Stingray predicts ‘aggressive’ autumn for acquisitions
Stingray Digital Group’s appetite for deals shows no signs of waning.
The Montreal-based provider of music and video services is mulling more than a dozen transactions to expand its product range during the coming months, said chief executive officer Eric Boyko. Assets being considered include radio stations and various business-to-business service providers, he said.
“Our pipeline has never been this strong,” Boyko told financial analysts on a conference call Wednesday. “We have many companies in play, and we feel that we will have an aggressive fall.”
Since its inception in 2007, Stingray has spent more than $760 million on acquisitions as a lever to increase sales and profit.
Annual revenue more than doubled over three years to reach $212.7 million in the company’s 2019 fiscal year. Stingray recently hired a new mergers and acquisitions specialist to help in the quest for new assets, Boyko said.
In a subsequent interview with the Montreal Gazette, Boyko said Stingray is focusing its efforts on U.S. and Canadian targets, though some are based in Europe.
Canada made up more than two-thirds of Stingray’s revenue in the company’s fiscal 2020 first quarter, compared with 11 per cent for the U.S.
Most of the transactions being considered are what the CEO deemed “tuck-ins,” for up to $20 million each.
“I don’t think we’ll be surprising the market with a $200-million acquisition,” Boyko said.
Now active in more than 150 countries, Stingray sells a range of music-related services to individual customers and businesses such as cable TV operators, including Vidéotron and Comcast of the U.S.
Stingray expanded into radio last year when it bought Newfoundland Capital Corp. and its stations across Canada in a deal valued at $506 million — the biggest acquisition in the company’s history.
In May, it agreed to buy two FM stations in Ontario, a transaction that will probably close this year once approval from the Canadian Radio-television and Telecommunications Commission has been obtained.
Late Tuesday, Stingray reported fiscal first-quarter net income of $9.2 million, or 12 cents a share, compared with $1.3 million, or 2 cents, a year earlier.
Revenue more than doubled to $80.4 million, an increase that Stingray pinned on the acquisition of Newfoundland Capital.
Net debt — a direct result of the firm’s acquisition strategy — stood at about $347 million as of June 30, representing about 2.9 times adjusted earnings before interest, taxes, depreciation and amortization. Stingray’s goal is to cut that ratio to less than 2.5 times within two years, Boyko said.