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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Stingray Digital Group Inc. Fiscal Year 2018 and Fourth Quarter 2018 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, June 7, 2018. I will now turn the conference over to Mathieu Peloquin, Senior Vice President, Marketing and Communications. Please go ahead, sir.
Thank you. [Foreign Language] Good morning, everyone. Thank you for joining us on Stingray's Conference Call for the Fourth Quarter and Fiscal Year ended March 31, 2018. Today, Eric Boyko, President, CEO; and Jean-Pierre Trahan, CFO, will be presenting Stingray's financial and operational highlights. Our press release reporting Stingray's fourth quarter and year-end 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 and performance are subject to risks and uncertainties, and actual results may differ materially. The risks and uncertainties include, but are not limited to, the risk factors identified in Stingray's annual information form dated as of 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 to new information, future events or otherwise, except as maybe required by applicable law. Accordingly, you are advised not to place undue reliance on such forward-looking statements.Thank you. And I will now pass on the call to Eric.
[Foreign Language] Good morning, everyone, and welcome to our year-end conference call. I'll start the call providing you with a summary of our initiatives and achievements for the past year. This is our third year as a public company. It truly gave us the chance to further highlight our strengths, most specifically, our capacity to execute our business model. I'm proud to say that all key financial metrics were in line with or surpassed our expectations, with growth well above 20% on a year-over-year basis. We are particularly pleased with our organic growth that reached a solid 9%. Now for the year-end results. Revenue increased by 25% to $127 million, driven by acquisitions and organic growth. Revenue in Canada performed in line with expectation, while revenues in the U.S. and other countries increased by 75% and 38%, respectively. It represents 53% of total consolidated revenues. Music broadcasting revenues increased by 23%, primarily as a result of the Yokee Music acquisition and Subscription Video On Demand in the U.S., while Commercial Music growth of 21% was attributable to organic growth in digital signage and acquisition of the Satellite Music Australia and SBA Music in Australia also.Adjusted EBITDA increased by a solid 23%, reflecting strong top line growth. And finally, adjusted free cash flow was also up by 25% and reached $33 million.Just a few weeks ago, we announced the acquisition of Newfoundland Capital Corporation Limited. This will be, by far, our largest transaction in our history, with a total value of over $500 million. As you know, this transaction is pending, the approval of the CRTC. We strongly believe that this acquisition is a stepping-stone to our quest to become a major and global player in the various spheres of the music industry.Near term, after only a decade in operation, we will become Canada's largest public independent media company and also Canada's largest music company once the NCC transaction is approved. On January 3, we were pleased to announce of acquisition of New York-based Qello Concerts, the world's leading over-the-top streaming service for on-demand concerts and music documentaries. We spent -- we expect to launch Qello services on national platforms in the coming month.For the quarter, SVOD services exceeded 348,000 paying subscribers, with a 10% organic growth over Q3, mainly due to increase in ARPU. We do have some expected seasonality on Karaoke after a very strong holiday period.In May, we also announced a long-term agreement for the renewal and expansion of 10 new Stingray services with Bell. We are also pleased to have been selected to publish end market The Voice worldwide singing app with an expected launch this fall.In conclusion, considering the pending acquisition of NCC and the solid momentum in our existing business, we have plenty of runway to create significant value for our shareholders over the next few years. I will then pass to our friend, Jean-Pierre, for the numbers.
Thank you, Eric. Good morning, everyone. Before I begin, let me remind you that all amounts are expressed in Canadian dollar unless otherwise indicated.Revenues increased 24.7% to $33 million in the fourth quarter compared with revenues of $26.5 million a year ago. The increase was primarily due to the acquisition of Yokee Music, Qello Concerts, Satellite Music Australia and SBA Music, combined with organic growth of SVOD in the U.S.Recurring revenues were up 30.8% to $29.7 million or 89.8% of revenues from $22.7 million a year ago. When compared with last year, recurring revenues as a percentage of total revenues increased from 85.6%, due primarily to Yokee Music, Qello Concerts and Comcast, which started to generate recurring revenues during -- this last fiscal year.Music Broadcasting revenues increased 26% to $24.8 million, mainly due to the acquisition again of Yokee Music and Qello Concerts, as well as organic growth of 9% in the U.S. market, primarily related to SVOD.Commercial Music revenues rose 20.9% to $8.2 million, mainly due to the acquisition of SMA and SBA Music in July 2017. Adjusted EBITDA for the fourth quarter increased 29.9% to $11.8 million compared to $9 million a year earlier. The increase in adjusted EBITDA was primarily due to the acquisition realized in fiscal 2018 and to organic growth, partially offset by higher operating expenses related to international expansion.Adjusted EBITDA margin increased to 35.6% from 34.1% a year ago, mainly due -- because of SVOD revenues.For the fourth quarter, the corporation reported a net income of $4.7 million or $0.08 per diluted share compared to $4.6 million or $0.09 per diluted share from the same period last year. The increase was mainly attributable to higher operating results and net finance income as well as lower legal fees, primarily offset by lower income tax recovery and higher amortization.Adjusted net income was $9.7 million or $0.17 per diluted share compared with $10.5 million or $0.20 per diluted share a year ago, as lower income net tax recovery was partially offset by higher adjusted EBITDA and net finance income.Cash flow from operating activity decreased to $10.7 million in the fourth quarter versus $10.8 million last year. The slight decrease was primarily due to the negative net change in noncash operating items, largely offset by higher operating results.Adjusted free cash flow increased to $11.1 million from $8 million a year ago. The increase was mainly related to higher adjusted EBITDA and foreign exchange gain as well as a lower income tax paid, partially offset by higher capital expenditures.Looking at our financial position, Stingray concluded the fourth quarter with a cash and cash equivalents of $3.4 million. Our net debt position was $35.3 million, resulting in a net debt to last 12-month adjusted EBITDA ratio of 0.85.As of March 31, 2018, the corporation had $100 million revolving credit facility, of which approximately $61.4 million was unused.I will now turn the call back to Eric.
Okay. That's it, Jean-Pierre. Thank you. This sums up our conference call for today. Thank you for your time and attention. At this point, Jean-Pierre and I will be pleased to answer any of your questions you may have.
[Operator Instructions] Your first question comes from the line of Adam Shine from National Bank Financial.
Eric, I want to start with SVOD, and first, with what you mentioned. So just to be clear, you said 10% growth, organic growth sequentially Q-over-Q in terms of SVOD revenues. Is that correct?
Yes. Because we're doing more and more SVOD B2C, and our ARPU increased from 620 to about 660, so that's helping us in the organic growth quarter-over-quarter.
Excellent. The other thing is we've seen tables from you guys over the last quarter or 2 splitting up B2B and B2C. Is there any further details you can provide on the split there on the 348k?
Yes. Well, we'll see what we can give. We try to keep it simple, so that's why we're keeping the overall number, but we'll see what we can share with the analysts after.
So then, maybe just as a final question. If we can just go back to -- obviously, some seasonality. That speaks to perhaps Karaoke. It also speaks maybe to the fact that we haven't seen additions to new geographies and/or new platforms that have otherwise been saturated maybe. Any other color that you can give in terms of maybe some elevated churn on B2B because of seasonality, and as you just said, traction, better traction upside in B2C subs?
Yes. So for sure, on Karaoke, the biggest day of the year is New Year's Eve. So that's when we get the most subscription is between Christmas and New Year's Eve because people do a lot of Karaoke in New Year's Eve. I know we did in our family.
And Thanksgiving.
And Thanksgiving. But I'd say, regarding -- and in terms of new platform, we're going to be launching -- we've launched with -- Jazz with our friends at Comcast. We're going to be launching with Comcast Qello. We've launched with Cox. We're going to be -- we launched Karaoke. We're going to be launching Jazz and Classica and Qello. We're also working very closely with our friends at Sling and also working hard with our friends at Roku. So we have a lot of new platforms that are being launched, and so we're excited -- we're still very excited about the U.S. market. So I think things are progressing well. And the more platforms we have, the more reach, the more sales we'll have.
Your next question comes from the line of Deepak Kaushal from GMP Securities.
First off, I wanted to ask a follow-up on the cash from ops. JP, you talked about the working capital impacts on cash from ops versus a year ago, bringing cash from ops down. I know you adjust the side of your adjusted free cash flow. What can we expect in terms of noncash working capital over the next couple of quarters before you finish the acquisition of NCC or close it? And I guess on a rough run rate in terms of cash from ops, you're doing about $4 million to $5 million a quarter. Can we expect that in the interim before you close the acquisition? And then I'll ask a couple of more follow-ups.
Deepak, did you say $45 million a quarter?
No, $4 million to $5 million.
Okay, $4 million to $5 million. Okay. [indiscernible].
Okay. If you did $45 million, there would be no problem.
I would drink champagne, you know.
Yes. It's going to be a bit the same level. I don't see any changes.
For the OpEx -- I think with the NCC in our business, roughly Stingray will do around $5 million to $6 million of OpEx per year in the future. NCC will do about $3 million. So $4 million to $5 million for us, $3 million for NCC in terms of OpEx. What really helped us this year is the income tax. Our structure in U.K. -- they changed the rules in the U.K. and instead of using our withholding tax as a credit, it becomes a full deduction. So it's been -- our income tax has been very positively affected because of the U.K. change in tax. And also, the U.S. tax is up against out, so we were safe in terms of income tax.
Yes. No. Sorry for the misunderstanding, Eric. Not OpEx, cash from operations. I guess, you did $19.4 million in '18 and $22 million in '17. Can we expect on average $4 million to $5 million in cash from operations per quarter organically before you close NCC?
Look, I see our cash flow at $11 million. I don't see your $4 million to $5 million. So maybe we can take this one off-line, yes?
No, I'm talking about going forward, on average.
Our free cash flow right now, this quarter was -- adjusted free cash flow, $11.1 million.
Okay. So are you expecting adjusted free cash flow of about $11 million a quarter?
Yes. Except for this quarter which -- we had a $1.5 million positive FX gain, so our real free cash flow was more like $9.6 million.
And a small tax recovery as well to that, so.
$9.6 million, okay. And then I wanted to more -- dig more deeper on...
And then, Deepak, but just -- and something we might -- with the NCC acquisition, we might change the way we give adjusted free cash flow because we find that this FX gain does not really represent real free cash flow.
Okay. So you'll be taking out the balance sheet translations on FX?
Yes. We'll see. Something we might change as we don't feel it represents the real true free cash flow of the business.
Excellent. Okay. I want to go back to the linear TV opportunity for video. You announced the renewal with Bell, and it's a significant expansion renewal for Bell. And you have, I guess it's about 6 linear channels for video, some of which you acquired from Bell. What's the opportunity for that? And how does that change your organic broadcast business in Canada? I guess when you went public, it was just the audio services, the former Galaxy Services. And you're getting about an average of $0.20 a month ARPU. Like when we compare this to channels like country music, there are about 6 million subs in Canada doing, I don't know, like $0.30 a month in ARPU, including advertising. What's kind of the outlook for that? And what is the status of renewals with the rest of BDs in Canada? What's the opportunity here to drive organic growth?
Yes. So quickly, roughly in Canada, broadcasting, we do $25 million. I think there -- for us to do advertising revenues, it's a potential above $10 million. So it will be an increase of 40% of our sales in Canada. And again, if you look at the advertising revenue of every specialty channel, the numbers are pretty strong. One of the main reasons for the NCC deal is to get the advertising expertise, and we're aware that's the reason we're launching all these video channels. And these channels, if you look at the U.K. market, Europe, all music video channels are advertising based, and they do command high -- good revenues per sub. Also, very important, I think we are in the final stage of being rated by [ Nümedia ]. So starting in September, all of our channels, video channels and all of our audio channels will be rated, so we're excited by that. It's the first time in our history that we're getting -- and the reason why we're doing it the first time in our history because this is the first time that we're focusing on advertising.
And technology.
And technology is also helping us. So I think it's going to be very strong. And also, in the U.S. market, we're also looking to launch music video channels linear, again, with the advantage of doing advertising there.
Okay. And in the case of Bell and perhaps some of the other BDs in Canada, do you envision the 6 linear channels, excluding the Specialty and the SVOD, to be carried on the basic services?
Our goal is -- for the music video channel, our goal is advertising-based and to be a basic. Right now, we're on Shaw with 2.5 million subs. Bell is going to give us another 2.5 million, and we're with Videotron. So our goal is to reach 8 million subscribers on the video side for these 6 channels. And don't forget, the more acquisition, the more that -- for us, the fact that Videotron bought our friends from Serdy, they bought Évasion and Zeste, the more that the integrated companies need. So for us as an independent, we're well positioned. And if there was a contract -- most of our contract has now been renewed for over long period of time, 4 to 5 years. We have one coming up in the next year. But besides that, with the renewal of Bell for a long-term agreement, and we had a long-term agreement with Shaw, all the 2 biggest operators for us have been re-signed.
Okay. And then just one final question for me, if I may. Given you didn't take questions when you announced NCC, the big question is, why radio? It's not necessarily a growth business. Can you guys grow it? Or do you stem the decline? Can you -- what kind of synergies can you get beyond the stated $3 million revenue synergies and $8 million in soft synergies?
So for sure, if you look at the -- the first thing with this NCC, it was a gem asset. It's incredible. It was a coast-to-coast. It's a free cash flow machine, a very strong management team, and the Steele family did a great job, so we're very lucky to find that unique asset. With our free cash flow per share, we'll go from about $0.40 to $0.50, depending on how you look at the last 12 months, to above $1. So in terms of free cash flow, this is incredible what the potential of this acquisition will do. And again, I do want to emphasize an incredible management team. And yes, we do expect to have organic EBITDA growth, with increase in sales and also in terms of management, a lean and mean management team. And also, NCC -- we always start with EBITDA margin, they did 37.1% EBITDA margin last year. So our goal is to be at 35%, they're at 37.1%, so it's really an incredible business.
Okay. And what's your kind of expected or target ROI on the acquisition?
You're advance of me. I haven't figured that one out. I don't -- I'll do the calculations.
Well, when you do, please don't forget the question.
Roughly, we bought it at 7.7x EBITDA, and they have no -- it's a business with very little CapEx. So we more or less paid it 7.7x free cash flow, so then it now gives you an ROI of 13%, 14%.
Your next question comes from the line of Drew McReynolds from RBC.
Just first, for you, Eric. The 9% organic growth in the quarter, clearly, a lot of that coming from SVOD. Just wondering if you can give us a high level kind of breakdown of kind of deposits of organic growth across for the rest the businesses and geography.
So last quarter, we did 15%. But we told the market that out of the 15%, 9% was equipment sales and only 6% was recurring revenue. This quarter, the 9% is 9% recurring revenue. So for sure, it's coming from all the SVOD, mostly from the SVOD and our TV products that are increasing. So this 9% organic growth is a true 9% recurring revenue growth, because the equipment sales were down compared to last year, so that's why if we look at our sales in Canada, the only reason our sales in Canada were down is the equipment sales. Last year, we did the Saputo Stadium. This year, we don't -- so it's the same thing, and the same thing in October, November, December of this year. In 2019, it's going to be tough to repeat the Jean Coutu deal that we did in October and November, December. So I think we got to take away the nonrecurring events.
Okay, that's helpful. And you've kind of long stated 5% organic revenue growth target for both of your kind of core segments. As you look into fiscal '19, is there any kind of change to that kind of outlook?
No, management again is very focused to deliver 5% organic growth and 5% EBITDA growth with acquisitions. So very focused on those 2 segments. And we feel very comfortable. The U.S. dollar doesn't go down by 40%. I'm always excluding FX.
Okay, okay. No, understood. Just on the M&A strategy for the company, clearly, you're going to close a big one with New Cap. Wondering how that acquisition has changed your acquisition priorities versus where they were before acquiring New Cap.
No. So that's a very good question. So for us, one of the main reasons for New Cap, again, a great cash flow machine with great management team. In terms of management time, New Cap is being -- are very independent, so it's not going to take a lot of our time here, in terms of the team in Montréal. We also raised -- we could have raised only $120 million. The reason we raised the extra $60 million is we expect the EBITDA closing to be about 3.3, 3.4, with the sale of certain New Cap assets. So we have a lot of flexibility. So we have about $100 million of flexibility to do acquisition. And we're still very focused in terms of acquisitions in the U.S., Europe, in the digital space and also in the Stingray business segment. So I think -- none I think, but we have a strong pipeline of smaller acquisitions. I agree with you, we're not expecting to do a $3 million acquisition within the next 6 to 12 months, but many small tuck-ins.
Okay, that's great. And one last one from me. Also for you, Eric, with the review of the Broadcasting and Telecom Acts, we're obviously going down a multi-year process that who knows what will happen at the other end of the tunnel. I want to get your high-level thoughts on what your expectations or hopes are for this big review.
And also, we're -- we are very happy. It's been a long time that we're talking with the different government entities. And we're in partnership with different -- absolutely, it doesn't make sense that Stingray, we play Canadian content, we play French content. We're happy to be Canadian. And Spotify and Google and music can come in Canada and not put any Canadian content in their music playlist. If we look at the future of Canada and the future of our artists, it's how you're going to discover music if you don't listen to Canadian artists and Francophone artists? So I think it's a key element for the culture of Canada. And so the discovery of music is a key point. And also, in terms of funding, we are happy to give 4% CCD. We are happy to give -- to be involved in the Canadian industry. It doesn't make sense. So I'm not talking about the taxation of Spotify, I'm just talking about the content and helping the industry. The issue with the music industry, it's not about Drake and Celine Dion and The Weeknd. It's about all the -- 99% of the artists that need radio to make money from publishers and from labels.
Your next question comes from the line of Maher Yaghi from Desjardins Capital Markets.
Eric, obviously, the market didn't see eye-to-eye in terms of your view on the acquisition of NCC. What do you think the market is misunderstanding in this acquisition? Because I guess, talking with investors, it's mainly the long-term projections for sales in radio. What's your view on the sustainability of the revenue model for NCC longer -- medium to long term?
Okay, good question. So I think for the market, as a management team and as with our bankers, it's always a decision. When you do a bad deal of $180 million or equity financing, how much you do private placement, how much you do a bad deal? We always try to respect our current shareholders. We want to have more shares for retail. So maybe the bankers or us, we didn't fully -- do the right asset mix between private placement and VOD deal. So we came short a bit on that, on the VOD deal. And in terms of NCC, NCC, as you -- if you look over the last 10 years, have been growing. Their EBITDA is growing. And we are, by far, NCC, I think it's one of the best management team in Canada and the best positioned to buy smaller independent stations. So we have great markets in Manitoba, Saskatchewan, southern Ontario and even in the future, Québec. So we see a lot of growth, a lot of tuck-ins. And we have the advantage of the way this NCC team has built -- they have their business units around the country. So every city is like a mini business unit. Very independent. So when we buy out the local radio station, we can put them in that business unit. So we're very well-positioned to increase our EBITDA margin, our sales and the EBITDA overall.
You touched on something I wanted to ask you on in a follow-up. Basically, a recent CRTC, the report mentioned, definitely, what you just said, that consolidation and radio has a weight of helping companies manage through the pressure on advertising and continue to grow them. So on the M&A side, what's your take -- what's -- will you be continuing the M&A strategy that NCC did? And you talked about the Québec market, to which obviously, they don't have any positions in. What's your view on how can you enter this market?
No. So I think, for sure, we will continue the NCC acquisition path and even maybe more aggressively. At the same time, again, when we bought Newfoundland Capital, and Ian and his team, is that Ian is an incredible COO, very well organized, well managed and in a good position to integrate a lot of radio stations. And while Ian is working hard with his team on doing that in Canada, our team is going to be working hard internationally to keep our acquisition targets of $525 million, a $25 million acquisition, $500 million EBITDA. We might even be increasing our international targets, because with the increase of free cash flow, both businesses together, by the time it's all integrated, we should be generating about $80 million free cash flow. So we now have a strong machine to do acquisitions worldwide. And also, an important point, we became -- we're now the largest music company in Canada, with sales of about $300 million. So we have scale. We do have scale with the labels, with the publishers. And we get -- and we're also getting the street credibility. So I think it's good times for us.
Okay. And yes, no, just -- you -- definitely. And just on the Québec market, what are you looking to do on the Québec market?
Okay. So there's no doubt in the Québec market, we will need something that we'll be looking at, us being based in Montréal, being based in Québec. But the current management team will probably need to get some management that are Francophone. I think we feel that to be -- have strong leadership, we need to be able to be fully bilingual for the Québec market. So it's not necessarily our priority #1 after closing, but it's something that we'll be looking at over the next few years. But there's a lot of option also in the rest of Canada.
Definitely, in the Ontario market, yes.
Ontario, Saskatchewan. The deal about NCC is they're very strong with national radio sales, but they're also very strong in terms of local sales, so you got a strong machine on both sides.
Okay, great. And on the SVOD market, you mentioned seasonality as having to deal -- to do with the lower regime in terms of net additions. Do you expect -- how is seasonality for Q1, Q2? Because we haven't seen many -- I mean, multi-year trends. And also, can you maybe just help us understand the seasonality a bit better?
So 2 things. A, we need to have more reach, so I think the fact that we're launching on Cox, the fact that we're launching on other platform is good news for us, so we're happy about that. We also want to launch Qello with Comcast, because Qello is a great product, and it hasn't been on the B2B side. So I think it's going to be -- there's no doubt that Karaoke, our business, we've always seen that Q3 is the biggest quarter of the year because we do Karaoke sales. Our Karaoke sales this year will be above $20 million, so we're really be -- we used to joke about Karaoke, but now we're -- we are the -- in terms of publishers, we are the #1 Karaoke company in the world in terms of paying the publishers.
It's a good business.
So -- yes, it's a good business. And we also -- don't forget, we own 23,000 songs. So in this case, we're the label. So it's something that we have a net advantage, a unique ability. So to answer your question quickly, so for sure, I think Q1, Q2, summer times, and for sure, starting June, July, August, when the back to schools and all the cable subscribers, people get back home, we're going to be stronger.
Okay, great. And one last question to -- on the margin side, very strong EBITDA margin in Q4. How should we look at margins in the next couple of quarters before you close the NCC acquisition?
I think, we're lucky. As you know, the SVOD business, I mentioned before, is 80% EBITDA margin. So the more SVOD keep on increasing, the more our ARPU increases. And I must say our U.K. division, our base in Israel, and the deal with The Voice is a multimillion deal, very exciting for us, in 157 country. So we're really, really optimistic about the B2C market with Karaoke so -- which again increases our EBITDA margins. So...
So 34 to 36, is that sustainable? 34 to 36?
Yes. Always, again, excluding -- if we have -- again, if we have a big...
Commercial contract, yes.
[indiscernible], then the equipment sales are 30% margin, excluding nonrecurring equipment sales.
The only thing that could change in Q1, we're going to start reporting gross net new via the IFRS 15.
Yes, a very important point. We did put a note in this quarter.
That's $6 million? The $6 million?
Yes, so just to clarify. So a good example is where our friends from -- when we sell on the iPhone ...
IOS.
IOS.
Android.
Yes, we used to record -- if we say -- if we would do a $10 sale, we would record $7, we would a record amount net. But now with the new IFRS 15, we are forced to take it gross. So that's going to increase our sales by $6 million this year, which will decrease our EBITDA margin. I don't know if you follow me on that one.
Yes, yes. You report gross sales?
No we report net sales. In the future, we'll have to report gross sales.
Gross sales, yes, yes.
That's going to increase our sales, but we have a commission for Apple by 30%, so it's...
So it's [indiscernible].
But it's -- we were forced with the new IFRS to report gross. And there's a note, we put a note in Q4 to advise the market.
Note 30. But you can call me on that.
[Operator Instructions] Your next question comes from the line of Bentley Cross from TD Securities.
First, just a couple of points of clarification. Eric, you mentioned $1 in free cash flow. Can you put a time line on that?
Once the deal is closed, and by 2020, and once everything is well integrated, we'll spend about $80 million free cash flow. So that's how we see our models. So -- and then there will be -- the free cash flow will increase because the more we repay our debt, and our goal is to have our -- our management goal is very clear, to be below 2.5x. And personally, I like our EBITDA debt to be at 2x. So I think we're going higher to 3.3x, 3.4x, but quickly deleveraging. Now we should be generating, once all integrated, about $20 million free cash flow per quarter. So it's really an incredible machine that we've -- a cash flow machine that we built.
And following on, on that. I mean you've mentioned delevering, but at the same time, prioritizing acquisitions. Presumably, you're not going to do too many equity raises because I assume you want to maintain control, Eric. Just can you kind of walk us through those puts and takes and how that timing could work?
Yes. I think we're going to keep doing -- for sure, our $25 million a year of acquisition will be -- I think we will probably at something -- we'll probably have to sit down as management, but that will be increased, because if we're buying on the radio side, and we're buying on the Stingray business side and we're buying also more TV channels around the world, I think that target will need to be increased. So we'll sit down and get back to you about that. And in terms of -- absolutely, I think that we've done -- we raised a lot of money this year. I think we're in a good position. And now with the -- in terms of size, the issue with us is that before we're valued, our EV was about $400 million, $500 million, $550 million. Now our EV is, close to $1.1 billion. So we're in a position to make acquisitions from mostly on debt, so we have that advantage. So I think it's -- we're in a good position.
Your next question comes from the line of Nicholas Kim from BMO Capital Markets.
Eric or JP, are you able to disclose what the SVOD churn rate was in the quarter? And can you give us any indication of how it's been trending so far in Q1?
Yes. What we do -- from the B2B side, we're seeing about a 14% to 16% churn rate on the SVOD, which our partners say is good. So -- and the B2B side, we see SVOD of 18% to 19%. We're trending at 14%, 15%. So we're -- I think we're in a good space. Again, on the B2C side, we're able to really track it better, so on the -- but on the B2B side, we only see the net number. So Comcast, and Cox and Amazon only gives us the net. We don't see the end customer. So on the B2C side, something that we'll be able to -- but again, Yokee is growing nicely. We're having every month a record month, and so it's exciting on the B2C side. And a very important point, we are launching our own B2C platform on Netflix this fall, so we'll be able to sell Classica, Jazz, Karaoke and have our own platform for Qello. So it's very exciting for us to getting ARPU of $10 a subscriber instead of sharing it with the another operator.
Okay. Sorry, so just to clarify, the B2C side, was -- did you disclose that churn rate number or is it your...
What was the churn rate on B2C?
It varies by product, so...
Okay, we'll try to get back to you for the B2C side after. We'll still give you a number of that, we'll get you the exact number. Again, on the B2C on the Yokee, we also do weekly subscription and we do monthly subscription, so it's a mix of both.
Okay, got it. One more. Any update on the Musictoyz lawsuits and expected timing on any potential resolution?
Yes. Good question. As you saw this quarter, less legal fees, we always joke -- we always make jokes that our Chief Legal Officer regarding that is a big cost for the company. No, but on a very more direct note, we expect the Patent Review Board to -- probably September, October. I could attest that, for sure, the Patent Review Board, in 80% of the case, when they review a patent, the patent is invalidated, sorry. And all the 4 patents to them are already expiring. So it's a bit of an interesting situation what we have right there. At the end of the day, we are very confident and very positive about the outcome of it. But the bad news, this is costing us money. We spent $6 million last year, so -- and that's $6 million of free cash flow, and that's $6 million -- we own 2 -- a manager owns 20%, so it cost us $1.2 million. So for sure, we want to -- we're happy when we get -- when this is resolved.
Your next question comes from the line of Deepak Kaushal from GMP Securities.
I just want to continue to sharpen my pencil on the cash flow, on the free cash flow expectations going forward. On the CapEx for the year, you guys did $7.8 million versus $2.6 million last year. I think there was a $3.3 million acquisition of equipment for the purpose of leasing. Can you talk about -- a little bit about what that is? And what we can expect for CapEx going forward on an organic basis and maybe sustaining CapEx for NCC?
So in terms of -- that deal was our deal with Farmacias in Mexico, so we have 1,500 location. So in Mexico, we bought the equipment for them and were -- so it's a bit of a unique deal...
And it's fully installed now.
So that's fully installed. But not the type of deal that we do in Canada or U.S. or Europe. It's very specific for the Mexican market, so it is a one-off. We also had last year the renovation of the building, which is almost finalized, and which one day, we should invite the analysts for a little tea or afternoon rose. So that -- that we're very happy about that. And the future expectations for CapEx for Stingray, about $5 million to $6 million, for NCC, $2 million to $3 million. So expect $8 million to $8 million to $9 million -- $8 million to $10 million as a range of CapEx in the future.
Your next question comes from the line of Drew McReynolds from RBC.
That was my follow-up, so maybe I'll squeeze one last one in. And JP, we can take this off-line, if it's kind of a little bit too complex. But just on cash taxes with new Cap feeding through, what kind of, I guess, cash tax rate should we be assuming once that acquisition closes?
So we're lucky because Stingray in Canada -- because all our R&D is done in Canada and all or most of our expenses are here, we should have a good impact in all of -- having a lower tax rate for new cap. So we'll get back to you on the market on that number.
We're working with KPMG as soon as we -- this summer to try to reduce the tax rate.
Yes. But for sure, Stingray Canada as an entity loses money because all of our costs are based here and our divisions [indiscernible] and there's a lot of transfer pricing, so it's a bit complicated. But for sure, we have a tax advantage with NCC in Canada, so that also helps our cash flow.
There are no further questions at this time. I turn the call back over to the presenters.
Okay. Thank you for all the questions. Thank you for the analysts, for your time, and excited to finalize the NCC acquisition with the CRTC, and we expect that to close in September, so it's going well and excited to be with the new family with NCC. So thank you, everybody.
This concludes today's conference call. You may now disconnect.