income Tax Act (Canada). The most recent funding
actuarial valuation for the Basic Plan was as of March 31, 2020.
In addition, the Corporation has two individual Supplementary Retirement Pension Arrangements (“SRPAs”), which each
provide pension benefits to a retired executive. These SRPAs provide benefits above the Income Tax Act (Canada) limit.
These plans are not funded and are paid from the Corporation’s operations.
The Corporation measures its accrued benefit obligations and fair value of plan assets for accounting purposes as of
March 31 of each year. The obligation as at March 31, 2020 and the 2021 current service cost of the Plans are determined
based on membership data as at March 31, 2020.
Items related to the Corporation’s defined benefit pension plans are presented as follows in the consolidated financial
statements:
2020
2019
Consolidated statements of financial position
Accrued pension benefit liability, included in other liabilities (note 22)
Accrued pension benefit asset, included in other non-current assets
Net accrued pension liability
Consolidated statements of comprehensive income
Pension benefit expense, included in net finance expense (income)
Other comprehensive gains and accumulated other comprehensive losses
Actuarial losses recognized in other comprehensive income
Cumulative actuarial losses recognized in other comprehensive income
$
$
$
$
$
(6,139)
10
(6,129)
217
392
574
$
$
$
$
$
(6,673)
370
(6,303)
116
182
182
Annual Report 2020 | Stingray Group Inc. | 90
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The following summarizes the movements in the defined benefit pension plan balances:
Accrued benefit obligations
Balance, beginning of year
Assumed through business acquisition
Current service cost
Interest cost
Benefits paid
Actuarial losses (gains):
Impact of changes in financial assumptions
Impact of changes in experience adjustments
Balance, end of year
Plan assets
Fair value, beginning of year
Acquired through business acquisition
Interest income
Actuarial gains:
Return on plan assets, excluding interest income
Administrative expenses
Employee contributions
Benefits paid
Fair value, end of year
Net accrued pension asset (liability)
2020
Basic Plan
SRPAs
2019
Basic Plan
SRPAs
$
$
$
$
$
4,872
—
—
146
(338)
(265)
67
4,482
5,242
152
(524)
(40)
—
(338)
4,492
6,673
—
—
188
(788)
(177)
243
6,139
—
—
—
—
—
—
—
—
$
$
$
$
—
6,576
12
88
(2,040)
242
(6)
4,872
—
6,993
94
209
(14)
—
(2,040)
5,242
—
6,744
—
96
(322)
155
—
6,673
—
—
—
—
—
—
—
—
10
(6,139) $
370
(6,673)
The Corporation determined that there was no limit on the defined benefit asset (asset ceiling) because the Corporation
has unimpaired rights to the surplus in the Basic Plan and it has the right to take contribution holidays when available.
Employer contributions to the SRPAs are estimated to be $605 in 2021.
Pension benefit expense recognized in the consolidated statements of comprehensive income (loss) as net finance
expenses (income) is as follows:
Current service costs, net of employee contributions
Interest cost
Interest income on plan assets
Administrative expenses
Defined benefit plan expense
2020
Basic Plan
—
146
(152)
40
34
SRPAs
—
188
—
—
188
2019
Basic Plan
12
88
(94)
14
20
SRPAs
—
96
—
—
96
Actuarial gains and losses recognized in other comprehensive income are as follows:
Cumulative actuarial losses,
beginning of year
Recognized actuarial losses
during the year
Cumulative actuarial losses,
end of year
2020
2019
Basic Plan
SRPAs
Total
Basic Plan
SRPAs
Total
$
$
27
326
353
155
66
221
182
392
574
—
27
27
—
155
155
—
182
182
Annual Report 2020 | Stingray Group Inc. | 91
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The principal actuarial assumptions were as follows:
Discount rate for the accrued net benefit obligation
Future pension increases
2020
Basic Plan
3.5%
1.4%
SRPAs
3.5%
0.1%
2019
Basic Plan
3.1%
1.4%
SRPAs
3.1%
0.1%
As at March 31, 2020 and based on an actuarial review, the net remeasurement loss recorded in other comprehensive
income (loss) of $392 (2019 – $182) was primarily reflective of an increase in the estimated discount rate for both plans
and an actuarial loss on plan assets.
Plan assets for the Basic Plan consist of:
Equity funds
Fixed income funds
2020
65%
35%
100%
2019
65%
35%
100%
The pension plan has no direct investments in the Corporation nor any of its affiliates. Investments are diversified such that
the failure of any single investment would not have a material impact on the overall level of assets. The largest proportion
of assets is invested in equities, although there is 40% also invested in bonds and other highly liquid assets. All assets are
invested in funds where the underlying securities have quoted market prices in an active market. The Corporation believes
that equities offer the best returns over the long-term with an acceptable level of risk.
Since the benefit payments are adjusted to the Consumer Price Index, the pension plan is exposed to inflation. It is also
exposed to interest rate risks and changes in life expectancy of pensioners. A large portion of the plan assets consist of
equity securities, which are exposed to equity market risk.
SIGNIFICANT ESTIMATE
The cost of defined benefit pension plans and the present value of the net pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the
future. These include the determination of the discount rate, mortality rates and future salary and pension increases. Due
to the complexity of the valuation, the underlying assumptions and its long-term nature, the net pension obligation is highly
sensitive to changes in these assumptions. Management engages the services of external actuaries to assist in the
determination of the appropriate discount rate. Management, with the assistance of actuaries, determines the applicable
discount rates using the interest rates on high quality corporate bonds that have terms to maturity approximating the terms
related to the defined benefit obligation. The mortality rate is based on publicly available mortality tables. Future salary
increases and pension increases are based on expected future inflation rates.
Changes in assumptions of all plans would have resulted in an increase (decrease) in the net defined benefit obligation as
presented below:
Discount rate — change of 0.5%
Future pension costs — change of 1.0%
Life expectancy — change by 1 year
Change in assumption
Decrease
Increase
(398)
564
810
(457)
697
798
The sensitivity analysis above has been determined based on a method that extrapolates the impact on the net defined
benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.
The average duration of the defined benefit plan obligation at the end of the reporting period is 7.9 years.
Annual Report 2020 | Stingray Group Inc. | 92
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
24. SHARE CAPITAL
Authorized:
Unlimited number of subordinate voting shares, participating, without par value
Unlimited number of variable subordinate voting shares, participating, without par value
Unlimited number of multiple voting shares (10 votes per share), participating, without par value
Unlimited number of special shares, participating, without par value
Unlimited number of preferred shares issuable in one or more series, non-participating, without par value
Issued and outstanding:
The movements in share capital were as follows:
Year ended March 31, 2019
Subordinate voting shares and variable subordinate voting shares
As at March 31, 2018
Conversion of subscription receipts issued through a bought deal offering
Conversion of subscription receipts issued through a private placement
Equity element of NCC purchase price
Private placement
Exercise of stock options
Purchased and held in trust through employee share purchase plan
Share issuance costs, net of income taxes of $1,780
As at March 31, 2019
Multiple voting shares
As at March 31, 2018
Conversion of subscription receipts issued upon exercise of subscription rights
Issuance
As at March 31, 2019
Year ended March 31, 2020
Subordinate voting shares and variable subordinate voting shares
As at March 31, 2019
Exercise of stock options
Repurchased and cancelled
Purchased and held in trust through employee share purchase plan
As at March 31, 2020
Multiple voting shares
As at March 31, 2019 and 2020
Number of
shares
Carrying
amount
40,011,468
7,981,000
3,846,100
3,887,826
2,429,544
147,500
(7,033)
—
58,296,405
16,294,285
1,452,850
194,363
17,941,498
76,237,903
58,296,405
275,000
(2,957,799)
(5,650)
55,607,956
17,941,498
73,549,454
$
$
$
$
$
$
$
145,238
83,002
39,999
30,558
25,000
618
(28)
(4,899)
319,488
1,116
15,110
2,000
18,226
337,714
319,488
1,517
(16,823)
(42)
304,140
18,226
322,366
To comply with the Broadcasting Act and the regulations and directions promulgated thereunder from time to time, which
permit non-Canadians (as defined in the Direction to the CRTC (Ineligibility of Non-Canadians) (SOR/97-192)) to own and
control, directly or indirectly, up to 20% of the voting shares and 20% of the votes of an operating licensee that is a
corporation, such as the Corporation, the Corporation has imposed restrictions respecting the issuance, transfer and, if
Annual Report 2020 | Stingray Group Inc. | 93
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
applicable, voting of the Corporation’s shares. Restrictions include limitations over foreign ownership of the issued and
outstanding voting shares.
TRANSACTIONS FOR THE YEAR ENDED MARCH 31, 2020
During the period, 275,000 stock options were exercised and consequently, the Corporation issued 275,000 subordinate
voting shares. The proceeds amounted to $921. An amount of $596 of contributed surplus related to those stock options
was transferred to the subordinate voting shares’ account balance.
On February 5, 2020, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate
voting share, multiple voting share and subscription receipts. The dividend of $5,600 was paid on March 16, 2020.
On November 7, 2019, the Corporation declared a dividend of $0.07 per subordinate voting share, variable subordinate
voting share, multiple voting share and subscription receipts. The dividend of $5,317 was paid on December 13, 2019.
On August 6, 2019, the Corporation declared a dividend of $0.07 per subordinate voting share, variable subordinate voting
share, multiple voting share and subscription receipts. The dividend of $5,345 was paid on September 13, 2019.
On June 15, 2019, the Corporation paid a dividend of $4,956. The dividend was declared on March 29, 2019 and therefore
accrued in the consolidated statement of financial position as at March 31, 2019.
Share repurchase program
On August 14, 2019, the Toronto Stock Exchange (the "TSX") approved the implementation of a share repurchase
program, which took effect on August 16, 2019. This program allows the Corporation to repurchase up to an aggregate
2,924,220 subordinate voting shares and variable subordinate voting shares (collectively, the "Subordinate Shares"),
representing approximately 5% of the 58,484,449 Subordinate Shares issued and outstanding as at August 7, 2019. In
accordance with TSX requirements, the Corporation is entitled to purchase, on any trading day, up to a total of 16,004
Subordinate Shares, representing 25% of the net average daily trading volume of the Subordinate Shares for the six-month
period preceding August 1, 2019. When making such repurchases, the number of Subordinate Shares in circulation is
reduced and the proportionate interest of all remaining shareholders in the Corporation's share capital is increased on a
pro rata basis. All shares repurchased under the share repurchase program will be cancelled upon repurchase. The share
repurchase period will end no later than August 15, 2020.
On March 20, 2020, the Corporation has received approval of the TSX to amend its share repurchase program to increase
the maximum number of subordinate voting shares and variable subordinate voting shares from 2,924,220 Subordinate
Shares to 4,903,887 Subordinate Shares, representing approximately 10% of the public float of Subordinate Voting Shares
as at August 7, 2019. All other terms and conditions of the share repurchase program remain unchanged.
The following table summarizes the Corporation's share repurchase activities during the year ended March 31, 2020:
Subordinate voting shares repurchased for cancellation (unit)
Average price per share
Total repurchase cost
Repurchase resulting in a reduction of:
Share capital
Retained earnings (1)
(1) The excess of net repurchase cost over the average book value of the Subordinate voting shares.
2020
2,957,799
5.9573
17,621
16,823
798
$
$
$
$
Annual Report 2020 | Stingray Group Inc. | 94
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
TRANSACTIONS FOR THE YEAR ENDED MARCH 31, 2019
During the year, 147,500 stock options were exercised and consequently, the Corporation issued 147,500 subordinate
voting shares. The proceeds amounted to $339. An amount of $279 of contributed surplus related to those stock options
was transferred to the subordinate voting shares’ account balance.
On March 27, 2019, the Corporation declared a dividend of $0.065 per subordinate voting share, variable subordinate
voting share and multiple voting share, totalling $4,956 that will be payable on or around June 15, 2019. The dividend
payable is accrued in the consolidated statement of financial position as at March 31, 2019.
On February 6, 2019, the Corporation declared a dividend of $0.065 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend of $4,956 was paid on March 15, 2019.
On November 13, 2018, the Corporation completed a private placement with Irving West and issued from treasury
2,429,544 subordinate voting shares at a price of $10.29 per subordinate voting shares for total gross proceeds of $25,000.
On November 7, 2018, the Corporation declared a dividend of $0.06 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend of $4,571 was paid on December 14, 2018.
On October 26, 2018, concurrently with the closing of the acquisition of NCC (note 4), the holders of the outstanding
subscription receipts exercised their conversion rights and consequently the Corporation issued 11,827,100 subordinate
voting shares and 1,452,850 multiple voting shares for total gross proceeds of $138,111 and net proceeds of $133,191.
Additionally, the Corporation issued from treasury 3,887,826 subordinate voting shares at a price of $7.86 per subordinate
voting shares to finance the equity portion of the purchase price, equivalent to $30,558. On the same day, the Corporation
also issued 194,363 multiple voting shares at a price of $10.29 per multiple voting shares for gross proceeds of $2,000.
On August 7, 2018, the Corporation declared a dividend of $0.06 per subordinate voting share, variable subordinate voting
share, multiple voting share and subscription receipts. The dividend of $4,179 was paid on September 14, 2018, of which
an amount of $797 was paid with restricted cash.
On June 15, 2018, the Corporation paid a dividend of $3,097. The dividend was declared on March 29, 2018 and therefore
accrued in the consolidated statement of financial position as at March 31, 2018.
25. SUPPLEMENTAL CASH FLOW INFORMATION
Trade and other receivables
Inventories
Other current assets
Other non-current assets
Accounts payable and accrued liabilities
Deferred revenues
Income taxes payable
Other payables
2020
(2,531)
(607)
(809)
272
7
137
(1,134)
6,834
2,169
$
$
2019
1,319
304
(2,166)
300
(10,779)
(1,401)
(612)
8,976
(4,059)
$
$
Additions to property and equipment and intangible assets, excluding broadcast licences, not affecting cash and cash
equivalents amounted to $454 (2019 — $1,594) and $23 (2019 — $381), respectively, during the year ended
March 31, 2020.
Annual Report 2020 | Stingray Group Inc. | 95
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
26. SHARE-BASED COMPENSATION
STOCK OPTION PLAN
The Corporation has a stock option plan to attract and retain employees, directors, officers and consultants. The plan
provides for the granting of options to purchase subordinate voting shares. Under this plan, 10% of all multiple voting
shares, subordinate voting shares and variable subordinate voting shares issued and outstanding on a non-diluted basis is
reserved for issuance. The terms and conditions for acquiring and exercising options are set by the Board of Directors.
Unless otherwise determined by the Board of Directors, each option shall expire at the latest on the tenth anniversary of
the grant date. The total number of shares issued to a single person cannot exceed 10% of the Corporation’s total issued
and outstanding common shares on a fully diluted basis.
Under the stock option plan, 2,431,819 stock options were outstanding as at March 31, 2020 (2,104,100 as at
March 31, 2019). Outstanding options are subject to employee service vesting criteria which range from nil to four years
of service.
The following summarizes the changes in the plan’s position for the years ended March 31, 2020 and 2019:
2020
2019
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Options outstanding, beginning of year
Granted
Exercised (note 24)
Forfeited
Options outstanding, end of year
2,104,100 $
694,303
(275,000)
(91,584)
2,431,819
6.52
5.62
3.35
7.05
4.99
1,965,227 $
567,146
(147,500)
(280,773)
2,104,100
Exercisable options, end of year
1,045,604 $
6.59
985,950 $
5.99
8.56
2.30
7.91
6.52
5.30
The following is a summary of the information on the outstanding stock options as at March 31, 2020 and 2019:
Exercise price
March 31, 2020
$ 0.46
1.46
2.26
5.60
6.13
6.25
7.00
7.27
7.62
7.92
8.61
8.89
9.00
$ 4.99
Outstanding
options
Weighted average
outstanding
contractual life
outstanding (years)
Number of options
outstanding
45,000
25,000
45,731
672,374
21,929
287,880
25,000
311,047
482,850
43,698
433,746
21,008
16,556
2,431,819
2.17
3.63
4.40
6.18
6.85
5.15
5.36
6.21
7.23
8.60
8.19
7.41
6.89
6.55
Exercisable
options
Number
45,000
25,000
45,731
—
—
287,880
25,000
233,285
241,425
10,925
108,437
10,504
12,417
1,045,604
Annual Report 2020 | Stingray Group Inc. | 96
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Exercise price
March 31, 2019
$ 0.46
1.46
2.26
6.25
7.00
7.27
7.62
7.92
8.61
8.89
9.00
$ 6.52
Outstanding
options
Weighted average
outstanding
contractual life
outstanding (years)
Number of options
outstanding
45,000
25,000
245,731
362,880
100,000
327,631
482,850
43,698
433,746
21,008
16,556
2,104,100
3.18
4.63
5.69
6.12
6.36
8.21
8.23
9.61
9.20
8.42
7.90
7.40
Exercisable
options
Number
45,000
25,000
245,731
297,160
75,000
163,816
120,713
—
—
5,252
8,278
985,950
The weighted average fair value of the stock options granted during the year ended March 31, 2020 was $0.96 per stock
option (2019 — $1.91). This fair value was estimated at the date on which the options were granted by using the
Black-Scholes option pricing model with the following assumptions:
2020
2019
Weighted average volatility
Weighted average risk-free interest rate
Weighted average expected life of options
Weighted average value of the subordinate voting share at grant date
Weighted average expected dividend rate
30%
1.34%
5 years
$5.60 — $6.13
4.24% — 4.57%
30%
2.14% — 2.46%
5 years
$7.92 — $8.61
2.56% — 2.78%
The weighted average volatility used is calculated based on the Corporation’s historical volatility.
Total share-based compensation costs recognized under this stock option plan amount to $828 for the year ended
March 31, 2020 (2019 — $1,072).
The weighted average share price at the date of exercise for share options exercised during the year ended March 31, 2020
was $6.49 (2019 — $7.64).
EMPLOYEE SHARE PURCHASE PLAN
The Corporation has an employee share purchase plan (“ESPP”) to attract and retain employees. Under this plan, eligible
employees, including certain key management personnel, are permitted to contribute up to a maximum of 6% of their
eligible earnings to purchase the Corporation’s subordinate voting shares and variable subordinate voting shares. Subject
to certain conditions, the Corporation will match a percentage of the employee’s contributions up to a maximum of 2% of
the employee’s eligible earnings and the shares purchased with the Corporation’s contributions become vested on
January 31st of the following year. All contributions are used by the plan’s trustee to purchase subordinate voting shares
and variable subordinate voting shares in the open market, on behalf of employees.
Annual Report 2020 | Stingray Group Inc. | 97
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The following summarizes the changes in the plan’s position for the year ended March 31, 2020 and 2019:
2020
Number of
units
Amount
2019
Number of
units
Unvested contributions, beginning of year
Contributions
Dividend credited
Vested
Unvested contributions, end of year
13,044 $
54,976
2,325
(51,651)
18,694 $
88
369
14
(341)
130
6,011 $
25,890
534
(19,391)
13,044 $
Amount
60
199
7
(178)
88
The weighted average fair value of the shares contributed during the year ended March 31, 2020 was $6.64
(2019 — $7.80).
Total share-based compensation costs recognized under the ESPP amount to $173 for the year ended March 31, 2020
(2019 — $140).
PERFORMANCE SHARE UNIT PLAN
The Corporation has a performance unit plan (“PSU”) that can be granted to directors, officers, executives and employees
as part of their long-term compensation package, which is expected to be settled in cash. The value of the payout is
determined by multiplying the number of PSU vested at the payout date by the volume weighted average price of the
Corporation’s shares on the last five trading days immediately preceding the vesting date. The fair value of the payout is
determined at each reporting date based on the fair value of the Corporation’s shares at the reporting date. The fair value
is amortized over the vesting period, being three years.
During the year ended March 31, 2020, 621,656 PSU (2019 — 528,440) were granted at a range of $5.17 to $6.51
(2019 — $6.35 to $9.20) per unit to executives and employees and no outstanding PSU were vested. As at March 31, 2020,
the fair value per unit was $3.52 (2019 — $7.31) for a total amount of $2,894 (2019 — $2,612) and was presented in
accrued liabilities on the consolidated statements of financial position.
The following summarizes the changes in the plan’s position for the years ended March 31, 2020 and 2019:
Balance, beginning of year
Granted
Expense and revision of estimates
Liabilities settled
Forfeited
Balance, end of year
Balance, vested
2020
Number of
units
774,854 $
621,656
—
(126,173)
(84,068)
1,186,269 $
—
Amount
2,612
—
1,492
(993)
(217)
2,894
—
2019
Number of
units
Amount
284,480 $
528,440
—
—
(38,066)
774,854 $
—
1,244
—
1,421
—
(53)
2,612
—
Total share-based compensation costs recognized under the PSU plan amount to $1,259 for the year ended March 31,
2020 (2019 — $1,368).
Annual Report 2020 | Stingray Group Inc. | 98
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
DEFERRED SHARE UNIT PLAN
The Corporation has a deferred share unit plan (“DSU”) that can be granted to directors, officers and employees as part
of their compensation package, which is expected to be settled in cash. The value of the payout is determined by
multiplying the number of DSU vested at the payout date by the fair value of the Corporation’s shares on the day prior to
the payout date. The fair value of the payout is determined at each reporting date based on the fair value of the
Corporation’s shares at the reporting date.
During the year ended March 31, 2020, 187,602 DSU (2019 — 88,487) were granted at a range of $5.15 to $7.30 per unit
to directors (2019 — $6.29 to $9.19) and 458,458 DSU were vested. The total expense related to DSU plans amounted to
$514 in 2020 (2019 — nil). As at March 31, 2020, the fair value per unit ranged from $3.99 to $4.00 (2019 — $6.98 to $7.01)
for a total amount, including fringes, of $1,948 (2019 — $2,004) presented in accrued liabilities on the statements of
financial position.
The following summarizes the changes in the plan’s position for the years ended March 31, 2020 and 2019:
Balance, beginning of year
Granted and vested
Liabilities settled
Revision of estimates
Balance, end of year
Balance, vested
27. COMMITMENTS
2020
Number of
units
Amount
2019
Number of
units
Amount
270,856 $
187,602
—
—
458,458 $
458,458 $
2,004
1,169
—
(1,225)
1,948
1,948
182,369 $
88,487
—
—
270,856 $
270,856 $
2,004
718
—
(718)
2,004
2,004
The following table is a summary of the Corporation’s operating obligations as at March 31, 2020 that are due in each of
the next five years and thereafter.
2021
2022
2023
2024
2025
2026 and thereafter
OPERATING OBLIGATIONS
Operating
obligations
$
$
3,044
635
325
325
170
373
4,872
The Corporation’s significant operating obligations are for licensing and other long-term contracts that do not meet the
definition of a lease under IFRS 16. The Corporation must also pay royalties for the use of music for the majority of its
music services. Through copyright collective societies, the Corporation pays royalties to two sets of rights holders: rights
holders in music works, which are the music and the lyrics; and, rights holders in artists’ performances and sounds
recordings, which are the actual performances and recordings of the musical works.
Annual Report 2020 | Stingray Group Inc. | 99
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
BROADCAST LICENCES
A condition of the broadcast licences owned by the Corporation is to commit to fund Canadian Content Development
(“CCD”) over the initial term of the licences, which is usually 7 years.
28. USE OF ESTIMATES AND JUDGMENTS
The preparation of these consolidated financial statements in conformity with International Financial Reporting Standards
(“IFRS”) requires management to make judgments, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which
are more likely to be materially adjusted due to estimates and assumptions differing from actual outcomes. Detailed
information about each of these estimates and judgments is included in notes 4 to 27 together with information about the
basis of calculation for each affected line item in the consolidated financial statements.
SIGNIFICANT ESTIMATES
The areas involving significant estimates are:
Estimation of current income tax payable and current income tax expense — note 10
Recognition of deferred tax assets for tax losses available for carry-forward — note 10
Estimation of cost of defined benefit pension plans and present value of the net pension obligation — note 23
Estimated fair value of certain investments — note 17
Estimated value in use and/or fair value less costs to sell of CGUs used in goodwill and broadcasting licences
impairment testing — note 16
Estimation of fair value of identified assets, liabilities and contingent consideration recorded in business
acquisitions — notes 4 and 22
Estimation of lease term of contracts with renewal options – notes 14 and 21
Estimates are based on management’s best knowledge of current events and actions that the Corporation may undertake
in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting
estimates are recognized in the year in which the estimates are revised and in any future years affected by these revisions.
CRITICAL JUDGMENTS
Critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the
consolidated financial statements include the following:
Impairment of non-current assets
For the purpose of impairment testing of property and equipment, intangible assets, broadcast licences and
goodwill, management must use its judgment to identify the smallest group of assets that generates cash inflows
that are largely independent of those from other assets (“cash generating unit” or ”CGU”).
The amounts used for impairment calculations are based on estimates of future cash flows of the Corporation,
including estimates of future revenues, operating costs, discount rates and market prices. By their nature, these
estimates and assumptions are subject to measurement uncertainty and, consequently, actual results could differ
Annual Report 2020 | Stingray Group Inc. | 100
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
from estimates used. The impact of COVID-19 on the Corporation was also considered in calculating the future
cash flows. Depending on the measures taken by the federal and provincial authorities to slow or stop the spread
of COVID-19, such as the closure of non-essential businesses and social distancing, actual results could differ
materially from estimates used.
Useful lives of broadcast licences
The Corporation has concluded that broadcast licences are indefinite life intangible assets because they are
renewed every seven years without significant cost and there is a low likelihood of the renewal being denied.
Identifying a business acquisition
Management must use its judgment in determining whether a transaction is a business combination or a purchase
of assets in accordance with the criteria established in IFRS 3 Business combinations. The acquisition of an asset
or a group of assets that constitute a business is accounted for as a business combination and may give rise to
goodwill, whereas an asset purchase does not, thereby impacting subsequent amortization expense and/or
impairment testing results.
Recognition of internally developed intangible assets
Management must use its judgment in determining whether an internally developed intangible asset qualifies for
recognition, such as, but not limited to, assessing the technological feasibility of a project and determining the
appropriate internal costs to be capitalized. This exercise requires management to distinguish between the costs
necessary to generate an intangible asset from the costs necessary to maintain it. Recognition of an internally
developed intangible asset would lead to an increase of amortization expense as the opposite would lead to an
increase in research and development costs.
Judgment is also involved in determining the estimated useful life of an internally developed intangible asset.
Increasing an asset’s estimated useful life would result in a decrease of the annual amortization expense.
Lease term of contracts with renewal options
The Corporation determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an
option to terminate the lease, if it is reasonably certain not to be exercised. After the commencement date, the
Corporation reassesses the lease term for whether significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business
strategy) has occurred.
29. FINANCIAL INSTRUMENTS
FAIR VALUES
The Corporation has determined that the carrying amount of cash and cash equivalents, trade and other receivables,
accounts payable and accrued liabilities and current other liabilities excluding the contingent consideration is a reasonable
approximation of their fair value due to the short-term maturity of those instruments. As such information on their fair values
is not presented below. The fair value of the credit facility bearing interest at variable rates approximates its carrying value,
as it bears interest at prime or banker’s acceptance rates plus a credit spread which approximate current rates that could
be obtained for debts with similar terms and credit risk. The fair value of the subordinated debt approximates its carrying
value as its interest rate approximates current rates that could be obtained for debts with similar terms and credit risk. The
carrying amount of CRTC tangible benefits and balance payable on business acquisitions is a reasonable approximation
of their fair value as they are discounted using the effective interest rate, which approximate current rates that could be
Annual Report 2020 | Stingray Group Inc. | 101
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
obtained with similar terms and credit risk. The tables below summarize the carrying and fair value of financial assets and
liabilities, including their level in the fair value hierarchy, as at March 31, 2020 and 2019. The Corporation uses the following
hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:
Level 1:
quoted price (unadjusted) in active markets for identical assets or liabilities;
Level 2 :
other techniques for which all inputs that have a significant effect in the
recorded value are observable, either directly or indirectly; and
Level 3 :
Techniques which uses inputs that have a significant effect on the recorded
fair value that are not based on observable market data.
As at March 31, 2020
Carrying value
Fair value
Level 1
Level 2
Level 3
Financial assets measured at amortized cost
Cash and cash equivalents
Trade and other receivables
$
2,512
68,620
Financial assets measured at fair value
Investments
Financial liabilities measured at
amortized cost
$
23,548
$
23,548 $
— $
— $ 23,548
Credit facility
Subordinated debt
Accounts payable and accrued liabilities
CRTC tangible benefits and post-employment
$
benefit obligations
Balance payable on business acquisitions
Financial liabilities measured at fair value
Contingent consideration
Derivative financial instruments
324,123
39,640
58,085
32,833
784
$
17,831
18,698
$
17,831 $
18,698
— $
—
— $ 17,831
—
18,698
As at March 31, 2019
Carrying value
Fair value
Level 1
Level 2
Level 3
Financial assets measured at amortized cost
Cash and cash equivalents
Trade and other receivables
Financial assets measured at fair value
Investments
Financial liabilities measured at
amortized cost
Credit facility
Subordinated debt
Accounts payable and accrued liabilities
CRTC tangible benefits and post-employment
benefit obligations
Balance payable on business acquisitions
Financial liabilities measured at fair value
Contingent consideration
Derivative financial instruments
$
4,673
66,674
$
16,998
$
16,998 $
— $
— $ 16,998
$
$
312,955
49,539
59,674
38,470
3,359
12,430
2,998
$
12,430 $
2,998
— $
—
— $ 12,430
—
2,998
Annual Report 2020 | Stingray Group Inc. | 102
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Fair value measurement (Level 3):
Balance as at March 31, 2018
Additions through business acquisitions
Addition through asset acquisition
Change in fair value
Settlements
Balance as at March 31, 2019
Change in fair value
Addition through asset acquisition
Settlements
Balance as at March 31, 2020
INVESTMENTS
Investments
Contingent
consideration
$
$
$
15,533 $
—
900
565
—
16,998 $
6,550
—
—
23,548 $
15,596
4,491
—
534
(8,191)
12,430
1,652
7,344
(3,595)
17,831
The fair value of the equity instrument in a private entity, AppDirect, was estimated using the market approach.
For the year ended March 31, 2019, the fair value has been measured by using the valuation from the most recent financing
round, minus a liquidity discount of 25%. During the year ended March 31, 2020, the Corporation revaluated the fair value
of its investment and consequently a gain of US$3,918 ($5,089) was recognized as part of the change in fair value through
profit and loss. The fair value was measured by using the latest external equity transaction, minus a liquidity discount of
15%. The liquidity discount was used to reflect the marketability of the asset. In measuring fair value, management used
the best information available in the circumstances and also an approach that it believes market participants would use.
For the years ended March 31, 2020 and 2019, the equity instrument in a private entity is classified as a financial asset at
fair value through profit and loss. A change of 5% in the liquidity discount would have increased / decreased the fair value
of the investment by approximately $1,332 and $1,073 during the years ended March 31, 2020 and 2019, respectively.
CONTINGENT CONSIDERATION
The contingent consideration related to business combinations is payable based on the achievement of targets for growth
in revenues for a period from the date of the acquisition and upon renewal of client contracts. The fair value measurement
of the contingent consideration is determined using unobservable (Level 3) inputs. These inputs include (i) the estimated
amount and timing of projected cash flows; and (ii) the risk-adjusted discount rate used to present value the cash flows
which is based on the risk associated with the revenue targets being met. If projected cash flows were 10% higher, the fair
value would have increased by $1,569 and if projected cash flows were 10% lower, the fair value would have decreased
by $1,569. Discount rates ranging from 18% to 36% have been applied and consider the time value of money. A change
in the discount rate by 100 basis points would have increased / decreased the fair value by $107.
The contingent consideration is classified as a financial liability and is included in other payables (note 22). The change in
fair value is recognized in net finance expense (income) (note 8).
CREDIT RISK
Credit risk is the risk of an unexpected financial loss to the Corporation if a customer or counterparty to a financial
instrument fails to meet contractual obligations, and it arises primarily from the Corporation's trade and other receivables.
The Corporation’s credit risk is principally attributable to its trade receivables. The amounts presented in the consolidated
statements of financial position are net of an allowance for expected credit risk, estimated by the Corporation’s
management and based, in part, on the age of the specific receivable balance and the current and expected collection
trends. The Corporation's exposure to credit risk is mainly influenced by the characteristics of each customer. Generally,
Annual Report 2020 | Stingray Group Inc. | 103
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
the Corporation does not require collateral or other security from customers for trade receivables; however, credit is
extended following an evaluation of creditworthiness. In addition, the Corporation performs ongoing credit reviews of its
customers.
During these unprecedented market challenges as a result of COVID-19, collection of accounts receivable remains a
priority of the Corporation. A substantial portion of the Corporation's accounts receivable are subject to normal industry
credit risks. As at March 31, 2020, there was no counterparty whose accounts receivable individually accounted
for more than 10% of the total accounts receivable balance.
An allowance for expected credit losses is maintained to reflect an impairment risk for trade accounts receivable based on
an expected credit loss model which factors in changes in credit quality since the initial recognition of trade accounts
receivable based on customer risk categories. Bad debts are also provided for based on collection history and specific
risks identified on a customer-by-customer basis.
The aging of trade receivable balances and the allowance for doubtful accounts as at March 31, 2020 and March 31, 2019
were as follows:
Current
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 90 days
Total trade receivables
Less : allowance for expected credit losses
2020
31,446
13,196
6,577
8,510
7,377
67,106
2,401
64,705
$
$
$
$
The movement in the allowance for expected credit losses in respect of trade receivables was as follows:
Balance, beginning of year
Addition through business acquisitions
Bad debt expense
Write-off against reserve
Balance, end of year
2020
1,980
—
933
(512)
2,401
$
$
2019
30,687
12,006
6,008
4,418
11,694
64,813
1,980
62,833
2019
566
960
794
(340)
$
$
1,980
The Corporation also has credit risk relating to cash and cash equivalents and other receivables. The Corporation manages
its risk by transacting only with sound financial institutions.
The carrying amounts of financial assets in the consolidated statements of financial position represent the Corporation's
maximum credit exposure.
LIQUIDITY RISK
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they become due. The
Corporation manages liquidity risk by continuously monitoring actual and budgeted cash flows under both normal and
stressed conditions. The Board of Directors also reviews and approves the Corporation’s operating and capital budgets,
as well as any material transactions out of the ordinary course of business, including proposals on mergers, acquisitions
or other major investments or divestitures.
The unprecedented market challenges as a result of COVID-19 may adversely affect the Corporation’s liquidity. In the early
days of the crisis, the decision was made by the Corporation’s management to implement significant cost saving measures
Annual Report 2020 | Stingray Group Inc. | 104
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
to maintain a solid financial position. Subsequent to March 31, 2020, the Corporation also obtained an additional term loan
in the amount of $20,000 (refer to note 3 for further information). The Corporation’s focus remains to closely monitor its
cash position and control its operating expenses.
The following are the contractual maturities of financial liabilities including estimated interest payments as at
March 31, 2020:
Credit facility
Subordinated debt
Accounts payables and
accrued liabilities
Other liabilities
MARKET RISK
Total carrying
amount
Contractual
cash flows
Less than 1
year
1 to 5 years
More than 5
years
$
324,123
39,640
$ 325,630
40,000
$
15,000
—
$ 310,630
40,000
$
—
—
62,101
81,281
62,101
87,415
62,101
27,682
—
33,464
—
24,803
Market risk is the risk that the changes in market prices, such as foreign exchange rates, interest rates and equity prices,
will affect the Corporation's earnings or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposure within acceptable parameters, while optimizing the return on
risk.
CURRENCY RISK
The Corporation is exposed to currency risk on sales and expenses that are denominated in currencies other than the
functional currency of the Corporation’s subsidiaries, primarily the US dollar (“USD”) and the euro (“EURO”). Also,
additional earnings variability arises from the translation of monetary assets and liabilities denominated in currencies other
than the functional currency of the Corporation’s subsidiaries at the rate of exchange at each balance sheet date, the
impact of which is reported as a foreign exchange gain or loss in the consolidated statements of comprehensive income
(loss).
The Corporation's objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash
flows, by transacting with third parties in the above currencies to the maximum extent possible and practical, given that
this will act as natural economic hedges for each of these currencies.
The Corporation's exposure to currency risk on its consolidated financial statements was as follows:
Cash and cash equivalents
Trade receivables
Investments
Credit facility
Accounts payable and accrued liabilities
Contingent consideration and
balance payable on business acquisitions
Net balance exposure
Equivalent in Canadian dollars
March 31, 2020
USD
EURO
March 31, 2019
USD
EURO
327
9,286
15,964
(9,500)
(1,460)
(2,070)
12,547
17,800
852
6,112
—
(6,000)
(4,534)
(3,415)
(6,985)
(10,885)
794
11,562
12,046
(4,500)
(1,347)
(5,089)
13,466
17,995
1,238
7,116
—
(7,200)
(2,524)
(3,356)
(4,726)
(7,090)
Annual Report 2020 | Stingray Group Inc. | 105
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
To manage its currency risk, during the year ended March 31, 2020, the Corporation entered foreign exchange forward
contracts. The table below summarize the foreign exchange forward contracts effective as at March 31, 2020:
Maturity
0 to 12 months
Contract
exchange
rate
Type
Contractual
amount
Mark-to-market
liabilities as at
March 31,
2020
USD Sale
1.3909
$
24,000 $
366
Given the Corporation did not elect to apply hedge accounting, the mark-to market losses related to these foreign exchange
forward contracts amounted to $366 was booked in net finance expense (income).
The following exchange rates are those applicable to the following periods and dates:
2020
2019
Average
Reporting
Average
Reporting
USD per CAD
EURO per CAD
1.3953
1.5417
1.4187
1.5584
1.3343
1.5090
1.3363
1.5002
Based on the Corporation’s foreign currency exposures noted above, varying the above foreign exchange rates to reflect
a 5% strengthening of the US dollar and EURO would have the following impacts on net income (loss), assuming that all
other variables remained constant:
Decrease (increase) in net loss
Increase (decrease) in net income
—
890
—
(545)
919
—
(334)
—
March 31, 2020
USD
EURO
March 31, 2019
USD
EURO
An assumed 5% weakening of the foreign currency would have had an equal but opposite effect on the basis that all other
variables remained constant.
INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
market interest rates. The Corporation holds the majority of its cash and cash equivalents balance in accounts bearing
interest at rates less than 1.25%. The Corporation is, therefore, not materially exposed to future cash flow fluctuations
coming from changes in market interest rates for its cash and cash equivalents. Cash equivalents consist of term deposits
with original maturities of less than three months and are, therefore, also exposed to interest rate risk on fair value. However,
fair value risk is not significant, considering the relatively short term to maturity of these instruments.
The credit facility is a variable interest rate instrument that is due in more than one year. This instrument is exposed to
changes in future interest rates that could result in future cash flow fluctuations. To manage its interest rate risk, the
Corporation entered into interest rate swap agreements.
Annual Report 2020 | Stingray Group Inc. | 106
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The table below summarize the interest rate contracts effective as at March 31, 2020:
Maturity
Swaps
October 25, 2024
October 25, 2024
October 25, 2024
October 25, 2024
August 29, 2029
August 31, 2029
Swaptions
October 25, 2024
October 25, 2024
Currency
Fixed interest rate
(when applicable)
Initial nominal value
Mark-to-market liabilities as
at March 31, 2020
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
0.81%
1.33%
2.19%
2.29%
1.73%
1.73%
—
—
$
$
50,000
50,000
50,000
50,000
40,000
60,000
300,000
100,000
100,000
200,000
$
$
$
1,349
904
1,164
2,912
2,098
2,963
11,390
3,064
3,878
6,942
18,332
Given the Corporation did not elect to apply hedge accounting, the mark-to-market losses related to these interest rate
swap agreements amounted to $15,334 was recorded in net finance expense (income).
30. CAPITAL MANAGEMENT
The Corporation’s objectives when managing capital are as follows:
Pursue its growth strategy through acquisitions and organic growth by maintaining financial flexibility; and
Provide the Corporation’s shareholders with an appropriate return on their investment.
For capital management, the Corporation has defined its capital as the combination of net debt and total equity.
Total managed capital is as follows:
Contingent consideration, including current portion
Balance payable on business acquisitions, including current portion
Credit facility
Cash and cash equivalents
Net debt, including contingent consideration and
balance payable on business acquisition
Total equity
2020
17,831
784
324,123
(2,512)
340,226
273,896
614,122
$
$
2019
12,430
3,359
312,955
(4,673)
324,071
287,535
611,606
$
$
The Corporation’s financing strategy is to maintain a flexible structure, to respond adequately to the changes in economic
conditions and to allow growth through business acquisitions. The Corporation monitors its capital structure using the net
debt to adjusted EBITDA ratio.
In order to maintain or adjust the capital structure, the Corporation may adjust the amount of dividends paid to shareholders
of the Corporation, issue or repay debt, issue shares or undertake any other activities as deemed appropriate under the
specific circumstances, on a quarterly basis.
Annual Report 2020 | Stingray Group Inc. | 107
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
31. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND RELATED PARTIES
KEY MANAGEMENT PERSONNEL
The key management personnel of the Corporation are the Chief Executive Officer, Chief Financial Officer and other key
employees of the Corporation.
Key management personnel compensation and director’s fees are as follows:
Short-term employee benefits
Share-based compensation
Restricted and performance share units
Deferred share units
RELATED PARTIES
2020
3,568
783
208
514
5,073
$
$
2019
4,497
630
811
—
5,938
$
$
Related parties of the Corporation include Directors and key management personnel, their family members and companies
over which they have significant influence or control. The Corporation has transacted with related parties during the
reporting period. These transactions are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties having normal trade terms.
During the year ended March 31, 2020, the Corporation recognized revenues amounted to $664 (2019 — $610) for
advertising sold to companies controlled by directors of the Corporation.
32. BASIS OF PREPARATION
A) STATEMENT OF COMPLIANCE
The consolidated financial statements of the Corporation have been prepared in accordance with IFRS as issued by
the International Accounting Standards Board (''IASB'').
The consolidated financial statements were authorized for issue by the Board of Directors on June 3, 2020.
B) BASIS OF MEASUREMENT
The consolidated financial statements have been prepared on the historical cost basis, except for the following:
Contingent consideration payable which is measured at fair value at each reporting period in accordance with
IFRS 3;
Investments measured at fair value at year-end in accordance with IFRS 9;
Cost of defined benefit pension plans and present value of the net pension obligation measured at fair value in
accordance with IAS 19;
Liabilities related to deferred share unit plan, restricted share unit and performance share unit plan measured at
fair value at year-end in accordance with IFRS 2;
Equity stock options which are measured at fair value at date of grant pursuant to IFRS 2; and
Assets and liabilities acquired in business combinations are measured at fair value at acquisition date.
Annual Report 2020 | Stingray Group Inc. | 108
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
C) FOREIGN CURRENCY TRANSLATION
FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the subsidiaries are measured using the currency of the primary
economic environment in which the subsidiary operates (‘the functional currency’). The consolidated financial
statements are presented in Canadian dollars, which is the Corporation’s functional and presentation currency. All
financial information presented in Canadian dollars has been rounded to the nearest thousand.
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are
recognized in profit or loss. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction. Foreign currency gains and losses are reported on
a net basis.
SUBSIDIARIES
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
income and expenses for each statement of profit or loss and statement of comprehensive income are
translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of
the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of
the transactions); and
all resulting exchange differences are recognized in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and are translated at the closing rate.
33. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all years presented in these consolidated financial
statements and have been applied consistently by the Corporation’s subsidiaries.
(A) BASIS OF CONSOLIDATION
BUSINESS COMBINATIONS
The Corporation measures goodwill as the excess of the fair value of the consideration transferred which includes the
fair value of contingent consideration, over the net recognized amount (generally fair value) of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain
purchase gain is recognized immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Corporation incurs
in connection with a business combination are expensed as incurred.
Annual Report 2020 | Stingray Group Inc. | 109
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
SUBSIDIARIES
Subsidiaries are entities controlled by the Corporation. The Corporation controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
These consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries,
Stingray Music USA Inc., Stingray Music Rights Management LLC, 2144286 Ontario Inc., 4445694 Canada Inc., Pay
Audio Services Limited Partnership, Music Choice Europe Limited, Stingray Digital International Ltd., Stingray Europe
B.V., Transmedia Communications SA, Think inside the box LLC (Nature Vision TV), SBA Music PTY Ltd., Stingray
Music, S.A. de C.V., Novramedia Inc., DJ Matic NV, Stingray Radio Inc. (formerly Newfoundland Capital Corporation
Limited) and Chatter Research Inc., and all of these entities’ wholly-owned subsidiaries.
INVESTMENT IN AN ASSOCIATE
An associate is an entity over which the Corporation has significant influence. The Corporation has significant influence
when it has the power to participate in the financial and operating policy decisions of the investee but does not have
control or joint control. The Corporation accounts for its investment in an associate using the equity method. Under
the equity method, the investment is initially recognized at cost. Subsequent to initial recognition, the consolidated
financial statements include the Corporation’s share of the earnings and losses of the associate until the date
significant influence ceases. Distributions received from an associate reduce the carrying amount of the investment.
The consolidated statements of comprehensive income (loss) include the Corporations’ share of any amounts
recognized by its associate in other comprehensive income, if any. Intercompany balances between the Corporation
and its associate are not eliminated.
INTEREST IN JOINT VENTURE
A joint venture is an arrangement whereby the Corporation and other parties that have joint control of the arrangement
have rights to the net assets of the arrangement.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements.
(B) FINANCIAL INSTRUMENTS
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Corporation initially recognizes financial assets on the trade date at which the Corporation becomes a party to the
contractual provisions of the instrument.
On initial recognition, the Corporation classifies its financial assets as subsequently measured at either amortized cost
or fair value, depending on its business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets. If the financial asset is not subsequently accounted for at fair value through profit
or loss, then the initial measurement includes transaction costs that are directly attributable to the asset’s acquisition
or origination.
Financial assets measured at amortized cost
A financial asset is measured at amortized cost if both of the following conditions are met and is not designated as at
fair value through profit and loss:
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Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
The asset is held within a business model whose objective is to hold the asset in order to collect contractual
cash flows.
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
The Corporation currently classifies its cash and cash equivalents and trade and other receivables as financial assets
measured at amortized cost.
Financial assets measured at fair value
All equity investments and other financial assets that do not meet the conditions to be classified as financial assets
measured at amortized cost are measured at fair value through profit and loss.
Changes therein, including any interest or dividend income, are recognized in profit or loss.
The Corporation’s investments are classified as financial assets measured at fair value through profit and loss.
The Corporation derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and
rewards of ownership of the financial asset are transferred, or it neither transfers not retains substantially all of the
risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such
derecognized financial assets that is created or retained by the Corporation is recognized as a separate asset or
liability.
Financial liabilities
The Corporation initially recognizes debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognized initially on the trade date at which the Corporation becomes a
party to the contractual provisions of the instruments.
Financial liabilities are initially measured at fair value. If the financial liabilities are not subsequently accounted for at
fair value through profit or loss, then the initial measurement includes directly attributable transaction costs.
The Corporation classifies all financial liabilities at amortized cost using the effective interest method, except for
contingent consideration recorded at fair value through profit and loss and financial liabilities designated at fair value
through profit or loss when doing so results in more relevant information. Such liabilities shall be subsequently
measured at fair value.
The Corporation derecognizes a financial liability when its contractual obligations are discharged or cancelled or
expire.
Financial assets and liabilities are offset and the net amount presented in the consolidated statements of financial
position when, and only when, the Corporation has a legal right to offset the amounts and intends either to settle on a
net basis or to realize the asset and settle the liability simultaneously.
Derivative financial instruments
The Corporation use derivative financial instruments to manage its interest rate risk on its credit facility and does not
use these instruments for speculative or trading purposes. The Corporation does not apply hedge accounting and
therefore mark-to-market gains or losses are recognized in net finance expense (income).
Annual Report 2020 | Stingray Group Inc. | 111
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
IMPAIRMENT OF FINANCIAL ASSETS
The Corporation recognizes loss allowances for expected credit losses on financial assets measured at amortized
cost. With respect to certain categories of financial assets, such as trade and other receivables, assets that are not
individually determined to be impaired are measured for impairment on an aggregate basis. Objective evidence of
impairment in the trade and other receivables portfolio may include the Corporation's past experience with debt
recovery, an increased number of days exceeding payment terms in the portfolio, as well as a change - internationally
or nationally - in economic conditions correlating with default payments in trade and other receivables.
If there is objective evidence that an impairment loss on financial assets measured at amortized cost has been incurred,
the amount of the loss is measured as an amount equal to the lifetime expected credit losses. The amount of the loss
is recognized in profit or loss.
If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the
previously recognized impairment loss is reversed. The reversal is recognized to the extent of the improvement without
exceeding what the amortized cost would have been had the impairment not been recognized at the date the
impairment is reversed. The amount of the reversal is recognized in profit or loss.
(C) REVENUE RECOGNITION
CONTRACTS WITH CUSTOMERS
The Corporation records revenues from contracts with customers in accordance with the five steps in IFRS 15
Contracts with customers as follows:
1)
2)
Identify the contract with a customer;
Identify the performance obligations in the contract;
3) Determine the transaction price, which is the total consideration provided by the customer;
4) Allocate the transaction price among the performance obligations in the contract based on their relative fair
values; and
5) Recognize revenues when the relevant criteria are met for each performance obligation.
Revenues are measured based on the value of the expected consideration in a contract with a customer and are
recognized when control of a product or service is transferred to a customer.
A contract asset is recognized in the consolidated statement of financial position when revenues are earned without
having been invoiced. Contract assets are presented in “Other current assets”. A contract liability is recognized when
the Corporation has received consideration in advance of the transfer of products or services to a customer.
Broadcasting and commercial music segment
The Broadcasting and commercial music segment specializes in the broadcast of music and videos on multiple
platforms and digital signage experiences and generates revenues from subscriptions or contracts.
Subscriptions
The Corporation recognize revenues related to continuous music and video distribution over time, as the customer
receives and consumes the benefits of the music supply at the same time it is broadcasted. On-demand products,
primarily music and concerts services, are also recognized over time as the customer receives and consumes the
benefits of the on-demand product at the same time it is broadcasted. The Corporation records contract liabilities
when customers pay their subscription fees in advance.
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Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Media solutions
For media solutions projects, mainly bundled arrangements, the Corporation accounts for individual products and
services when they are separately identifiable, and the customer can benefit from the product or service on its own or
with other readily available resources. The total arrangement consideration is allocated to each product or service on
its own or with other readily available resources based on its stand-alone selling price.
The Corporation generally determines stand-alone selling prices based on the observable prices for products sold
separately without a service contract, adjusted for market conditions and other factors, as appropriate. When similar
products and services are not sold separately, the Corporation uses the expected cost plus margin approach to
determine stand-alone selling prices. The Corporation recognizes revenues for each individual product or service,
when the related performance obligations are satisfied, which is usually at a point in time for sale of equipment and
over time for music related services.
Radio segment
The radio segment operates radio stations across Canada and generates revenues from advertising. Advertising
revenues are recognized at a point in time when the advertising airs on the Corporation’s radio stations. Revenues are
recorded net of any agency commissions as these charges are paid directly to the agency by the advertiser.
(D) RESEARCH AND DEVELOPMENT
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognized in profit or loss as incurred.
Development costs, net of tax credits, are recognized in profit or loss as incurred, unless the costs can be measured
reliably, the product or process is technically feasible, future economic benefits are probable and the Corporation
intends to and has sufficient resources to complete the development and to use or sell the asset. In such a case, costs
are recognized as internally developed intangible assets (see (m) intangible assets).
(E) GOVERNMENT GRANTS
Investment tax credits are accounted for as a reduction of the research and development costs during the year in
which the costs are incurred, provided that there is reasonable assurance that the Corporation has met the
requirements of the approved grant program and there is reasonable assurance that the grant will be received.
The investment tax credits must be reviewed and approved by the tax authorities and it is possible that the amounts
granted will differ from the amounts recorded.
(F) LEASES AND PAYMENTS
Operating leases are not recognized in the Corporation’s consolidated statements of financial position. Payments
made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognized as an integral part of the total lease expense, over the term of the lease. Contingent
lease payments are accounted for in the year in which they are incurred.
(G) FINANCE INCOME AND FINANCE COSTS
Finance income comprises interest income on funds invested, change in fair value of contingent consideration. Interest
income is recognized as it accrues in profit or loss, using the effective interest method.
Annual Report 2020 | Stingray Group Inc. | 113
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Finance costs comprise interest expense on revolving facility, unwinding of the discount on provisions, change in fair
value of derivatives and contingent consideration, amortization of deferred financing costs, foreign exchange (gain)
loss and impairment losses recognized on financial assets.
The Corporation recognizes finance income and finance costs as a component of operating activities in the
consolidated statements of cash flows.
(H) INCOME TAXES
Income tax expense comprises current and deferred taxes. Current and deferred taxes are recognized in profit or loss
except to the extent that they relate to a business combination, or items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for the following temporary differences:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
temporary differences relating to investments in subsidiaries, associates and joint arrangements to the extent that
the Corporation is able to control the timing of the reversal of the temporary difference and it is probable that they
will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
A deferred tax asset is recognized for unused tax losses, unused tax credits and deductible temporary differences to
the extent that it is probable that future taxable profit will be available against which they can be used. Deferred tax
assets are measured at the end of each reporting year and their carrying amount is reduced to the extent that it is no
longer probable that a taxable profit will be realized.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be
realized simultaneously.
(I) EARNINGS PER SHARE
Basic earnings per share are computed by dividing net earnings by the weighted average number of subordinate
voting shares, variable subordinated voting shares and multiple voting shares outstanding during the year. Diluted
earnings per share are computed using the weighted average number of common shares, subordinate voting shares,
variable subordinated voting shares and multiple voting shares outstanding during the year adjusted to include the
dilutive impact of stock options, restricted share units and deferred share units. The number of additional shares is
calculated by assuming that all instruments with a dilutive effect are exercised and that the proceeds from such
exercises, as well as the amount of unrecognized share-based compensation which is considered to be assumed
proceeds, are used to repurchase subordinate voting shares, variable subordinated voting shares and multiple voting
Annual Report 2020 | Stingray Group Inc. | 114
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
shares at the average share price for the year. For restricted share units, only the unrecognized share-based
compensation is considered assumed proceeds since there is no exercise price paid by the holder.
(J) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and balances with banks.
(K) INVENTORIES
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in,
first-out cost method.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated selling
expenses.
(L) PROPERTY AND EQUIPMENT
RECOGNITION AND MEASUREMENT
Items of property and equipment are recognized at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset and the costs of dismantling
and removing the item and restoring the site on which it is located, if any.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items
(major components).
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from
disposal with the carrying amount, and are recognized in profit or loss.
SUBSEQUENT COSTS
The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of the item if
it is probable that the future economic benefits embodied within the part will flow to the Corporation, and its cost can
be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing
of property and equipment are recognized in profit or loss as incurred.
DEPRECIATION
Depreciation is calculated over the cost of the asset less its residual value and is recognized in profit or loss on a
straight-line basis over the estimated useful lives of each part of an item of property and equipment, since this most
closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased
assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the
Corporation will obtain ownership by the end of the lease term.
The estimated useful lives for the current and comparative years are as follows:
Property and equipment
Building
Broadcasting infrastructure
Furniture, fixtures and equipment
Computer hardware
Leasehold improvements
Period
20-60 years
8 to 25 years
3 to 10 years
4 to 6 years
Lease term
Annual Report 2020 | Stingray Group Inc. | 115
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Estimates for depreciation methods, useful lives and residual values are reviewed at each reporting year-end and
adjusted if appropriate prospectively.
(M) INTANGIBLE ASSETS, EXCLUDING BROADCAST LICENCES
Intangible assets that are acquired by the Corporation and have finite useful lives are measured at cost less
accumulated amortization and any accumulated impairment losses.
The fair value of non-compete agreements acquired in a business combination are based on the discounted estimated
revenues losses that have been avoided as a result of the non-compete being signed. The fair value of clients list and
relationships acquired in a business combination is determined using the multi-period excess earnings method,
whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related
cash flows. The fair value of music catalogs acquired in a business combination is determined using the estimated
costs for creating such music catalogs. The fair value of trademarks acquired in a business combination is based on
the discounted estimated future royalty payments that have been avoided.
Amounts capitalized as internally developed intangible assets include the total cost of any external products or services
and labour costs directly attributable to development.
AMORTIZATION
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the definite life
intangible assets.
Internally developed intangible assets, net of related tax credits, are amortized starting from the date the products and
services are commercialized.
The estimated useful lives for the current and comparative years are as follows:
Intangible assets
Internally developed intangible assets
Music catalog
Client list and relationships
Trademarks
Licences, website applications and computer software
Non-compete agreements
Period
2 to 5 years
5 to15 years
3 to 15 years
2 to 20 years
1 to 11 years
2 to 11 years
Estimates for depreciation methods, useful lives and residual values are reviewed at each reporting year-end and
adjusted if appropriate prospectively.
Annual Report 2020 | Stingray Group Inc. | 116
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
(N) LEASES
At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease based on whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Corporation allocates the consideration in the contract to each lease and non-lease component on the basis of
their relative stand-alone prices. However, for leases of properties for which it is a lessee, the Corporation has elected
not to separate non-lease components and will instead account for the lease and non-lease components as a single
lease component. The right-of-use asset and a lease liability are recognized at the lease commencement date.
RIGHT-OF-USE ASSETS ON LEASES
The right-of-use asset is measured at cost. The cost is based on the initial amount of the lease liability plus initial direct
costs incurred, less any lease incentives received, if any,
The cost of right-of-use assets is periodically reduced by amortization expenses and impairment losses, if any, and
adjusted for certain remeasurements of the lease liability. Right-of-use assets are amortized to reflect the expected
pattern of consumption of the future economic benefits which is based on the lesser of the useful life of the asset or
the lease term using the straight-line method. The lease term includes the renewal option only if it is reasonably certain
to be exercised. The lease terms range from 1 to 19 years for buildings and towers, from 6 to 57 years for land and
from 1 to 5 years for vehicles.
The Corporation elected not to recognize a right-of-use asset and liability for leases where the total lease term is less
than or equal to twelve months and for leases of low value assets; such as but not limited to, office equipment. The
lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease
term.
LEASE LIABILITIES
At the commencement date of the lease, the Corporation recognizes lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives
receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Corporation and payments of penalties for terminating a lease, if the lease term reflects the
Corporation exercising the option to terminate. The variable lease payments that do not depend on an index or a rate
are recognized as expense in the period in which the event or condition that triggered the payment has occurred.
In calculating the present value of lease payments, the Corporation uses the incremental borrowing rate as at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of the lease liability is increased to reflect the accretion of interest and reduced to reflect the lease
payments made. In addition, the carrying amount of the lease liability is remeasured if there has been a modification,
a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
(O) BUSINESS COMBINATION, GOODWILL AND BROADCAST LICENCES
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at the acquisition date fair value. Acquisition costs incurred are
expensed and included in acquisition, legal, restructuring and other expenses. The cost of a business combination is
allocated to the fair value of the related net identifiable tangible and intangible assets. The excess of the cost of the
Annual Report 2020 | Stingray Group Inc. | 117
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
acquired businesses over the fair value of the related net identifiable tangible and intangible assets acquired is
allocated to goodwill. If the consideration is lower than the fair value of the net assets acquired, the difference is
recognized in the consolidated statements of comprehensive income (loss).
To receive approval to launch a new broadcast licence pursuant to applications made by the Corporation to the CRTC,
the CRTC may require the Corporation to commit to fund Canadian Content Development (“CCD”) during the initial
term of the licence over and above the prescribed annual requirements. These obligations are considered to be part
of the costs related to the award of new broadcast licences and are recognized as a liability upon the launch of the
new broadcast licence. Any other direct costs related to the award and launch of new broadcast licences are also
capitalized as broadcast licences. CCD that arises from a business acquisition is considered a transaction cost and is
expensed in the consolidated statements of comprehensive income (loss).
After initial recognition, goodwill and broadcast licences are recorded at cost less any accumulated impairment losses.
Both goodwill and broadcast licences have indefinite useful lives and are not amortized, but they are subject to an
impairment evaluation. Broadcast licences are deemed indefinite life assets since they are renewed every seven years
without significant cost, with the unlikely chance that the renewal will be denied; therefore, there is no foreseeable
limit to the period over which broadcast licences are expected to generate net cash flows for the Corporation.
(P) IMPAIRMENT OF NON-FINANCIAL ASSETS
The Corporation reviews the carrying amount of its non-financial assets, which include intangible assets with a finite
useful life and property and equipment on each reporting date in order to determine if specific events or changes in
circumstances indicate that their carrying amounts may not be recoverable. The recoverable amount of goodwill and
broadcast licences are tested for impairment each year at the same date, or more frequently if indications of
impairment exist.
For impairment testing purposes, assets that cannot be tested individually are grouped in CGUs. Goodwill is allocated
to the CGU or CGU group that is expected to benefit from the synergies resulting from the business combination.
Each unit or group of units to which goodwill is allocated shall not be larger than an operating segment and represents
the lowest level at which goodwill is monitored for internal management purposes.
An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Impairment losses are
recognized in profit or loss. Impairment losses are first allocated to reduce the carrying amount of goodwill allocated
to the CGU, and then to reduce the carrying amount of the other assets of the CGU on a pro rata basis.
Annual Report 2020 | Stingray Group Inc. | 118
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
(Q) PROVISIONS
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognized as finance cost.
CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the
Corporation; or a present obligation that arises from past events (and therefore exists), but is not recognized because
it is not probable that a transfer or use of assets, provision of services or any other transfer of economic benefits will
be required to settle the obligation, or the amount of the obligation cannot be estimated reliably.
(R) EMPLOYEE BENEFITS
SHORT-TERM EMPLOYEE BENEFITS
Short-term employee benefits are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid if the Corporation has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated
reliably.
Stock option plan
The fair value at the grant-date of equity settled share-based payment awards granted to management and key
employees of the Corporation is recognized as an employee benefit expense, with a corresponding increase in equity,
over the vesting period of the awards. The amount expensed is adjusted to reflect the number of awards for which it
is expected that the service conditions will be met, so that the amount ultimately expensed will depend on the number
of awards that meet the service conditions at the vesting date.
Restricted and performance share units and deferred share units plans
Restricted share units, performance unit plan and deferred share units expected to be settled in cash are accounted
for as cash settled awards, with the recognized compensation cost included in accounts payable and accrued liabilities.
Compensation cost is initially measured at fair value at the grant date and is recognized in net income over the vesting
year. The liability is remeasured based on the fair value price of the Corporation’s shares, at each reporting date.
Remeasurements during the vesting year are recognized immediately to net income to the extent that they relate to
past services and amortized over the remaining vesting year to the extent that they relate to future services. The
cumulative compensation cost that will ultimately be recognized is the fair value of the Corporation’s shares at the
settlement date.
Annual Report 2020 | Stingray Group Inc. | 119
Notes to Consolidated Financial Statements
Years ended March 31, 2020 and 2019
(In thousands of Canadian dollars, unless otherwise stated)
Employee share purchase plan
The Corporation’s contributions, used to purchase shares on the open market on behalf of employees, are recognized
when incurred as an employee benefit expense, with a corresponding increase in contributed surplus. The amount
expensed is adjusted to reflect the number of awards for which it is expected that the vesting conditions will be met,
so that the amount ultimately expensed will depend on the number of awards that meet the vesting conditions at the
vesting date.
Unvested shares held in trust on behalf of employees are treasury shares and therefore deducted from equity until
they become vested.
PENSION BENEFITS
The Corporation maintains a defined contribution pension plan and defined benefit pension plans. The Corporation
does not provide any non-pension post-retirement benefits to employees.
Defined contribution pension plan
The Corporation matches employee contributions under the defined contribution pension plan. Under this plan,
contributions are funded to a separate entity and the Corporation has no legal or constructive obligation to pay further
amounts. The Corporation’s portion is recorded as compensation expense as contributions are made, which coincides
with the periods during which services are rendered by employees.
Defined benefit pension plans
The cost of providing benefits under the defined benefit pension plans is determined on an annual basis by
independent actuaries separately for each plan using the projected unit credit costing method. Actuarial gains and
losses for both defined benefit plans are recognized immediately in full in the period in which they occur in OCI.
Actuarial gains and losses are not reclassified to the consolidated statements of income in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of: (i) the date of the plan amendment or curtailment,
and (ii) the date that the Corporation recognizes restructuring-related costs.
The discount rate is applied to the net defined benefit asset or liability to determine net interest expense or income.
The Corporation recognizes the following changes in the net defined benefit obligation under operating expenses in
the consolidated statements of income: (i) service costs comprising current service costs, past service costs, gains
and losses on curtailments and settlements, and (ii) net interest expense or income.
The value of any defined benefit asset recognized is restricted to the present value of any economic benefits available
in the form of refunds from the plan or reductions in the future contributions to the plan.
(S) SHARE CAPITAL
Subordinate voting shares, variable voting shares and multiple voting shares are classified as equity. Incremental costs
that are directly attributable to their issuance are recognized in reduction of equity, net of tax effects.
Annual Report 2020 | Stingray Group Inc. | 120
GLOSSARY
OF TERMS
Video On Demand (VOD): A system
in which viewers choose their own filmed
entertainment, by means of a PC or inter-
active TV system, from a wide selection.
Subscription Video On Demand
(SVOD): Refers to a service that gives
users unlimited access to a wide range
of programs for a monthly flat rate.
The users have full control over the
subscription, and can decide when
to start the program.
Over the top (OTT): Refers to film
and television content provided via a
high-speed Internet connection rather
than a cable or satellite provider.
4K UHD: Ultra-high-definition (UHD)
television, also abbreviated UHDTV, is a
digital television display format in which
the horizontal screen resolution is on the
order of 4000 pixels (4K UHD).
Pay TV: Television broadcasting in which
viewers pay by subscription to watch a
particular channel.
IPTV: Internet Protocol television (IPTV)
is the process of transmitting and broad-
casting television programs through the
Internet using Internet Protocol (IP).
Satellite TV: Television broadcasting
using a satellite to relay signals to
appropriately equipped customers
in a particular area.
Free Ad-Supported Streaming
Television (FAST): FAST channels are
a new category of IPTV content which
consists of subscription-free linear
programming supported by advertising
(requires an Internet subscription).
Artificial Intelligence (AI): Sometimes
called machine intelligence, is, generally
speaking, algorithms designed to make human-
like decisions, often using real-time data.
ANNUAL GENERAL
MEETING OF
SHAREHOLDERS
The Annual General Meeting will
be held virtually by videoconference
on August 5, 2020.
PROVISIONAL
CALENDAR
OF RESULTS
First quarter of 2021
August 4, 2020
Second quarter of 2021
November 4, 2020
Third quarter of 2021
February 3, 2020
Fourth quarter of 2021
June 2, 2021
STOCK
EXCHANGE
TSX : RAY.A and RAY.B
TRANSFER
AGENT
AST Trust Company
2001 Boulevard Robert-Bourassa
Suite 1600
Montreal, Quebec
H3A 2A6
Canada
1.514.285.8300 or 1.800.387.0825
help@astfinancial.com
www.astfinancial.com
v stingray.com
Annual Report 2020 | Stingray Group Inc. | 32