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.'s Fourth Quarter 2021 and Fiscal 2021 Results Call. [Operator Instructions] Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded today, June 3, 2021.I will now turn the conference over to Mathieu Péloquin, Senior Vice President, Marketing and Communications. Please go ahead.

[Mathieu Péloquin]

Merci beaucoup. Good morning, everyone. [Foreign Language] Thank you for joining us for Stingray's conference call for the fourth quarter results ending March 31, 2021. Today, Eric Boyko, President, CEO and Co-Founder; and Jean-Pierre Trahan, CFO, will be presenting Stingray's financial and operational highlights. Our press release reporting Stingray's fourth quarter and annual results for fiscal 2021 was issued yesterday after the market closed. Our press release, MD&A and financial statements for the quarter are available on our investor website at stingray.com and also on SEDAR.I will now give you the customary caution that today's discussion of the corporation's performance and its future prospects 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 2, 2021, 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 of -- on this call are expressed in Canadian dollars, unless otherwise indicated.With that, let me turn the call over to Mr. Eric.

[Eric Boyko, Co]

Okay. Merci, Mathieu. Good morning, everyone, and welcome to our fourth quarter and year-end results conference call. I think we're all breathing a sigh of relief now that we can see a light at the end of the tunnel regarding the pandemic. Still despite the multiple effects of COVID, I'm pleased to say that fiscal 2021 has been a very good year for us. We delivered solid results that exceeded our expectations, reduced our net debt by close to $35 million, maintain dividend payments and repurchased $10 million in shares.We also invested in Stingray Business in the U.S., laying the foundation for future growth and continue to build on solid traction and streaming subscriptions and FAST channels as we further or pivot into digital distribution channels. Organic growth for the year reached 3.5% for Broadcast and Commercial Music recurring revenues before exchange rate and onetime COVID effects. U.S. revenues, which will be our biggest market, grew by 11.6%. For the quarter, organic growth was at 4.3% for Broadcast and Commercial, and U.S. revenues grew by 13.3%, so we can see the curve accelerating. These are very important accomplishment especially now, and I congratulate our teams for their excellent work.Fourth quarter adjusted EBITDA decreased to $23.6 million, primarily due to higher accrued liabilities related to the business, better overall performance in fiscal '21. Adjusted EBITDA for the year declined only 3.2% to $114.3 million. Our comprehensive cost-cutting measures have a lot to do with this. I'd like to point out that many of these initiatives will continue to help us in the upcoming year. By acting swiftly and aggressively last year we were able to quickly create the financial flexibility, which allowed us to continue delivering on our key capital allocation priorities.This year, despite lower revenues, both the Broadcast and Commercial Music and Radio segments reported significant improve in adjusted EBITDA margin with the benefits of much reduced operational cost structure. Q4 Broadcast and Commercial Music decreased by 5.5% to $36 million due to a combination of factors, not in the least was the pandemic, which we hope is almost finished, but also included lower equipment and installation sales as well as negative impact on the FX, all of which were partially offset by rapid growth in advertising revenues. Adjusted EBITDA decreased by 14% to $16.3 million due primarily to adjustments to certain accrued liabilities, which were probably offset by operating costs.Let's go to Radio now. Radio revenues for the quarter were down 19%, 19.9% or almost 20% to $24 million, but continue to progressively recover on a comparable basis. Adjusted EBITDA decreased 9.8% to $8.7 million. This was also due primarily to the impact of the pandemic and adjustments to accrued liabilities. We were able to partially offset this with the CEWS and other subsidies, although much lower than previous quarters as well as reduced operating costs.On the subs. We ended the year with 525,000 streaming subscribers. For the fiscal 2022, we expect strong incremental organic gains and confident that we will reach our objective of 1 million subscribers in the next 2 to 3 years, and the trends are looking very good. A result of the strong traction in FAST channels over the past year, advertising revenues almost tripled from $0.5 million to $1.5 million. And that was one of our KPIs we told the market that we wanted to achieve. So very excited about that also.As you know, we are -- we put in place an experienced U.S. sales team at Stingray Business, and we can clearly see the momentum building up. In fact, we're very excited since we expect Stingray Business to become a key growth vector for the company for the foreseeable future.We are completing our rollouts at Boston market, Fatburger, Johnny Rockets and Elevation Burger locations. Orangetheory Fitness Live is fully deployed. We are also happy to report that we have further rollouts with Tesla worldwide, Subway APAC and European Wax and are active with pilots in more than 5 other global brands.We have made also great progress with our AI insight-driven solution Chatter with rollouts in Nike stores global, [ Gustav ], Circle K, VMO, Pink.com, Pink store and also with our friends at Rogers. We've also continued our progress with Lush, Mall of America, Staples and Fanatics. In total, with Chatter, we are approaching -- if all these pilots are successful, we're approaching 8,000 locations in the U.S. with 3 in the Fortune 500, which just these pilots would give us $10 million a year in revenues.We're moving into fiscal 2022 with leaner and more agile operations, significant growth opportunities and a solid financial position to continue our pivot. With better days ahead, we are fully prepared to take advantage of the expected recovery in Radio, which will continue to provide financial flexibility to invest in all our growing standards. And before our friends or analysts ask a few questions, for the first 2 months of the year, Radio was growing compared to last year by about 90%.We're now moving to a more offensive stance. What this is -- what this means is that our capital allocation strategy will shift towards acquisition and the repurchasing of shares. With simply the total addressable markets on our radar, we see many opportunities to enhance shareholder value.I will now turn things over to my friend, Jean-Pierre, for the financial overview, and I'll finish with the final comments. Jean-Pierre?

[Jean-Pierre Trahan]

Thank you, Eric. Good morning, everyone. For the fourth quarter, our revenues decreased 11.8% year-over-year to $60.3 million compared to $68.4 million. As in previous quarters, the decrease was primarily due to the impact of COVID-19 on our Radio business and to a lesser extent, on our Broadcast and Commercial Music segment. Sales of equipment installation related to digital signage also decreased. Revenues were also negatively impacted by FX, and the decline was partially offset by the increase of -- in advertising revenues in the Broadcast and Commercial Music segment.By geography, revenues in Canada decreased 18.2% year-over-year to $35.6 million, representing 59.1% of total revenues down from 63.6% last year. The decrease in revenues reflect the same factors I just described for global revenues, excluding the impact of the FX.The U.S. now. Revenues rose to 6.9% to $10.9 million or 18.1% of total revenues due to organic growth in advertising revenues in the Broadcast and Commercial Music segment and in streaming subscriptions, partially offset by the negative impact of FX. Organic growth in the U.S. was 13.3%. Lastly, revenues in other countries decreased 6% to $13.8 million or 22.8% of total revenues, due mainly to the impact of COVID-19.Looking at our performance by business segment in the fourth quarter, Broadcasting and Commercial Music revenues decreased 5.5% year-over-year to $36.3 million. The decrease was mainly due to the impact of COVID-19 and a decrease in equipment and installation sales related to digital signage as well as the negative impact of FX. The decline was partially offset by the increase in advertising revenues.Radio revenues decreased 19.9% to $24 million, mainly due to the impact of COVID-19. Revenues in this segment have improved since to more than 60% decline [ in '21 ] first quarter.Regarding consolidated operating expenses for the fourth quarter, it's remained stable to $38.9 million. The upward adjustment and reversal of certain accrued liabilities in Q4 2020 had a negative impact on our year-over-year operating expenses. These increases were offset by reduced operating costs by the CEWS and other subsidies in order of $4 million, and by reduced variable expenses due to the impact of the pandemic on revenues.Consolidated adjusted EBITDA for the fourth quarter decreased to 16.2% to $23.6 million or a margin of 39.2% compared to $28.2 million or a margin of 41.3% a year ago. The decline in adjusted EBITDA reflects mainly higher accrued liabilities as previously mentioned and the impact of COVID-19 on revenues, which were partially offset by reduced operating costs and by the CEWS and other subsidies.By business segment, Broadcasting and Commercial Music adjusted EBITDA decreased 14.1% to $16.2 million. The decline was primarily due to adjustments of certain accrued liabilities in the fourth quarter of fiscal 2020 and 2021, as explained earlier. Partially offset by reduced operating costs, adjusted EBITDA margin was 44.8% this quarter compared to 49.2% in the fourth quarter of last year. As for the Radio segment, adjusted EBITDA decreased by 9.8% to $8.7 million. The adjusted EBITDA margin increased 36% this quarter from 21.9% in the fourth quarter of last year.In terms of bottom line, in the core -- the corporation recorded a net income of $12.1 million or $0.17 per share compared to a net loss of $8.5 million or $0.11 per share in the fourth quarter last year.The fourth quarter of fiscal 2021 adjusted net income was $12 million or $0.16 per share compared to $10.1 million or $0.13 per share a year ago. The increase was mainly related to FX gains, partially offset by lower operating results and higher income taxes.Turning now to liquidity and capital resources. Cash flow generated from the operating activities amounted to $24.5 million in the fourth quarter compared to $14.1 million a year earlier. The increase was mainly due to the positive change in noncash operating items and to the FX gain, partially offset by lower operating results.In the fourth quarter, adjusted free cash flow amounted to $13.8 million compared to $18 million a year ago. The decrease was mainly related to lower operating results and higher interest paid, partially offset by lower income tax paid.Lastly, turning to our balance sheet. At the end of the quarter, the corporation had a cash and cash equivalents totaling $9 million, sub debt of $31.7 million and credit facilities of $416.3 million, of which $110.8 million was available. Total net debt at the end of the quarter stood at $326.4 million or 2.81 pro forma adjusted EBITDA ratio. We believe we have the right balance sheet and growth opportunities in front of us to continue our build and buy strategy.This ends my presentation for today. I will now turn the call back to Eric.

[Eric Boyko, Co]

Okay, Mathieu, JP. This concludes our prepared remarks. Thank you for your time and attention. At this point, Jean-Pierre and I will be pleased to answer any questions you have.

[Operator]

[Operator Instructions] Your first question today comes from the line of Adam Shine with National Bank Financial.

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

Eric, let's start with SVOD. A little bit of a slowdown in the Q4 just compared to some of the better tracking in prior quarters. Maybe just touch on that first. And then emphasize maybe some of the key drivers that drive some of your enthusiasm around the projected ramp over the next 2 to 3 years in SVOD subs?

[Eric Boyko, Co]

Yes, SVOD. So good growth in subscribers. For sure, what we're seeing now is a much higher growth in the B2B side so when we sell with Comcast and Amazon and all these partners than we see on the B2C side. Last year, the pandemic did help us on the SVOD B2C. A lot of people were at home in March and those periods. So there was a lot of traffic on the Apple site.But again, we see the momentum is going forward. We're very comfortable to hit our target of 1 million subscribers. We expect our ARPU to be around $8. So -- and the momentum is going on in Q1. So it's -- I think that we can be very confident that, that segment will continue to grow at high organic sales.

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

If we flip over to Stingray Business, can you just touch a little bit, maybe you or JP in regards to just any elevation, obviously, on customer credits in Canada during the period and whether we're starting to see a bit of an easing of that dynamic starting new fiscal?

[Eric Boyko, Co]

Yes. So for sure, we thought -- we were hoping that January, February, March was the end of it, but we still had -- you saw this quarter of $1.6 million of credits. There's still a few left in April, May, June, but I think it's almost finished. A big place where we got hit a lot was a lot of stores were closed in Europe. And we have a lot of more restaurant business in Europe. So those were all closed.But I think we're 95% finished. So I think that this is the end of the credits for April, May, June or very little. And hopefully, for us, we're -- a big market for us that's hurting us a lot for these credits is Ontario. So hopefully, Ontario gets out of the red zone. Because when the store is closed, very difficult for us to tell the store eventually in a contract that you're going to pay me for music when your store is closed. So it's a bit -- and we want to keep these customers long term. So we have to show that we're flexible with them.

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

And just lastly, maybe just turning to the U.S., and I'll queue up again later. Just in terms of some of the reopening that we're clearly seeing at a faster clip happening south of the border, have you reached a point where maybe COVID is less of an issue at least in regards to the execution of your existing mandates in regards to U.S. Stingray Business?

[Eric Boyko, Co]

Yes, absolutely. The U.S. right now is probably, for Stingray Business, 95% of our focus. All these global brands that we speak to all have 10,000, 15,000, 20,000 locations. Every client is 10x bigger than a Canadian customer. We do $50 million in Canada. There's no doubt in our mind for management that in the long term, we'll be doing $500 million in the U.S. And we're -- as you saw with all the customers we pointed out before, Nike, Staples, Lush and Tesla and Subway, these are all major brands, and Pink. And I mean, it's very interesting for us for the first time to work with global brands. And also, we're the only company able to offer music, digital signage and AI insight with Chatter. So we come with a unique formula, and we really make sure that we bundle all 3 products, so we have a big hedge.And also launching of Chatter -- when we launch music, you got to install a box. So it takes more time. But launching Chatter could be done overnight. It's a SaaS product. So very good, very interesting, lots of work. And for you as an analyst, I would be seeing our U.S. growth on both Stingray streaming and Stingray Business.

[Operator]

Your next question comes from the line of Matthew Lee with Canaccord.

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

So just as a follow-up to your comment on the offensive stance. What type of leverage are you comfortable with in order to get a transaction done in 2022?

[Eric Boyko, Co]

Yes, good question, and it goes to our capital allocation. But right now, we're focusing at closing, post-synergy to be around the 3, 4x EBITDA. And we have a very strong pipeline. We have right now more than 5 due diligence in progress. So when you do a due diligence part, it's -- you have a nonbinding LOI, and you're ready to move to the SPA. So a lot of tuck-ins, a lot of great tuck-ins. Some of them are a bit bigger. But very excited to be coming out with a lot of acquisitions in this year.And if you look at capital allocation quickly, we did $80 million last year to keep the $80 million number of free cash flow, $20 million goes to dividends. Then after that, we got about -- we expect we'll keep on buying another 2 million shares a year if the share price stays low, so that's that $15 million. Our goal will be to repay about $25 million of debt to bring our debt closer to $300 million with an EBITDA of $120 million, so close to 2.5. So we have about $20 million, $25 million available to do acquisitions that we want to deploy this year. So -- and if you do the numbers at 3x, we'd like those to generate about $8 million of EBITDA -- of new EBITDA. So that's a bit of our capital allocation target for the year. But we're very excited -- lots of good deals.

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

I mean, would you look at something maybe a little bit bigger, extend the balance sheet a little further...

[Eric Boyko, Co]

Absolutely. There's -- as you know, there's also some bigger deals. A lot of our competitors, and you can search on it, a lot of our competitors are owned by private equity. As you know, a PE, when they get into the 7, 8 year, the sunset comes in. So a lot of activity of our peers that need to sell out. So that one is -- so those will be bigger deals. And I think we did look into Mood. One of the private equity fund vector was able to buy Mood. But for sure, if there's a big deal, that's very accretive, we'll extend the balance sheet.

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

That's perfect. And then maybe on the free cash flow side, another strong year of cash generation. Can you kind of give me your preliminary estimate as to what range do you expect to deliver in 2022?

[Eric Boyko, Co]

Yes. You saw that even during the pandemic, we were able to maintain that dollar per share. We're very confident that we'll beat the dollar per share of free cash flow. So again, very strong free cash flow yield. Right now, we're delivering $1, we did $1.01, I think, out of the stock price at $7. So that's what, 16% or 15% free cash flow. So for sure, free cash flow yield is very high. We management feel it should be at 8%. We should be trading at 12x cash flow, so 12 x $1 is $12. And again, we're looking at all options in the future if we can get that evaluation, which I think right now we deserve.

[Operator]

Your next question comes from the line of Drew McReynolds with RBC Capital Markets.

[Drew McReynolds]

My apologies. I missed, I think, Eric, your just comment on Radio and maybe the trajectory here in Q2. And just how you see that playing out for the rest of the year.

[Eric Boyko, Co]

Yes. Good. Radio for us, we see a great recovery. April and May -- April, May seems to be 90% higher than last year, but we're still below March 2020. So for us -- the big number for us is Ontario. As you know, we're very strong in Ottawa. We're very strong in Toronto. Ontario is an important market. So hopefully, Ontario gets back and you get the vaccinations and opens up.But right now, we're seeing an increase of 90%, but still lower than 2020 by 20%. So very excited to see the light at the end of the tunnel in the next few weeks and see the impact on Radio. So for us, if Radio comes back to the 2020 levels or 2 years ago, then we would be -- I would come back to generating about $60 million of EBITDA because of our cost savings. So that's going to be an interesting point in the next few months to see the trends.

[Drew McReynolds]

Super. And just shifting gears completely on the FAST channels, clearly, you continue to kind of make lots of penetration, gains on platforms worldwide. Just is there any update just on some of the dynamics you're seeing with your channels on all these platforms, just kind of looking underneath the hood, anything to kind of flag there?

[Eric Boyko, Co]

Yes. The good news is we're getting $0.20 of revenues per hour, roughly, with our channels. We're doing about 2.2 million hours a month right now. So we're generating about -- that's U.S. dollars, so $400,000 a month. It's still a small number. But I think that the FAST channels will double for sure just this year. I think by -- we'll finish the year at 4 million hours, which will generate $800,000 a month. So it's becoming an important segment or more. It's new. Everything is new on this part. We're launching with a lot more platforms. We're trying to launch more products.The home run for Stingray is, we've launched audio channels with our friends at LG and a few of our partners. The home run is to launch the 40 audio channels of Stingray as a FAST channel worldwide because the listenership of the audio channels that we see in Canada and on the cable market is very strong. And if you replace that in the U.S. and the world, it will be a very significant number. So we still believe that the FAST segment will be $100 million business, so generating $8 million a month.

[Drew McReynolds]

Okay. Super. A lot of good granularity there. Lastly for me, just in terms of fiscal 2022 outlook, thanks for just that free cash flow, I guess, guidance or outlook. Just an update here on CapEx and cash taxes, just for modeling purposes.

[Eric Boyko, Co]

Yes. This year, taxes were -- looking on my sheet, tax this year were -- looking on my sheet #2, 3 -- yes, this year, we only paid $3.3 million of taxes. So I think next year, $5 million to $8 million of taxes. And our CapEx should stay the same this year. CapEx this year, all in JP, that were at...

[Jean-Pierre Trahan]

$6 million both regional and broadcast.

[Eric Boyko, Co]

Both the R&B CapEx of $6 million. So this year, $13 million of CapEx. So $13 million of CapEx, $5 million to $8 million of income tax. The good news is our interest rates are really falling down. Interest last year paid was close to $16.5 million. And this year, we expect to be below $12 million. And with a bit of luck, we might even close to $10 million of interest. Our net interest rate can go down almost below 3%. So I think that will also help our capital structure. Because when you're paying 3% interest rates, you're -- and after tax, you deduct it, you're in good position to allocate the money.

[Operator]

[Operator Instructions] Your next question comes from the line of Tim Casey with BMO.

[Tim Casey, Equity Research Analyst]

Can I confirm a couple of figures, Eric? On the SVOD growth, you're at 525,000 now. I just want to make sure we're targeting like you expect to be around 1 million in 2, 3 years, is that right?

[Eric Boyko, Co]

Yes. And this is Tim?

[Tim Casey, Equity Research Analyst]

Yes. Yes.

[Eric Boyko, Co]

Okay, because she had a different name. On the screen, it says Kent Casey. I'm like, okay, maybe the new. Sorry about that because then I could recognize if everything is okay. No, no it's okay.

[Tim Casey, Equity Research Analyst]

[indiscernible] account.

[Eric Boyko, Co]

I know. I know. I was like, okay, there's new guys calling us. I was a bit -- okay. Sorry, Tim, go ahead. Please ask your question.

[Tim Casey, Equity Research Analyst]

I just level set a couple of things. So the SVOD count is 525,000 right now. That is the number that you're projecting to be 1 million in 2 or 3 years at $8 ARPU?

[Eric Boyko, Co]

Yes, we still maintain that we will be able to increase our B2C strategy. And our view is all B2C, we get about $15 ARPU. B2B, we get $5 because one is accounted net, one is accounted gross. So that's the whole difference of a product mix. I think we're going to have more B2C products coming out, and we have also some nice little tuck-ins in that market. So that's why we feel confident that ARPU will go back to $8.

[Tim Casey, Equity Research Analyst]

But again just on the sub count, I mean, you're implying that you're going to accelerate the sub add annually quite dramatically from what you've done in the last year in a pandemic. Just walk us through how you'd get there.

[Eric Boyko, Co]

Okay. Just for example, Amazon went from 50,000 subscribers to 100,000 subscribers for us in last year. And this year, we expect Amazon to go from 100,000 to 200,000 subscribers. So that's the growth we're seeing because all of our platforms are growing faster. So just Amazon, we see as 100,000 net subscribers, but those are more around the $5 mark. So that's why we feel very confident to hit the 1 million subscribers.

[Tim Casey, Equity Research Analyst]

Like what else is going to take you there? Because that -- Amazon isn't going to get you there. What are the other drivers you see?

[Eric Boyko, Co]

Oh, it's Amazon, it's Comcast. We're doing a lot of SVODs in LatAm. LatAm is opening up the SVOD market. We're doing SVODs in Asia, more in Europe. And for sure, Amazon by itself. It's -- we're going to be launching Amazon Mexico, Brazil and Canada. You know our friends at -- our friends are at Corus, they created the STACK product, which is a bundled product, which we're also looking to test. And I think the STACK numbers are public, but they have -- just in Canada, STACK with Corus has 400,000 subscribers, I think. Don't quote me on this, but that's some feedback I got.So I think that our growth with Amazon could be even stronger. And we're also launching in many more countries, many more products. So now we have 4 good products. We have Qello, Karaoke, DJAZZ and Classica. So -- and they work -- some work better than others, but we have a good lineup.

[Tim Casey, Equity Research Analyst]

Okay. Got you. And just to clarify is about FAST channel. You're running it -- so I think, now, you said it's a $400 million a month business. You hope to get to $800,000 a month. And then you're telling us it's going to be $100 million annual business. I mean, that is a massive, massive -- that's a 20x acceleration from where you are now. Like what's the growth driver there?

[Eric Boyko, Co]

The growth there is all of our TVs at home are going to have the FAST channels. And so I bought myself a new Samsung TV, so it's easy. It's Samsung Plus, you click a button. And so all of the TVs are going to be upgraded to launch the FAST channels. And when I say all, it's from Samsung to LG to Sony, every TV will be modernized. If you have a Samsung TV of [ 215 ], that one you don't have it. But -- and there -- every partner is investing a lot of money.Samsung by itself will have 60 million connected TVs in the world. So they're going to be 3x the size of Comcast. And I think that people are more and more getting used to going on Samsung Plus, and I think they have a winning formula. So the growth is coming by a lot more connected TVs, a lot more investment by our partners. And for us, launching with them, with all these companies worldwide. And right now, I can -- some of our products like Naturescape is being chosen in every platform that's being launched. So I think that our goal is to hit 40 million hours of listenership a month, which would generate that $0.2, $8 million a month. And for sure, we are pushing, expecting that Stingray Music Audio, the 40 audio channels is part of that strategy, so.

[Tim Casey, Equity Research Analyst]

And what are you negotiating with all the TV suppliers on the audio channels right now?

[Eric Boyko, Co]

Yes. For sure, we won't do it in Canada because Canada is a unique market for pay audio. But for the rest of the world -- in Canada, we estimate that roughly we get -- roughly in Canada, we get 40 million hours of listenership per month on our audio products. That's people listening to TV or music on their TV. The numbers are huge. So it's 4 hours per subscriber per month. So worldwide, if we could launch all the other channels with Samsung, you can do the numbers. If Samsung would generate 4 hours per month per audio channel, it would be 240 million hours. So -- but that's one of our big goals and KPIs, convince the big platform that they need those audio channels as a TV product, and people do listen to background music audio at home. So for us, the U.S. market is virgin, LatAm is virgin, Europe, Asia. So there's no cannibalization for this product.

[Tim Casey, Equity Research Analyst]

And you can clear the music rights globally?

[Eric Boyko, Co]

Yes. All linear products, we can clear music rights. On demand, we can't, but linear audio, yes.

[Tim Casey, Equity Research Analyst]

Right. Yes. And are you confident you'll have an announcement on the audio channels this year, this fiscal?

[Eric Boyko, Co]

Yes. We've already launched with XUMO. XUMO is a platform that distributes LG and some other TV operators. XUMO is owned by Comcast. So we've already launched with them. Our numbers are great. The goal is to convince the other platform, which is one of our #1 KPIs to show the results that we're having with XUMO LG and to -- for them to take them also. So I think that will be a -- I would be very disappointed if we can't convince the other TV manufacturers of the advantage of audio products.

[Tim Casey, Equity Research Analyst]

Great. One last one for me. Just on the tuck-ins. And I think you mentioned you had 4 potential targets in due diligence phase. Are you able to offer any insight on what verticals you're focusing on? Are you trying to buy the traditional audio channels that you have in the past? Is it more a music library? Or is it now something on Stingray Business and...

[Eric Boyko, Co]

So good question. One of the tuck-ins is a B2C with a strong audio catalog. Another tuck-in will be a great addition to our FAST channels. And we also have a huge catalog of videos. So we're investing a bit in content. Another one is one of our Canadian partners in Stingray Business that we have been talking a long time. We have -- and then we have many acquisitions in the U.S. market for Stingray Business. So anywhere from 10,000 to 20,000 to 40,000 locations help us grow quickly the U.S. market and to get more scale. So a lot of lines in the water for the U.S. market.

[Operator]

[Operator Instructions] And there are no further questions in queue at this time. I turn the call back to the presenters for any closing remarks.

[Eric Boyko, Co]

Okay. Thank you very much for the analysts be -- joining us -- for joining this conference call. We look forward to speaking with you again following the release of our first quarter results in early August. Have a great day, everyone, and thank you for your time, and thank you for all the team members of Stingray, and for all our investors in having confidence in us. That's it from us.

[Operator]

And this concludes today's conference call. Thank you for your participation. You may now disconnect.