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, 2021 and 2020. This MD&A reflects information available to the Corporation as at
June 2, 2021. 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 shows stable results from its operations which allows users of the financial statements to better assess the trend in the profitability of the business.
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
dividends and reduce debt. The Corporation believes that Net debt and Net debt to Pro Forma Adjusted EBITDA are important to analyse the company's
debt repayment capacity on an annualized basis, taking into consideration the annualized adjusted EBITDA of acquisitions made during the last twelve
months. 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 2021 | Stingray Group Inc. | 28
KEY PERFORMANCE INDICATORS(1)
For the three-month period ended March 31, 2021 (“Q4 2021”):
$60.3 M
▼ 11.8% from Q4 2020
Revenues
$12.1 M
Or $0.17 per share
Net income
$24.5 M
▲ 74.3% from Q4 2020
Cash flow from
operating activities
Or $0.34 per share
$23.6 M
$12.0 M
$13.8 M
▼ 16.2% from Q4 2020
Adjusted EBITDA
Or $0.16 per share
Adjusted Net income
▼ 23.2% from Q4 2020
Adjusted free cash flow
Or $0.19 per share
For the year ended March 31, 2021 (“Fiscal 2021”):
$249.5 M
▼ 18.7% from Fiscal 2020
Revenues
$45.1 M
Or $0.61 per share
Net income
$104.2 M
▲ 18.3% from Fiscal 2020
Cash flow from
operating activities
Or $1.42 per share
$114.3 M
$62.9 M
$74.4 M
▼ 3.2% from Fiscal 2020
Adjusted EBITDA
Or $0.86 per share
Adjusted Net income
▼ 5.1% from Fiscal 2020
Adjusted free cash flow
Or $1.01 per share
Notes:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 29
FINANCIAL AND BUSINESS HIGHLIGHTS
Highlights of the fourth quarter ended March 31, 2021
Compared to the quarter ended March 31, 2020 (“Q4 2020”):
Revenues decreased 11.8% to $60.3 million from $68.4 million, primarily due to the impact of the COVID-19 pandemic
on Radio revenues;
Adjusted EBITDA(1) decreased 16.2% to $23.6 million from $28.2 million. Adjusted EBITDA(1) by segment was $16.3 million
or 44.8% of revenues for Broadcasting and Commercial Music, $8.7 million or 36.0% of revenues for Radio and
$(1.3) million for Corporate;
Net income was $12.1 million ($0.17 per share) compared with a Net loss of $8.5 million ($(0.11) per share);
Adjusted Net income(1) of $12.0 million ($0.16 per share) compared with $10.1 million ($0.13 per share);
Cash flow from operating activities increased 74.3% to $24.5 million ($0.34 per share) compared to $14.1 million
($0.19 per share);
Adjusted free cash flow(1) decreased 23.2% to $13.8 million ($0.19 per share) compared to $18.0 million ($0.24 per
share);
Net debt to Pro Forma Adjusted EBITDA(1) ratio of 2.81x, and;
967,415 shares repurchased and cancelled for a total of $6.8 million.
Highlights of the year ended March 31, 2021
Compared to the year ended March 31, 2020 (“Fiscal 2020”):
Revenues decreased 18.7% to $249.5 million from $306.7 million, primarily due to the impact of the COVID-19 pandemic
on Radio revenues;
Adjusted EBITDA(1) decreased 3.2% to $114.3 million from $118.1 million. Adjusted EBITDA(1) by segment was
$77.5 million or 51.1% of revenues for Broadcasting and Commercial Music, $41.3 million or 42.2% of revenues for Radio
and $(4.5) million for Corporate;
Net income was $45.1 million ($0.61 per share) compared with $14.0 million ($0.18 per share);
Adjusted Net income(1) of $62.9 million ($0.86 per share) compared with $55.9 million ($0.74 per share);
Cash flow from operating activities increased 18.3% to $104.2 million ($1.42 per share) compared to $88.1 million
($1.16 per share);
Adjusted free cash flow(1) decreased 5.1% to $74.4 million ($1.01 per share) compared to $78.4 million ($1.03 per share),
and;
1,530,180 shares repurchased and cancelled for a total of $10.2 million.
Notes:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 30
Additional business highlights for the fourth quarter and subsequent events:
During Fiscal 2021, 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 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 Q4 2020, 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, which, combined with the
Canadian Emergency Wage Subsidy (CEWS), helped to maintain a solid financial position. The Corporation’s Radio
segment, and Broadcast and Commercial Music segment, but to a lesser extent, have been impacted during the first half
of 2021. In the second half of 2021, although still impacted, the Corporation noticed progressive improvements in Radio
advertising bookings as provinces begin lifting restrictions on social distancing. Management expects the situation to
continue improving as local businesses resume their normal operations. The extent to which COVID-19 continues to
impact the Corporation’s business will depend on future developments, which are uncertain and cannot be predicted at
this time. The Corporation’s focus will be to continue to closely monitor its cash position and control its operating
expenses while capitalizing on its growth opportunities.
On May 5, 2021, the Corporation announced the launch of free, ad-supported TV channels and premium SVOD services
with thirteen major OTT providers: Alteox (Luxembourg), Amazon Prime Video Channels (Italy, Spain and Netherlands),
ChannelBox (United Kingdom), Maskatel (Canada), Pluto TV (Latin America and United States), Pzaz (Global), Rakuten
TV (Europe), Redbox (United States), Rostelecom (Russia), Ruutu (Finland), Samsung TV Plus (Brazil, Mexico,
Netherlands and Sweden) Totalplay (Mexico) and Zeasn (Austria and Germany). These distribution agreements grow
Stingray’s audience over new platforms in new territories and add millions of potential viewers.
On April 28, 2021, the Corporation announced that free, ad-supported channels Qello Concerts by Stingray and Stingray
Karaoke have become available on Samsung TV Plus Mobile in Germany and the UK. Mobile and tablet users will access
both channels on Samsung’s free ad-supported video service through the TV Plus App and the Samsung Free page. The
distribution agreements grow Stingray’s potential reach by millions of users. The service is set to launch in June 2021 in
Austria and Switzerland.
On March 24, 2021, 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, 2021, to shareholders on
record as of May 31, 2021.
On March 1, 2021, the Corporation announced it signed an agreement to provide custom music, media, and consumer
insights solutions for Orangetheory Fitness, one of the world's fastest-growing brands, operating 1,400 studios worldwide,
in Canada, 50 American states and 25 countries around the globe.
On February 26, 2021, the Corporation announced that Ms. Karinne Bouchard has been appointed to the Board of
Directors, effective immediately. Ms. Bouchard has also joined the Corporation’s Audit Committee. The Corporation also
announced that Mr. John Steele has resigned from the board.
On February 5, 2021, the Corporation launched its Classic Hits brand Rewind in three Maritime markets. In addition to
rebranding the popular Classic Hits station Up! 93.1 (CIHI) in Fredericton as Rewind 93.1, the format and brand appears
in Miramichi as Rewind 95.9 (CHHI, previously 95.9 Sun FM) and in Nova Scotia’s Annapolis Valley as Rewind 89.3 (CIJK,
previously 89.3 K-Rock).
On February 3, 2021, the Corporation declared a dividend of $0.075 per subordinate voting share, variable subordinate
voting share and multiple voting share. The dividend was paid on March 15, 2021 to shareholders on record as of
February 28, 2021.
Annual Report 2021 | Stingray Group Inc. | 31
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)
3 months
March 31, 2021
Q4 2021
% of
revenues
$
March 31, 2020
Q4 2020
% of
revenues
$
March 31, 2021
Fiscal 2021
$
% of
revenues
12 months
March 31, 2020
Fiscal 2020
$
% of
revenues
March 31, 2019
Fiscal 2019
$
% of
revenues
60,316
38,941
–
100.0 %
64.6 %
0.0 %
68,398
38,932
–
100.0 %
56.9 %
0.0 %
249,468 100.0 % 306,721 100.0 % 212,650 100.0 %
142,487 57.1 % 190,381 62.0 % 142,877 67.3 %
0.0 % 25,306 11.9 %
0.0 %
–
–
9,821
(7,284)
–
16.3 %
(12.1) %
0.0 %
9,875
33,463
(1,914)
14.4 %
49.0 %
(2.8) %
38,692 15.5 %
(1,199)
(0.5) %
3,787
1.5 %
40,302 13.1 % 31,133 14.6 %
42,822 14.0 % 12,298
5.8 %
(565)
(6,550)
(2.1) %
(0.3) %
2,714
16,124
4,047
12,077
4.5 %
26.7 %
6.7 %
20.0 %
693
(12,651)
(4,165)
(8,486)
1.0 %
(18.5) %
(6.1) %
(12.4) %
4,637
1.9 %
61,064 24.5 %
15,960
6.4 %
45,104 18.1 %
24,104
15,662
1,692
13,970
7.9 % 16,817
5.1 % (15,216)
(3,228)
0.5 %
4.6 % (11,988)
7.9 %
(7.2) %
(1.5) %
(5.7) %
Adjusted EBITDA(2)
Adjusted Net income(2)
Cash flow from operating activities
Adjusted free cash flow(2)
Net debt(2)
Net debt to Pro Forma Adjusted
EBITDA(2)(3)
23,638
11,981
24,514
13,808
326,405
2.81x
Net income (loss) per share basic
Net income (loss) per share diluted
Adjusted Net income per share basic(2)
Adjusted Net income per share diluted(2)
Cash flow from operating activities per
share basic
Cash flow from operating activities per
share diluted
Adjusted free cashflow per share basic(2)
Adjusted free cashflow per share
diluted(2)
0.17
0.17
0.17
0.16
0.34
0.34
0.19
0.19
–
–
–
–
–
–
–
–
–
–
39.2 %
19.9 %
40.6 %
22.9 %
28,217
10,095
14,062
17,974
361,251
41.3 %
14.8 %
20.6 %
26,3 %
114,268 45.8 % 118,086 38.5 % 72,234 34.0 %
55,908 18.2 % 39,727 18.7 %
88,145 28.7 % 44,703 21.0 %
78,350 25.5 % 38,834 18.3 %
62,855 25.2 %
104,246 41.8 %
74,359 29.8 %
–
–
–
–
–
–
–
–
–
–
326,405
–
361,251
2.81x
0.62
0.61
0.86
0.86
1.42
1.42
1.01
1.01
–
–
–
–
–
–
–
–
–
3.01x
0.18
0.18
0.74
0.74
1.16
1.16
1.03
1.03
–
–
–
–
–
–
–
–
–
–
357,821
3.13x
(0.19)
(0.19)
0.61
0.61
0.69
0.68
0.60
0.59
–
–
–
–
–
–
–
–
–
–
3.01x
(0.11)
(0.11)
0.13
0.13
0.19
0.19
0.24
0.24
Revenues by segment
Broadcasting and Commercial Music
Radio
Corporate
Revenues
36,356
23,960
–
60,316
60.3 %
39.7 %
0.0 %
100.0 %
38,483
29,915
–
68,398
56.3 %
43.7 %
0.0 %
100.0 %
151,658 60.8 % 154,466 50.4 % 146,741 69.0 %
97,810 39.2 % 152,255 49.6 % 65,227 30.7 %
0.3 %
249,468 100.0 % 306,721 100.0 % 212,650 100.0 %
0.0 %
0.0 %
682
–
–
Revenues by geography
Canada
United States
Other Countries
Revenues
35,594
10,942
13,780
60,316
59.1 %
18.1 %
22.8 %
100.0 %
43,498
10,236
14,664
68,398
63.6 %
15.0 %
21.4 %
100.0 %
150,729 60.5 % 209,843 68.4 % 121,919 57.3 %
37,987 12.4 % 34,439 16.2 %
58,891 19.2 % 56,292 26.5 %
249,468 100.0 % 306,721 100.0 % 212,650 100.0 %
42,028 16.8 %
56,711 22.7 %
Notes:
(1)
Interest paid during the Q4 2021 was $5.1 million (Q4 2020; $3.8 million) and $18.1 million Fiscal 2021 (Fiscal 2020; $17.4 million and Fiscal 2019;
$10.0 million)
(2) Refer to “Forward-looking statements” and “Supplemental information on Non-IFRS measures” on page 28 and for reconciliations to the most directly
comparable IFRS financial measure, refer to “Supplemental information on Non-IFRS measures” on page 33.
(3) Refer to page 44 for a reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable IFRS financial measure.
Annual Report 2021 | Stingray Group Inc. | 32
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 28.
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
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, mark-
to-market losses (gains) on derivative financial instruments
and acquisition, legal, restructuring and other expenses
Adjusted Net income
March 31,
2021
Q4 2021
12,077
(7,284)
–
4,047
3,082
1,436
5,303
235
2,028
2,714
23,638
(3,214)
(4,047)
(3,082)
(1,436)
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,
2021
Fiscal 2021
45,104
(1,199)
3,787
15,960
11,653
5,660
21,379
851
6,436
4,637
114,268
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
(12,619)
(15,960)
(11,653)
(5,660)
(27,122)
(1,692)
(11,477)
(5,618)
122
11,981
(7,095)
10,095
(5,521)
62,855
(16,269)
55,908
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,
2021
Q4 2021
24,514
March 31,
2020
Q4 2020
14,062
March 31,
2021
Fiscal 2021
104,246
March 31,
2020
Fiscal 2020
88,145
(1,929)
(2,153)
(5,690)
(6,704)
(194)
(1,367)
(5,142)
(1,099)
(344)
(3,345)
2,714
13,808
(463)
(1,534)
(3,819)
(1,180)
7,262
5,106
693
17,974
(1,313)
(6,428)
(18,053)
(5,011)
10,632
(8,661)
4,637
74,359
(1,769)
(5,902)
(17,442)
(4,873)
(2,169)
4,961
24,104
78,351
March 31,
2021
303,704
31,741
(9,040)
326,405
March 31,
2020
324,123
39,640
(2,512)
361,251
Annual Report 2021 | Stingray Group Inc. | 33
FINANCIAL RESULTS FOR THE QUARTERS AND YEARS ENDED
MARCH 31, 2021 AND 2020
CONSOLIDATED PERFORMANCE
Revenues
Revenues are detailed as follows:
(in thousands of Canadian dollars)
2021
2020 % Change
2021
2020 % Change
3 months
12 months
Revenues by geography
Canada
United States
Other Countries
Revenues
Global
35,594
10,942
13,780
60,316
43,498
10,236
14,664
68,398
(18.2)
6.9
(6.0)
(11.8)
150,729
42,028
56,711
249,468
209,843
37,987
58,891
306,721
(28.2)
10.6
(3.7)
(18.7)
Revenues in Q4 2021 decreased $8.1 million or 11.8% to $60.3 million, from $68.4 million for Q4 2020. The decrease was
primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and
Commercial Music revenues, as well as a decrease in equipment and installation sales related to digital signage and the
negative impact of foreign exchange, partially offset by the increase in advertising revenues in the Broadcast and Commercial
Music segment.
Revenues for Fiscal 2021 decreased $57.2 million or 18.7% to $249.5 million, from $306.7 million for Fiscal 2020. The decrease
was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and
Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage, partially offset by
the increase in advertising revenues in the Broadcast and Commercial Music segment, the acquisition of Marketing Sensorial
México (MSM) and Chatter Research Inc. and the organic growth in streaming subscriptions.
Canada
Revenues in Canada in Q4 2021 decreased $7.9 million or 18.2% to $35.6 million, from $43.5 million for Q4 2020. The decrease
was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on Broadcast and
Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage.
Revenues in Canada for Fiscal 2021 decreased $59.0 million or 28.2% to $150.8 million, from $209.8 million for Fiscal 2020.
The decrease was primarily due to the impact of the COVID-19 pandemic on Radio revenues and, to a lesser extent, on
Broadcast and Commercial Music revenues and to a decrease in equipment and installation sales related to digital signage,
partially offset by the increase in advertising revenues in the Broadcast and Commercial Music segment.
United States
Revenues in the United States in Q4 2021 increased $0.7 million or 6.9% to $10.9 million, from $10.2 million for Q4 2020. The
increase was primarily due to organic growth in advertising revenues in the Broadcast and Commercial Music segment and in
streaming subscriptions, partially offset by the negative impact of foreign exchange.
Revenues in the United States for Fiscal 2021 increased $4.0 million or 10.6% to $42.0 million, from $38.0 million for
Fiscal 2020. The increase was primarily due to organic growth in advertising revenues in the Broadcast and Commercial Music
segment and in streaming subscriptions.
Other Countries
Revenues in Other countries in Q4 2021 decreased $0.9 million or 6.0% to $13.8 million, from $14.7 million for Q4 2020. The
decrease was primarily due to the impact of the COVID-19 pandemic on revenues.
Revenues in Other countries for Fiscal 2021 decreased $2.2 million or 3.7% to $56.7 million, from $58.9 million for Fiscal 2020.
The decrease was primarily due to the impact of the COVID-19 pandemic on revenues and to the decrease in streaming
subscriptions, partially offset by the acquisition of MSM.
Annual Report 2021 | Stingray Group Inc. | 34
Operating Expenses
Operating expenses in Q4 2021 remained stable at $38.9 million. Due to a better performance than initially anticipated, certain
accrued liabilities recorded in the first nine months to reflect uncertainty created by the COVID-19 pandemic were adjusted
upward in the fourth quarter. This, combined with the reversal of certain accrued liabilities in Q4 2020, had a negative impact
on year-over-year operating expenses. The operating expenses increased is also due to increased expense for performance
and deferred share unit, largely offset by reduced operating costs, by the CEWS and other subsidies ($4.0 million) and by
reduced variable expenses due to the impact of the COVID-19 pandemic on revenues.
Operating expenses for Fiscal 2021 decreased $47.9 million or 25.2% to $142.5 million, from $190.4 million for Fiscal 2020.
The decrease was primarily related to the CEWS and other subsidies ($25.2 million), to reduced operating costs, to reduced
variable expenses due to the impact of the COVID-19 pandemic on revenues and to a settlement with SOCAN (refer to page
45), partially offset by adjustments of certain accrued liabilities in the fourth quarters of fiscal 2020 and 2021 which had a
negative impact on operating expenses as explained above and by increased expense for performance and deferred share
unit.
Adjusted EBITDA(1)
Adjusted EBITDA in Q4 2021 decreased $4.6 million or 16.2% to $23.6 million from $28.2 million for Q4 2020. Adjusted EBITDA
margin was 39.2% compared to 41.3% for Q4 2020. Due to a better performance than initially anticipated, certain accrued
liabilities recorded in the first nine months to reflect uncertainty created by the COVID-19 pandemic were adjusted upward in
the fourth quarter. This, combined with the reversal of certain accrued liabilities in Q4 2020, had a negative impact on year-
over-year Adjusted EBITDA. The decrease in Adjusted EBITDA is also due to the impact of the COVID-19 pandemic on
revenues, partially offset by reduced operating costs and by the CEWS and other subsidies.
Adjusted EBITDA for Fiscal 2021 decreased $3.8 million or 3.2% to $114.3 million from $118.1 million for Fiscal 2020.
Adjusted EBITDA margin was 45.8% compared to 38.5% for Fiscal 2020. The decrease in Adjusted EBITDA was primarily due
to the impact of the COVID-19 pandemic on revenues, to the reversal of certain accrued liabilities in Q4 2020 and to the
adjustments of certain accrued liabilities in the fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted
EBITDA as explained above, partially offset by the CEWS and other subsidies, by reduced operating costs and by a settlement
with SOCAN (refer to page 45).
Depreciation, amortization and write off
Depreciation, amortization and write off decreased $0.1 million or 0.5% to $9.8 million from $9.9 million for Q4 2020.
Depreciation, amortization and write off for Fiscal 2021 decreased $1.6 million or 4.0% to $38.7 million, from $40.3 million for
Fiscal 2020. The decrease was primarily due to less intangible assets to amortize compared to the prior period.
Net finance expense (income)
Net finance income for Q4 2021 was $7.3 million compared to a Net finance expense of $33.5 million for Q4 2020. The variance
was mainly related to a mark-to-market gain on derivative instruments and a foreign exchange gain.
Net finance income for Fiscal 2021 was $1.2 million compared to a Net finance expense of $42.8 million for Fiscal 2020. The
variance was mainly related to a mark-to-market gain on derivative instruments, a foreign exchange gain and a lower negative
change in fair value of contingent considerations.
Change in fair value of investments
In Q4 2021, there was no gain or loss on fair value as the securities held in AppDirect Inc. were sold in Q3 2021. In Q4 2020,
a gain of $1.9 million was recorded.
For Fiscal 2021, a loss on fair value of $3.8 million was recorded compared to a gain of $6.6 million for Fiscal 2020. The
variance is related to the sale of securities held in AppDirect Inc. during Q3 2021 which had a lower proceed than the estimated
fair value before the transaction occurred.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 35
Acquisition, legal, restructuring and other expenses
(in thousands of Canadian dollars)
Acquisition
Legal
Restructuring and other
Acquisition, legal, restructuring
and other expenses
2021
1,107
424
1,183
3 months
2020
Change $
166
(1,955)
2,482
941
2,379
(1,299)
12 months
2020
Change $
1,556
19,540
3,008
883
(18,917)
(1,433)
2021
2,439
623
1,575
2,714
693
2,021
4,637
24,104
(19,467)
In Fiscal 2020, legal expenses were higher due to a patent litigation with Music Choice, which was settled in Q4 2020.
Income Taxes
The income taxes expense recognized in comprehensive income was $4.0 million for Q4 2021 compared to an income tax
recovery of $4.2 million for Q4 2020. The effective tax rate for Q4 2021 was 25.1% compared to 32.9% for Q4 2020. The
variance in the effective tax rate is mainly due to the increase in the UK corporate income tax rate enacted in Q4 2020, which
increased the deferred tax assets.
The income taxes expense recognized in comprehensive income was $16.0 million for Fiscal 2021 compared to $1.7 million
for Fiscal 2020. The effective tax rate for Fiscal 2021 was 26.1% compared to 10.8% for Fiscal 2020. The variance in the
effective tax rate is mainly due to the decrease in the Alberta corporate income tax rate enacted in Q1 2020, which reduced
deferred tax liabilities.
Net income (loss) and Net income (loss) per share
Net income in Q4 2021 was $12.1 million ($0.17 per share) compared to a Net loss of $8.5 million ($(0.11) per share) for
Q4 2020. The variance was mainly related to a mark-to-market gain on derivative instruments and a foreign exchange gain,
partially offset by higher legal expenses, higher income taxes and lower operating results.
Net income for Fiscal 2021 was $45.1 million ($0.61 per share) compared to $14.0 million ($0.18 per share) for Fiscal 2020.
The increase was mainly related to a mark-to-market gain on derivative instruments, to lower legal expenses and to a foreign
exchange gain, partially offset by higher income taxes, by a negative change in fair value of investments following the sale of
securities held in AppDirect Inc., by higher performance and deferred share unit expense and by lower operating results.
Adjusted Net income(1) and Adjusted Net income per share(1)
Adjusted Net income in Q4 2021 was $12.0 million ($0.16 per share), compared to $10.1 million ($0.13 per share) for Q4 2020.
Adjusted Net income for Fiscal 2021 was $62.9 million ($0.86 per share), compared to $55.9 million ($0.74 per share) for
Fiscal 2020. Both increases were mainly related to a foreign exchange gain, partially offset by lower operating results and
higher income taxes.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 36
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
2021
36,356
20,059
16,297
44.8%
2020 % Change
(5.5)
2.9
(14.1)
(9.1)
38,483
19,501
18,982
49.3%
2021
151,658
74,205
77,453
51.1%
2020 % Change
(1.8)
(18.2)
21.6
23.8
154,466
90,765
63,701
41.2%
In Q4 2021, Broadcasting and Commercial Music revenues decreased $2.2 million or 5.5% to $36.3 million, from $38.5 million
for Q4 2020. The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, as well as a decrease in
equipment and installation sales related to digital signage and the negative impact of foreign exchange, partially offset by the
increase in advertising revenues.
Broadcasting and Commercial Music revenues for Fiscal 2021 decreased $2.8 million or 1.8% to $151.7 million from
$154.5 million for Fiscal 2020. The decrease was primarily due to the impact of the COVID-19 on revenues and to a decrease
in equipment and installation sales related to digital signage, partially offset by the increase in advertising revenues, the
acquisition of MSM and Chatter Research Inc. and the organic growth in streaming subscriptions.
Adjusted EBITDA(1)
In Q4 2021, Broadcasting and Commercial Music Adjusted EBITDA decreased $2.7 million or 14.1% to $16.3 million from
$19.0 million for Q4 2020. The decrease in Adjusted EBITDA was primarily due to adjustments of certain accrued liabilities in
the fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted EBITDA as explained earlier, partially
offset by reduced operating costs.
Broadcasting and Commercial Music Adjusted EBITDA for Fiscal 2021 increased $13.8 million or 21.6% to $77.5 million from
$63.7 million for Fiscal 2020. The increase in Adjusted EBITDA was primarily due to the CEWS and other subsidies, to a
settlement with SOCAN (refer to page 45) and to reduced operating costs, partially offset by the adjustments of certain accrued
liabilities in the fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted EBITDA as explained earlier
and by the impact of the COVID-19 pandemic on revenues.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 37
RADIO
(in thousands of Canadian dollars)
Revenues
Operating expenses
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Revenues
3 months
12 months
2021
23,960
15,340
8,620
36.0%
2020 % Change
(19.9)
(24.6)
(9.8)
12.6
29,915
20,358
9,557
31.9%
2021
97,810
56,528
41,282
42.2%
2020 % Change
(35.8)
(39.7)
(29.4)
9.9
152,255
93,760
58,495
38.4%
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 2021, Radio revenues decreased $5.9 million or 19.9% to $24.0 million from $29.9 million for Q4 2020. Radio revenues
for Fiscal 2021 decreased $54.5 million or 35.8% to $97.8 million from $152.3 million for Fiscal 2020. Both decreases were
primarily due to the impact of the COVID-19 pandemic on revenues.
Adjusted EBITDA(1)
In Q4 2021, Radio Adjusted EBITDA decreased $0.8 million or 9.8% to $8.7 million from $9.5 million for Q4 2020. The decrease
was primarily due to the impact of the COVID-19 pandemic on revenues and to adjustments of certain accrued liabilities in the
fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted EBITDA as explained earlier, partially offset
by the CEWS and other subsidies and by reduced operating costs.
Radio Adjusted EBITDA for Fiscal 2021 decreased $17.2 million or 29.4% to $41.3 million from $58.5 million for Fiscal 2020.
The decrease was primarily due to the impact of the COVID-19 pandemic on revenues, partially offset by the CEWS and other
subsidies and by reduced operating costs.
CORPORATE
(in thousands of Canadian dollars)
Operating expenses
Adjust:
Share-based compensation
Performance and deferred share
unit expense
Adjusted EBITDA(1)
Adjusted EBITDA(1)
3 months
12 months
2021
3,542
2020 % Change
(482.1)
(927)
2021
11,754
2020 % Change
100.7
5,856
(235)
(258)
(8.9)
(851)
(1,001)
(15.0)
(2,028)
(1,279)
1,507
(322)
(234.6)
297.2
(6,436)
(4,467)
(745)
(4,110)
763.9
8.7
Corporate Adjusted EBITDA represents the head office operating expenses less the share-based compensation and
performance and deferred share unit expense. The increase in operating expenses is related to adjustments of certain accrued
liabilities in the fourth quarters of fiscal 2020 and 2021 which had a negative impact on Adjusted EBITDA as explained earlier.
The increase in Performance and deferred share unit expense is due to the increase in the share price and to additional grants.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 38
Quarterly results
Revenues fluctuated over the last eight quarters from $80.4 million in the first quarter of Fiscal 2020 to $60.3 million in the
fourth quarter of Fiscal 2021. The 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 and Q1 2021 were due to the impact of the COVID-19 pandemic. The increases
in Q2 2021 and Q3 2021 are due to progressive improvements in Radio advertising bookings as provinces begin lifting
restrictions on social and economic activity and to normal business seasonality. The decrease in Q4 2021 is due to normal
business seasonality.
Adjusted EBITDA(1) fluctuated over the last eight quarters from $31.2 million in the first quarter of Fiscal 2020 to $23.6 million
in the fourth quarter of Fiscal 2021. The 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 and Q1 2021 were mainly due to the impact of the COVID-19
pandemic on Radio revenues, which was partially offset by the CEWS and reduced operating costs in Q1 2021. The increase
in Q2 2021 is due to progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social
and economic activity, partially offset by higher operating costs and lower CEWS. The increase in Q3 2021 is due to continuing
improvements in Radio advertising bookings and normal business seasonality and to a settlement with SOCAN (refer to page
45), partially offset by a special bonus to employees, lower CEWS and higher operating costs. The decrease in Q4 2021 is due
to normal business seasonality and to a settlement with SOCAN in Q3 2021, partially offset by a special bonus to employees
in Q3 2021.
Net income (loss) fluctuated over the last eight quarters from a net income of $9.2 million in the first quarter of Fiscal 2020 to
$12.1 million in the fourth quarter of Fiscal 2021. In Q2 2020, the decrease was due to 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 due to 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 due to 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. In Q1 2021, the increase was due to lower mark-to-market losses on derivative financial instruments and a foreign
exchange gain, partially offset by the impact of the COVID-19 pandemic on revenues, higher income taxes expense and
negative change in fair value of investments. In Q2 2021, the increase was due to higher operating results and positive change
in mark-to-market on derivative financial instruments, partially offset by higher income taxes and legal expenses. In Q3 2021,
the increase was due to higher operating results, positive change in fair value of contingent considerations, and higher gain in
mark-to-market on derivative financial instruments, partially offset by a negative change in fair value of investments related to
the sale of securities held in AppDirect Inc. In Q4 2021, the decrease was due to lower operating results, partially offset by
higher gains in mark-to-market on derivative financial instruments.
Annual Report 2021 | Stingray Group Inc. | 39
Summary of Consolidated Quarterly Results
(in thousands of Canadian dollars,
except per share amounts)
Revenues by segment
Broadcasting and Commercial
Music
Radio
Total revenues
Revenues by geography
Canada
United States
Other countries
Total revenues
Adjusted EBITDA(1)
LTM Adjusted EBITDA(1)
Net income (loss)
Net income (loss) per share basic
and diluted
Adjusted Net income(1)
Adjusted Net income per share
basic(1)
Adjusted Net income per share
diluted(1)
Cash flow from operations
Adjusted free Cash Flow(1)
Quarterly dividend
March 31,
2021
FY2021
Dec. 31,
2020
FY2021
Sept. 30,
2020
FY2021
June 30,
2020
FY2021
March 31,
2020
FY2020
Dec. 31,
2019
FY2020
Sept. 30,
2019
FY2020
June 30,
2019
FY2020
3 months
36,356
23,960
60,316
40,186
32,379
72,565
39,169
25,125
64,294
35,947
16,346
52,293
38,483
29,915
68,398
39,894
41,419
81,313
38,742
37,831
76,573
37,347
43,090
80,437
35,594
10,942
13,780
60,316
47,368
10,693
14,504
72,565
39,710
10,091
14,493
64,294
28,057
10,302
13,934
52,293
43,498
10,236
14,664
68,398
57,515
9,575
14,223
81,313
52,723
9,035
14,815
76,573
23,638
114,268
12,077
33,993
118,847
14,118
31,156
115,887
11,888
25,481
112,402
7,021
28,217
118,086
(8,486)
31,033
112,276
8,089
27,671
108,462
5,184
56,107
9,141
15,189
80,437
31,165
92,220
9,183
0.17
11,981
0.19
21,054
0.16
16,311
0.10
13,509
(0.11)
10,095
0.11
16,710
0.07
12,416
0.12
16,687
0.17
0.29
0.22
0.18
0.13
0.22
0.16
0.22
0.16
24,514
13,808
0.075
0.29
16,333
19,645
0.075
0.22
25,406
22,861
0.075
0.18
37,993
18,045
0.075
0.13
14,062
17,974
0.075
0.22
28,833
21,033
0.075
0.16
18,952
18,756
0.070
0.22
26,298
20,587
0.070
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33. Last twelve months (LTM) Adjusted EBITDA represents the Adjusted
EBITDA of the referenced period, plus the Adjusted EBITDA of the three quarters immediately preceding the referenced period.
Annual Report 2021 | Stingray Group Inc. | 40
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
March 31,
2021
FY2021
12,077
(7,284)
–
4,047
Dec. 31,
2020
FY2021
14,118
(1,290)
2,434
4,900
Sept. 30,
2020
FY2021
11,888
2,774
461
4,654
3 months
June 30,
2020
FY2021
7,021
4,601
892
2,359
March 31,
2020
FY2020
(8,486)
33,463
(1,914)
(4,165)
Dec. 31,
2019
FY2020
8,089
(4,383)
(4,781)
1,897
Sept. 30,
2019
FY2020
5,184
6,362
(188)
2,479
June 30,
2019
FY2020
9,183
7,380
333
1,481
3,082
1,436
5,303
235
2,894
1,399
5,478
231
2,976
1,413
5,188
219
2,701
1,412
5,410
166
2,790
1,426
5,659
258
2,876
1,402
5,494
238
2,989
1,419
5,935
257
2,822
1,371
6,119
248
unit expense
2,028
1,780
1,312
1,316
(1,507)
677
794
781
Acquisition, legal, restructuring and
other expenses (income)
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, mark-to-
market losses (gains) on
derivative financial instruments
and acquisition, legal,
restructuring and other
expenses (income)
Adjusted Net income
(in thousands of Canadian dollars)
Cash flow from operating
activities
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
2,714
23,638
2,049
33,993
271
31,156
(397)
25,481
693
28,217
19,524
31,033
2,440
27,671
1,447
31,165
(3,214)
(4,047)
(3,082)
(1,436)
(1,727)
(4,900)
(2,894)
(1,399)
(4,340)
(4,654)
(2,976)
(1,413)
(3,338)
(2,359)
(10,976)
4,165
(2,701)
(1,412)
(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)
122
11,981
(2,019)
21,054
(1,462)
16,311
(2,162)
13,509
(7,095)
10,095
(3,964)
16,710
(2,601)
12,416
(2,609)
16,687
March 31,
2021
FY2021
Dec. 31,
2020
FY2021
Sept. 30,
2020
FY2021
June 30,
2020
FY2021
March 31,
2020
FY2020
Dec. 31,
2019
FY2020
Sept. 30,
2019
FY2020
June 30,
2019
FY2020
3 months
24,514
16,333
25,406
37,993
14,062
28,833
18,952
26,298
(1,929)
(1,849)
(1,209)
(703)
(2,153)
(1,479)
(1,459)
(1,613)
(194)
(649)
(212)
(258)
(463)
(495)
(292)
(519)
(1,367)
(5,142)
(1,099)
(1,838)
(6,312)
(1,255)
(1,671)
(2,912)
(1,443)
(1,552)
(3,687)
(1,214)
(1,534)
(3,819)
(1,180)
(1,286)
(4,150)
(1,295)
(1,559)
(4,493)
(1,303)
(1,523)
(4,980)
(1,095)
(344)
15,858
6,530
(11,412)
7,262
(17,702)
6,143
2,127
exchange
(3,345)
(2,692)
(1,899)
(725)
5,106
(917)
327
445
Acquisition, legal, restructuring and
other expenses (income)
Adjusted free cash flow
2,714
13,808
2,049
19,645
271
22,861
(397)
18,045
693
17,974
19,524
21,033
2,440
18,756
1,447
20,587
Annual Report 2021 | Stingray Group Inc. | 41
LIQUIDITY AND CAPITAL RESOURCES FOR THE QUARTERS AND YEARS ENDED
MARCH 31, 2021 AND 2020
(in thousands of Canadian dollars)
Operating activities
Financing activities
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
2021
24,514
(21,811)
(3,490)
(787)
9,827
9,040
13,808
2020
14,062
(12,293)
(6,572)
(4,803)
7,315
2,512
17,974
2021
104,246
(103,148)
5,430
6,528
2,512
9,040
74,359
2020
88,145
(72,359)
(17,947)
(2,161)
4,673
2,512
78,351
Cash flow generated from operating activities amounted to $24.5 million for Q4 2021 compared to $14.1 million for Q4 2020.
The increase was mainly due to the positive change in non-cash operating items and to the foreign exchange gain, partially
offset by lower operating results.
Cash flow generated from operating activities amounted to $104.2 million for Fiscal 2021 compared to $88.1 million for
Fiscal 2020. The increase was mainly due to lower legal expenses and to the foreign exchange gain, partially offset by a
negative change in non-cash operating items and by lower operating results.
Financing Activities
Net cash flow used in financing activities amounted to $21.8 million for Q4 2021 compared to $12.3 million for Q4 2020. The
increase was mainly related to the payment of the second installment related to the Fiscal 2020 settlement with Music Choice
and to higher repayment of the subordinated debt, partially offset by higher credit facilities borrowing and by less shares
repurchased.
Net cash flow used in financing activities amounted to $103.1 million for Fiscal 2021 compared to $72.4 million for Fiscal 2020.
The increase was mainly due to higher repayment of the credit facilities, to the payment of the second installment related to
the Fiscal 2020 settlement with Music Choice and to the repayment of the balance payable for the acquisition of MSM, partially
offset by less shares repurchased.
Investing Activities
Net cash flow used in investing activities amounted to $3.5 million for Q4 2021 compared to $6.6 million for Q4 2020. The
decrease was primarily due to lower business and assets acquisitions.
Net cash flow generated by investing activities amounted to $5.4 million for Fiscal 2021 compared to net cash flow used in
investing activities of $17.9 million for Fiscal 2020. The positive net change was primarily due to the $18.9 million proceeds
from the sale of securities held in AppDirect Inc. during Q3 2021 and to lower business and assets acquisitions.
Adjusted free cash flow(1)
Adjusted free cash flow generated in Q4 2021 amounted to $13.8 million compared to $18.0 million for Q4 2020. The decrease
was mainly related to lower operating results and higher interest paid, partially offset by lower income taxes paid.
Adjusted free cash flow generated in Fiscal 2021 amounted to $74.4 million compared to $78.4 million for Fiscal 2020. The
decrease was mainly related to lower operating results, partially offset by lower capital expenditures.
Note:
(1) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
Annual Report 2021 | Stingray Group Inc. | 42
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, 2021, 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
4,787
5,046
6,373
27,500
–
53,146
14,135
110,987
1 to 5
years
16,895
2,399
21,686
277,184
32,000
–
18,638
368,802
More
than 5
years
16,601
372
12
–
–
–
3,018
20,003
Total
38,283
7,817
28,071
304,684
32,000
53,146
35,791
499,792
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 2021 | Stingray Group Inc. | 43
Capital resources
Our principal sources of liquidity are our net cash provided by operating activities and borrowings available under our revolving
facility. Our principal uses of cash are to repay our debt, finance our acquisitions and capital expenditures, pay dividends,
repurchase shares and provide for working capital. We expect that cash generated from operations and borrowings available
under our current credit facilities will be sufficient to meet our liquidity needs in the foreseeable future.
On October 6, 2020, the Corporation amended its existing $373.8 million credit facilities by increasing the authorized amount
up to $420.0 million. The credit facilities consist of a $325.0 million revolving credit facility and a $75.0 million term loan, both
maturing in October 2023, and includes the pre-existing $20.0 million term loan, secured on May 29, 2020 and maturing in
May 2021.
The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial drawdown of the
$75.0 term loan. The remaining capital balance will be payable on maturity date, on October 25, 2023.
The credit facilities bear interest at either (a) the bank’s prime rate plus an applicable margin based on a financial covenant or
(b) the banker’s acceptance rate plus an applicable margin based on a financial covenant. In addition, the Corporation incurs
standby fees, varying between 0.40% and 0.63% based on a financial covenant.
As of March 31, 2021, the Corporation had cash and cash equivalents of $9.0 million, a subordinated debt of $31.7 million and
credit facilities of $416.3 million, of which approximately $110.8 million was available.
The following table summarizes the impact on the Net debt that occurred in the fiscal year ended March 31, 2021 including
related ratios:
Movement in Net debt(1)(2)
$18.1
$10.2
$22.0
$(18.9)
$(76.0)
Interests
payment
Share
repurchases
Dividend
payment
$326.4
As at March
31, 2021
Proceeds
from an
investment
Remaining
net change of
revolving
facility and
cash
$361.3
$9.7
As at March
31, 2020
Business
acquisitions
outlays,
balance
payable and
contingent
consideration
payments
(in thousands of Canadian dollars)
LTM Adjusted EBITDA(2)
Synergies and Adjusted EBITDA(2) for the months prior to the business
acquisitions which are not already reflected in the results
COVID-19 mandated store closures required anticipated rollouts and
deployments to be deferred
Pro Forma Adjusted EBITDA(2)
Net debt to Pro Forma Adjusted EBITDA(2)
March 31,
2021
114,268
March 31,
2020
118,086
190
2,037
1,825
116,283
2.81
-
120,123
3.01
Notes:
(1)
(2) Refer to “Supplemental information on Non-IFRS measures” on page 28 and 33.
In millions of Canadian dollars.
Annual Report 2021 | Stingray Group Inc. | 44
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, 2021:
(in thousands of Canadian
dollars)
March 31,
2021
March 31,
2020
Variance
Trade and other receivables
61,114
73,456
(12,342) ▼
Intangible assets
41,884
54,490
(12,606) ▼
Goodwill
337,897
337,824
73 ▲
Accounts payables and
accrued liabilities
53,146
62,101
(8,955) ▼
Other liabilities
60,027
81,281
(21,254) ▼
Credit facility
303,704
324,123
(20,419) ▼
Subordinated debt
31,741
39,640
(7,899) ▼
Music Choice Litigation
Significant contributions
Timing of payments by clients
and decrease in revenues due to
the COVID-19 pandemic, partially
offset by the receivable from the
settlement with SOCAN
Amortization and disposals of
intangible assets, partially offset
by additions through internally
developed intangible assets and
business acquisition
Acquisition of Marketing
Sensorial Mexico, largely offset by
foreign exchange differences
Timing of payments to suppliers
and decrease in operating
expenses
Decrease in negative mark-to-
market on derivative financial
instruments, payment of the
second installment related to the
Fiscal 2020 settlement with Music
Choice and repayment of
contingent consideration from
past business acquisitions,
partially offset by an increase in
CRTC tangible benefits payable
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
was made on 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.
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.
As of December 2020, the Objectors and SOCAN have entered into a binding memorandum of understanding that will result
in a partial refund to the Objectors of past royalties paid to Canadian collective societies and a meaningfully reduced tariff
burden for the present and future. As a result, $4.4 million was recognized as a reduction of expenses in Q3 2021.
On May 29, 2021, the Copyright Board released its decision and approval of the Re:Sound and SOCAN – Stingray Pay Audio
and Ancillary Services Tariff (2007–2016) (the “Tariff”), which decision confirmed that allocation of revenue amongst the
Stingray suite of services is to be done for the entire period of the Tariff (that is, for each year from 2010 to 2016), and also
approved a gradual reduction in the rates of the Tariff.
Annual Report 2021 | Stingray Group Inc. | 45
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
Performance share units
Deferred share units
Off-Balance Sheet Arrangements
12 months
2021
2020
5,727
465
1,755
2,908
10,855
3,568
783
208
514
5,073
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, 2021
March 31, 2021
53,372,162
53,799,462
(9,819)
382,040
17,941,498
71,685,881
(7,112)
377,740
17,941,498
72,111,588
3,163,253
3,163,253
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 2021, 80,732 options were exercised, 21,008 options were forfeited, and 833,174 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
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
Annual Report 2021 | Stingray Group Inc. | 46
material transactions out of the ordinary course of business, including proposals on mergers, acquisitions or other major
investments or divestitures.
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)
Currency
Fixed interest rate
(when applicable)
Initial nominal
value
Mark-to-market
Liabilities as at
March 31, 2021
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
$
$
$
945
403
494
1,938
—
—
3,780
642
948
1,590
5,370
$
$
$
1,349
904
1,164
2,912
2,098
2,963
11,390
3,064
3,878
6,942
18,332
Maturity
Swaps
October 25, 2024
October 25, 2024
October 25, 2021
October 25, 2024
August 29, 2029
August 31, 2029
Swaptions
October 25, 2024
October 25, 2024
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, 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.
An allowance for expected credit losses is maintained to reflect an impairment risk for trade accounts receivable based on an
expected credit loss model. 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.
Annual Report 2021 | Stingray Group Inc. | 47
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.
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.
Annual Report 2021 | Stingray Group Inc. | 48
Estimation of 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.
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
There are no new standard adopted by the Corporation as of March 31, 2021.
Future Accounting Changes
There are no material future accounting changes as of March 31, 2021.
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, 2021, 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, 2021.
As at March 31, 2021, 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, 2021.
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.
Subsequent Events
There are no subsequent events.
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 2021 | Stingray Group Inc. | 49
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, 2021 and March 31, 2020
the consolidated statements of comprehensive income 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, 2021 and March 31, 2020, 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended March 31, 2021. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters. We have
determined the matter described below to be the key audit matter to be communicated in our auditors’
report.
© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Page 2
Impairment of goodwill and broadcast licenses for certain cash generating
units
Description of the matter
We draw attention to Note 16 of the consolidated financial statements. The Entity’s goodwill and
broadcast licenses amount to $337,897 and $272,988, respectively. For the purposes of impairment
testing, broadcast licenses are allocated to groups of cash generating units ("CGUs"). Goodwill and
broadcast licenses are tested for impairment annually and when circumstances indicate the carrying
value may be impaired. The recoverable amounts of the CGUs have been determined based on their
value in use ("VIU"). A significant estimate used in determining the recoverable amount is the
measurement of future cash flows expected to be generated. Significant assumptions used to
determine the future cash flows include revenue growth rate in operating expenses, margin and
discount rate based on experience and expected growth for the industry considering both external
sources and internal sources (historical data).
Why the matter is a key audit matter
We identified impairment of goodwill and broadcast licenses for certain CGUs as a key audit matter.
This matter represented an area of significant risk of material misstatement for certain groups of
CGUs. This is due to the magnitude of the goodwill and the high degree of estimation uncertainty in
the measurement of future cash flows used within the determination of the recoverable amount.
Significant auditor judgment was required in evaluating the results of our audit procedures. Further,
specialized skills and knowledge were needed to evaluate certain significant assumptions used in the
determination of the VIU of certain groups of CGUs.
How the matter was addressed in the audit
The following are the primary procedures we performed to address this key audit matter:
• We evaluated the Entity’s revenue growth rate assumptions for certain groups of CGUs, by
comparing those assumptions to the expected growth rates included analyst reports of the Entity
and comparable entities.
• We compared certain groups of CGUs’ future cash flows and margins to historical actual results.
We obtained and reperformed the sensitivity analyses prepared by management to assess the
impact of possible changes to the future cash flows and discount rate assumptions on certain
groups of CGUs’ recoverable amounts.
• We involved valuation professionals with specialized skills and knowledge. They assisted us in
evaluating the reasonableness of the discount rate assumptions used by management in the
determination of the VIU by comparing them to discount rate ranges that were independently
developed using publicly available market data for comparable entities.
Page 3
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 Commission.
the information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled "Annual Report".
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 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" 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 International Financial Reporting Standards, 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.
Page 4
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.
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
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion,
from error, as
fraud may
forgery,
• 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.
Page 5
• 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.
• 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.
• Determine, from the matters communicated with those charged with governance, those matters
that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditors’ report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our auditors’ report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this auditors’ report is Alain Bessette.
Montréal, Canada
June 2, 2021
*CPA auditor, CA, public accountancy permit No. A115894
Consolidated Statements of Comprehensive Income
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts)
Note
2021
2020
Revenues
Operating expenses
Depreciation, amortization and write-off
Net finance expense (income)
Change in fair value of investments
Acquisition, legal, restructuring and other expenses
Income before income taxes
Income taxes
Net income
Net income per share — Basic
Net income per share — Diluted
Weighted average number of shares — Basic
Weighted average number of shares — Diluted
Comprehensive income
Net income
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 $3 (2020 — $89)
Total other comprehensive income (loss)
5
6
8
17, 29
9
$
249,468
$
306,721
142,487
38,692
(1,199)
3,787
4,637
61,064
15,960
190,381
40,302
42,822
(6,550)
24,104
15,662
1,692
45,104
$
13,970
0.62
0.61
$
$
0.18
0.18
73,266,886
73,435,192
75,845,030
75,958,871
$
$
$
10
11
11
11
11
$
45,104
$
13,970
(7,577)
4,826
(7)
(7,584)
(303)
4,523
Total comprehensive income
$
37,520
$
18,493
Net income is entirely attributable to Shareholders.
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2021 | Stingray Group Inc. | 55
Consolidated Statements of Financial Position
March 31, 2021 and 2020
(In thousands of Canadian dollars)
Note
March 31,
2021
March 31,
2020
Restated (note 3)
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 facilities
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 facilities
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)
Total liabilities and equity
$
12
$
$
13
14
15
16
16
17
10
19
18
24
21
22
19
20
21
22
10
24
$
9,040
61,114
3,801
3,215
13,439
90,609
42,228
28,184
41,884
272,988
337,897
3,046
1,335
4,666
2,512
73,456
549
3,336
13,171
93,024
45,732
29,460
54,490
272,910
337,824
25,732
1,095
10,682
822,837
$
870,949
$
27,462
53,146
5,409
4,970
4,479
15,812
9,211
120,489
276,242
31,741
25,733
44,215
49,725
548,145
313,951
5,180
(40,172)
(4,267)
274,692
15,000
62,101
—
4,808
4,517
16,672
4,850
107,948
309,123
39,640
26,336
64,609
49,397
597,053
322,366
4,620
(56,407)
3,317
273,896
$
822,837
$
870,949
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 2021 | Stingray Group Inc. | 56
Consolidated Statements of Changes in Equity
Years ended March 31, 2021 and 2020
(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, 2019
76,237,903
$ 337,714
$ 4,344
$
(53,317)
$
(1,024)
$
(182)
$ 287,535
Issuance of shares upon
exercise of stock 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)
Net income
Other comprehensive income
(loss)
(5,650)
(42)
—
—
—
—
—
792
80
—
—
—
—
—
—
—
—
—
—
—
—
—
—
921
(16,262)
(17,621)
792
38
13,970
—
4,826
(303)
4,523
Balance at March 31, 2020
73,549,454
$ 322,366
$ 4,620
$
(56,407)
$ 3,802
$
(485)
$ 273,896
Issuance of shares upon
exercise of stock options
(note 24)
Dividends
80,732
—
269
—
(125)
—
—
(27,376)
Repurchase and cancellation
of shares (note 24)
(1,530,180)
(8,700)
Share-based compensation
—
Employee share purchase
plan (notes 24 and 26)
Net income
Other comprehensive income
(loss)
11,582
—
—
—
16
—
—
—
700
(15)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
144
(27,376)
(10,193)
700
1
45,104
—
(7,577)
(7)
(7,584)
Balance at March 31, 2021
72,111,588
$ 313,951
$ 5,180
$
(40,172)
$
(3,775)
$
(492)
$ 274,692
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report 2021 | Stingray Group Inc. | 57
(798)
—
—
13,970
(1,493)
—
—
45,104
Consolidated Statements of Cash Flows
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars)
Note
2021
2020
Operating activities:
Net income
Adjustments for:
Depreciation, amortization and write-off
Share-based compensation, PSU and DSU expenses
Interest expense and standby fees
Mark-to-market losses (gains) on derivative financial
instruments
Change in fair value of investments
Share of results of joint venture
Change in fair value of contingent consideration
Depreciation, amortization and accretion of other
liabilities
Interest expense on lease liabilities
Income tax expense
Income taxes paid
Net change in non-cash operating items
Financing activities:
Increase (decrease) of credit facilities
Decrease of subordinated debt
Payment of dividends
Proceeds from the exercise of stock options
Shares repurchased and cancelled
Shares purchased under the employee share purchase plan
Interest paid
Repayment of lease liabilities
Repayment of other payables
Unwind of interest rate swaps
Investing activities:
Business acquisitions, net of cash acquired
Addition to investments in associate
Disposal of non-core assets
Proceeds from the disposal of an investment
Acquisition of property and equipment
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
8
8
17
17
8
8
21
25
20
24
24
21
29
3
17
17
$
45,104
$
38,692
7,287
16,151
(13,818)
3,787
38
110
3,248
1,628
15,960
(3,309)
114,878
(10,632)
104,246
(21,901)
(8,000)
(21,967)
144
(10,193)
(339)
(18,053)
(5,011)
(18,318)
490
(103,148)
—
—
—
18,861
(5,690)
(1,313)
(6,428)
5,430
6,528
2,512
Cash and cash equivalents, end of year
$
9,040
$
The accompanying notes are an integral part of these consolidated financial statements.
13,970
40,302
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
2,512
Annual Report 2021 | Stingray Group Inc. | 58
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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 years ended
March 31, 2021 and 2020, Radio revenues are not expected to follow historical patterns due to the ongoing impact of the
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, 2021:
Since March 2020, global economies and financial markets have been impacted by the COVID-19 pandemic.
Government authorities around the world have taken actions 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 Q4 2020, 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, which,
combined with the Canadian Emergency Wage Subsidy (CEWS), helped to maintain a solid financial position. The
Corporation’s Radio segment, and Broadcast and Commercial Music segment, but to a lesser extent, have been
impacted during the first half of 2021. In the second half of 2021, although still impacted, the Corporation noticed
progressive improvements in Radio advertising bookings as provinces begin lifting restrictions on social distancing.
Management expects the situation to continue improving as local businesses resume their normal operations. The
extent to which COVID-19 continues to impact the Corporation’s business will depend on future developments, which
are uncertain and cannot be predicted at this time. The Corporation’s focus will be to continue to closely monitor its
cash position and control its operating expenses while capitalizing on its growth opportunities.
In December 2020, the Corporation, together with its Canadian Broadcast Distribution Undertaking customers
(together, the “Objectors”), and SOCAN have entered into a binding memorandum of understanding that will result in
a partial refund to the Objectors of past royalties paid to Canadian collective societies and a meaningfully reduced
tariff burden for the present and future. As a result, $5,155 was recognized as a reduction of operating expenses
during the year ended March 31, 2021.
On December 21, 2020, the Corporation announced the sale of the securities it held in the capital stock of San
Francisco based AppDirect Inc. for a cash consideration of USD14,612 ($18,861). Refer to note 17 for more
information.
On October 6, 2020, the Corporation amended its existing $373,750 credit facilities by increasing the authorized
amount up to $420,000. The credit facilities consist of a $325,000 revolving credit facility and a $75,000 term loan,
both maturing in October 2023, and includes the pre-existing $20,000 term loan, secured on May 29, 2020 and
maturing in May 2021.
Annual Report 2021 | Stingray Group Inc. | 59
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
On September 23, 2020, the Corporation announced that the Toronto Stock Exchange had approved its normal course
issuer bid, authorizing the Corporation to repurchase up to an aggregate 3,485,155 subordinate voting shares and
variable subordinate voting shares (collectively, “Subordinate Shares”), representing approximately 10% of the public
float of Subordinate Shares as at September 21, 2020.
3. BUSINESS ACQUISITIONS
FISCAL 2021
Marketing Sensorial México
On May 6, 2020, the Corporation purchased all assets of Marketing Sensorial México, (“MSM”) for total consideration of
MXN 127,759 ($7,433). MSM is a Mexican leader in point-of-sale marketing solutions. As a result of the acquisition, goodwill
of $2,947 was recognized related to the operating synergies expected to be achieved from integrating the acquired
business into the Corporation’s existing business. The intangible assets and goodwill will be deductible for tax purposes.
The contingent consideration arrangement requires the Corporation to pay, in cash, to the former owners, an amount not
exceeding MXN 44,164 ($2,570) over the next two years ending in June 2022, 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. Total consideration consists of a balance payable on business acquisition of
MXN 90,000 ($5,236) that was fully settled on December 1, 2020 and a contingent consideration.
The results of the business acquisition of MSM for the period ended March 31, 2021 are included in results since the date
of the acquisition. Revenues recorded from the acquisition date to March 31, 2021 were $2,384 and net income was $920
the acquisition occurred at the beginning of the fiscal year, revenues related to this acquired business would have been
approximately $2,601 and net income would have been $961.
Assets acquired:
Property and equipment
Intangible assets
Goodwill
Net assets acquired at fair value
Consideration given:
Balance payable on business acquisition
Contingent consideration
Preliminary
$
$
$
$
1,765
2,721
2,947
7,433
5,236
2,197
7,433
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 2021 | Stingray Group Inc. | 60
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 $4,708 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 $543, 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 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 consolidated statements of
financial position as shown below.
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 as of
March 31, 2020 Adjustments
168 $
303
5,446
4,654
587
11,158
208
14
1,443
1,665
$
—
240
(400)
54
—
(106)
—
—
(106)
(106)
Final
168
543
5,046
4,708
587
11,052
208
14
1,337
1,559
9,493 $
—
$
9,493
2,140 $
7,344
9
9,493 $
—
—
—
—
$
2,140
7,344
9
$
9,493
Purchase price adjustments within the measurement period have been recorded as at March 31, 2020 (recasted).
Annual Report 2021 | Stingray Group Inc. | 61
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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.
The Corporation finalized the assessment of the fair values of the assets acquired and liabilities assumed related to this
acquisition and no adjustment to the preliminary assessment have been recorded in the consolidated statements of
financial position.
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
Final
70
400
1,200
1,670
30
1,640
1,600
40
1,640
$
$
$
$
Annual Report 2021 | Stingray Group Inc. | 62
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
4. 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 earnings
before interest, taxes, depreciation and amortization (thereafter “Adjusted EBITDA”), and for which distinct financial
information is available. Adjusted EBITDA excludes from income before income taxes the following expenses: share-based
compensation, performance and deferred share unit expense, 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, 2021 and 2020.
Year ended
2021
2020
2021
2020
Broadcasting and
commercial music
Radio
Corporate and
eliminations
2021
2020
Consolidated
2021
2020
Revenues
Operating expenses
(excluding Share-
based
compensation, PSU
and DSU expenses)
Adjusted EBITDA
Share-based
compensation
PSU and DSU
expenses
Depreciation,
amortization and
write-off
Net finance expense
(income)
Change in fair value of
investments
Acquisition, legal,
restructuring and
other expenses
Income before income
taxes
Income taxes
Net income
$ 151,658 $ 154,466 $ 97,810 $ 152,255 $
— $
— $ 249,468 $ 306,721
74,205
77,453
90,765
63,701
56,528
41,282
93,760
58,495
4,467
(4,467)
135,200
4,110
(4,110) 114,268
188,635
118,086
851
1,001
851
1,001
6,436
745
6,436
745
38,692
40,302
38,692
40,302
(1,199)
42,822
(1,199) 42,822
3,787
(6,550)
3,787
(6,550)
4,637
24,104
4,637
24,104
61,064
15,662
15,960
1,692
$ 45,104 $ 13,970
Annual Report 2021 | Stingray Group Inc. | 63
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
Broadcasting and
commercial music
Radio
Corporate and
eliminations
Consolidated
March 31,
2021
March 31,
2020
March 31,
2021
March 31,
2020
March 31,
2021
March 31,
2020
March 31,
2021
March 31,
2020
Total assets
Total liabilities(1)
$ 217,256 $ 248,955 $ 605,581 $ 599,346 $
— $ 22,648 $ 822,837 $ 870,949
$ 85,194 $
90,967 $ 116,727 $ 123,625 $ 346,224 $ 382,461 $ 548,145 $ 597,053
(1) Total liabilities include operating liabilities, the Credit facilities and the Subordinated debt. Total assets as at March 31, 2020 is the
investment in AppDirect which was sold during the year ended March 31, 2021.
Year ended
2021
2020
Broadcasting and
commercial music
Radio
2021
Consolidated
2020
2021
2020
Acquisition of property
and equipment
Addition to
right-of-use assets on
leases
Acquisition of intangible
assets
Acquisition of broadcast
licences
Goodwill recorded on
$
$
$
$
6,731 $
3,258 $
1,527 $
4,300 $
8,258 $
7,558
3,282 $
1,168 $
1,415 $
540 $
4,697 $
1,708
11,654 $
13,140 $
— $
— $
11,654 $
13,140
— $
— $
78 $
1,200 $
78 $
1,200
business acquisitions
$
2,947 $
4,654 $
— $
— $
2,947 $
4,654
Acquisition of property and equipment, right-of-use assets on leases, intangible assets, broadcast licences and goodwill,
includes those acquired through business acquisitions, whether they were paid or not.
Approximately 80% of the Corporation’s non-current assets are located in Canada.
Annual Report 2021 | Stingray Group Inc. | 64
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
5. REVENUES
DISAGGREGATION OF REVENUES
The following table presents the Corporation’s revenues disaggregated by reportable segment, primary geographical
market and product.
Year ended
2021
2020
2021
2020
2021
2020
Broadcasting and
commercial music
Radio
Total revenues
Reportable segments
Geography
Canada
United States
Other countries
Products
Subscriptions (1)
Equipment and labor (2)
Advertising (2)
$
52,919
42,028
56,711
151,658
135,259
11,138
5,261
57,588 $
37,987
58,891
154,466
138,006
14,622
1,838
97,810
—
—
97,810
—
—
97,810
152,255 $
—
—
152,255
—
—
152,255
$
151,658
154,466 $
97,810
152,255 $
150,729
42,028
56,711
249,468
135,259
11,138
103,071
249,468
209,843
37,987
58,891
306,721
138,006
14,622
154,093
306,721
(1) Generally recognized over time
(2) Generally recognized at a point in time
UNSATISFIED PORTION OF PERFORMANCE OBLIGATIONS
The following table presents the revenues expected to be recognized over the next 3 years and thereafter related to
unsatisfied or partially satisfied performance obligations as at March 31, 2021. 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.
2022
2023
2024 Thereafter
Equipment and labor
Subscriptions
$
$
2,487
12,848
15,335
—
8,291
8,291
—
5,138
5,138
—
3,131
$
3,131
$
Total
2,487
29,408
31,895
Annual Report 2021 | Stingray Group Inc. | 65
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
6. OPERATING EXPENSES
During the year ended March 31, 2021, the Corporation applied and qualified for the Canada Emergency Wage Subsidy
(“CEWS”), a Canadian federal government program created in response to the negative economic impact of the COVID-19
pandemic and designed to provide financial assistance to businesses who experienced a certain level of decrease in
revenues to help them retain their employees. During the year ended March 31, 2021, the Corporation recognized, as a
reduction of operating expenses, the subsidies claimed under the CEWS and other programs amounting to $25,161. As at
March 31, 2021, the Corporation had already received a significant portion of the subsidies claimed and believes that there
is reasonable assurance that the amount outstanding would be received from the Canadian federal government.
The Corporation also received tax credits related to its research and development and multimedia activities, which
amounted $3,127 (2020 – $1,366) and was recorded as a reduction of operating expenses.
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 (gains) on derivative financial instruments
Change in fair value of contingent consideration
Depreciation, amortization and accretion of other liabilities
Interest expense on lease liabilities
Foreign exchange (gain) loss
$
$
$
9. ACQUISITION, LEGAL, RESTRUCTURING AND OTHER EXPENSES
Acquisition
Legal
Restructuring and other
$
$
2021
79,013
7,562
4,932
851
6,436
2021
16,151
(13,818)
110
3,248
1,628
(8,518)
(1,199)
2021
2,439
623
1,575
4,637
2020
88,906
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
$
$
$
$
$
Annual Report 2021 | Stingray Group Inc. | 66
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
10. INCOME TAXES
The income tax expense 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
$
$
2021
9,851
(177)
9,674
6,194
6
86
—
6,286
Total income tax expense
$
15,960
$
2020
5,360
(405)
4,955
(1,353)
(2,643)
458
275
(3,263)
1,692
The following table reconciles income tax computed at the Canadian statutory rate of 26.5% (2020 — 26.6%) and the total
income tax expense for the years ended March 31:
2021
2020
Income before income taxes
$
61,064
$
15,662
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
SIGNIFICANT ESTIMATE
16,182
(1,726)
1,548
—
6
(50)
15,960
$
4,166
(1,538)
948
275
(2,643)
484
1,692
$
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.
Annual Report 2021 | Stingray Group Inc. | 67
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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, goodwill and
broadcast licences
Financing fees
Tax losses and Scientific Research and
Experimental Development
Expenditures (“SR&ED”) carried
forward
Investments
CRTC tangible benefits
Performance share unit
Right-of-use assets on leases
Lease liabilities
Accrued pension benefit liability
Other
Deferred tax assets and liabilities
Offsetting of assets and liabilities
2021
2020
Assets
Liabilities
Assets
Liabilities
$
1,837 $
2,940
$
1,658 $
2,884
934
980
65,134
—
1,138
1,304
63,948
—
7,670
—
7,390
2,596
—
5,270
1,941
327
28,945
(24,279)
—
—
—
—
4,844
—
—
1,086
74,004
(24,279)
15,491
—
7,113
1,313
—
5,932
2,238
367
36,554
(25,872)
—
2,829
—
—
5,608
—
—
—
75,269
(25,872)
Net deferred tax assets and liabilities
$
4,666 $
49,725
$
10,682 $
49,397
Changes in deferred tax assets and liabilities for the year ended March 31, 2021 are as follow:
Property and equipment
Intangible assets, goodwill and
$
broadcast licences
Financing fees
Tax losses and SR&ED carried
forward
Investments
CRTC tangible benefits
Performance share unit
Right-of-use assets on leases
Lease liabilities
Accrued pension benefit liability
Other
Balance
as at March
31, 2020
(1,226)
Recognized in
net income
123
Recognized in
other
comprehensive
income (loss)
—
Exchange
rate change
—
Balance
as at March
31, 2021
(1,103)
(62,811)
1,304
15,491
(2,829)
7,113
1,313
(5,608)
5,932
2,238
368
(1,445)
(324)
(7,807)
2,829
277
1,283
764
(662)
(300)
(1,024)
(6,286)
—
—
—
—
—
—
—
—
3
—
3
56
—
(14)
—
—
—
—
—
—
(103)
(64,200)
980
7,670
—
7,390
2,596
(4,844)
5,270
1,941
(759)
(61)
(45,059)
$
(38,715)
Annual Report 2021 | Stingray Group Inc. | 68
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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, goodwill and
$
broadcast licences
Financing fees
Tax losses and SR&ED carried
forward
Investments
CRTC tangible benefits
Performance share unit
Right-of-use assets on leases
Lease liabilities
Accrued pension benefit liability
Other
$
Balance
as at
March 31,
2019
(2,255)
Recognized
in net
income
1,029
Recognized in
other
comprehensive
income (loss)
—
Exchange
rate change
—
Business
acquisitions
—
Balance
as at
March 31,
2020
(1,226)
(64,992)
2,708
11,424
(1,973)
9,490
1,308
—
—
1,776
1,153
(41,361)
3,358
(1,404)
3,508
(856)
(2,377)
5
(5,608)
5,932
373
(697)
3,263
—
—
—
—
—
—
—
—
89
—
89
160
—
(28)
—
—
—
—
—
—
(88)
44
(1,337)
—
(62,811)
1,304
587
—
—
—
—
—
—
—
(750)
15,491
(2,829)
7,113
1,313
(5,608)
5,932
2,238
368
(38,715)
UNRECOGNIZED DEFERRED TAX ASSETS
The Corporation has operating tax losses carried forward of $43,047 (2020 – $71,880) that are available to reduce future
taxable income. A tax benefit was not recognized for $6,818 (2020 – $12,740) 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 utilize the benefits therefrom.
As at March 31, 2021 and 2020, the amounts and expiry dates of the tax losses carried forward were as follows:
Canada (1)
Singapore
Switzerland
United Kingdom
2021
$
2022
2023
2028
2036
2037
2038
2039
2040
2041
Indefinite
$
—
—
—
51
323
2,992
808
4,465
1,535
—
$
10,174
$
—
—
—
—
—
—
—
—
—
579
579
$
$
3,335
2,032
360
—
—
—
—
—
—
—
$
5,727
$
—
—
—
—
—
—
—
—
—
26,567
26,567
(1) Represents tax losses carried forward as per federal jurisdiction and tax losses available as per provincial jurisdictions may differ.
Annual Report 2021 | Stingray Group Inc. | 69
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
Canada (1)
Singapore
Netherlands
Switzerland
2020
$
2021(2)
2022
2023
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
—
—
—
—
—
—
—
—
—
—
—
41,807
41,807
(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, 2021.
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.
Annual Report 2021 | Stingray Group Inc. | 70
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
11. EARNINGS PER SHARE
2021
2020
Net income
$
45,104
$
13,970
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
73,266,886
168,306
75,845,030
113,841
73,435,192
75,958,871
Earnings per share — Basic
Earnings per share — Diluted
12. TRADE AND OTHER RECEIVABLES
Trade
Other receivables
Settlement receivable
Sales taxes receivable
Canada Emergency Wage Subsidy
Research and development and multimedia tax credits
$
$
$
$
0.62
0.61
2021
45,381
6,965
5,155
3,223
390
—
61,114
$
$
$
$
0.18
0.18
2020
64,945
3,915
—
1,922
—
2,674
73,456
During the year ended March 31, 2021, the Corporation, together with its Canadian Broadcast Distribution Undertaking
customers (together, the “Objectors”), and SOCAN have entered into a binding memorandum of understanding that will
result in a partial refund to the Objectors of past royalties paid to Canadian collective societies. An amount of $5,155 was
therefore recognized in reduction of operating expenses and was still receivable as at March 31, 2021.
As at March 31, 2021 and 2020, the Corporation had research and development tax credits receivable of $3,506 and
$2,674, respectively, from the provincial and federal governments, which relate to qualified research and development
expenditures under the applicable tax laws. As at March 31, 2021, the research and development tax credits receivable of
$3,506 was booked as a deduction of income tax payable. The amounts are subject to a government tax audit and the final
amounts received may differ from those recorded.
Annual Report 2021 | Stingray Group Inc. | 71
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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
Other
Total
$
15,402 $
891
15,970 $
23,702 $
1,690
2,525
13,728 $
1,691
$
1,801
361
70,603
7,158
—
(458)
34
15,869
131
—
(21)
(40)
—
—
—
17,660
1,119
—
(48)
—
—
(718)
(438)
25,071
3,769
—
(4,298)
—
(3)
(25)
15,391
1,419
400
—
—
2,562
55
1,765
(71)
—
(301)
400
(1,179)
(429)
76,553
6,493
1,765
(4,739)
(126)
105
—
(61)
Cost:
Balance at March 31, 2019
Additions
Additions through business
acquisition
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2020
Additions
Additions through business
acquisition
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2021
$
15,939 $
18,731 $
24,416 $
18,609 $
2,316
$
80,011
$
Accumulated depreciation:
Balance at March 31, 2019
Depreciation for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2020
Depreciation for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2021
$
2,387 $
1,687
(36)
28
4,066
1,409
(12)
(34)
5,429 $
715 $
2,370
—
—
3,085
2,706
(31)
9,142 $
3,860
(113)
(161)
12,728
4,093
(3,587)
7,845 $
2,531
—
(40)
10,336
2,596
(36)
$
188
418
—
—
606
103
(15)
20,277
10,866
(149)
(173)
30,821
10,907
(3,681)
—
(219)
(11)
—
(264)
5,760 $
13,015 $
12,885 $
694
$
37,783
Net carrying amounts:
March 31, 2020
March 31, 2021
$
$
11,803 $
10,510 $
14,575 $
12,971 $
12,343 $
11,401 $
5,055 $
5,724 $
1,956
1,622
$
$
45,732
42,228
Annual Report 2021 | Stingray Group Inc. | 72
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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
Additions
Disposals and write-off
Foreign exchange differences
Balance at March 31, 2021
Accumulated depreciation:
Balance at March 31, 2019
Depreciation for the year
Foreign exchange differences
Balance at March 31, 2020
Depreciation for the year
Disposals and write-off
Foreign exchange differences
Balance at March 31, 2021
Net carrying amounts:
March 31, 2020
March 31, 2021
Land and
buildings
Vehicles
Total
$
$
$
$
$
$
—
32,763
1,548
(57)
34,254
4,627
(407)
13
38,487
—
5,179
110
5,289
5,285
(35)
(4)
10,535
28,965
27,952
$
$
$
$
$
$
—
648
160
43
851
70
—
(13)
908
—
439
(83)
356
329
—
(9)
676
495
232
$
$
$
$
$
$
—
33,411
1,708
(14)
35,105
4,697
(407)
—
39,395
—
5,618
27
5,645
5,614
(35)
(13)
11,211
29,460
28,184
Annual Report 2021 | Stingray Group Inc. | 73
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
15. INTANGIBLE ASSETS, EXCLUDING BROADCAST LICENCES
Internally
developed
software
and apps
Music
catalog
Client list
and
relationships Trademark
Licences,
website
application
and
computer
software
Non-
compete
agreements
Total
$
8,140 $
5,901
11,702 $
429
110,970 $
—
10,264 $
7
20,835
1,357
$
17,455 $
—
179,366
7,694
—
—
1,764
—
3,008
274
5,046
263
14,304
6,428
—
—
23
12,154
1,527
—
(3,574)
589
113,323
—
2,087
(3,587)
350
10,621
—
253
—
725
25,925
978
—
(1,207)
172
17,901
—
381
—
2,122
194,228
8,933
2,721
(8,368)
(336)
(41)
(982)
(392)
(788)
(183)
(2,722)
$
20,396 $
10,066 $
110,841 $
10,482 $
24,908
$
18,099 $
194,792
$
1,158 $
3,112
5,921 $
924
84,276 $
10,073
3,706 $
1,093
12,422
4,035
$
7,488 $
3,970
114,971
23,207
173
4,443
5,075
—
19
6,864
862
(1,299)
563
94,912
6,174
(3,587)
144
4,943
1,316
—
547
17,004
3,976
(1,025)
114
11,572
3,976
—
1,560
139,738
21,379
(5,911)
(259)
(33)
(919)
(198)
(758)
(131)
(2,298)
Cost:
Balance at March 31, 2019
Additions
Additions through
business acquisition
Foreign exchange
differences
Balance at March 31, 2020
Additions
Additions through
business acquisition
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2021
Accumulated depreciation:
Balance at March 31, 2019
Amortization for the year
Foreign exchange
differences
Balance at March 31, 2020
Amortization for the year
Disposals and write-off
Foreign exchange
differences
Balance at March 31, 2021
$
9,259 $
6,394 $
96,580 $
6,061 $
19,197
$
15,417 $
152,908
Net carrying amounts:
March 31, 2020
March 31, 2021
$
$
9,861 $
11,137 $
5,290 $
3,672 $
18,411 $
14,261 $
5,678 $
4,421 $
8,921
5,711
$
$
6,329 $
2,682 $
54,490
41,884
Annual Report 2021 | Stingray Group Inc. | 74
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
16. GOODWILL AND BROADCAST LICENCES
Balance at March 31, 2019
Additions through business acquisitions (note 3)
Foreign exchange differences
Balance at March 31, 2020
Additions through business acquisition (note 3)
Additions
Foreign exchange differences
Balance at March 31, 2021
ANNUAL IMPAIRMENT ASSESSMENTS
Goodwill
Broadcast licences
$
$
331,332
4,708
1,784
337,824
2,947
—
(2,874)
337,897
$
$
271,710
1,200
—
272,910
—
78
—
272,988
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 the greater of value-in-use (“VIU”) and fair value less cost to sell (“FVLCS”) calculations determined by using a
discounted cash flow model. VIU and FVLCS of cash generating units (“CGUs”) are determined with significant
unobservable inputs and are 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 licences 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 comprehensive 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)
2021
218,404
119,493
337,897
90,270
48,568
134,150
272,988
$
$
$
$
2020
218,404
119,420
337,824
90,040
48,420
134,450
272,910
$
$
$
$
(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 2021 | Stingray Group Inc. | 75
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
RADIO 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 cash flows. The most significant assumptions that
form part of the risk adjusted forecasted cash flows relate to estimated growth in revenues and operating expenses.
Forecasts are 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.
CGU
Toronto
Ottawa
Other(1)
Five-year average
growth rate in
revenues
14.9%
14.6%
6.3% to 15.4%
Five-year average
growth rate in
operating expenses
12.8%
14.2%
6.2% to 13.9%
Terminal value
1.5%
1.5%
1.5%
Pre-tax discount
rate
8.9%
8.9%
8.7% to 9.0%
(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.
The pre-tax discount rates applied to cash flow projections were derived from the Corporation’s weighted average cost of
capital (“WACC”). 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.
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 2021 | Stingray Group Inc. | 76
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
GOODWILL IMPAIRMENT ASSESSMENTS
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 risk adjusted cash flows from financial budgets
approved by the Board of Directors covering a five-year period. The Corporation considered past experience, economic
trends as well as industry and market trends in assessing the level of cash flows that can be maintained in the future.
The most significant assumptions that form part of the risk adjusted forecasted cash flows relate to estimated growth in
revenues and operating expenses. Forecasts are based on the Corporation’s estimate of future performance for this mature
industry.
CGU
Broadcast and Commercial Music
Radio (1)
Five-year average
growth rate in
revenues
5.8%
11.4%
Five-year average
growth rate in
operating expenses
2.8%
11.9%
Terminal value
Pre-tax discount
rate
2.5%
1.5%
8.6%
8.9%
(1) The five-year average for Radio is higher due to the fact that, for the next two years, revenues are expected to go back to a pre-
COVID volume, followed by a 1.5% normal growth.
The pre-tax discount rate represents the Corporation’s 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 2021 | Stingray Group Inc. | 77
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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 associates:
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
Proceeds from disposal of an investment
Share of results of joint venture
Change in fair value, including foreign
exchange differences
Balance at March 31, 2021
INVESTMENTS
Investments
Investment in a
joint venture
Investments
in associates
16,998 $
—
—
6,550
23,548
(18,861)
—
634 $
—
(6)
1,106 $
450
—
—
628
—
(38)
—
1,556
—
—
Total
18,738
450
(6)
6,550
25,732
(18,861)
(38)
(3,787)
900 $
—
590 $
—
1,556 $
(3,787)
3,046
$
$
As at March 31, 2021, the Corporation has an equity instrument in Nextologies, a private entity. Fair value as at
March 31, 2021 and 2020 was $900. The equity instrument is classified as financial asset at fair value through profit and
loss.
During the year ended March 31, 2021, the Corporation disposed of its investment in AppDirect for a cash consideration
of USD14,612 ($18,861) and recognized a loss on disposal of $3,787 in change in fair value of investments in the
consolidated statements of comprehensive income. The fair value of the investment as at March 31, 2020 was $22,648.
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, 2021, 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 associates had no capital commitments as at March 31, 2021.
Annual Report 2021 | Stingray Group Inc. | 78
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
18. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade
Accrued liabilities
Sales taxes payable
19. CREDIT FACILITIES
2021
15,226
34,172
3,748
53,146
$
$
2020
17,984
40,101
4,016
62,101
$
$
On October 6, 2020, the Corporation amended its existing $373,750 credit facilities by increasing the authorized amount
up to $420,000. The credit facilities consist of a $325,000 revolving credit facility and a $75,000 term loan, both maturing
in October 2023, and includes the pre-existing $20,000 term loan, secured on May 29, 2020 and maturing in May 2021.
The Credit facilities 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 facilities bears interest at (a) the bank’s prime rate (2.45% for the years ended March 31, 2021 and 2020) or
US base rate if denominated in US dollars (3.75% for the years ended March 31, 2021 and 2020) plus an applicable margin
based on a financial covenant, or (b) the banker’s acceptance rate (0.52% and 1.23% as at March 31, 2021 and 2020,
respectively) plus an applicable margin based on a financial covenant, or (c) LIBOR (0.11% and 0.99% as
at March 31, 2021 and 2020, 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 facilities
(0.40% for the years ended March 31, 2021 and 2020). The Credit facilities are secured by guarantees from subsidiaries
and first ranking lien on universality of all assets, tangible and intangibles, present and future.
The tables below are a summary of the Credit facilities:
March 31, 2021
Total available
Drawn
Letter of credit
Net available
Committed credit facilities
Revolving facility
Term facilities
Total committed credit facilities
Less: unamortized deferred financing fees
Balance, end of year
$
$
325,000
91,250
416,250
Current portion
Non-current portion
$
$
$
$
$
$
213,434
91,250
304,684
(980)
303,704
27,462
276,242
750
—
750
$
$
110,816
—
110,816
Annual Report 2021 | Stingray Group Inc. | 79
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
March 31, 2020
Total available
Drawn
Letter 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, 2021, letter(s) of credit amounting to $750 (2020 – $10,392) reduced the availability on the revolving
facility.
The Corporation is required to make consecutive quarterly capital repayments of 2.50% of the initial term facility drawdown
amount and a capital payment of $20,000 due in May 2021. The remaining capital balance will be payable on maturity date,
on October 25, 2023.
2022
2023
2024
$
Capital repayments
27,500
7,500
56,250
91,250
$
As at March 31, 2021, the Corporation was in compliance with all the requirements of its credit agreement.
20. SUBORDINATED DEBT
The subordinated debt has a nominal value of $50,000 and matures on October 26, 2023. During the years ended on
March 31, 2021 and 2020, the Corporation made voluntary capital repayments under its prepayment option of $8,000 and
$10,000, respectively. The loan is unsecured and bears interest based on a financial covenant (6.95% as at March 31, 2021
and 2020). The remaining capital balance will be payable on maturity date.
Unamortized deferred financing fees amounted to $259 as at March 31, 2021 (2020 – $360).
Annual Report 2021 | Stingray Group Inc. | 80
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
21. LEASE LIABILITIES
The following table presents a summary of the activity related to the lease liabilities of the Corporation:
Lease liabilities, beginning of year
Additions resulting from adoption of IFRS 16
Additions
Payment of lease liabilities, including related interest
Reassessment of leases’ term
Disposal
Interest expense on lease liabilities (note 8)
Foreign exchange
Lease liabilities, end of year
Lease liabilities included in the consolidated
statements of financial position
Current portion
Non-current portion
2021
2020
$
$
$
$
$
30,853
—
4,703
(6,639)
(381)
32
1,628
16
30,212
March 31,
2021
4,479
25,733
30,212
$
$
$
$
$
—
34,048
1,708
(6,541)
—
—
1,668
(30)
30,853
March 31,
2020
4,517
26,336
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, 2021:
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities as at March 31, 2021
$
$
4,787
16,895
16,601
38,283
Annual Report 2021 | Stingray Group Inc. | 81
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
$
2021
27,970
—
14,456
100
6,112
5,370
6,019
60,027
(15,812)
$
2020
26,694
9,316
17,831
784
6,139
18,698
1,819
81,281
(16,672)
$
44,215
$
64,609
During the year ended March 31, 2020, the Corporation and Music Choice executed and exchanged a settlement
agreement to put a definitive end to the parties’ patent litigation in the United States and fully and finally settled all claims,
counterclaims and defenses asserted in connection with that litigation. During the year ended March 31, 2021, the
Corporation paid the second and last payment of US$6,797 ($8,622), which resulted in the recognition of a realized gain
on foreign exchange of $694.
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 $14,456 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 discount rates ranging from 12% to 36%. During the year ended March 31, 2021, 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 2021 | Stingray Group Inc. | 82
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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 totaled $1,375 (2020 – $1,667).
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, 2021.
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 funded by the Corporation.
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, 2021 and the 2022 current service cost of the Plans are determined
based on membership data as at March 31, 2021.
Items related to the Corporation’s defined benefit pension plans are presented as follows in the consolidated financial
statements:
2021
2020
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 (loss)
Cumulative actuarial losses recognized in other comprehensive income (loss)
$
$
$
$
$
(6,112)
532
(5,580)
234
10
584
$
$
$
$
$
(6,139)
10
(6,129)
222
392
574
Annual Report 2021 | Stingray Group Inc. | 83
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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
Interest cost
Benefits paid
Actuarial gains (losses):
Impact of changes in financial assumptions
Impact of changes in experience adjustments
Balance, end of year
Plan assets
Fair value, beginning of year
Interest income
Actuarial gains:
Return on plan assets, excluding interest income
Administrative expenses
Benefits paid
Fair value, end of year
Net accrued pension asset (liability)
2021
2020
Basic Plan
SRPAs
Basic Plan
SRPAs
$
4,482 $
6,139 $
4,872 $
6,673
151
(316)
194
(793)
146
(338)
444
44
4,805 $
364
208
6,112 $
(265)
67
4,482 $
4,492 $
151
1,050
(40)
(316)
5,337 $
— $
—
—
—
—
— $
5,242 $
152
(524)
(40)
(338)
4,492 $
188
(788)
(177)
243
6,139
—
—
—
—
—
—
532 $
(6,112) $
10 $
(6,139)
$
$
$
$
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 $765 in 2022.
Pension benefit expense recognized in the consolidated statements of comprehensive income (loss) as net finance
expenses (income) is as follows:
Interest cost
Interest income on plan assets
Administrative expenses
Defined benefit plan expense
2021
Basic Plan
$
151
(151)
40
40
$
SRPAs
194
—
—
194
$
$
2020
Basic Plan
146
(152)
40
34
$
$
SRPAs
188
—
—
188
$
$
Actuarial gains and losses recognized in other comprehensive income (loss) are as follows:
Cumulative actuarial losses,
beginning of year
Recognized actuarial losses
during the year
Cumulative actuarial losses,
Basic Plan
2021
SRPAs
Total
Basic Plan
2020
SRPAs
Total
$
353
$
221 $
574 $
27 $
155 $
182
(562)
572
10
326
66
392
end of year
$
(209) $
793 $
584 $
353 $
221 $
574
Annual Report 2021 | Stingray Group Inc. | 84
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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
2021
Basic Plan
2.8%
1.7%
SRPAs
2.8%
0.3%
2020
Basic Plan
3.5%
1.4%
SRPAs
3.5%
0.1%
As at March 31, 2021 and based on an actuarial review, the net remeasurement loss, before income tax recovery, recorded
in other comprehensive income (loss) of $10 (2020 – $392) 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
2021
68%
32%
100%
2020
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 a good portion 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
Increase Decrease
463
$
$
$
(428)
610
960
$
$
$
(269)
(991)
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 8.3 years.
Annual Report 2021 | Stingray Group Inc. | 85
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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, 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
Year ended March 31, 2021
Subordinate voting shares and variable subordinate voting shares
As at March 31, 2020
Exercise of stock options
Repurchased and cancelled
Purchased and held in trust through employee share purchase plan
As at March 31, 2021
Multiple voting shares
As at March 31, 2020 and 2021
Number of
shares
Carrying
amount
58,296,405
275,000
(2,957,799)
(5,650)
55,607,956
17,941,498
73,549,454
55,607,956
80,732
(1,530,180)
11,582
54,170,090
17,941,498
72,111,588
$
$
$
$
$
$
$
$
319,488
1,517
(16,823)
(42)
304,140
18,226
322,366
304,140
269
(8,700)
16
295,725
18,226
313,951
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
applicable, voting of the Corporation’s shares. Restrictions include limitations over foreign ownership of the issued and
outstanding voting shares.
Annual Report 2021 | Stingray Group Inc. | 86
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
TRANSACTIONS FOR THE YEAR ENDED MARCH 31, 2021
During the period, 80,732 stock options were exercised and consequently, the Corporation issued 80,732 subordinate
voting shares. The proceeds amounted to $144. An amount of $125 of contributed surplus related to those stock options
was transferred to the subordinate voting shares’ account balance.
During the year ended March 31, 2021, the Corporation declared dividends of $0.075 per subordinate voting share,
variable subordinate voting share and multiple voting share totalling $27,376, of which an amount of $21,967 was paid
during the year. A dividend payable of $5,409 is accrued in the consolidated statement of financial position as at
March 31, 2021 as it will be payable on or around June 15, 2021.
Share repurchase program
On September 23, 2020, the Toronto Stock Exchange (the "TSX") approved the implementation of a share repurchase
program, which took effect on September 29, 2020. This program allows the Corporation to repurchase up to an aggregate
3,485,155 subordinate voting shares and variable subordinate voting shares (collectively, the "Subordinate Shares"),
representing approximately 10% of the Subordinate Shares issued and outstanding as at September 21, 2020. In
accordance with TSX requirements, the Corporation is entitled to purchase, on any trading day, up to a total of 32,265
Subordinate Shares, representing 25% of the net average daily trading volume of the Subordinate Shares. 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
September 24, 2021.
The following table summarizes the Corporation's share repurchase activities during the years ended March 31, 2021 and
2020:
Subordinate voting shares repurchased for cancellation (unit)
1,530,180
2,957,799
2021
2020
Average price per share
Total repurchase cost
Repurchase resulting in a reduction of:
Share capital
Deficit (1)
$
$
$
$
6.6610
10,193
8,700
1,493
$
$
$
$
5.9573
17,621
16,823
798
(1) The excess of net repurchase cost over the average book value of the Subordinate voting shares.
Annual Report 2021 | Stingray Group Inc. | 87
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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.
During the year ended March 31, 2020, the Corporation declared and paid dividends of ranging from $0.07 to $0.075 per
subordinate voting share, variable subordinate voting share and multiple voting share totalling $16,262. The Corporation
also paid a dividend of $4,956 that was declared on March 29, 2019 and accrued in the consolidated statement of financial
position as at March 31, 2019.
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
2021
10,236
(70)
(2,308)
(240)
(18,220)
3,080
(6,171)
3,061
(10,632)
$
$
2020
(2,531)
(607)
(3,870)
272
7
3,198
(1,134)
6,834
2,169
$
$
Additions to property and equipment and intangible assets, excluding broadcast licences, not affecting cash and cash
equivalents amounted to $803 (2020 — $454) and $1,192 (2020 — $23), respectively, during the year ended
March 31, 2021.
The comparative figures have been recasted as there was a reclassification of $3,061 between deferred revenues and
other current assets.
Annual Report 2021 | Stingray Group Inc. | 88
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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
are 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, 3,163,253 stock options were outstanding as at March 31, 2021 (2,431,819 as at
March 31, 2020). 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, 2021 and 2020:
Options outstanding, beginning of year
Granted
Exercised (note 24)
Forfeited
Options outstanding, end of year
2021
Number of
options
Weighted
average
exercise price
2,431,819 $
833,174
(80,732)
(21,008)
3,163,253
4.99
4.63
1.79
8.89
6.30
2020
Number of
options
Weighted
average
exercise price
2,104,100 $
694,303
(275,000)
(91,584)
2,431,819
6.52
5.62
3.35
7.05
4.99
6.59
Exercisable options, end of year
1,449,918 $
7.02
1,045,604 $
The following is a summary of the information on the outstanding stock options as at March 31, 2021 and 2020:
Exercise price
March 31, 2021
$ 0.46
4.63
5.60
6.13
6.25
7.00
7.27
7.62
7.92
8.61
9.00
$ 6.30
Outstanding
options
Weighted average
outstanding
contractual life
outstanding (years)
Number of options
outstanding
35,000
833,173
672,374
21,929
287,880
25,000
311,047
482,850
43,698
433,746
16,556
3,163,253
1.17
6.18
5.18
5.85
4.15
4.36
5.21
6.23
7.60
7.19
5.89
5.78
Exercisable
options
Number
35,000
—
168,093
5,482
287,880
25,000
311,047
362,138
21,849
216,873
16,556
1,449,918
Annual Report 2021 | Stingray Group Inc. | 89
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
The weighted average fair value of the stock options granted during the year ended March 31, 2021 was $0.71 per stock
option (2020 — $0.96). 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:
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
2021
2020
35%
0.52%
5 years
$4.63
6.26%
30%
1.34%
5 years
$5.60 — $6.13
4.24% — 4.57%
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 $717 for the year ended
March 31, 2021 (2020 — $828).
The weighted average share price at the date of exercise for share options exercised during the year ended March 31, 2021
was $6.65 (2020 — $6.49).
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 2021 | Stingray Group Inc. | 90
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
The following summarizes the changes in the plan’s position for the years ended March 31, 2021 and 2020:
Unvested contributions, beginning of year
Contributions
Dividends credited
Vested
Unvested contributions, end of year
2021
Number of
units
18,694 $
46,988
4,616
(63,186)
7,112 $
Amount
130
305
28
(349)
114
2020
Number of
units
13,044 $
54,976
2,325
(51,651)
18,694 $
Amount
88
369
14
(341)
130
The weighted average fair value of the shares contributed during the year ended March 31, 2021 was $6.11
(2020 — $6.64).
Total share-based compensation costs recognized under the ESPP amount to $134 for the year ended March 31, 2021
(2020 — $173).
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 after a 3 year vesting period. 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, 2021, 563,837 PSU (2020 — 621,656) were granted at a range of $4.38 to $7.05
(2020 — $5.17 to $6.51) per unit to executives and employees and no outstanding PSU were vested. As at March 31, 2021,
the fair value per unit was $7.17 (2020 — $3.52) for a total amount of $5,705 (2020 — $2,894) 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, 2021 and 2020:
Balance, beginning of year
Granted
Expense and revision of estimates
Liabilities settled
Forfeited
Balance, end of year
Balance, vested
2021
Number of
units
1,186,269 $
563,837
—
(163,850)
(75,743)
1,510,513 $
—
Amount
2,894
—
3,669
(663)
(195)
5,705
—
2020
Number of
units
774,854 $
621,656
—
(126,173)
(84,068)
1,186,269 $
—
Amount
2,612
—
1,492
(993)
(217)
2,894
—
Total share-based compensation costs recognized under
the PSU plan amount
to $3,528
for
the year
ended March 31, 2021 (2020 — $1,259).
Annual Report 2021 | Stingray Group Inc. | 91
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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 volume
weighted average price of the Corporation’s shares on the last three trading days immediately preceding 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, 2021, 214,369 DSU (2020 — 187,602) were granted at a range of $4.40 to $7.73 per
unit to directors (2020 — $5.15 to $7.30) and 672,827 DSU were vested. The total expense related to DSU plans amounted
to $2,908 in 2021 (2020 — $514). As at March 31, 2021, the fair value per unit ranged from $7.12 to $7.20 (2020 — $3.99
to $4.00) for a total amount, including fringes, of $5,063 (2020 — $1,948) 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, 2021 and 2020:
Balance, beginning of year
Granted and vested
Revision of estimates
Balance, end of year
Balance, vested
27. COMMITMENTS
2021
Number of
units
458,458 $
214,369
—
672,827 $
672,827 $
Amount
1,948
1,193
1,922
5,063
5,063
2020
Number of
units
270,856 $
187,602
—
458,458 $
458,458 $
Amount
2,004
1,169
(1,225)
1,948
1,948
The following table is a summary of the Corporation’s operating obligations as at March 31, 2021 that are due in each of
the next five years and thereafter.
2022
2023
2024
2025
2026
2027 and thereafter
OPERATING OBLIGATIONS
Operating
obligations
$
$
5,046
1,736
325
169
169
372
7,817
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 2021 | Stingray Group Inc. | 92
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(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 3 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 3 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.
Annual Report 2021 | Stingray Group Inc. | 93
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
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.
Annual Report 2021 | Stingray Group Inc. | 94
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 portion of 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 facilities 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 derivative financial instruments is determined using an
evaluation of the estimated market value, adjusted for the credit quality of the counterparty. 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 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, 2021 and 2020. 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, 2021
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 facilities
Subordinated debt
Accounts payable and accrued liabilities
CRTC tangible benefits and accrued pension
benefit liability
Balance payable on business acquisitions
Financial liabilities measured at fair value
Contingent consideration
Derivative financial instruments
$
$
$
$
9,040
57,891
900
$
900 $
— $
— $
900
303,704
31,741
49,398
34,082
100
14,456
5,370
$
14,456 $
5,370
— $
—
— $ 14,456
—
5,370
Annual Report 2021 | Stingray Group Inc. | 95
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
Financial assets measured at fair value
Investments
Financial liabilities measured at
amortized cost
$
2,512
68,620
$
23,548
$
23,548 $
— $
— $ 23,548
Credit facilities
Subordinated debt
Accounts payable and accrued liabilities
CRTC tangible benefits and accrued pension
$
benefit liability
Balance payable on business acquisitions
Financial liabilities measured at fair value
Contingent consideration
Derivative financial instruments
Fair value measurement (Level 3):
324,123
39,640
58,085
32,833
784
$
17,831
18,698
$
17,831 $
18,698
— $
—
— $ 17,831
—
18,698
Balance as at March 31, 2019
Change in fair value, including foreign exchange differences
Addition through business acquisition
Settlements
Balance as at March 31, 2020
Change in fair value, including foreign exchange differences
Additions through business acquisition
Settlements
Balance as at March 31, 2021
INVESTMENTS
Investments
Contingent
consideration
$
$
$
16,998 $
6,550
—
—
23,548 $
(3,787)
—
(18,861)
900 $
12,430
1,652
7,344
(3,595)
17,831
110
2,197
(5,682)
14,456
For the year ended March 31, 2021, the Corporation disposed of its investment in AppDirect for a cash consideration of
USD14,612 ($18,861) and recognized a loss on disposal of $3,787 in change in fair value of investments in the consolidated
statements of comprehensive income.
During the year ended March 31, 2020, the Corporation revaluated the fair value of its investment and consequently a gain
of US$3,918 ($6,550) 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, 2021 and 2020, the equity instrument in a private entity was 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 $45 and $1,332 during the years ended March 31, 2021 and 2020 respectively.
Annual Report 2021 | Stingray Group Inc. | 96
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 $1,700 and if projected cash flows were 10% lower, the fair value would have decreased
by $1,635. Discount rates ranging from 12% 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 $119.
The contingent consideration is classified as a financial liability and is included in other liabilities (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,
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.
An allowance for expected credit losses is maintained to reflect an impairment risk for trade accounts receivable based on
an expected credit loss model. 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, 2021 and March 31, 2020
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
2021
20,125
9,652
6,767
5,134
6,901
48,579
(3,198)
45,381
$
$
2020
31,686
13,196
6,577
8,510
7,377
67,346
(2,401)
64,945
$
$
Annual Report 2021 | Stingray Group Inc. | 97
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
The movement in the allowance for expected credit losses in respect of trade receivables was as follows:
Balance, beginning of year
Bad debt expense
Write-off against reserve
Balance, end of year
2021
2,401
1,488
(691)
3,198
$
$
2020
1,980
933
(512)
2,401
$
$
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 following are the contractual maturities of financial liabilities including estimated interest payments as at
March 31, 2021:
Credit facilities
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
$
303,704
31,741
$ 304,684
32,000
$
27,500
—
$ 277,184
32,000
$
53,146
60,027
53,146
63,862
53,146
20,508
—
40,324
—
—
—
3,030
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.
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.
Annual Report 2021 | Stingray Group Inc. | 98
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
The Corporation's exposure to currency risk on its consolidated financial statements was as follows:
Cash and cash equivalents
Trade receivables
Investments
Credit facilities
Accounts payable and accrued liabilities
Contingent consideration and
balance payable on business acquisitions
Net balance exposure
Equivalent in Canadian dollars
March 31, 2021
USD
EURO
March 31, 2020
USD
EURO
877
10,438
—
(10,421)
(280)
—
614
772
1,925
3,753
—
(6,000)
(1,770)
—
(2,092)
(3,088)
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)
To manage its currency risk, the Corporation had foreign exchange forward contracts, which all matured during the year
ended March 31, 2021. Given the Corporation did not elect to apply hedge accounting, the mark-to-market gains 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:
USD per CAD
EURO per CAD
1.3221
1.5406
1.2575
1.4759
1.3953
1.5417
1.4187
1.5584
2021
2020
Average
Reporting
Average
Reporting
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, assuming that all other
variables remained constant:
Increase (decrease) in net income
39
(154)
890
(545)
March 31, 2021
USD
EURO
March 31, 2020
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.
Annual Report 2021 | Stingray Group Inc. | 99
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 facilities are variable interest rate instruments 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.
The table below summarize the interest rate contracts effective as at March 31, 2021 and 2020:
Maturity
Currency
Fixed interest
rate (when
applicable)
Initial nominal
value
Mark-to-market
liabilities as at
March 31, 2021
Mark-to-market
liabilities as at
March 31, 2020
Swaps
October 25, 2024
October 25, 2024
October 25, 2021
October 25, 2024
August 29, 2029
August 31, 2029
Swaptions
October 25, 2024
October 25, 2024
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
$
$
$
945
403
494
1,938
—
—
3,780
642
948
1,590
5,370
$
$
$
1,349
904
1,164
2,912
2,098
2,963
11,390
3,064
3,878
6,942
18,332
During the year ended March 31, 2021, the Corporation unwound two interest rate swaps with maturity dates
of August 29, 2029 and August 31, 2029 and received cash payments totaling $490.
Given the Corporation did not elect to apply hedge accounting, during the year ended March 31, 2021 and 2020,
mark-to-market gains of $13,818 and mark-to-market losses of $15,334 were recorded in net finance expense (income),
respectively.
Annual Report 2021 | Stingray Group Inc. | 100
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 facilities
Cash and cash equivalents
Net debt, including contingent consideration and
balance payable on business acquisition
Total equity
2021
14,456
100
303,704
(9,040)
309,220
274,692
583,912
$
$
2020
17,831
784
324,123
(2,512)
340,226
273,896
614,122
$
$
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.
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
Performance share units
Deferred share units
RELATED PARTIES
2021
5,727
465
1,755
2,908
10,855
$
$
2020
3,568
783
208
514
5,073
$
$
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.
Annual Report 2021 | Stingray Group Inc. | 101
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
During the year ended March 31, 2021, the Corporation recognized revenues amounted to $742 (2020 — $664) 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 2, 2021.
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, 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.
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.
Annual Report 2021 | Stingray Group Inc. | 102
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 financial position presented are translated at the closing rate at the date of that
financial position;
income and expenses for each statement of income 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 (loss).
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.
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., 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,
SBA Music PTY Ltd., Stingray Music, S.A. de C.V., DJ Matic NV and Stingray Radio Inc. and all these entities’
wholly-owned subsidiaries.
Annual Report 2021 | Stingray Group Inc. | 103
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
INVESTMENT IN ASSOCIATES
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 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:
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.
Annual Report 2021 | Stingray Group Inc. | 104
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 facilities 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).
IMPAIRMENT OF FINANCIAL ASSETS
The Corporation recognizes loss allowances for expected credit losses (ECLs) on financial assets measured at
amortized cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. The
maximum period considered when estimating ECLs is the maximum contractual period over which the Corporation is
exposed to credit risk. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the
present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Corporation expects to receive). ECLs are discounted at the effective interest rate
of the financial asset.
ECLs on trade and other receivables is assessed by portfolio based on factors that 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.
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the
assets and is recognized in profit or loss.
Annual Report 2021 | Stingray Group Inc. | 105
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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.
Equipment and labor
For equipment and labor 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.
Annual Report 2021 | Stingray Group Inc. | 106
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 ASSISTANCE
Government assistance is recognized when there is reasonable assurance that the Corporation will comply with the
requirements of the approved grant or subsidy program and the Corporation, based on management's judgment, is
reasonably certain that the government assistance will be received. Government assistance related to operating
expenses, including salary subsidy such as the Canada Emergency Wage Subsidy, is recorded as a reduction of such
expenses. Investment tax credits are accounted for as a reduction of the research and development costs during the
year in which the costs are incurred.
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.
Finance costs comprise interest expense on credit facilities, 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.
Annual Report 2021 | Stingray Group Inc. | 107
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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, performance 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
shares at the average share price for the year. For performance 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.
Annual Report 2021 | Stingray Group Inc. | 108
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
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
Annual Report 2021 | Stingray Group Inc. | 109
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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 software and apps
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 amortization methods, useful lives and residual values are reviewed at each reporting year-end and
adjusted if appropriate prospectively.
(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 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 50 years for buildings and towers, from 14 to 99 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
Annual Report 2021 | Stingray Group Inc. | 110
Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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
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
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Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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.
(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.
Performance share units and deferred share units plans
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.
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Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020
(In thousands of Canadian dollars, unless otherwise stated)
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.
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.
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