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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Stingray Digital Group Inc. First Quarter 2019 Results Conference Call. [Foreign Language] [Operator Instructions]Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded today, August 8, 2018.I will now turn the conference over to Mathieu Péloquin, Senior Vice President, Marketing and Communications. Please go ahead.
Thank you. [Foreign Language] Good morning, everyone. Thank you for joining us on Stingray's conference call for the first quarter ending June 30, 2018. Today, Eric Boyko, President and CEO, Co-Founder; and John-Pierre Trahan, CFO, will be presenting Stingray's financial and operational highlights.Our press release reporting Stingray's first quarter results was issued this morning before the market opened. Our press release, MD&A and financial statements for the quarter are available on our investor website at stingray.com and on SEDAR.I will now give you the customary caution that today's discussion of the corporation's performance and its future prospect may include forward-looking statements. The corporation's future operation performance are subject to risks and uncertainties, and actual results may differ materially. These risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's annual information form dated June 7, 2018, which is available on SEDAR.The corporation specifically disclaims any intention or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Accordingly, you are advised not to place undue reliance on such forward-looking statements.Thank you. I will now pass the call to Eric.
[Foreign Language] Good morning, everyone. I'm very happy to be here today to discuss our results of the first quarter and about the future of Stingray.As you know, we are awaiting the CRTC approval for the NCC acquisition and just last week announced an unsolicited bid for Music Choice. We've had eyes on both of these acquisitions for some time now, and they are part of our plan to become a sizable player in the global music industry.In regards to the results, we are pleased with our performance for the first quarter with our great organic growth of 7% and 10% excluding nonrecurring and foreign exchange and also expansion of our adjusted EBITDA margin. Revenues increased 16% to $30.4 million (sic) [ $34.5 million ], fueled by solid growth in our U.S., reflecting the contribution of subscription video on demand, or SVOD, and the acquisition of Qello Concerts, combined with continued growth in the other countries.Our recurring revenues increased 21% to 89% of total revenues, and adjusted EBITDA increased by a solid 22% to $11.2 million. The adjusted EBITDA margin increase of 22% also included new IFRS 15 factors, reflects lower equipment and installation sales related to digital signage and positive impact on Yokee Music following its successful integration. More than ever, we are limiting Stingray's karaoke catalog to fuel our growth in that segment.As you all know, SVOD had become an important driver of growth over the past few quarters. The number of subscribers reached 322,000 in the first quarter. This is a significant increase over the same period last year but down versus last quarter. Part of the decrease can be explained by seasonality on a short-term basis, but also, we expect the subscribers to level off near the current level, and we're also doing some B2C testing with the Yokee app. As we add those new services over the next few quarters, we'd expect SVOD to regain traction and growth over the next few semesters.Last week, you have all seen our press release regarding our intent to acquire Music Choice. This is our third attempt in the past 5 years that we try to make this acquisition. This time, we presented a public offer to the unitholders of the company for USD 120 million, hoping to quick-start a process leading to a transaction.Music Choice is a multi-platform video and music network that delivers its own music programming to consumers via television, online and mobile devices. We estimate that Music Choice has approximately 80 million subscribers in the U.S. The combination of this acquisition to our operation will essentially triple our revenues in the U.S. market. This would no doubt be a game changer for us in terms of achieving a critical mass in the largest music market in the world. Furthermore, we see significant cross-selling and operational synergies between both companies.We strongly believe that we presented a fair offer to the unitholders of Music Choice and also one that remains within our valuation of parameters of past acquisitions. We estimate that our offer presents a high mid-single multiple of Music Choice EBITDA.Also, at the beginning of August, we announced the acquisition of Novramedia, a Toronto-based leader in design, development and implementation of digital media solutions. The company manufactures and develops its own software and hardware for a variety of digital media solutions and supplies industries such as banking with BMO, retail, hospitality and health care. From our perspective, Novramedia will clearly reinforce our position in Canadian in-store media market and enhancing our product offering and providing access to new customers and very focused on the banking market.But also, at the end of June, we moved another step closer to our transformative acquisition of the NCC announcement at the beginning of May. The shareholders of NCC voted in favor of the transaction, and we now anticipate a decision by the CRTC in early September. We officially got [indiscernible] on August 4.Over the past 10 years, we have completed 37 acquisitions, allowing us to create a very solid platform in the global music industry with a clear vision to become the industry leader. NCC is by far our largest acquisition in our history and fits perfectly in our vision and our mission goals. Once completed, Stingray will become Canada's largest music company. This position will allow us to fully leverage the potential of our existing services and the distribution of music and videos on multi-music platform.With regards to our international strategy, NCC will provide robust free cash flow to support Stingray's ambitious growth strategy up in Canada. Finally, with this acquisition, we also see an opportunity to return more cash to our shareholders via our dividend policy.And I would like to conclude my remarks by saying we are very excited about the future. We are extremely proud of what we have achieved in the past 10 years and are even more excited about what we will be doing the next 10 years for the team, for management and our shareholders.So Jean-Pierre, with this in mind, I'll pass it to you for the financials.
Thank you, Eric. Good morning, everyone. Before I begin, let me remind you that all amounts are expressed in Canadian dollars, unless otherwise indicated.Stingray generated revenues of $34.5 million in the first quarter, an increase of 16.1% compared with revenues of $29.7 million a year ago. The increase was primarily due to organic growth of SVOD, combined with the acquisition of Qello Concerts, Satellite Music Australia and SBA Music. Recurring revenues were up 20.8% to $30.8 million or 89.4% of revenue from $25.5 million or 86% a year ago.Geographically, Canadian revenues decreased 6.2% to $13.7 million or 39.6% of total revenues due to less equipment and installation sales related to digital signage. United States revenues increased 74% to $8.2 million or 23.7% of total revenues, whereas revenues in other countries increased by 21.1% to $12.6 million or 36.7% of total revenues.Music Broadcasting revenues increased 16.5% to $26 million, mainly due to organic growth related to SVOD as well as the acquisition of Qello Concerts. Commercial Music revenue rose 15% to $8.5 million, mainly due to the acquisition of SMA and SBA Music in Australia, partially offset by a decrease in equipment and installation sales related to digital signage.As a result, adjusted EBITDA was up 21.9% to $11.2 million from $9.2 million a year earlier. The increase was primarily due to organic growth related to SVOD and to the acquisitions realized in fiscal 2018, partially offset by higher operating expenses related to international expansion.Adjusted EBITDA margin also increased to 32.4% from 30.9% a year ago and was mainly related to the decrease in equipment and installation sales, which present lower margins, combined with an increase in adjusted EBITDA margin of Yokee Music after the successful integration, which has the effect of reducing royalties expense and other operating costs.For the first quarter, the corporation recorded net income of $1.3 million or $0.02 per diluted share compared to $300,000 or $0.01 per diluted share last year. The increase was mainly attributable to higher operating results and positive change in fair value of investments, partially offset by negative change in fair value of contingent consideration and higher depreciation of property and equipment.Adjusted net income increased 3.4% to $5.9 million or $0.10 per diluted share compared with $5.7 million or $0.11 per diluted share a year ago, as higher operating results were partially offset by negative change in fair value of contingent consideration and higher depreciation of property and equipment.Cash flow generated from operating activities increased to $6.9 million in the first quarter from $600,000 of cash used for operating activities a year earlier. The increase was mainly due to positive net change in noncash operating item as well as higher operating results.Adjusted free cash flow decreased to $6.2 million from $7.2 million for the same period a year ago. The decrease was mainly related to higher capital expenditures due to nonrecurring leasehold improvement of $1.5 million and FX loss, partially offset by higher adjusted EBITDA.Looking at our financial position. Stingray conclude the first quarter with cash and cash equivalents of $4.3 million. Our net debt position was $43.6 million, resulting in a net debt to last 12-month adjusted EBITDA ratio of 1.As of June 30, 2018, the corporation had $100 million revolving credit facility, of which approximately $52.1 million was unused, allowing us to pursue our strategic acquisition program and investment to achieve our growth objectives.I'll now turn the call back to Eric.
[Foreign Language] So this will conclude our call today. We're excited to get your questions. And also, today is a special day for us because we have our AGM at 11. So for you that are in Montreal, you're invited to come to our special shareholder meeting today where we have a -- and our new office and new building. So we're very excited to host everybody. [Foreign Language]
[Operator Instructions] Your first question comes from the line of Maher Yaghi with Desjardins.
I wanted to ask you on your SVOD deployment strategy. Where are you in that strategy in terms of markets deployed, products, end markets? Just because I wanted to see, Eric, when you said that you expect SVOD momentum to recover in the next couple of quarters, I just need to -- wanted to understand where it's going to come from, which markets, which products.
So we now -- as you know, we just signed Qello on Comcast. We just launched Qello on Comcast. We just launched DJAZZ on Comcast. We launched Karaoke on Sling, and we launched Karaoke on Cox. And we should be launching Qello on Cox. And also, we have -- for this fall, we also officially have been chosen in launching with Roku. So we know we have a lot of good U.S. platform. But for us, also one of the big vectors of growth is we started A/B testing. And on Yokee, our sub price, we increased sub to USD 18 a month on Yokee Karaoke. So every subscriber of Yokee is like 6 subscriber of Comcast or Amazon. So as you know, we are launching The Voice application in September. Mathieu and I were there in Tel Aviv 3 weeks ago. Very excited about that launch, international brand, so we expect -- if we can have just 10,000 subscribers at USD 18,000, that's almost $0.25 million a month. So we're very excited about that. And we're also launching a piano educational app this fall that we love. We love the piano educational market, which is a great segment. And that also, we're looking about USD 20 ARPU per subscriber. So a lot of movements in the next quarter end. The fall is our big season. The fall is a big season. And finally also, as you know, we're also -- we're expecting to launch our Stingray B2C app with Karaoke, Classica, DJAZZ and Qello on our site.
Perfect. And just to follow up on the organic growth. Nice number in the quarter again. Where do you expect that number to head in the next couple of quarters? What's driving it apart from the SVOD services?
So, no, we didn't -- if you exclude FX and the nonrecurring, as you know, the nonrecurring, you got a good quarter, bad quarter, so we were at 9.3%. So we're close to 10% this quarter. We've been close to 10% for the last few quarters, but again, we always tell the market 5%. We -- the management wants to be 5% organic growth, and we're comfortable that we'll be able to meet -- to beat the 5%.
Okay. Perfect. I don't want to pick anything from what you might say during your AGM, but can you talk about NCC more? Give us a little bit more meat on what you can drive out of those operations as you integrate them inside the Stingray operation. What type of cross revenue synergies you can deliver in terms of advertising offerings, et cetera, et cetera? Maybe just to understand, now that you've worked your way through the acquisition a bit further than the last announcement date.
Yes. So again, for us, the offer that we made for Music Choice, the hostile bid, was made on -- our estimate is that they do about $55 million in sales. They do about $17 million EBITDA. Our offer is at 7x EBITDA, so roughly $120 million. For sure, both companies operate in the exact same product. So it is like an XM Sirius situation. They have 80 million subscribers. So for us, if they have 80% of the U.S. market, we want to be launching more of our SVOD products. We want to be launching more of our mobile product in the U.S. and monetize it. So clearly, on the -- and on the operational side as well, so some great operational synergies. So I think we're happy with that.
And finally, just on NCC, that was part of my question. Basically, where do you see the revenue synergies coming?
Sorry, I heard MC.
No, no. Sorry, I was talking...
Sorry about that, sorry about that.
My mistake, sorry.
No, no. It's okay. The phone sometimes -- let's do [indiscernible] operation.
Yes, there you go. Let's do that.
Okay. With that, I think the [indiscernible] updates, our synergies plan that we have told the market for about 8, we feel we're going to be higher, so that's going very well. And on the revenue side, on the positive revenue side, there's 3 big vectors that we're very excited about. The first vector is I think that the NCC team and all their operation and their 200 salespeople will have the chance to sell radio as value add. And on our side, we want to open up the Stingray mobile app and to add for non-TV client for them to have access to Stingray mobile with ads. So we see that's a great digital wrap for NCC and a great revenue growth for us. Our second big vector also is to be possible, we're going to be rated by [ Nümedia ] starting this fall. All pay audio, all the [ PDM ], audio channels, music video, even the fire log will be rated this fall. So it will be fun to see the ratings on the fire log during in the holidays. And so that gives us flexibility also to start looking at branding the pay audio channels. So that's also a big vector for us. And the last one is selling ads, TV ads on music video channels that we feel will have anywhere between 6 million to 8 million subscribers by September.
So if I understood what you said, basically, you're going to have 2 parallel products, one that is nonadvertising, one is advertising for music for Stingray, and you're going to cross-sell the advertising service for Stingray with the advertising with NCC, basically offering 2 layers of services to the same announcement, right?
I think one of our goals is to give NCC a digital wrap and to have the people, the radio stations and the salespeople to be able to sell ads on radio and to also sell audio ads on the mobile streaming Stingray.
Okay. So that's another offering that you can give out to keep the service -- to keep the advertising flowing into the system?
Exactly. And also, there's -- we're also going to be launching the mobile app with advertising in the U.S. also. Sorry about the misunderstanding.
Your next question comes from the line of Adam Shine with National Bank Financial.
So maybe just to continue with SVOD. ARPU was up. Are we looking at somewhere around just over $7 at this point versus the $6.60 at 4Q?
Yes. That's what I said, with the new IFRS ruling, 15, when we used to sell in iTunes at $10, we would record $7 of revenue. We would record net. Now we're obliged with iTunes to record at $10. So our numbers of last year were adjusted. And so that's where our ARPU now, it's much higher ARPU now. I'm looking at my sheet now is at $8.21. So it's $8.21. So ARPU is at $8.21. For sure, every time we sell a subscriber on Yokee at USD 18, now our gross revenue, which we report is 20 -- almost CAD 24. So we expect our ARPU -- the more we do B2C, our ARPU will be increasing significantly over the next 2 quarters.
With The Voice.
So -- yes, with The Voice coming. With -- we're no longer seeing the B2C, B2B dynamic here, but how should we think about the seasonality effects? Because, obviously, there was a bigger-than-expected drop, I guess, in this quarter. Do we think about it in regards to elements across Comcast that are seeing some degree of disconnect? Or perhaps this was more of a B2C dynamic regarding seasonality?
It's a bit -- for sure, Karaoke has a bit of seasonality in the summer. And also, our TV subs, all VOD assets, SVOD, VOD on TV, are slower in the summer. So now we can see a bit of that effect. And also, we're doing the A/B testing. So we're aggressively pricing our products. We -- Karaoke was selling at the start at $7.99. We increased it to $10.99, and now it's $17.99 a month. But we're making more money that way. So there's a big effect on both factors. But we're confident in July, August, September, which is back to school and return for Karaoke, and then for sure, October, November, December, which is the best time of the year.
Okay. So when you said earlier in terms of subs could level off at current levels, that's really just very temporary for the next few months and then some regaining of traction, obviously, heading into seasonal strength, right?
And for us, the -- our view with The Voice and the fact that we're launching the product in September, we would like to -- The Voice for us, we expect to have at least 10,000 subscribers. But again, these are subscribers at USD 18. So every Voice subscriber is 6 Comcast subscriber. The B2C has a huge impact.
Absolutely. Turning to Music Choice. You specified in the press release on Friday that the offer was also pro rata made to unitholders. So on the potential possibility that the entirety of Music Choice is not sold to you, do you have any particular unitholders that perhaps are indeed prepared to sell to you at this point?
No -- so for sure, the offer was made very -- when we spoke to the unitholders, we were very clear. The offer is for the whole company or any or each individual unitholder. So there's 7 unitholders at Music Choice. For sure, it's a bit of a different company. It's not a corporation with shareholders where you need 66.6% of the votes. So in this case, there's 7 unitholders. And if 1 or 2 do want to sell, then we were very clear with them that we're buyers at the pro rata rate. And the way we feel their structure is made, Music Choice, is once 1 or 2 unitholders sells, there's a process where the other unitholders to also sell their units. So in this case, we need 1 or 2 unitholders to be on our side, and we feel that there will be some pressure on the co-op to take full actions. So the answer is yes.
Okay. So you just need 1 or 2 of them to break ranks and sort of stimulate something alternatively. Yes, okay. And then lastly, just in terms of Newfoundland Capital, I'd be -- may ask a number of questions. So one question, I guess, that didn't come up was just in the context of noncore divestitures, hotel or any other peripheral assets. Anything you want to add on that, Eric?
Yes. That's on East Coast is the course. We are very confident that, that will be sold before the end of December this year. We're not in the business of hotels and other [indiscernible]. So for sure, our goal is to sell those assets back. So we're going to be processing -- we're very confident we're going to do it in October, November, December after closing. And then the other part also, we feel -- based on the numbers, we're very confident to be around net debt to EBITDA at closing using the September 30 date to be around 3.3. So that's the number that we're confident to be. So our numbers and EBITDA are better than we first forecasted when we did -- raising our money.
Okay. So 3.3 instead of like -- I think it was, what, 3.7 or thereabouts?
3.4, 3.5. Now we're 3.3. And our goal is to finish the year below 3, our year-end at March 31 below 3.
Your next question comes from the line of Deepak Kaushal with GMP Securities.
I guess I've got 3 broad questions. First off, Eric, on the Music Choice acquisition, I guess the big question here is why now? You've taken a couple of runs with this. You're in the process of acquiring Newfoundland Capital with some debt, and that's got a time line before you can close that. You've got a better product organically in the U.S., and you're growing organically in the U.S. Why do this now?
One reason is with the acquisition of Nextologies. Nextologies is one of the companies that's distributing Music Choice in the U.S. with over 20 million subscribers. So now we do have a position. We are attempting to be the distributor of the Music Choice single in the U.S. And number two, part of that process, we did discover that management was open to sell the company at 7x $17 million for $120 million. So we got that information. And also, the last time we did our bid in March 2 years ago, we had signed an NDA that we couldn't approach the unitholders for a period of 2 years. That ended in March, April. So that's why we attempt to put everything back together as the timing is now. But for sure, the fact that we saw a letter from management willing to sell for $120 million to an outside company, we decided that we should approach the unitholders with the same offer. And if it was good for the other company, it should be good for us also. Our U.S. dollars are as good as the other company.
Okay. So -- and just to clarify, did you say that on $17 million in EBITDA, Music Choice is generating $55 million in revenue? I'm just trying to understand the implied...
Yes, about $55 million in revenues, $17 million EBITDA, these are -- these numbers are estimates. These numbers were -- are not confirmed and nobody -- that was the information that we received from the third party.
Okay. So if Music Choice is running at roughly 30% EBITDA margins, is there much that you can squeeze out of that? Or...
We run the same business. So how many rock channels do you need and how many country? And how many spa channels you need? So that will be my answer. I won't go into the numbers today, but you can imagine that the synergies are very large.
Okay. But your organic business is running 40% margins, right? So we're thinking about 10% pickup?
We don't know their OpEx. But most of their OpEx would be -- if there's not enough synergies, we're -- it's duplication here in this case.
Got it, got it. Okay. And then you mentioned Nextologies. What else do you get in that acquisition? I kind of see it in your cash flow statement as an acquisition of intangible assets, and I'm trying to make sense of what's the CapEx? What's an intangible acquisition? What's the business...
Nextologies for us was a threefold. While they're also a technology, they're a specialist in distributing channels worldwide. So our goal is to get rid of our satellites and doing all deliveries of IP. So they distribute over 8 -- or 1,000 channels over different satellites and do all the IP delivery for most channels you get here in Canada. And also, they deliver to our friends at AT&T, DirecTV. They do at our friends at DISH, Verizon. So they're a great partner for us. And it was also a way to -- more or less, it was an offensive move against Music Choice since they also do the distribution of Music Choice in the U.S.
Okay. So it's considered an acquisition, not a CapEx?
Good question. We'll get back to that one to you of how you qualify the exact information of that acquisition. I would say acquisition now, let me get back to you.
Okay. So maybe just in general, what can we expect organically in terms of CapEx for the fiscal year of '19, excluding Newfoundland Capital?
Roughly, we're looking about $6 million to $8 million in CapEx; and NCC, about $2 million. So $8 million to $10 million.
Maybe we can talk about the treatment of Nextologies offline.
Okay. Exactly.
Your next question comes from the line of Tim Casey with BMO.
A couple for me. First, on Music Choice. You said you like to buy the whole company, but you'll essentially buy what you can. Have you thought through what the implications of that would be? Because in theory, you could end up with a minority position and not generate any return on that. But how are you thinking about that strategically? And then on the SVOD dynamic, can you talk a little bit more about what's happening? Because the momentum in that metric seems to just have really rolled over sharply. And I think we're all trying to figure out what's really going on there. I get the seasonal argument, but in the December quarter, which is your seasonally strong quarter, was also weak. So can you talk about -- a little more about what's happening with the SVOD distribution?
Okay. So regarding the first one, which was on Music Choice, with our perception of how the unitholders agreement works, if one sells, then everybody has the right to buy that person first rank and then piggyback. So I think we're ready to buy any unit shareholders. But a second one falls, our perception and our direction is then it will be a bit like a house of cards, everything else falls. So we will be buying all unitholders or majority. So we'd be very surprised that if one unit falls, that only -- others don't follow, even more if you get one of the big unitholders. In there, you have unitholders that -- Microsoft, why is Microsoft owning units in Music Choice? You got ARRIS. Why is ARRIS owning shares in there? You got Sony Corp. Sony Corp., it's not in their business to be -- to own a specialty channel in the U.S. So those 3 shareholders are more than 50% of the votes. So there's a -- I think there's going to be -- for sure, we will be aggressive, but we believe that if one falls, then we will have a chance for the whole company. So that's for the first question. Regarding SVOD, for sure, I think Q2 is a soft quarter of the year. On the TV side, for sure, we're seeing not only SVOD down on the TV side, but we also see our VOD numbers. We also do the music videos, as you know, on Comcast. And the VOD numbers are also down during the summer. People are more on vacation, less at home. So they use -- there's less VOD activity. Since we're highly dependent right now on the cable market, we have more density than that seasonability. And the second thing, we are trying right now and being aggressive on the A/B testing. We're excited to see the results. With that also, we're going for higher subs. Maybe that's affecting also our sub group. And we're confident about Q3 and Q4. But I agree with you, Tim, that Q2 was weak.
Has the percentage of unitholders at Music Choice ever been disclosed? Like do we know how much...
I think we could disclose it. We have rough numbers of people who have shares. But I'll talk to my legal team and see what we can disclose. But we know there's 7 holders, we know about that. We've spoken to each one of them/e-mail each one of them. So -- and we have a good idea of who owns what. So -- but not officially disclose, I think.
So it felt like it's 14.3% each. It's...
No. We only can offer example. Even Charter told us they only have -- Charter, which used to be Time Warner, they only have 4%. So I mean, it varies. Some have 20% and some have 4%. So it's really a mixed bag of a -- and even before ours, there was -- our friends at Google were shareholders before they sold their units to Ericsson, which sold to ARRIS. So it's a bit of a legacy business unitholders.
[Operator Instructions] Your next question comes from the line of Bob Bek with CIBC.
Just a couple of fine-tuning questions left. Eric, can you talk about some of these -- the revenue synergy potential with the Newfoundland Capital? Is their investment -- OpEx investment required ahead of the closing just to get ahead of some of these things? I'm just kind of trying to model better for the next couple of quarters.
No, no. We look at the branding issue and changing all of the Newcap signs to, let's say, a Stingray radio brand, and that was like 47,000. So the CapEx are very -- in terms of servers, very few servers to buy. As you know, the Viva Radio, radio is very low CapEx. And for sure, there will be some severance costs, and those were disclosed when we did the deal on May 2. There will be some severance costs at closing. But relatively, it's a pretty easy transition. As you know, we don't have any radio stations, so it's pretty much business as usual.
It's very decentralized.
Very -- and we've done long-term agreements with the top management for them to stand board for us for 3 years. But I told Ian, the President, last night that I said, be on board with us for 15 years. So we're very confident with the team.
Okay. Some of those revenue synergies, how quickly do you think you can capture some of them?
That's -- for us, we would like -- on the mobile side, we would like to open up the mobile app as soon as possible, like in October, to start doing audio ads if you're a non-TV sub. So again, if you're a basic subscriber, you will get ads. If you're a TV subscriber and [indiscernible], you get no ads, you get the premium app for free. Same thing with Pandora and Spotify. If not, you can always buy the service at $4.99 a month. So we want to open up that app in October. Selling ads on the pay audio or branding the channels, for example, calling the DJAZZ and Classica channels by TV, having Budweiser sponsor The Hit List, having Sleep Country sponsor spa and the nature channel. So these are the type of stuff that we like even to start this fall. And again, I mean, we're excited. We started this company 10 years ago. For the first time, we're going to be rated, I think, by September or October. So all of these Stingray audio channels are going to be rated. We know our numbers because of IPTV. Our AMA, we expect, will be as high as TSM. It's just that we were never rated. But IPTV, there's 2 million subscribers that we get to see whatever they do. Everything with our friends at TELUS, Foxtel, MTS, Bell [indiscernible] and sorry, our friends at Bell Aliant, we get to see their numbers as subscribers. So we know our metrics. And also, our music video channels are going to be rated and the [ MBM ] channels/fire log. So we're very excited to see those numbers coming up.
That's very helpful. On the -- just on the music program, your cost trends, just a bit of commentary, if you can, on how the outlook -- I mean, we popped up a bit in this quarter on -- and we have gone up a little bit of late. Just your thoughts on music programming as a cost component.
Yes. For sure, when we did the IPO, we won't go into detail, but we ended with a lot of costs in our cost of goods sold because we -- in terms of right management, when we negotiate for the Classica channel and Karaoke and all that, our goal was not to get clear indication of where exact gross profit per product. So I'll get back to you why that increased on our side. But the thing I'd like to say is that, as you know, our sales are up 20%, our EBITDA is up 30%, so we're getting the synergies of scale. Our EBITDA is growing faster than our sales. We should be getting some OpEx synergies. I'm not sure how we classify them. But I was happy as an operator to see EBITDA growing faster than the sales.
All right. and just lastly, I guess, JP, the reporting -- quarterly reporting with $0.01, you see it broaden. I guess you're sticking with your timing on reporting and shifting NCC over. Is that correct?
Yes. We're expecting to merge company at the end of September. That's our goal, to be superclean Q3 results in December. But we believe we're going to pull it from September, that's our goal.
Your next question comes from the line of Bentley Cross with TD Securities.
I wanted to follow on with some of the earlier questions. Eric, you made it pretty clear why now you would approach Music Choice again, but why announce now? Couldn't you...
Three things. We started the process of reaching out to some unitholders. Since -- again, since this is not a public company, we -- a lot of people start to know about the transaction. So legally, we felt it was better just to go and make it public and not to be in any breach in the U.S. And number two, we want to make sure that every unitholder, every company that's public knew about our offer. Every one of the unitholders is public. And thirdly, we were -- even some of the unitholders said if we went public, it would help them out into making a decision and going with the process.
Okay. And then switching gears. Canada was weighed down by a lack of digital signage revenue. Ex digital signage, is it fair to say Canadian revenues were down kind of 3% or somewhere in that ballpark?
I thought we're pretty much flat, but let me see. I'm looking at Page -- on our side, we'll get back to you. But besides P&L, as you know, the A&L, which is a nonrecurring part, I think last year, we had done the Saputo Stadium in Montreal. We're pretty much flat on the broadcasting side. And then we always tell the market we expect Canada will be flat for us. The growth and revenues in Canada will come from advertising. Much Music, which is a channel that we compete against, does $18 million of revenues a year, advertising-based.
It's really -- that's down compared to last quarter.
Okay. And the last one for me, just on the other payables and contingent consideration. When can we expect those to hit, especially kind of the big chunk of the $6 million for Nextologies that's still to come?
Yes, we -- most of -- I'll ask them to look at that problem. Most of them are -- a lot of them are delayed. We have one that's due for Unitel. That one was due for January. We're still in negotiations. So for sure, the holdback/earnout is always in negotiation at the end. So usually, they get delayed because of negotiations. But we'll get back with more details on that one.
And there are no further questions at this time. I turn the call back over to our presenters.
Okay. Thank you very much for the call today. Again, we have our AGM at 11:00. Excited if any one of you or all of you come. And we appreciate your time to being on the call with us today. [Foreign Language]
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.