Stingray Group Inc

TSX:RAY.A

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Stingray Group Inc. investor Presentation Conference call. [Operator Instructions] Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded today, August 5, 2020. I will now turn the conference over to Mathieu Péloquin, Senior Vice President, Marketing and Communications. Please go ahead.

[Mathieu Péloquin]

Thank you very much, [Foreign Language]. Good morning, everyone, and thank you for joining us for Stingray's conference call for the first quarter results ending June 30, 2020. Today, Eric Boyko, President, CEO and Co-Founder; and JP Trahan, CFO, will be presenting Stingray's financial and operational highlights. A press release reporting Stingray's first quarter of fiscal 2021 results was issued yesterday after the market closed. Our press release, MD&A and financial statements for the quarter and the full year 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 and 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 3, 2020, 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. Also, please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Please refer to Stingray's MD&A for a complete definition and reconciliation of such measures to IFRS financial measures. Finally, let me remind you that all amounts on this call are expressed in Canadian dollars unless otherwise indicated. I will now turn the call over to Eric.

[Eric Boyko, Co]

Good morning, everyone. Also, our AGM is [Technical Difficulty] today for us. So welcome to the Q1 results conference call. Once again, I would like to start by thanking all our employees for the hard work and commitment to Stingray, particularly during these challenging time. We are pleased with our results considering the challenged market conditions we face with COVID-19. Debt reduction and improving our balance sheet remain among our top priorities, and we are making good progress on that front, as you will hear. We generated solid cash flow from operational activities of $38 million, up 44.5% over last year. This allowed us to reduce our debt level and improve our balance sheet. As a result, Stingray's net debt to pro forma adjusted EBITDA ratio dropped below 3, now standing at 2.91. Adjusted EBITDA was at $25.5 million, down 18.2%, reflecting the impact of COVID-19, mostly on our Radio division. Our quick and decisive response to implementing significant cost savings initiatives as well as the impact of the government wage subsidy support partially offset the impact of lower revenue. As you may recall, we reduced our operating expense by approximately $30 million on an annualized basis, approximately 1/3 of which is expected to remain permanent. The full impact of COVID-19 hit the Radio segment during the quarter. We have seen positive recovery in July following the positive [indiscernible] from 1 market to the other. Given the overall improvement with the current pandemic situation in Canada, we are confident to see our Radio sales significantly improving during our second quarter and for the rest of the year. In early May, we launched unique grant advertising plan in [indiscernible] radio customers called the Stingray Stimulus plan. It initially started with $15 million, and due to extraction and success with customers was increased to $20 million. It is most encouraging that we have more than 5,000 local businesses participating across Canada. The plan has allowed us to engage with new and existing customers and to build and solidify future relationships. Broadcast and streaming revenues were up 3.6%, so a very strong quarter. And recurring commercial music revenues were up 0.2%. However, due to onetime credits to clients and delays in equipment installation due to the temporary store closures, our overall revenues of the Broadcasting and Commercial Music segment decreased by 3.7% to $35.9 million. The growth of the subscribers to SVOD and B2C apps remained solid with 18.6% year-over-year increase to reach total number of subscribers of 436,000. The continued launch of the new free ad-supported streaming TV, which we call the FAST channels, with major over-the-top provider is fueling exceptional month-over-month growth in listenership and viewership, which is currently increasing at 25% month-over-month. On Monday, we announced the launch of Stingray Music audio channels with 6 partners in the U.S. The way people watch TV and consume music is in a rapid and constant evolution. Stingray has pivoted by adapting to new market dynamics and by leveraging its curated content to the largest audience possible. With these partnerships, our number of potential viewers will now reach up to 40 million subscribers. We believe that this development of both FAST video and audio channels will lead to a growing advertising revenue stream, and we are confident that the FAST channels will become as a big vector as the SVOD was a growth for us. With the regards to Stingray business, COVID-19 has temporarily delayed installation of audio and digital equipment, although the pace has picked up recently. Given our unique offering, our international presence and our focus on banking, groceries and other essential businesses, we remain confident and continue to expect a double-digit growth through fiscal 2021. Considering our capacity to reduce and manage our operating expense, I would even say our agility, combined with a significant improvement in our balance sheet, we feel we're well positioned to benefit from the strong future growth of our Broadcast and Commercial Music segment. We have taken a leading position, over-the-top distribution and fully orchestrated our pivot into the new media distribution. This provides us with great confidence in the future and our ability to reward our shareholders. So now I'll pass you the phone to Jean-Pierre, and I'll do some quick last comments, and then we'll go to questions. Jean-Pierre?

[Jean-Pierre Trahan]

Thank you, Eric. Good morning, everyone. In the first quarter of fiscal 2021, our revenues decreased 35% to $52.3 million compared to $80.4 million a year ago. The decrease was primarily due to the impact of COVID-19 on Radio revenues and, to a much lesser extent, on Broadcast and Commercial Music revenues. By geography, revenues in Canada decreased 50% to $28.1 million, representing 53.7% of total revenues, reflecting the same factors as I just described. In the United States, revenues rose to 12.7% to $10.3 million or 19.7% of total revenues due to organic growth in subscription. Finally, revenues in other countries decreased 8.3% to $13.9 million or 26.6% of total revenues, again due to COVID-19. Looking at our performance by business segment, Broadcasting and Commercial Music revenues decreased slightly by 3.7% in the first quarter to $35.9 million, primarily due to the credit given to clients for COVID-19, partially offset by strong organic growth in subscriptions. Radio revenues decreased 62.1% to $16.3 million in the first quarter due to the impact of the COVID-19 pandemic. Consolidated adjusted EBITDA for the first quarter decreased 18.2% to $25.5 million or a margin of 48.7% compared to $31.2 million or a margin of 38.7% a year ago. The decrease in adjusted EBITDA was primarily due to the negative impact of COVID-19 on our revenues, partially offset by the Canada Emergency Wage Subsidy and our significant reduction in operating costs, as outlined by Eric. By business segment, Broadcasting and Commercial Music adjusted EBITDA increased 39.4% to $20.3 million compared to $14.6 million last year. The increase was primarily due to the Canada Emergency Wage Subsidy and decrease in operating costs, partially offset by lower revenues related to COVID-19, adjusted EBITDA margin increased to 56.7% from 39.1% a year ago. As for Radio segment, adjusted EBITDA decreased by 67.7% to $5.7 million or a margin of 35.2% in the first quarter of 2021 versus $17.8 million or a margin of 41.4% to the prior year. This decrease was also for the same reason as indicated for the consolidated adjusted EBITDA. In terms of bottom line, the corporation recorded net income of $7 million or $0.10 per share compared to a net income of $9.2 million or $0.12 per share in the corresponding period last year. The decrease was mainly related to lower operating results due to COVID-19, partially offset by lower legal expenses and by FX gain. Adjusted net income was $13.5 million or $0.18 per share compared to $16.7 million or $0.21 per share a year ago. Again, this reflects COVID-19, partially offset by net fixed gain and lower interest costs. Turning now to liquidity and capital resources. Cash flow generated from operating activities amounted to $38.8 million -- $38 million, sorry, for the first quarter of fiscal 2021 compared to $26.3 million a year earlier. Adjusted free cash flow was $18 million in the first quarter compared to $20.6 million for the same period a year ago. The decrease was mainly related to lower operating results, partially offset by lower interest paid and the acquisition of property and equipment. Turning to our balance sheet. At the end of the first quarter, the corporation had cash and cash equivalents totaling $6.4 million, subordinated debt of $39.7 million and credit facilities of $377.5 million, of which $62.4 million was available. Total net debt at the end of the quarter stood at $336.8 million or 2.91x pro forma adjusted EBITDA, representing a decrease of $24.5 million from $361.2 million in Q4 2020. This ends my presentation. I will now turn the call back to Eric.

[Eric Boyko, Co]

Okay. [Foreign Language] Jean-Pierre. This concludes our prepared remarks. Thank you for your time and attention. We are always happy to have so many people following us and have all our analysts with us. At this point, Jean-Pierre and I would be pleased to answer any questions you may have.

[Operator]

[Operator Instructions] And your first question comes from the line…

[Eric Boyko, Co]

Deepak, can we hear you? Or is it us?

[Deepak Kaushal, Director and Technology & Communications Analyst]

Hello, I wasn't sure if you're calling me. Can you hear me now?

[Eric Boyko, Co]

Yes. All right. Thanks, buddy.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. Great. A couple of questions. They probably won't be in a logical order, but I'll ask it anyway. Eric, JP, on the wage subsidy, can you give us a dollar value of that contribution to EBITDA in the quarter and what the run rate of OpEx will be going forward without the subsidy?

[Eric Boyko, Co]

So I think recently it was $9 million.

[Jean-Pierre Trahan]

$9 million, and $1 million was from Q4. Don't forget that. Of course, we -- everything is above the line, Deepak. The credit to customer, we kept some sales guys on the payroll, and we did some top-ups for employees. So if you net all of these plus and minus, I think the impact of the value is not that significant.

[Eric Boyko, Co]

So subsidies, $9 million, $1 million was for Q4. Reduction in costs, $7.5 million per quarter. We estimate 1/3 of that is going to be recurring $10 million. So when you do your models, you can take out $10 million of OpEx. And we should expect another $8 million of wage subsidies for Q2.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. Okay. And then continued credits in Q2 on the top line as well?

[Eric Boyko, Co]

No. Credits -- most credits are finished. So every store is back up. No, we were very generous to all of our good customers. You can imagine [indiscernible], Allrecipes…

[Jean-Pierre Trahan]

A&W.

[Eric Boyko, Co]

A&W and all those. So we know we were upfront, [ to get in ] other stores workloads, and we called them up and says, we'll give you credit for April, May and a bit of June. But July, it's -- I would say that they're 95% gone. And we did that in Canada, Europe and Australia.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. What I'm trying to get at is as you guys start to see better momentum in the top line and less sub-season on the cost line, you've had an EBITDA margin versus the last couple of quarters. Where do you expect EBITDA margins to kind of round out at the end of the year on a quarterly basis? And what's kind of a sustainable target going forward?

[Eric Boyko, Co]

Deepak, you're cutting in and out a bit, so if you can just keep -- ask your questions shorter because I couldn't hear it.

[Deepak Kaushal, Director and Technology & Communications Analyst]

EBITDA margin expectation, please.

[Eric Boyko, Co]

Yes. EBITDA expectation? Absolutely, yes. No, we were absolutely able to reduce our OpEx significantly, very tight on also these direct cost. We managed the business very tightly. And I think that's one thing as shareholders, Stingray is very agile. Most of our business is variable cost. Now we don't operate a mine. We don't operate a real estate portfolio. If things go bad, we can quickly adjust and cut our costs everywhere. So we have that advantage at Stingray of being an online company with very little installation or manufacturing plants.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. So do you still expect to be in the 40%-plus range by Q4? Or…

[Eric Boyko, Co]

Yes. Our EBITDA margin will be higher. But again, this is unusual quarter because with the wage subsidies and all that. And that's -- I would say like we finished in Q4. Q4 was a good target for us.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. Got it. And then just on the broadcast business, there seems to be a big gap between organic growth and reported growth. Was some of that due to underperforming acquisitions? Or how do we interpret where that gap is coming from?

[Eric Boyko, Co]

The gap is 3 parts. You got about 2.5 of credits that was given. And then, for sure, a bit in Europe. Europe was weaker. And then you take out the E&O. We almost had no equipment and labor during that quarter. So that's why we feel the recurring sales are going to be maintaining and the E&O is coming back. So every store, like the banks, everybody that we couldn't do or they delayed is coming back. So we feel very confident for Stingray business. And that segment, a lot of M&A and a lot of growth coming from multiple customers. So I think we'll be -- it used to be the black sheep of the company and now it's becoming our favorite child.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Okay. And the backlog in E&O, how do we expect the profile of that to come back? Is it all coming back in Q2 or coming to…

[Eric Boyko, Co]

[ Talk about ], in Q2 -- it's going to come back Q2, Q3, and it stops in December. Usually, we can't do any installments post-U.S. Thanksgiving. So yes, we'll see that coming back. But a lot of new customers, a lot of recurring revenues, a lot of new customers, strong pipeline all over, not only in Canada but Canada and Mexico. And as you know, we're going to the U.S. market at the end of the year. The U.S. market for us is going to be a vector of growth for Stingray business for the next 10 years because we were never -- because of our deal with Mood, we couldn't be in the U.S. So we know it's going to be a great new venture for us. So imagine, we can now start working with all the big chains in the world and work on a global company. So that, for us, is going to be very exciting.

[Operator]

And your next question comes from the line of Matthew Lee with Canaccord Genuity.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Could you maybe give us some color into the radio trends you've been seeing over the last month? I know you said it's improved, but maybe can you put a figure around that?

[Eric Boyko, Co]

Yes. So roughly for Q2, because we're already halfway into it, we're going to be in the 40s. So we're still going to be negative. So I say 40%, it could be minus 42%, I can't tell you, but we're going to be in the 40s, could be 45s. In Q3, we're -- hopefully, we'll be back in the 20s. And hopefully, by the end of the year, we'll be back at 0. Right now, for the last couple of weeks, we've been hitting about 80% of the sales flow of last year. So we're selling at 80% of last year. Direct correlation with the stores opening up. So when the stores are opening up, then our sales go per city. The last city that we were down was Toronto, but now Toronto has opened up. So -- but again, all this is where 0 -- or this -- if there's a second closure of stores in the fall because then we'll go back down to what number of stores are closed. So this is based on the fact that stores remain open, there's no second closure. So I just want to put a big asterisk on that. So in the 40s this quarter, in the 20s, and then we should be back to 0 by the end of the year.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Right. That's good. And then maybe you could give us some color on to the subscriber trends in SVOD and B2C. It seems that people are de-confining, have you seen subscriber adds slip?

[Eric Boyko, Co]

No. Our Q1 was the first quarter that we beat. Q1 never beat Q4. So we're very happy. And the trends are strong. We launched with Amazon Japan, believe it or not, but Prime video in Japan is 5x bigger than Netflix. So a huge customer. We launched Qello with them. That should be another 10,000 to 30,000 new subscribers. Also, we're launching with Claro. We've launched with Rogers, TELUS. We're launching with Amazon Italy, Spain, France, and we're working hard on Mexico, Brazil and Canada. So a lot of growth in the SVOD space. And every one of our customers right now, every customer we have, is growing. And we've also launched with a few mobile operators, lower ARPU but the mobile side is exponential growth, but lower ARPU. On the mobile side, we -- our ARPU is only $1.50. It's a different product. But -- so we're very confident now to say that our new goal is our -- our old goal used to be 0.5 million subs at $6, now our new goal is 1 million subscribers at $8. So that should be $8 million a month, $24 million a quarter, and it should be $100 million business. And then you're going to ask me, okay, when. So to give us time, we'll tell you in the next 3 years. But very confident that the SVOD will be $100 million vector.

[Matthew James Lee, Associate Analyst of Telecom and Media]

That's great. And maybe on the ARPU front, can you maybe tell us what the ARPU is right now?

[Eric Boyko, Co]

Sorry?

[Jean-Pierre Trahan]

ARPU.

[Matthew James Lee, Associate Analyst of Telecom and Media]

What's your ARPU?

[Eric Boyko, Co]

Our ARPU, yes. So B2C that's about $15 average ARPU. B2B is at $6. And when we do mobile, it's at $1.50 to $2. When we do deal in Mexico, the ARPU is also smaller in Mexico because of the way we do it in the pesos. So -- but generally, we feel comfortable that our average ARPU should be around $8.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Is that where it is right now on average?

[Eric Boyko, Co]

Yes, yes. Roughly $8.15. But should be around $8, $8.15, $8.50. It depends of the mix with B2C. So very difficult to predict the mix.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Right. Okay. That's good. And then just maybe last housekeeping question. Can you kind of detail how you broke down the wage subsidy by Radio and Music Broadcasting?

[Eric Boyko, Co]

Yes. Roughly, if you do it by both, it was -- so we see the wage subsidy for Broadcast, $3.9 million. And the wage subsidies for Radio was $6 million. So total you got about -- total was of $9.8 million and $1.4 million of the last quarter. So on a run rate, should be at $8 million.

[Matthew James Lee, Associate Analyst of Telecom and Media]

And Q2 should probably look the same, kind of same kind of…

[Eric Boyko, Co]

Q2, $8 million.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Yes, right. But the same split, like ratio-wise?

[Eric Boyko, Co]

Yes. Yes, same split. And in the end, we're going to be out of it. With Radio coming back, we're out of the program by September. So that's wide for us. And the new program also has modified a lot. So starting September, I think we don't -- we haven't put much in our model for October, November, December because we're -- unless there's a second wave and whatever happens. But for now, we're out of it. I think, we'll be getting minimal amounts.

[Operator]

And your next question comes from the line of Bentley Cross from TD Securities.

[Bentley Cross, Equity Research Associate]

Eric, I just want to follow-up on your comments about expanding in the U.S. on the business side. Obviously, that's going to be a potential growth vector. But on the flip side, Mood could compete here in Canada. Just wondering how you're thinking about protecting your current base on this side of the border.

[Eric Boyko, Co]

No, no. But Bentley, again, I know if it's the new system, we'll get a seat -- If it's on our side maybe -- It's just ask again because it was broken a bit.

[Bentley Cross, Equity Research Associate]

On the noncompete with Mood coming off, how do you protect the Canadian side?

[Eric Boyko, Co]

Yes. That one, we got to be careful. It is -- we know we have -- we still have, how can you say -- but we feel very comfortable that there's a lot to gain in the U.S. market. We feel that we're going to have a good agreement with Mood, the way we -- and what we're trying to negotiate or discuss is that we will maintain their customers in Canada for operational purposes, so we see little downside in Canada. And then we see the upside of being able to bid for global brands. Not only in worldwide, so there's many global brands that we can never bid on in Europe, and you can imagine. So very confident to gain in the U.S. and very little liftback in Canada.

[Bentley Cross, Equity Research Associate]

Okay. And then you disclosed in the release that you're still expecting 10% growth for the Business segment. Can you put an actual number in that just because disclosure now makes it a little bit tricky to talk about what you're planning on?

[Eric Boyko, Co]

Well, roughly, we did $50 million last year, or we should get $5 million organic sales, $55 million. So we're very confident that we'll get $5 million organic plus acquisitions, a strong M&A pipeline plus acquisitions. Based on our pipeline, it's -- we feel very comfortable. It's not a big number. I know you're going to say $5 million, Eric, but for us, it's still a division that will have growth for the mix for the next couple, and let's say, the next 5 to 10 years.

[Bentley Cross, Equity Research Associate]

Okay. And then lastly, on the E&O side, you suggested it's coming back. Is it back to normal levels or just back from the depressed Q1 level?

[Eric Boyko, Co]

Sorry, again, I heard E&O and then it cut a bit.

[Bentley Cross, Equity Research Associate]

Are you back to normal or just an improvement from the terrible Q1?

[Eric Boyko, Co]

Yes. I think we're going to be -- again, even E&O will be stronger and we have a lot of installation coming up right now. I won't give you all the names of the customers, but we're fully deployed and active right now. So we'll see when we finish with the whips and all that. For us, E&O, it's a nice to have business, but it gives us the recurring. So we're very excited about, again, of all of our new customers. And by the way, every big customer, Sobeys, Loblaws, Metro, they're all upgrading their equipment, and they all want our equipment to be IP-based. So we can have -- we can do direct delivery. And what they're looking for is able to do messaging. So that's giving us a big edge. And also, we save a lot on rights management and on an OpEx, we don't ship by FedEx. So we get a lot of savings that improves the margin by having an IP box in every store. And it gives us the most interesting, the chance to start doing the retail audio networks and start doing ads at very high CPM in stores, which will be a great synergy with the Radio team.

[Operator]

[Operator Instructions] And your next question comes from the line of Maher Yaghi with Desjardins.

[Maher Yaghi]

I'm trying to figure out and understand the benefit you got in the quarter from trade and other receivables, which declined quite a bit and helped you on working cap. And because I hear you talk about the fact that you have clients that have not paid or you gave them time to pay. And at the same time, I see this big jump in accounts receivables that came in. So can you just clarify where the help came in and how much bad debt have you accounted for that?

[Eric Boyko, Co]

Yes. So a very good question, Maher. So if you look at our adjusted free cash flow and our free cash flow from operations, there's a big gap, about $11 million. That $11 million, $8 million comes from collecting receivables. We were much more on top collecting receivables. There was also less receivables. That's also in. But the most important for myself and for the investors is we only extended our accounts payable by $2 million. So we did not create the free cash flow from operations by not paying anybody. So most of it came from receivables, very little from payable. And as I look at our payments now, our payments are pretty much in line as they were last year. So that's the good news. And we continue to be very aggressive on our receivables, asking more deposits and doing all the good stuff a good entrepreneur company does when he wants to protect his balance sheet.

[Maher Yaghi]

It does look like you pressed the button in terms of accelerating some of the receivables that you do. Have you accounted for any bad debt or passed any kind of bad debt into your income statement this quarter?

[Eric Boyko, Co]

Yes. So on the broadcast side, there's none. On the Stingray business, we more or less gave everybody credits, and that's the $2.5 million. So we gave them the credit. So there's no bad debt. We said to all these customers, here's a credit, don't pay us and we'll be good partners. And the other good news of our credit is that we don't pay for the music. So there's not a cost. There's not a loss on our side. And then on the Radio, we put $0.5 million of bad debt. That $0.5 million is in the OpEx. So our OpEx would have been even lower based on the $0.5 million of bad debt, which was also onetime based on this quarter. So all those should not be there going forward.

[Maher Yaghi]

Okay. Okay. Great. And so now just go back on the Radio side. You mentioned that you're running at 80% of slots sold this time last year. How -- I mean, when you're running at 80%, why do you still see a potential 40% decline in Q2? And shouldn't we be closer to the 20% range?

[Eric Boyko, Co]

Yes, because we're -- it's -- for sure, Q2 is a very small quarter, so July, August, September. Our sales are back to 80%, 85%. So we're very happy with last year. And increasing every week for the last 6 -- for the last 8 weeks. So direct correlation. But for Q2, there's -- July is a very small month. August is a small month. We'll see what happens if -- September is the big month. So we'll see what happens in September. So that's the part I don't -- we don't control yet. So I'm just trying to give trends of in the 40s for this quarter. If we do better, great. In the 20s for the next -- for the fall or October, November, December. Again, that's -- and hopefully, we'll be back at 0 by the end of the year. So -- but this again, this is estimation. We're not ready. Nobody is ready, even including dug to trend, what the trend of radio will be for the next 6 months.

[Maher Yaghi]

Yes. No, I hear you. So you're just being a bit cautious here. So in terms of the TV subscribers trend, can you maybe talk a little bit about the initial business that Stingray launched on in terms of Canadian subscribers. We've seen pressure recently on subscribers in the TV space. What are you seeing in Canada versus the U.S. right now?

[Eric Boyko, Co]

Absolutely. So in Canada, we're seeing negative subscribers. But because we've now launched the advertising on the channels, not big amounts yet, but because of that, even if subscribers are down 5% or 6% in Canada, maybe even more in sort of 7%, organic sales is still plus 2%, plus 3% right now because we're selling advertising and we're getting better pricing. So Canada is good for us organically, but the subs are going down. And the U.S., they lost a huge number of subscribers. I would say they've lost some 100 million to 80 million. We have very little CPS business in the U.S. We have 3 accounts. So most of our business in the U.S. is subscription-based and advertising-based. So it's hurting us in the U.S., but it's minimal because we don't have huge numbers. So we probably do in the U.S., I really think about $5 million or $6 million a year of CPS, maybe I'll think maybe more, $8 million. So it's not a big number. About $2 million a quarter of CPS model in the U.S. And Maher, the list of the numbers. The U.S. is up 12.5%. And we can expect the U.S. to continue growing at double-digit for the foreseeable future. All these launches that we announced on Monday are all going to be U.S. sales. So that we're very excited about it. And also at that point, the FAST channels, which were the free advertising TV channels, I think will be as big as the SVOD business in the near future. So very excited about all that side of the business. And so -- and quarter-by-quarter, you'll be able to see those results in the advertising line.

[Maher Yaghi]

Okay. Great. And I got -- I saw yesterday's announcement, and I wanted to ask you on the Comcast Xfinity platform. How widespread your channels will be on Comcast, on which programming or which subscriber base you'll be on that platform?

[Eric Boyko, Co]

So the good news is we'll be available on every X1 subscriber of Comcast. So roughly, I think, we'll be between 15 million to 18 million subscribers.

[Maher Yaghi]

And it's paper -- I mean, how -- what do you expect the take-up of your product in terms of percentages of the base? What's your…

[Eric Boyko, Co]

Yes. Long-term, Maher, on the -- usually, if you have 1 million subscribers, an average subscriber will listen to the audio channels 2 hours a month. So a long-term customer with 10 million subs, we would get 20 million hours of viewership. And right now, we're getting $0.10 an hour of revenue. So that customer will give us $2 million a month long term. So that's why we're very excited. The metrics of launching and deploying when all -- over those subs, and if people listen to our audio channels like they do on TV, the numbers are very impressive.

[Maher Yaghi]

Yes. Okay. And are there other discussions going on with other partners in the U.S. that -- of size like Comcast that we should see may be coming in over the next year?

[Eric Boyko, Co]

Absolutely. Like for sure. Like we've launched the audio channels with all these partners, but our biggest partner is Samsung. We're close to them. We love to launch the audio channels on Samsung. So that, for us, would be big -- a huge -- and the audio channels increased, people are used to listen to music on TV. So the listenership is growing. We only launched 2 months ago. So very strong listenership. So very excited about that. And I think we have a lot more partners we can launch. And at the end of the day, people are unsubscribing for the cable on the U.S. They're going with Roku. They're going with Pluto. They're going with Samsung, with LG, Vizio, and that's where we get them. So we win on both sides. But we win more if they go over-the-top because we're more based on over-the-top. I don't know if you follow my -- so that's why I always talk about the pivot. I think we've done the right pivot. You see Disney this morning, Disney's report. They're doing the pivot, but it's a big one for them. For us, I think we started 2 years ago. And I think we're probably in the top media companies in the world that pivoted at the right time.

[Maher Yaghi]

Okay. And Perfect. And the last question I have is on the dividend. So I understand the reasoning behind the decision not to move on that front. But can you maybe tell us what's in your mind or the Board's mind. What needs to be seen in terms of results and trends for you to consider looking at raising the dividend? I mean I understand definitely not deciding to raise it today while you're getting subsidies from the government. But what are the milestones that…

[Eric Boyko, Co]

Maher, can you just -- because, again, maybe the phone line today isn't good. But can you just keep it shorter the question because we missed part of it.

[Maher Yaghi]

I'm trying to figure out what are the milestones that you need to hit for you to start looking at maybe raising the dividend once more?

[Eric Boyko, Co]

Yes. Good question. So for us, and I saw your report this morning, Maher. I agree. So right now, increasing dividend is not something you want to do in the middle of a bit of a crisis. Second thing, for sure, we'd like to -- we want to reduce our debt-to-EBITDA to 2.5. We want to bring down our debt quickly before year-end to below $300 million. So we're aggressively repaying our debt. And we believe our EBITDA will maintain around $120 million. We feel very confident about that also in that range. I'm also -- always giving a range. So our goal is to be below 2.5. And then after that, another thing that we'll have to start looking is also in terms of capital allocation, we have some good M&A. And the third one is that for us to relook at once its -- we're post and everything is done, you look at NCIB, we're generating $80 million of free cash flow. Marketing cap is at $360 million. That's 25% return on capital. So start up one -- for sure, their company and the Board will have to sit down and reinstate an NCIB. If, again, the market doesn't valuate our shares at what we feel is an appropriate number.

[Maher Yaghi]

I don't -- you said $80 million, but I don't think $80 million is what you're expecting to do in 2021, I think you're more closer to $70 million maybe?

[Eric Boyko, Co]

Sorry. We feel -- no, actually, we did $78 million. So I think we should be in the range. We're -- so far, our numbers based on what we see today, if there's no second hit, we're in that range. We're in that range of very close to last year. So I think we're in a good position on both EBITDA and -- for now, and the free cash flow. So the numbers are coming strong on Broadcast. The recurring, they're coming every day. Stingray Business is strong. And right now, we feel positive about Radio coming back for now. It could change in 2 weeks, right? But for now, all the numbers are looking in the right direction. Don't want to be too positive on the phone with our -- with you guys. But still, we feel good. We feel -- and also our balance sheet and our debt repayment and cash flow doesn't lie.

[Operator]

Our next question comes from the line of Adam Shine with National Bank.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Sorry if I'm repeating anything, I was on a call earlier. But if we go back to radio. Can we speak a little bit about maybe some of the regions and/or specific markets? I think, in your press release, you called out Toronto and Ottawa as obviously markets that are key to some of the improvement going forward. Can you speak to how these are trending?

[Eric Boyko, Co]

Yes. For sure, there is a direct correlation with the cities opening up. And I know it sounds that the cities that were the latest in Canada was Ottawa, which for us is a huge market. We are -- we have the #1, 2 radio station in Ottawa. And the last city, and you guys -- people in Toronto, where they have stage a 3 or whatever, the Phase III. So Ottawa and Toronto were the ones that delayed us the most and just then come back in the last week, that's been very important. So we got that happening. The other part also that maybe is good and bad, by giving away $20 million of stimulus, it is affecting our local sales. So maybe we lost a bit of cash sales for the stimulus to customers. So that's going to maybe hurt us for Q2. But I think long term, helping -- getting access to 5,000 new customers was the right decision. Even if it's going to cost us, we can't really -- a few millions of cash sales. I don't know if you follow me, but -- so -- but if not, for us, Ontario is key, and for sure. The rest of the country seems to be pretty much opened up or finalizing the stage. So.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Okay. And if we go back to some of Maher's questions regarding some of the new press-related -- press release items from Monday in terms of some of those new U.S. signings. How quickly do these contracts effectively kick in and the revenues begin ramping? Is it literally post the news on Monday, expectations are the revenue starts to come in? Or somehow, is there some other mechanism that creates a bit of a lag in the take-up?

[Eric Boyko, Co]

No. It's -- for sure. What happens, the revenues comes in the first day. Because if you get an hour, you get $0.10. So it's very -- it's linear. But then the most important is for us to build the people to get used to the channels, EPG and the listenership increases fast. So our biggest thing that we need to is how do we get people to know that if you have LG TV in the U.S., well, you have your 10 or 20 audio channels on your LG TV, and you don't need to go to a cable operator, you have it for free, So that's the time for people to realize, do I -- if I'm with Time Warner Cable, do I go on to Time Warner Cable to get my music? Or I just stay on Samsung, in this case, LG, and get my audio channels for free?

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Okay. Just on the M&A front. Is there anything in this environment right now that arguably is slowing some of the opportunities? Or from a timing perspective, given your focus on the deleveraging, are you sort of holding off perhaps on more aggressive opportunities that may exist in the market. And obviously, I say that within the context that I know you're being pretty careful in terms of what you're willing to pay, which perhaps might be part of the timing dynamic as well?

[Eric Boyko, Co]

Yes. So we've been -- on the M&A side, we've been -- with COVID, more difficult to meet your potential partners. Takes longer times. That's 1 negative. Usually, they come see our office. We give them the Kool-Aid, and there's a bit of relationship built. But so for sure, now it takes more time on the phone and Zoom. We are very, very, very disciplined. The upfront deals, we're looking out between 3 and 4. We tell our partners we're between 3 and 4x cash upfront, so there's no real impact on our debt-to-EBITDA ratio. And so we have a strong pipeline, probably have 4 or 5 LOIs right now that we're working on. So we're very -- and we feel that we're ready starting probably in September to pull the trigger. For sure, for the last 4 or 5 months, we are a bit more worried about pulling the trigger. But I think now we're down that path. So we're happy to -- I think we're going to see a few deals close before the holidays. That will be tuck-in, but it will be very strategic.Yes, I think that was the last question.

[Operator]

Yes. There are no further questions at this time.

[Eric Boyko, Co]

Okay. Good. Thank you very much for joining us today on this conference call this morning. I would like to invite you to attend our virtual AGM at 11:00 today. We have a good presentation for the shareholders that I think we do a good summary. We try to have more presentations. And the login information is available on our website at stingray.com. And also, as you know, the AGM will be recorded, so looking forward to speaking to all of you soon. And let's all stay safe. Thank you, everybody [Foreign Language]. Bye, guys.