International expansion once again drove higher quarterly revenue and profit at Stingray Digital Group Inc., as the company continues to focus on acquisitions to fuel its growth.
Wednesday's first-quarter earnings results also coincided with Stingray's first annual general meeting as a public company, and executives arrived in a newly acquired 1964 Corvette Stingray painted in company colours. The company was typically upbeat, with revenue up more than 23 per cent compared with a year earlier.
The Montreal-based music channel provider's results are "on budget, on project," chief executive officer Eric Boyko said in an interview. Yet despite solid returns, attention has focused of late on a lawsuit against the company filed by U.S. rival Music Choice, alleging patent infringement after Stingray tried to buy the American company in 2013, and was privy to confidential information.
The suit was filed just after Stingray announced it would expand its reach in the United States through a new pact with Comcast Corp. – one of Music Choice's own backers – and Mr. Boyko has been defiant about the allegations.
"First of all, we feel the patents are invalid," he said, promising the company will file its response before the end of August. "The only reason Music Choice did this is [in reaction to] the Comcast deal."
Mr. Boyko has also said Music Choice has "overstretched themselves" with the lawsuit.
"Management continues to believe that an opportunity will arise to buy Music Choice and extract material-related synergies," Adam Shine, an analyst at National Bank Financial Inc., said in a research note.
Earlier this week, Stingray took an extra step to bolster its position by hiring Rick Bergan – who spent 15 years at Music Choice, where he was a vice-president, and more recently worked for Comcast – as its head of content distribution in the United States. Mr. Bergan "knows the customers, knows the space," Mr. Boyko told analysts during a conference call on Wednesday.
The expanded arrangement with Comcast, which will see Stingray supply music videos for Comcast's Xfinity television platform, is expected to take effect in September.
Recent acquisitions, which include the purchase of Swiss-based TV channel iConcerts last December, have helped propel Stingray's stronger earnings. The company now gets 43 per cent of its revenue from abroad and aims to increase that share to 70 per cent by 2020, having just opened a new regional headquarters in Singapore.
First-quarter earnings were $2-million, or 4 cents a share, compared with a loss of $1.8-million, or 5 cents a share, in the same quarter last year, when profit was wiped out by expenses related to the company's IPO.
Revenue was $24.5-million, up from $19.9-million last year, and though the growth was driven largely by acquisitions, the company's organic growth rate was 5 per cent. Stingray also boosted its quarterly dividend by 14.3 per cent to 4 cents per share.
In June, the company bought four specialty music channels from Bell Media for a total of $4-million: MuchLoud, MuchRetro and MuchVibe, as well as Juicebox, a music video channel aimed at kids. They are being rebranded under the Stingray name, and the company is confident the channels will be in demand with large Canadian TV distributors that must carry independently owned channels to comply with federal regulations.
The drumbeat of acquisitions shows no sign of slowing in the coming quarters, as Stingray is contemplating two smaller European deals that could be sealed within the next six weeks.
"We're confident to deliver a deal per quarter," Mr. Boyko said.